“It is easy, in the first blush of excitement about a Budget, to miss a tiny bit of fine print that really matters.
The government says that most people would be better off after taking into account the GST rise and the income tax cuts. Their calculator uses the estimate of 2.02 percent inflation arising from GST alone.
Turn the page and there is the forecast inflation figure for 2011 5.9 percent! Run that number back across household incomes and add in the ECE cuts, and here are some conservative numbers we can hang our hats on:
â€¢ An average family with 2 kids at kindy on $76,000 per annum, gets a $25 tax cut, but after GST, ECE costs, inflation and an average wage rise, they are $55 per week worse off.
â€¢ Even a higher income family with 3 kids: $140,000 income, $62 tax cut, is $23 per week worse off.
Moral of story: check the fine print before opening the champagne.
Which brings me to debt.
There was once a promise that the tax package would be “broadly fiscally neutral”. Now we know what Bill English means by “broadly” – $450 million a year, or over $1 billion for the forecast period.
Trivial? Not if it were my money! And not when interest servicing costs are due to double and not start declining until 2021.
And on the subject of broken (or at least extremely elastic) promises, lets not forget:
â€¢ “I did not raise GST with that electorate”
â€¢ “I shall restore superannuation prefunding when the books return to surplus” (No surplus forecast in 2016, prefunding restarts 2019)
â€¢ “I will compensate pensioners for the rise in GST” (No it’s a one-off, soon absorbed by the wage indexation they had anyway)
â€¢ “Pensioners can have all the benefits they have today or I’ll resign” (Sure…)
â€¢ “No cuts to front line health services” (how about the $270 million hole relative to next year’s inflation?)
â€¢ “We’ll rebalance the economy to level the property tax playing field” (Really no CGT, no ring fencing, only half the depreciation allowance, no bright line)
â€¢ And my personal favourite: “We’ll stop the rorts”. Yeah, right.
This Budget is full of holes.
We will be working alongside Kiwi families to try to understand what the fine print means for them.” David Cunliffe
Politically safe, yet economically timid and fiscally vulnerable – that’s the initial verdict on Bill English’s second and perhaps most crucial Budget….
He has also been bold by his standards in cutting company tax from 30 per cent to 28 per cent.
It is after that the Budget suddenly stops dead in its tracks. Those looking for the bright ideas and initiatives to galvanise economic growth are going to be hugely disappointed…
He will also be praying even harder that the world does not teeter back into recession as a result of the current debt turmoil,
To borrow from Oscar Wilde, to postpone tax cuts once could be seen as unfortunate. To have to do it twice might be regarded as carelessness. John Armstrong
The Government will save about $400 million over four years in abolishing the top two funding rates for early childhood centres – the funding rates depend on qualified staff.
Officials tell me that will affect about 2000 centres, or about 50 per cent of them.
English justified the cut in the lock-up for journalists by saying funding for the centres had trebled in recent years, even if they had kept the same number of staff and children.
On that basis he figures there are a lot of centres that will have the “freeboard” to absorb the cut in funding.
But exactly how parents will be affected will depend on how their centre responds to the funding cut. If all the costs are passed on in fees, parents will have to pay another $400 million over four years. Audrey Young
“If a landlord could put up a rent, wouldn’t they put it up now?” he said.
Real estate firm Bayleys said watch out for rising rents in coming months.
“I believe that property investors will not be happy to, or indeed in many cases be able to, absorb the changes in depreciation expenses claims on their properties,” said John Freeman from Bayleys Valuations Ltd.” Industry warns rents will rise
“However by choosing not to increase total tertiary funding, the Government has failed to build a strong sustained recovery and deliver on its vision. It has failed to meaningfully tackle the real issues of underfunding and student debt.” NZUSA Co-President David Do
The early childhood education sector is “devastated” by the Government’s decision to remove recognition for fully qualified centres, saying it would “dumb down” early childhood education.
The Labour Party said the change would push costs of up to $25 a week on to parents and affect more than 100,000 children.
Education Minister Anne Tolley today annouced an extra $107 million would be spent on ECE in 2010-11 – about half what had been expected previously.
The savings would come from removing extra funding for centres that had more than 80 per cent qualified staff, Ms Tolley said….
Labour Party early childhood education spokeswoman Sue Moroney said 108,000 children would be affected by the policy change.
Affected centres would be reluctant to fire their qualified staff and would likely pass on extra costs to parents, Ms Moroney said.
Three of five children in ECE centres would be affected, she said.
Labour’s education spokesman, Trevor Mallard, said the $100 million shortfall in ECE funding amounted to about $25 a week per parent.
The teachers’ union, NZEI, said the changes would “dumb down” the sector. Herald reporters
“Bill English has written a one-dimensional tax-shuffle Budget… The Government will no doubt still be accused of skewing the cuts to the well-off, bearing in mind that those on high incomes pick up all the cuts from rates lower down. And when someone on the minimum wage gets a net $4.85 a week against $56 for someone on $120,000 it is a free hit for the opposition.” Vernon Small
“Those earning over $150,000, the top 2%, pocket $430 million, about 11.5% of the total. This is almost exactly the amount the government has to borrow to fund this package. The people of New Zealand will be saddled with further debt to pay for the greed of the few at the top.
The effects of increased GST will effectively claw back everything gained by those earning under $20,000, and most of what is gained by those earning under $70,000. Only the rich will be better off. And that’s without even getting into the effects of higher ACC charges or reduced government services.
Basically, the vast majority of New Zealanders have just been screwed over for the benefit of a tiny percentage of parasites at the top. John Key is right – we shouldn’t be envious: we should be angry.” No Right Turn
“Whatever you think of the budget itself we have to admit that it was a masterpiece of media strategy: they got the issue of tax-cuts for the rich out well in advance, set expectations around it, took the critique from the opposition and then reversed all the expectations. The rich still get massive, MASSIVE tax cuts but the story is around the larger than expected changes to lower and middle income brackets because those are news, the changes to the top end aren’t.
Part of the strategy was a disinformation campaign: English has been solemnly telling us for months that tax changes had to be â€˜revenue neutral’. The package he released today is not even remotely revenue neutral. He’s borrowing around half a billion dollars a year (at least) to pay for all of this. Naturally all the the pundits that criticised Labour’s plans to borrow for more government spending as â€˜irresponsible’ are falling over themselves to praise English’s â€˜solid’, â€˜sensible’, etc borrowing for tax cuts. Jackasses.” Dimpost