Lost taxes dig deeper hole for finances
Officials have warned the Government it faces a $5 billion hole in its tax revenue as the true financial cost of the Christchurch earthquake begins to emerge.
Prime Minister John Key had already put the estimated cost of rebuilding the shattered city at $15b to $20b, leaving the Government to pick up the bill for about $5b after EQC and other insurance payments.
But the latest Treasury figures on tax income take the hit on the Government's books to $10b, even before the extra cost of unemployment benefits and other assistance is taken into account.
A Treasury spokesman said new tax forecasts were yet to be finalised.
"However, the loss of revenue could be in the order of $5b over the next four years," he said.
That was based on the economy being $15b smaller than forecast before the Christchurch quakes.
The gloomy predictions came as Mr Key confirmed plans to cut Working for Families payments for high-income earners as the Government looks for ways to save money to offset the bill for rebuilding Christchurch.
"Both Working for Families and student loans are arguably broad and generous schemes," he said. "There may be opportunities to make alterations to the generosity of those schemes, particularly Working for Families where it reaches into very high income levels and where those people have enjoyed reasonably good tax cuts because we have lowered the top personal rates."
There could be areas to reduce the cost of student loans, but he did not expect major changes such as reimposing interest on the loans.
His comments sparked immediate opposition from the Maori Party, which said taxes on income over $70,000 should be raised instead.
"Now is the time for those who `have' to help those who `have not'," co-leader Tariana Turia said.
The rise would affect 296,640 people who have incomes over $70,000 and pay the top tax rate.
Co-leader Pita Sharples said families on low incomes already feeling recent price increases should not be put under more stress through changes to policies such as Working for Families.
Mr Key said Treasury believed there would be virtually no growth in the economy this year. Other areas would grow, but Christchurch would go backwards.
"The Government will have to make sure it makes some savings. More outgoings and less revenue means you have to be more careful with your expenditure."
The earthquake had also changed the shape of the May 19 Budget. It would still have a strong focus on savings and investment, but the Christchurch quake would now play a significant part.
He was considering involving other political parties in decisions about Christchurch as well as locals and the city council.
"I don't think this is a political event, I think it's actually a national event and we need to reflect that."
Meanwhile, more than 8500 applications covering 20,000 people have been made for earthquake support available to those who have lost jobs or whose future employment is under threat.
Assistance had already been approved for more than 14,000 people, Social Development Minister Paula Bennett said.
The Dominion Post