Can either party afford its election promises?

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1. 0:06Speaker 1: Kia ora, I'm Richard Martin in for Chelsea Daniels and this is The Front Page, a daily podcast presented by
2. 0:12Speaker 1: the New Zealand Herald. National has committed its election promises to the balance sheet. The fiscal plan released today includes
3. 0:22Speaker 1: billions for health, funding to keep school lunches going and of course, lots of money for roads. Debt reduction has taken priority with no tax cuts happening until after the
4. 0:33Speaker 1: books are back in surplus which isn't forecast until 2029.
5. 0:38Speaker 1: So how much does that leave for improving public services?
6. 0:42Speaker 1: And how does this compare with Labour's fiscal plan? Today on the front page, NZ Herald political editor Thomas Coghlan has been poring over the details, and he joins us now.
7. 0:54Speaker 1: All right, so first off, Thomas, what have we actually learned from the announcement today? Are there any new taxes?
8. 1:01Speaker 2: It will surprise you to learn. that there are no new taxes in the National Party fiscal plan. No new taxes, who would have thought? True to their campaign slogan, which I'm sure you and all of our listeners and viewers
9. 1:13Speaker 2: are sick of hearing by now, there are no new taxes.
10. 1:16Speaker 2: Of course... The Labour Party would remind you that National is going to increase fuel excise duty and road user charges during the course of the next Parliament if they
11. 1:26Speaker 2: win the election. So there are no new taxes, but there are increases to existing taxes.
12. 1:33Speaker 1: Yeah, what were big surprises from the announcement?
13. 1:35Speaker 2: I think one of the interesting themes of this election is the fact that obviously we've been through difficult economic times.
14. 1:41Speaker 2: The government books have been through difficult economic times. There isn't a lot of money left. sloshing about. And so you see in this fiscal plan, as you see in basically everyone's fiscal plans, is that there isn't a lot
15. 1:52Speaker 2: of free money. The only way to get money this time around is to do taxes like Labour is doing.
16. 1:58Speaker 2: And if you want a lot of money, then you have to have quite big taxes, which is what the Greens are doing, big taxes. And if you don't want
17. 2:05Speaker 2: taxes and the National Party, to remind you, wants no new taxes. Just to make that clear. Just to make that clear. Then there is not a lot of money.
18. 2:15Speaker 2: So what they're doing is they're taking the pre-election economic and fiscal update, the basic parameters of the coalition government.
19. 2:22Speaker 2: That kind of gives you a framework of a very tight next three years of the parliament. And we budget over four years. So you've got four years in this plan.
20. 2:31Speaker 2: They're taking those parameters and they're fitting basically everything within those parameters. There are no new cuts on top of what was in the budget this year. So in the budget this year, they did $ 2. 4 billion of cuts over
21. 2:43Speaker 2: the next few years, four years. So those cuts are in this plan, but no new cuts. There is $ 2. 4 billion of new operating spending each year over the course
22. 2:54Speaker 2: of the next parliament. Now that $ 2. 4 billion is meant to pay for the increased cost of teachers needing a pay rise every year, nurses, doctors needing, all that sort
23. 3:03Speaker 2: of stuff. Treasury thinks you need $ 2. 5 billion a year just to keep the lights on. This plan has only $ 2. 4 billion, so it's tight. Now, the Labour plan also only has $ 2. 4 billion, so they're tight as well. Everyone's
24. 3:15Speaker 2: really tight. And it basically uses that $ 2. 4 billion a year to fund all of the cost pressures over the next few years and all of National's election commitments. So
25. 3:26Speaker 2: it adds up. So far as we know, we've only had it for a few hours, but it's tight. And so basically, it funds the small number of election policies
26. 3:35Speaker 2: that the Nats have, and it doesn't fund basically much more than just keeping the lights on.
27. 3:42Speaker 1: Yeah, and on the tax cuts, so there aren't any in this update, but they are sort of still dangling the carrot of tax cuts a bit, right?
28. 3:48Speaker 2: What this plan does do is it doesn't offer tax cuts.
