Election 2023: National releases fiscal plan, promising to lower debt quicker, deliver greater surplus

There would smaller operating allowances under National.
There would smaller operating allowances under National. Photo credit: Getty Images.

National is promising to bring down New Zealand's debt quicker than what was predicted in the Government's latest accounts, while also delivering a greater surplus for 2026/27.

But there is a slightly smaller operating allowance - new Government spending - each year under the National Party plan. There would also be major savings by trimming services and changing how benefits are increased.

The party finally released its fiscal plan on Friday, revealing how it expects to pay for its spending commitments in comparison to the numbers presented in the Government's Pre-election Economic and Fiscal Update (PREFU).

National finance spokesperson Nicola Willis said her party would "restore discipline to Government spending" while also lowering taxes and reducing net debt compared to the forecasts in PREFU.

For example, in PREFU, net debt was set to peak at $103.8 billion in 2025/26 and then drop to $102.6 billion in 2026/27. Under National's proposal, debt would reach $102.8 billion in 2025/26 and then fall to $100.6 billion the following year.

National would also achieve a slightly larger surplus than under the current projections. The books are currently forecast to return to the black in 2026/27 with a $2.1 billion surplus.

Under National, it would hit $2.9 billion in that financial year, the party said.

Election 2023: National releases fiscal plan, promising to lower debt quicker, deliver greater surplus

But this comes with smaller operating allowances. For example, next year, National is planning an operating allowance of $3.2 billion, compared to $3.5 billion set out by Labour.

By 2027/28, the difference between the current projections and National's would be $1.3 billion.

Election 2023: National releases fiscal plan, promising to lower debt quicker, deliver greater surplus

"We have provided for significant buffers, with $9.9 billion of unallocated operating spending to ensure we can respond to cost pressures and changing circumstances," said Willis.

"Labour's plan does not have any credibility when they have failed to stay within their spending limits for every single Budget since they have been in office, nor when they have delayed the return to surplus three times in the last two years.

"National's fiscal plan is responsible and credible. It has been reviewed and verified by independent economic advisors Castalia."

One of National's areas for savings is through indexing benefits to inflation rather than average wages as they currently are. Over the forecast period, National is expecting this to bring in slightly more than $2 billion in savings.

Labour's Grant Robertson has defended going over his expected operating allowances by noting that Government has faced unexpected challenges like COVID-19, requiring more spending.

National revealed its $14.6 billion tax plan last month, which included shifting income brackets to account for inflation. It promised to pay for that by introducing new taxes, like one on foreign buyers purchasing properties worth more than $2 million.

That plan has been criticised by multiple economists, who don't believe the foreign buyers' tax will bring in as much revenue as National (and the independent analysis it commissioned) has predicted, calling into question how it will end up paying for its tax cuts.

National also wants to cut make an average 6.5 percent cut to public services on top of the $4 billion savings identified by the Government in August.

The party said it would do this by reducing advertising and public relations spending, stopping work programmes not supported by National (like any work on the Resource Management Act replacement and Fair Pay Agreements), leaving some job vacancies empty, retiring some working groups and stopping programmes to refurbish offices or upgrade property leases.

However, some agencies will be excluded from delivering this efficiency dividend and will instead be "expected to redirect savings found in the back-office into frontline services". 

These agencies include the Ministry of Health, Te Whatu Ora, the Ministry of Education, Corrections, Oranga Tamariki, police, the Defence Force, the NZ Transport Agency Waka Kotahi and Kainga Ora.

A Newshub-Reid Research poll this week showed 53.8 percent of respondents didn't believe National could pay for its tax cuts, while just 29.9 percent thought they could. Even 29.4 percent of National voters didn't think the party could pay for the cuts, though the majority of party voters did.

Labour released its fiscal plan earlier this week. The party said now "is not the time for additional taxes", adding it would maintain current income tax settings during "these volatile times".

Its plan was independently verified by Infometrics, which found the value of its proposed fiscal programme can be met within the allowances set out in the PREFU.

The plan included Labour's election commitments of removing GST off fruit and vegetables, making changes to Working for Families and its paid partner's leave initiative, as well as others like extending free school lunches to the end of 2026 and pumping more money into drug-buying agency Pharmac.

"Labour's fiscal plan is responsible, balanced, costed and credible. It has been endorsed by an independent analysis from Infometrics, who have concluded that the new spending commitments Labour has made can be accommodated within the future spending allowances set aside in PREFU," said finance spokesperson Grant Robertson.

He said the next few Budgets will be "tight" as the Government reduces expenditure following "necessary investments through COVID and to ease the pressures of the cost of living".

"There is room in Labour's plan to meet cost pressures and for a limited number of new commitments, as announced during the campaign."