Council of Trade Unions finds another $500m shortfall in Government's tax plan

The Government has confirmed the National Party's promise to give parents of children attending early childhood education up to 25 percent a week of the costs back.  

The policy will kick in from July 1 but it comes with a hook, parents will have to apply for the rebates themselves.  

It comes as the Government's on the hunt to pay for its promised tax plan, and now Newshub can reveal the Council of Trade Unions has found another $500 million shortfall.  

Winning the votes of young families was no child's play for National, and on Monday they got to deliver with confirmation of the FamilyBoost policy.   

"One of our top priorities is to put extra money in the pockets of families affected by the rising cost of living," Prime Minister Christopher Luxon said.   

It's a 'more you earn, the less you get' system which gives some families up to 25 percent of their childcare costs back.  

Using weekly childcare costs of $300 per week, households earning less than $140,000 get a maximum of $75 back a week. Those earning $160k get $37.50, $170k get $18.75, and households earning more than $180,000 don't get any tax credits.  

But parents will have to submit invoices to get the credits.  

"Over time, we are determined to reduce the administrative burden for parents," Finance Minister Nicola Willis said.    

On the election campaign, National came under fire for accepting that only 3000 families would be eligible for the full policy.

But Willis now says more will.   

"I can confirm that based on official modelling around 21,000 families will be entitled to the full payment."  

The Family Boost package was a key plank of the National Party's tax plan it won the election with.  

But former Reserve Bank economist Michael Reddell says the price for tax cuts could be interest rates.

"If we were lowering the fiscal deficit, cutting spending and not cutting taxes we would bring forward the time when the Reserve Bank would be able to be cutting the OCR," he said.  

"I and plenty of others have argued that the priority should be getting back to surplus. You don't run tax cuts when you're running deficits."  

The Government could need to find even more cash than it thought to deliver its tax cuts promise.  

The National Party campaigned on a tax plan that used numbers from 2021. The Council of Trade Union's chief economist Craig Renney - who is also on Labour's policy council - has run the numbers again with 2022 data.   

National estimated its income tax cuts would cost $8.9 billion, but the CTU believes new figures show they'd now cost $9.4 billion. That's a $500 million difference.  And it could even be more than that.  

"If you add in population change, if it follows the same path as pre-COVID, it's another $300m. That makes the gap $800m," Renney said. 

Renney looked at all the unders and overs the Government is facing, like their landlord tax cut blowout and the broken promise of bringing in an app tax, and reckons the shortfall could be as big as $3.8 billion overall.

"Are we seeing cuts to disability services, are we seeing cuts to policing services? These are the kinds of choices this Government's having to make because of its tax plan and because of its inability to cost central elements of it," Renney said.

Willis said in response: "We reject the repetitive, false and politically motivated attacks from Labour Party policy council member Craig Renney.

"In our upcoming Budget, we will deliver more funding for frontline services including for Police and Disability Services."

Five for five people we spoke to in Onehunga on Monday are no longer keen on tax cuts.   

"I think it's a silly idea. There are much better things to spend money on," said one person.   

"There is definitely a lot more they should be focusing on," said another.    

"Not unless they consider the well-being and the need at the moment," said a third.  

"I don't need a tax cut, I just need the money to go where it needs to go," said another.   

"Does it help anybody else, the tax cuts?"  

Willis said the Budget would present official Government costings for its policies "which will be funded responsibly".

"It's a shame the CTU has strayed so far from the people it is supposed to represent. I call on the CTU to stop its campaign against Kiwi workers and to get behind our Government's plan to deliver overdue tax reduction to hardworking Kiwis," she said.

"I believe that when New Zealanders see the tax relief we deliver at the Budget and the responsible way in which we deliver it, they will be grateful for it."