ACT’s alternative budget: tax cuts and public service cuts


The ACT party is proposing a wide range of cuts and an increase in the retirement age to secure tax cuts and return the government to surplus within a year.

David Seymour
Photo: RNZ / Angus Dreaver

His alternative budget would also reverse various efforts to curb climate change, increase defense spending, freeze the minimum wage, abolish various government agencies, including the Human Rights Commission, and create a fund for directors to top teacher salaries.

Shares of various public companies would be sold, including 100% of LandCorp, and thousands of government jobs would be cut.

Real estate investors would also see an advantage, the light line test being entirely abolished and interest deductibility returning to residential real estate investment.

The overall tax cut change would create just two brackets – 17.5% for incomes below $70,000 and 28% for those above – offering significant benefits to those at the top of the pay scale. .

This compares to current income brackets up to $14,000 taxed at 10.5%, between that and $48,000 at 17.5%, income between $48,000 and $70,000 at 30%, between 70,000 $ and $180,000 at age 33 and income over $180,000 taxed at 39%.

ACT’s proposal would be balanced with a tax credit program called Low and Middle Income Tax Offset worth $800 a year for those earning between $12,000 and $48,000, to ensure that low-income people would not be stung by the changes.

The party also pledges to cut public sector jobs – which have risen 13.7% over the past five years, compared to an 8.9% increase in the private sector – to levels they were in 2017.

However, it would also mean thousands of layoffs, which could themselves prove costly, and the potential reversal of trends that have seen spending on contractors and consultants reduced.

It was also unclear how this would be achieved given the relatively small number of employees in the organizations being cut and the potential increase in civil service workload due to ACT policy requiring that all agencies publicly review all major regulatory expenditures at least every 10 years.

“We would restrict the government’s power to urgently impose new legislation on Parliament and automatically repeal all new regulations 10 years after they are passed unless they are reviewed and actively reintroduced,” the party said. .

Asset cuts and sales

The party budget proposes operating allocations higher than what the government had in 2021, but considerably lower than the one-time total of $6 billion to pay for reform programs, including health care, proposed by the government .

The ACT budget says it would limit the increase in operating allowances to just 20% of what the government has proposed.

Other cuts include:

  • Climate Change Commission, Energy Efficiency and Conservation Authority, Freshwater and Land Use Program, Forestry Program
  • Climate Emergency Response Fund operating and capital expenditures
  • Contributions to the superannuation fund ceased and the eligibility age increased at the rate of two months per year until it reached age 67, at which time it would be indexed to the life expectancy
  • Abolition of the Human Rights Commission and the Office of Crown-Māori Relations
  • Abolition of Ministries for Women, Maori Development, Pacific Peoples and Ethnic Communities
  • Free program for university
  • KiwiSaver grants removed
  • Payment for winter energy would be limited to beneficiaries and community service card holders
  • First-time homeownership assistance and progressive homeownership programs
  • R&D Tax Credit, Callaghan Innovation, Covid-19 Horticulture Subsidies, Growth and Development Spending, the Provincial Growth Fund, the Cultural Sector Regeneration Fund, New Market Operations Spending, Cultural Sector Regeneration Fund
  • National and international film grants
  • Jobs for Nature, Jobs for Biodiversity, Jobs for Pest Control, Jobs for Waterways, Jobs for Pine Control and He Poutama Rangatahi
  • Regional Skills Leadership Groups
  • Workforce Development Tips
  • “Ready to start” infrastructure projects

The party is also proposing to sell 49% of the shares of various public companies, including New Zealand Post, KiwiRail, Transpower, Kordia, KiwiBank and its subsidiaries, as well as food testing and inspection organization AsureQuality.

It would also sell 100% of LandCorp, which operates dairy, sheep, beef and deer farms on more than 365,000 hectares and provides farm management services. Where land cannot be sold due to Treaty of Waitangi concerns, it would be retained in Crown ownership and leased to LandCorp.

These sales would reduce dividends paid to the government, but in addition to the amount of the sale, the party said they should increase the companies’ overall profitability.

New expenses

One of the few new budget areas that ACT would spend on is a policy to create a $250 million a year fund called the Teaching Excellence Award Fund, distributed among schools based on the number of teachers. per school. This would allow principals to top the salaries of teachers and senior school leaders.

ACT would also increase defense spending to 2% of GDP, an increase of $6.133 billion over four years.

Of course, much of the revenue clawed back from widespread ACT cuts would go towards tax cuts, reducing the Crown’s base net debt by $15 billion and spending less.

Climate change

One of the main objectives of ACT reductions is to devote efforts to reducing climate change.

In addition to disbanding the climate-focused organizations listed above, the party is proposing to repeal the Zero Carbon Act.

“The Zero-Carbon Act sets New Zealand’s benchmark for reducing CO2 emissions well above those likely to be achieved by our trading partners, particularly our direct competitors in Asia-Pacific,” said declared the party.

It would also reverse the ban on companies exploring for oil and gas.

Other policies

Changes to the retirement pension would mean an increase in the eligibility age of two months per year. The ACT said this would amount to ‘ensuring that each generation is entitled to the same pension period as previous generations’. However, KiwiSaver withdrawals could still be made at age 65.

The party would also see the government no longer contributing to the fund as the government has a debt on its books.

It would also aim to help businesses by reintroducing the 90-day trial period for workers, freezing the minimum wage for three years, “to allow productivity growth to catch up with those higher costs”, and scrapping fair wage agreements and the social insurance scheme. .

Another proposal is to exempt OECD countries from the Overseas Investment Act unless the assets are important to national security.

Half of the GST from building houses would also be shared with local councils, with funding partly taken from the Housing Acceleration Fund.

Major benefits and salary increases in the civil service – with the exception of police, front-line health and education, and defense personnel – would also be linked to inflation rather than to wage growth.


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