There are four options open to National regarding the tax expectations it will deliver large tax cuts ($20+ per person a week = $3 billion+ a year) additional to Labour’s.
a) fail to meet those expectations by offering small cuts. Who would vote for a one-trick pony that won’t do its trick?
b) cut taxes funded by cutting government waste. There simply is not waste on the scale needed; National’s waste-o-meter stands at just $3.3 million.
c) cut taxes funded by cutting spending. National has not announced any spending cuts it would make and, by my count, has already guaranteed to maintain or increase 90% of spending. Unless National breaks its promises (which it could do by tricks like keeping spending at the same nominal level, letting it fall after-inflation and population growth.), it can’t fund tax cuts from spending cuts.
d) borrow to pay for tax cuts. National has already signalled it will increase debt to 25% of GDP. That means increasing debt by about $10 billion, which would cause huge inflation. Problem is, the public doesn’t like government borrowing. There’s a way around that though have the SOEs borrow and pass on the money in dividends to the Government. That wouldn’t make the government’s debt increase, it would show up in the books as lower asset worth. Another trick is using public-private partnerships: these are just a fancy form of borrowing the government gets captial up front and the private moneymen make the profit from rents in the longrun.
Which option do you think National will choose? I’m picking them to fund lower than expected tax cuts by increasing debt (one way or another) while arguing that the money is coming from cutting waste.