29. 3:53Speaker 2: It says we need to get surplus first. Once we get surplus, if the economy continues to grow, touch wood,
30. 4:02Speaker 2: then we can bend the debt curve down. that means that debt as a percentage of GDP starts to reduce, the fiscals get better, the government books get healthier. And if that happens, once we're in surplus, then eventually maybe
31. 4:14Speaker 2: if you're very good, you know, if you're kind to your parents, then there might be tax cuts in the future.
32. 4:20Speaker 2: So currently we're looking at a surplus in 2029 and this plan says all going well. At that point, we will think about tax cuts, not promise them, but it's in the picture.
33. 4:30Speaker 1: Yeah, it's interesting that a lot of it is focusing on that debt reduction kind of rather than introducing too many new ideas. Like, do you get the sense that
34. 4:43Speaker 1: because it's not the kind of like, you know, the lolly scrambles they always talk about, that it is kind of like just showing off economic stability and competency?
35. 4:53Speaker 2: Yes, I think the National Party is trying to make a virtue of stability and for want of a better term.
36. 5:02Speaker 2: The economic world is very turbulent at the moment. Obviously, we've had the oil shock this year. At the moment, there's a bit of a shock in the bond market, which is making debt more expensive for us, for everyone who has a lot of debt. And a lot of
37. 5:13Speaker 2: countries have a lot more debt than we do. We do.
38. 5:15Speaker 2: And the subtext of this plan is to sort of fix the roof while the sun is somewhat shining. The sad thing is that we are fixing the roof. The sun hasn't started to shine yet, but we sort of have to fix the roof.
39. 5:25Speaker 1: Yeah, but again, if you're very good and you're nice to your parents, the sun might shine again.
40. 5:30Speaker 2: Yeah. Interestingly, we had ACT's fiscal plan yesterday. They call it an alternative budget. And theirs was the same, but like typical ACT party that dialed it up to $ 10, 000.
41. 5:40Speaker 2: So there's this surplus earlier, bigger surplus is more than $ 12 billion less debt over the next four years than under the status quo plan. So the ACT Party is
42. 5:51Speaker 2: also saying, got to get on top of the debt and we're going to cut much harder, lift the super age, start lifting the super age sooner to get on top of the debt sooner as well. So both ACT and
43. 6:02Speaker 2: National are making the same points. But ACT is saying, hey, look, we're willing to do a lot more.
44. 6:08Speaker 1: With ACT's fiscal plan or alternative budget being released as well, is National in their one sort of taking into account that they are going to be a coalition partner of theirs,
45. 6:19Speaker 1: you know, if they should form the next government?
46. 6:23Speaker 2: It's a very good question. It's a funny part of these fiscal plans is that the fiscal plans work. Well, most parties do them. New Zealand First doesn't do them, which is funny because New Zealand First probably enjoys announcing
47. 6:33Speaker 2: more money than anyone else, which is probably why they don't tend to do these plans. There's not enough pages in the world. The irony about these plans is that everyone sort of pretends that they're in a first-past-the-post world.
48. 6:46Speaker 2: Even the ACT Party plan, it's sort of like, well, here's what an ACT Party government would do. And you're like, well....
49. 6:51Speaker 1: Good luck.
50. 6:52Speaker 2: Good luck with that. And the Greens are the same.
51. 6:54Speaker 2: Even National Labour, it's the same. Obviously, there isn't going to be a National Labour majority government this election, and probably for some time. So that is the irony. And actually,
52. 7:06Speaker 2: your question is a very important one because Treasury, when it released the economic and fiscal, a pre-election economic and fiscal update, the Treasury Secretary, Ian Rennie, did note that
53. 7:16Speaker 2: one of the risks that the government books face is is coalition commitments. In fairness to the main parties, they have actually been quite modest with their promises, and I think that's probably reflective of the time that we're in.
