While Nicola Willis wouldn’t give any details on its size, she said a package of tax cuts is definitely still coming in this year’s budget, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.
A detail-light Budget Policy Statement
The cupboard is a lot more bare than originally thought, and a surplus is at least two years away – but tax cuts are still on. That’s the key message from the Budget Policy Statement (BPS) delivered on Wednesday by finance minister Nicola Willis. Her statement “threw up more questions than it did answers,” writes Interest’s Dan Brunskill, “with a number of key details conspicuously absent”, most notably the operating allowance for the budget. The operating allowance, as you’ll recall, is the “net new operating funding available at each budget for new policy initiatives or cost increases in existing policy” and it is usually set out in the BPS. However Willis wouldn’t commit to an exact figure yesterday, only saying that it would be less than the $3.5 billion planned by the Labour government and included in Treasury’s Half-Year Update in December.
Omission a ‘combination of hypocrisy and incompetence’
Willis defended her reticence on the operating allowance by saying she was trying to be more precise. “The previous finance minister would publish an operating allowance in the updates and then he would completely break it in the budget,” she said, “well, we’re a different kind of government.” Labour said that was laughable. Chris Hipkins called the delay “a combination of hypocrisy and incompetence” which showed the “level of dysfunction that this government seems to be operating under”. He pointed out that Willis had already had three more months than usual to come up with a number. The BPS is usually delivered in December but was postponed by the late-running coalition negotiations.
Come what may, tax cuts are happening
While Willis reiterated her promise that the tax cuts would not involve any new borrowing, she refused to be drawn on how big the overall package would be. “It is possible even Willis doesn’t fully know the full details of tax cuts,” surmises the Herald’s Claire Trevett, given that the package is likely still being negotiated with coalition partners. In BusinessDesk (paywalled), Pattrick Smellie says it’s clear the “cacophony of economic rationalists and opposition activists condemning tax relief as fiscally irresponsible and potentially inflationary has been water off a duck’s back”. Having staked so much political capital on tax cuts, National is duty-bound to deliver them. The case for addressing “fiscal drag” (otherwise known as “bracket creep”, or taxation by inflation) is strong, writes Smellie, but with less money to play with, “a betting person would probably assume” there will be little or no change to the top two personal tax thresholds in Budget 2024.
What would Nicola Willis do (to placate her partner)?
Among the journalists attending the BPS lock-up and press conference was The Spinoff’s Joel MacManus. While other reporters peppered Willis with questions about operating allowances, net core Crown debt indicators and fiscal strategy reports, MacManus writes that he was distracted by an important text from his partner: “Did you remember the present for my dad?”
“I thought to myself, WWNWD (What would Nicola Willis do)? Suddenly, like a gap of light in the jungle, the words tumbling out of the finance minister’s mouth offered me a path out of my relationship conundrum.
“I can absolutely confirm that I have fulfilled my commitment to buy the present that I promised I would deliver,” I typed back. “I can say with 100% confidence that I have purchased a present for your dad. And I can assure you that when he opens that present, it will be meaningful and targeted to him.”