Tax cuts blamed for 'zero' Budget admission

DANYA LEVY
Last updated 05:00 02/04/2012

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The Government's admission there will be a "zero" Budget this year is evidence New Zealand cannot afford National's tax cuts, the Greens say.

In its Budget Policy Statement in December, the Government said it expected to have an operating allowance of $800 million for the 2012 Budget.

However, Prime Minister John Key said yesterday he expected the Government would hand down a zero or "very close to zero" Budget in May, meaning there would now be no new money spent.

"We need to get New Zealand back into surplus ... so that future generations aren't continuing to pay for debts that we would be racking up today," he told TVNZ's Q&A programme.

Greens co-leader Russel Norman said the 2010 tax cuts had left a "huge hole" in the Budget.

"The Government is having to borrow in order to cover the tax cuts that they gave and so now it is putting pressure right through the Budget."

Under the Government's "tax switch", income tax rates were reduced while GST was increased from 12.5 per cent to 15 per cent.

The Government had claimed the changes would be "broadly fiscally neutral", Dr Norman said.

"But it isn't. The figures at the time said it would cost about $1 billion over four years but it has got much worse than that because the Government thought the increase in GST would cover it but it hasn't, people aren't spending as much on goods and services."

Mr Key said the Government would be spending more in health and education, but all other ministries would be expected to save money.

Labour's finance spokesman David Parker said questions needed to be asked about why the economy was not thriving.

"We have had record commodity prices, our two largest trading partners, Australia and China, have both been doing amongst the best in the world and yet New Zealand is still in the doldrums," Mr Parker said.

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