54. 7:28Speaker 2: But when it comes to forming a government after the election, there is a risk, and I think the Treasury Secretary identified this, there is a risk that you just say, right, well,
55. 7:38Speaker 2: you know, we're going to have a lolly scramble and future taxpayers are going to pay for it. And so there is no obvious way of funding those commitments in
56. 7:49Speaker 2: this plan. There is some headroom. There's about $ 7 odd billion worth of headroom there, but that will be for future cost pressures like teachers' salaries, et cetera. And you
57. 8:00Speaker 2: could potentially dig into that for election commitments, but then obviously when you need to increase teachers' salaries, there are thousands of teachers out there, there's less money to do that.
58. 8:08Speaker 2: So you need to be very– there's not a lot of money to fund the fun stuff and the boring stuff.
59. 8:13Speaker 3: Yeah, yeah.
60. 8:14Speaker 1: And I see they've got around three quarters of what Labour has for headroom now. But that sort of doesn't really tell the full story, right?
61. 8:22Speaker 2: Every election has a sort of fiscal debate. You know, we had fiscal holes. The big fiscal debate this election is around headroom. So you announce your fiscal plan and that has all of your election promises in it. But
62. 8:33Speaker 2: obviously your fiscal plan is for four years. It's three years of the next parliament plus another year just for stability's sake. Now, obviously you're not going to announce three years worth of spending in one go on the campaign
63. 8:45Speaker 2: because you need to keep something left over for your next three budgets if you win the election. So you tend to, every party leaves a bit of headroom. And in past elections, that's been about $ 9 or $ 10 billion.
64. 8:56Speaker 2: So the headroom in these plans, Labour's got $ 10. 4 billion, National has just over $ 7 billion. So National has less headroom. But,
65. 9:06Speaker 2: and Nicola Willis made the point at the stand-up, National's headroom has not been committed to anything. Labour's headroom has been committed to funding pay equity, and it also needs
66. 9:18Speaker 2: to fund an extra year of health spending. But fiscal plans are four years, not three years. And so Labour has, in its fiscal plan, frozen the health budget at the
67. 9:27Speaker 2: end of its fiscal plan, the 2030 budget. And that is probably one of the biggest flaws of the plan is that, yes, it funds health cost pressures, but if we read the plan literally, the health budget freezes, which
68. 9:39Speaker 2: is not something anyone believes the Labour government would do.
69. 9:42Speaker 2: Labour will not freeze health and Labour has said it won't freeze health spending. So Labour is not freezing health spending.
70. 9:50Speaker 2: So National has funded the full four years. So you can see in National's plan, the four years of spending, but that means that National's headroom is lower. So the other big issue is that Labour's biggest promise, the pay
71. 10:02Speaker 2: equity promise, is also meant to be funded from that headroom.
72. 10:05Speaker 2: If you take the $ 11 billion, which Treasury thinks is the pay equity number, Labour's funded an interim settlement of $ 2. 5 billion, so that takes your total unfunded pay equity,
73. 10:15Speaker 2: the total amount you need for pay equity, down to $ 8.
74. 10:17Speaker 1: 5 billion.
75. 10:18Speaker 2: So that $ 8. 5 billion Labour said will come from the headroom.
76. 10:24Speaker 2: They also need about $ 1. 5 billion to do that extra year of health. So if you have the $ 8. 5 billion for pay equity, roughly, Labour disputes the figure. So it's important to say that Labour disputes the figure. But if
77. 10:35Speaker 2: you take that rough Treasury figure, $ 8. 5 billion plus $ 1. 5 billion for that extra year of health, then Labour's headroom
78. 10:45Speaker 2: goes down to about 300 400 million dollars.
79. 10:50Speaker 1: Yeah it's interesting because you know obviously when you describe it with all the numbers and stuff like that it sounds like a lot but you know if you're not someone as tuned into treasury spreadsheets like how do you
80. 11:01Speaker 1: sort of look at these two plans from national labor just from sort of like a layman's point of view.
81. 11:06Speaker 2: They're an important exercise because they force you to make credible promises It's important also not to overstate them because the economy changes a lot. Like when we were last
82. 11:18Speaker 2: doing these fiscal plans, we were thinking we'd be in surplus by now, we'd be paying down debt by now, that things would be pretty good by now. The forecasts
83. 11:26Speaker 2: were wrong. Treasury revised them quite dramatically after the last election.
