Union 'worried' as National leader Christopher Luxon eyes public service cuts to fund tax plan

New Zealand's largest trade union is calling for clarification from the National Party over its proposal to slash public service staff.

National leader Christopher Luxon said on Wednesday he wanted to trim 14,000 public service jobs to fund a $3 billion-plus tax cut package, in order to save $2b a year. 

"We're going to have a very efficient public service," Luxon told AM

"It's very simple: When we get to next year and we actually have a look at the books before the election, you can trust National that we are good economic managers, we're going to make sure we're responsible, we're prudent, we're really disciplined."

But Public Service Association (PSA) president Benedict Ferguson told AM Luxon should be upfront about what services National would cut if in power.

"I'm worried about what services will be cut - the public service is really efficient right now," he said. "Yes, it has grown but it's needed to due to the underfunding by the previous Government and due to population growth so it's kept up with that, and it has been delivering high-quality public service." 

The National Party has said the money being spent on bureaucrats was "something you've got to ask questions about". 

But Ferguson believed frontline services such as border security and social services had become more efficient since Labour took office.

"With these tax cuts, how will they be funded? That's what we're asking Mr Luxon," Ferguson said. "How will he fund these tax cuts? What of these 14,000 workers will go?

Christopher Luxon.
Christopher Luxon. Photo credit: AM

"These are quality public services that we deliver constantly to New Zealanders and New Zealanders expect that, and all we're asking from him is: How will you fund these tax cuts for the most wealthy?"

Ferguson pointed to the fact New Zealand "survived a global pandemic" as proof of getting value out of the growing public sector.

"We are looked at as one of the best countries in the world for that and that was because of the quality public services that we've delivered."

Independent economist Cameron Bagrie doesn't back tax cuts, saying they're "the wrong policy response" amid global economic turmoil. 

Bagrie.
Bagrie. Photo credit: AM

While National believed its tax cut plan differed from the UK government's policy that nearly caused an economic crash in Britain last week, Bagrie said tax cuts were "the last thing we want".

"What we want is what's called 'micro-economic policy' - these are all the levers such as immigration settings that can help our economic car drive a little bit faster," he told AM last week.

Ferguson said making changes to the public sector for tax cuts would cause services to decline.

"The size of our public service in New Zealand is comparable to other countries in the world - UK and Australia."

Public service workers do a "fantastic job", he said.

"I just think [Luxon] needs to come clean on what his plan is to fund these tax cuts."

Asked about the PSA's concerns on Wednesday, Luxon said New Zealand was "spending more money, we are hiring more people and we are getting worse outcomes".

"Never before, in our country, have we seen a Government spend so much, hire so many people and achieve so very little."

While Labour has yet to reveal a tax policy for election 2023, National's fellow right bloc ACT party wants to simplify the tax system with a two-rate structure; 17.5 percent up to $70,000 and 28 percent after that, with a low- and middle-income tax offset and carbon tax refund.

David Seymour, ACT's leader, said on Thursday those cuts would be funded by "reducing the size of the bureaucracy" and "wouldn't touch a single dollar of health, education, police or any frontline service".

"ACT is the only party that's produced a fully costed, alternative budget where we've laid out, 'This is Government spending that needs to stop, we can't afford it at this point in New Zealand and history - and here's how much tax relief we'd give you.'"

Overall, ACT would reduce taxes by about $3.6 billion, Seymour said.