Tax cuts paid for by up to 13k more kids in poverty

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Tax cuts paid for by up to 13k more kids in poverty

Benefit indexation savings under forecast; Fiscal hole up to $4.3b; Leaks show National wants to allow foreign investors to buy land for new homes, but not live in them, & to invest in Build-To-Rent

Bernard Hickey

Feb 14, 2024

Transcript

MSD advised the government that the indexation change it passed under urgency last night is likely to put around 7,000 extra children (and potentially up to 13,000) into poverty. Photo: Lynn Grieveson / The Kākā

TL;DR: The Government has reverted indexation for main beneficiaries to price inflation from wage inflation under Parliamentary urgency to save money for tax cuts, which it has been advised could drive an extra 13,000 kids into poverty.

The savings are also $1.36 billion less than National estimated before the election, expanding its fiscal hole created by the rejection of its to $2.96 billion foreign buyers’ tax to a total of $4.33 billion over four years.

Also, National wants to encourage foreign investors to buy land here to build homes as landlords, and to invest in big apartments-for-rent projects.

Paying subscribers can see more detail and analysis on these and other news items in Aotearoa-NZ’s political economy below the fold and in the podcast above.

Tax cuts paid for by pushing kids in poverty

The National-ACT-NZ First Government used urgency in Parliament yesterday to revert indexation for main benefits to prices from wages, in a move expected to save less than a third of the money National needed for tax cuts, MSD advised.

MSD advised the indexation change, which won’t apply to those on NZ Superannuation, is likely to put around 7,000 extra children into poverty and up to 13,000, reports Thomas Coughlan via NewstalkZB.

The change will also only generate $670 million in savings over four years, which was less than a third of the $2 billion in savings over four years hoped-for by National in its pre-election tax-cutting plans (page 7).

Social Development Minister Louise Upston argued the shift would encourage people off the benefit.

“Over the longer-term, taxpayers will gain from savings in benefit expenditure, while benefit recipients retain a consistent level of income.
“This change also supports our relentless focus on getting people who can work into work by improving incentives to move off benefits. We know that a job is the best way for New Zealanders to get ahead, and we want to make sure the rates of main benefits reflect this.” Louise Upston in a statement.

So what? The use of urgency to pass this change was ugly. National also now has a $4.33 billion shortage of funding for its tax cuts over the next four years, which Labour will now portray as being paid for by pushing kids into poverty.

Foreign investment in land and funds for build-to-rent?

Draft Cabinet papers leaked to Newshub last night and RNZ this morning show National wants to encourage foreign investors to buy land to become landlords of new homes and to invest in new build-to-rent apartments, setting up a clash with NZ First’s opposition to foreign buyers. The loophole to get it past NZ First’s foreign buyers’ ban is that the buyers would not be able to live in the homes, although Winston Peters has yet to agree to it.

Bishop's preferred option is to allow foreign buyers to invest in any residential land to build new houses or accommodation facilities, even a single additional dwelling, as long as the buyer did not intend to live in them.
"Build to rent could play a part in helping to solve New Zealand's housing crisis. We have committed as part of our First 100 Days plan to make it easier for build to rent housing to be developed in New Zealand by amending the Overseas Investment Act," Bishop said in a statement.
"We're looking at a range of options to meet this commitment. The foreign buyers ban will remain unchanged." RNZ

The leaked papers show the idea has yet to go to Cabinet.

"I'll be making further announcements in due course once Cabinet has considered the options available to deliver more build to rent housing in New Zealand," Bishop said.

So what? Anything that gets more build-to-rent housing built is a good idea and this one might just sneak past the NZ First picket line because it’s similar to the exemption NZ First agreed to for apartment new-builds off the plan in the initial OIA changes by Labour in 2018.

Just briefly elsewhere

The new Government’s plan to allow landlords to deduct interest costs from their tax bills could be retrospective, according to the Inland Revenue Department (IRD), which could lead to refunds to landlords of provisional tax payments from the 2023/24 year. NZ Herald-$$$ Thomas Coughlan

KiwiRail has brought in McKinsey consultants to advise on its future. BusinessDesk-$$$ Oliver Lewis

A fishing boss who donated $30,000 to NZ First candidate Shane Jones is now lobbying Fishing Minister Shane Jones to remove MPI’s cameras from fishing boats, saying the cameras breached crew privacy. Newsroom Jonathan Milne

Auckland Mayor Wayne Brown announced a nine-point plan last night to speed up KiwiRail repairs of Auckland commuter rail services after an emergency meeting with officials in response to widespread outages and delays. RNZ

World Wildlife Fund (WWF), Environmental Defence Society (EDS), Greenpeace, Forest and Bird and Pure Advantage have argued in a submission to the Ministry for Foreign Affairs and Trade that the Government’s rolling back of environmental laws was breaching its free trade deal with the United Kingdom. RNZ Eloise Gibson

Education Minister David Seymour wants to prosecute and fine the parents of kids not attending school enough. NZ Herald-$$$ Claire Trevett

Wellington City Council will decide later today on a series of cuts to services such as pools and libraries to save money. NZ Herald Georgina Campbell

Transport, Auckland, Energy and Local Government Minister Simeon Brown threatened to over-ride Auckland’s opposition to public transport, cycling and walking spending cuts by legislation to force the cuts. RNZ

Calls are growing for Fletcher Building to be broken up and its board cleaned out after a shock profit warning and the exits of its CEO and Chairman. Robert MacCulloch Jenny Ruth