84. 11:32Speaker 2: And so it threw a lot of the commitments out.
85. 11:36Speaker 2: So there's a discipline. It's a good exercise in terms of forcing some discipline on the political parties, forcing them not to promise things that are ridiculous and unaffordable. For example,
86. 11:48Speaker 2: when the forecasts changed, you know, National's fiscal plan, the last election said, well, we'd be in surplus by now.
87. 11:54Speaker 2: It also promised tax cuts funded by those spending cuts. Now, National had a choice. They could have kept the surplus promise, by ditching the tax cut promise. But instead they kept
88. 12:06Speaker 2: the tax cut promise and broke the surplus promise. You know, you couldn't do both, basically. And that is the challenge with fiscal plans is that things change. And like these fiscal plans, both Labour and National are going to the
89. 12:17Speaker 2: election with them. And whoever wins, the economy could change.
90. 12:22Speaker 2: And if the economy gets worse, then they'll have that same issue. Do we keep our spending promises or do we keep our surplus promises? what does the bond market
91. 12:32Speaker 2: tell us to do? So they are interesting, but they also create choices down the line, very difficult choices. The
92. 12:43Speaker 2: other thing they're useful to do is it does list all the things that a political party has promised. And so you have the first budget in May 2027, if
93. 12:52Speaker 2: we're all still here. you can basically take the fiscal plan into the budget and say, you know, you've done this,
94. 13:03Speaker 2: this and this, and you haven't done that. So they're quite good there.
95. 13:06Speaker 1: Thank you.
96. 13:12Speaker 3: What is your commitment? But I'm only going to make a commitment when I know that I can pay for it.
97. 13:16Speaker 4: So National says $ 150 million a year. Will a Labour government increase medicines by at least that much?
98. 13:21Speaker 3: But that's an unfunded commitment. We do our maths, we do our numbers, we know our economics. How are you going to fund this? Say how you're going to fund it.
99. 13:26Speaker 3: It's in our plan. It's in our financial plan. You haven't released your plan, so how are you going to pay for it? It's really released next week.
100. 13:31Speaker 1: It's aligned with pre-through.
101. 13:32Speaker 2: It's not a surprise to you.
102. 13:33Speaker 3: You say you're going to pay for it by cutting international aid. Guys, let's make an agreement. Winston Peters has already said he's not going to let you do that.
103. 13:38Speaker 1: Can I talk about that?
104. 13:39Speaker 2: No, no, no.
105. 13:39Speaker 3: Let's make an agreement.
106. 13:40Speaker 4: So you say that he's not funded stuff. You say that he hasn't released a fiscal plan. Can we leave the have you funded it to one side and move on?
107. 13:48Speaker 4: Let's actually look at the issues as they stand.
108. 13:52Speaker 1: One thing I found interesting as well is the timing of it because we had the first leaders debate last week with TBNZ and then we've got our one coming up this week and it's coming in the middle of
109. 14:04Speaker 1: those because last week Jack Tame had to take discussion of like fiscal holes off the table because everything that came up Luxon would say to Hipkins you there are
110. 14:14Speaker 1: holes in your numbers and then Hipkins would say well you haven't don't even have any numbers yet and so yeah how do you think that having this all out on the table now is going to affect Winston Arts debate?
111. 14:23Speaker 2: Yes, I thought that was a flaw in Nationals planning, having Labour have theirs come out early. One of the sort of the bouquets to give out to political parties is the fact that Labour got theirs out, got their
112. 14:34Speaker 2: fiscal plan out within days of the pre-election economic and fiscal update. Now both of them are out. We have our debate on Wednesday night with Ryan Bridge moderating. And so, yes, we will, for the first time, we will see the leaders,
113. 14:46Speaker 2: the Chris's, face off. And they will actually be able to debate their fiscal plans because they both have them.
114. 14:52Speaker 2: And that will be very, very interesting to see what they are able to say because they both have flaws.
