Act’s fiscal plan: Deeper cuts, earlier surplus, but no income tax cuts

Act wants to cut spending but, perhaps surprisingly, not your income tax, writes Henry Oliver in today’s excerpt from The Bulletin.

Act has released a fiscal plan promising a surplus a year earlier than the Government, $12.4bn less debt by 2031, and $9.9bn in cuts – paid for by raising the superannuation age, cutting disability benefits and foreign aid. For the first time under David Seymour's leadership, there are no broad income tax cuts.

The plan, announced at a photography studio on Auckland’s Karangahape Rd yesterday, would deliver a $79m surplus in 2028 under OBEGALX (the Government’s preferred measure) a year ahead of the Pre-Election Economic and Fiscal Update (“prefu”), The Post’s Nick James reports. Under the traditional OBEGAL measure, Act reaches surplus in 2029 with $5.1bn, against the Government's $2.06bn and Labour's $2.02bn.

The promised savings are significant. Act would shave $400m a year off the operating allowance, taking it from $2.4bn to $2bn – below the $2.5bn treasury estimated in 2024 would be needed to maintain services at existing levels. It would raise the superannuation age by three months a year to reach 67 by 2035, saving $1.9bn annually by 2031, and put contributions to the NZ Super Fund on hold. It would also end Government contributions to KiwiSaver while removing tax on qualifying investment earnings.

On welfare, Act would require independent medical certification against clear criteria for health and disability benefits, with phased reassessment of existing recipients – cutting $653m over four years and bringing mental health claimant numbers back to pre-pandemic levels relative to the working-age population. It would introduce a five-year stand-down for residence class visa holders.

Foreign aid would fall to 2017 levels, excluding Ukraine, saving about $283m a year – a 28% cut – with the Pacific protected. “We believe that we should be looking after our friends in the Pacific,” Seymour said. RNZ reports he cited “$15m for transgender passionfruit” as an example of waste; the project in question, the Vietnam Climate-Smart Fruit Value Chain, has spent about $4.5m and MFAT’s own information makes no reference to anything to do with trans people.

The concession

The most politically significant element could be what’s not in there. For the first time since Seymour took over the leadership, the party is not campaigning on broad income tax cuts. Instead, the plan hints at a “targeted” cut costing $264m in 2028, which Seymour said would “make it a lot easier for New Zealanders to have a place to live.”

Seymour called it “immoral” to cut taxes by borrowing – the same argument finance minister Nicola Willis has used. The Herald’s Thomas Coughlan notes the irony: the government continued borrowing this term while delivering the tax cuts Willis promised in 2023. Seymour did not name her, but the criticism landed close enough that Willis issued a defence, pointing to Act’s own wins including the ministry for regulation and charter schools.

Seymour was more critical of his colleagues. “The fiscal blowout during Covid has not been repaired,” he said, warning that if nothing changed, “Prefu 2029 will also say the government’s going to be in surplus two years later.” He invoked John Key, Bill English, Helen Clark and Michael Cullen, and said New Zealand had “drifted so far to the left” that Act was “a little bit like England in May 1940 as the only ones holding the line for sanity.”

The reaction

Labour’s Barbara Edmonds said Act was “punching down,” as reported by RNZ. “New Zealanders deserve to know exactly who will be affected and what support they’ll lose,” she said, calling the plan “cut, cut, cut.” The Greens’ Chlöe Swarbrick described it as “welfare for the wealthiest,” arguing the KiwiSaver changes most benefit the richest while disabled people absorb hundreds of millions in cuts.

Opportunity’s Qiulae Wong focused on Act’s promised carbon dividend, budgeted at $200m in 2027/28. “The most recent ETS auction attracted no bids at all,” she said. “You can’t refund money you haven't collected.” An Act spokesperson said removing the ETS price floor would let the Government sell units at market price.

Winston Peters, whose party would likely be needed for any National-Act coalition, was scathing about the aid cuts: “mindless,” “training wheel stuff,” and the product of a party with “zero” qualifications in the field, as reported by RNZ’s Kaya Selby. “It’s high time that they left it to the adults in the room.”

Seymour was asked how he’d get the superannuation changes past NZ First, which was founded in opposition to a previous raising of the age. As The Post reported, Seymour said NZ First understood “deep down” that the change would be forced eventually – “maybe in five years, maybe in 10 years, and there’ll be no warning.”

National has yet to release its fiscal plan.