115. 14:58Speaker 2: Labour's one really doesn't have a lot of wiggle room for public services once the pay equity and health promise
116. 15:02Speaker 2: comes out. National's one is very, very tight. It's tight
117. 15:10Speaker 2: and it does– there are some other issues around the capital spending. So this is the investment in building roads
118. 15:19Speaker 2: and hospitals and whatever. The capital spending that they have announced is very road heavy, again, despite the fact that this parliamentary term, there's been a big discussion with the
119. 15:28Speaker 2: Infrastructure Commission saying, park the roads, pardon the pun, and start thinking about hospitals. Because we're an ageing population, and
120. 15:39Speaker 2: an ageing population spends less time on the road and more time in hospital.
121. 15:44Speaker 1: Yeah.
122. 15:46Speaker 2: Put it bluntly. So that's what the Infrastructure Commission has been telling us and National, well, National said it was listening when the report was released earlier this year and
123. 15:56Speaker 2: published a fiscal plan today that suggested it was not listening.
124. 16:00Speaker 1: So Nicola Willis and Barbara Edmonds on Q & A yesterday agreed to a political accord around the retirement system.
125. 16:07Speaker 4: I want a yes and a yes right now.
126. 16:09Speaker 3: So we've got a yes from Barbara Edmonds. A political accord around the retirement system, yes.
127. 16:15Speaker 1: Agreed. Do you think there's actually a willingness to work together on something like this, or is this just a nice little moment for a viral clip?
128. 16:23Speaker 2: Well, I would like to think there is, because something does need to be done. Everyone is saying superannuation is unsustainable, and all of the reports out of Treasury suggest that
129. 16:33Speaker 2: it is. And we're probably going to need some changes to support it. Higher taxes, lower some costs on super.
130. 16:44Speaker 2: But there was an accord. Jack Tame, again, put out this offer and they both agreed to it in the studio.
131. 16:50Speaker 2: We've had superannuation accords in the past and they've all fallen apart. Because there's one person in New Zealand politics who is very powerful and has very strong views on
132. 17:01Speaker 2: superannuation and the fact that it shouldn't change and that person is Winston Peters. and it is very difficult to see a situation in which his power in that area diminishes. However,
133. 17:12Speaker 2: it is interesting to see ACT and National and Labour all lining up with an agreement that something needs to be discussed. ACT's plan over the weekend suggested lifting the
134. 17:23Speaker 2: age to three months a year from next year. I think the challenge is Labour and National have very different ideas of what should change with super. So National's view
135. 17:33Speaker 2: is that the age of eligibility should increase, which would save you some money because you're not paying it for as long. Now, Labour has made some noises earlier this
136. 17:43Speaker 2: year that it might prefer means testing. They sort of pushed back on that quite quickly after it was said.
137. 17:51Speaker 2: And there is a challenge there because those two things are very different. Lifting the age is effectively a cut because you are not getting as much super as you
138. 18:01Speaker 2: in the past. And means testing super sort of sounds like a cut. But it is actually sort of a tax.
139. 18:12Speaker 2: If you have means and get your entitlement reduced, then that sort of acts as a tax on your lifetime earnings.
140. 18:21Speaker 2: Why should you save during your life if the more you save, the less super you get? Obviously, there's also the issue that some people can't save during their lives and actually do need a lot of super. And one of the good things about New Zealand super, it's always
141. 18:31Speaker 2: important to make the point in these conversations, is one of the good things about New Zealand super is that we do still have old age poverty in New Zealand, but we have much less than other countries do because
142. 18:41Speaker 2: we have this universal benefit, effectively, super. So you have to be very careful when you change it because you don't want to throw out the thing that is good about super, which is that we actually do have very
143. 18:51Speaker 2: low rates of pensioner poverty in other countries, which have different systems, have much higher rates. So it's very difficult to see National and Labour agreeing on because those two things are very different. It's very difficult to see them agreeing.
144. 19:03Speaker 2: The other idea is superannuations indexed to wages, so it goes up. It keeps pace with wages. Wages tend to grow faster than inflation. I know everyone listening and watching
145. 19:14Speaker 2: will be thinking, not recently, and you're right, not recently.
146. 19:17Speaker 2: But usually, over time, wages do tend to grow higher than inflation, and there has been a sort of discussion, well, actually, maybe we change the indexation to inflation so it keeps
147. 19:27Speaker 2: up with the cost of living. but not wages so that it costs less over time. And you actually do save quite a lot of money that way if you
148. 19:35Speaker 2: index it to inflation rather than wages. But obviously that means less money in the hands of pensioners, which goes to that pensioner poverty question. There's less money, so therefore
149. 19:45Speaker 2: likely more poverty. It's a nightmare. Superannuation is a nightmare.
150. 19:49Speaker 4: Yeah.
151. 19:50Speaker 2: I you know it's it's it's i so to your question it's it's goodness knows how they'll solve that we should lock the doors of parliament until they come out with a solution.
152. 20:02Speaker 1: Just finally and just quickly i want to get we've got as we mentioned the leaders debate uh downstairs on wednesday uh as you know political editor what's on your
153. 20:13Speaker 1: bingo card for what to expect to see.
154. 20:16Speaker 2: Well i would have like if you'd asked me a week ago i would have said no new taxes would be bad christopher lyston didn't actually say no taxes that much um so i so my my my bingo card
155. 20:28Speaker 2: is pretty redundant um but we'll probably hear that at least once. I think the fiscal plan issue is a big one, and that issue around the credibility of both
156. 20:39Speaker 2: of their plans, and I'd certainly expect to hear a lot about that. The other interesting thing is both ACT and the Greens have come out with quite hardcore versions
157. 20:50Speaker 2: of their various major party friends. The Greens... The Greens aren't really helping Labour brush off the no new taxes message because the Greens have quite a few new taxes.
158. 21:02Speaker 2: And Labour polling below 30 is saying that it won't implement any of them. They're saying CGT, investment boost, the tobacco,
159. 21:12Speaker 2: the heated tobacco products, excise, a few tax changes, a new tax, a few tax changes, and that's it. But when they're polling as badly as they're polling, they're sort of in no position to say, no, ifs, no buts,
160. 21:23Speaker 2: no maybes, we're not taking your taxes. And so Christopher Luxon has every incentive to say, you know, to tar
161. 21:32Speaker 2: Labour with the brush of their coalition partner, the Greens.
162. 21:37Speaker 2: Exactly the same thing is going to happen on the right side of politics. Christopher Luxton and the National Party are also not polling very well. And the ACT Party has a fiscal plan that has things that make Nicola
163. 21:49Speaker 2: Willis's stomach churn and are not very politically palatable. I think the polling suggests the electorate has had it up to here with cuts to public spending. And the ACT
164. 22:00Speaker 2: Party fiscal plan has plenty of cuts to public spending that they would like to do in the next three years.
165. 22:06Speaker 2: And just like Chris Hipkins will have a difficult time convincingly ruling out the Greens' new taxes, Christopher Luxon is going to have a difficult time polling where he is ruling out some of the ACT Party's cuts to public spending.
166. 22:17Speaker 2: But those are big cuts in the ACT Party plan, very big cuts. So I expect to hear Christopher Luxon talk a lot about those as well. So you are
167. 22:28Speaker 2: going to hear a lot of Chris Hipkins and Christopher Luxon having to front up for the quirkiness of their likely coalition partners and a wee bit of opportunity too,
168. 22:38Speaker 2: the opportunity coming through the middle. So we might hear some give and take about the ruling in and ruling out of opportunity.
169. 22:46Speaker 1: Well, I should make for a heated debate then.
170. 22:48Speaker 2: Look, I know I'm probably contractually obliged to say it, but I genuinely will be watching it. It will be a very, very interesting and good debate.
171. 22:57Speaker 1: Well, I look forward to reading your analysis on Thursday.
172. 22:59Speaker 1: Thanks for joining us, Thomas. Thank you. That's it for this episode of The Front Page. For more on this story and all of the stories that The Herald has
173. 23:09Speaker 1: been covering today, you can head along to nzherald.co.nz. The Front Page is produced by Jane Yee and myself, Richard Martin.
174. 23:18Speaker 1: Kane Dickey is our studio operator. Hope you enjoyed this episode and we'll be back tomorrow with a brand new episode for you.