Irresponsible tax cuts lead to seventh successive deficit

National's borrowing to pay for cutting the top tax rate was irresponsible and will likely lead to a seventh successive deficit, the Green Party said today.

Treasury have forecast a $572 million deficit this year in its Half Year Economic and Fiscal Update released today. Net core Crown debt has now increased by a record $49.3 billion since National took office.

“National has repeatedly staked its economic credibility on achieving a budget surplus this year, but even that narrow goal is looking unachievable,” Green Party Co-leader Dr Russel Norman said today.

“How can people say Bill English is a good economic manager when his decisions are leading to seven consecutive deficits?

“We already know that health and education are facing big cuts in real terms under this Government, so it is concerning that Bill English plans to cover his deficits with more cuts.

“Tax cuts for those on high incomes in 2010 have cost $1 billion in lost revenues each year.

“National has borrowed $4.7 billion to date to fund these tax cuts. Without these ill-timed tax-cuts, Bill English could have run a fiscally responsible Government restoring it to surplus this year.

“National have stretched their economic credibility to breaking. This is the same Finance Minister who promised further tax cuts in September – a few weeks before the election.”

Dr Norman accepted the difficult headwinds the economy has faced since 2009, but said it was time for the National Government to start taking responsibility for the choices they’ve made over two terms.

“National chose to bet the books on continuing high dairy prices, but dairy prices were always going to retreat from their record highs,” said Dr Norman.

“National could have invested in R&D to help diversify our economy away from its dependence on one export commodity – milk powder.

“National chose to bet the books on top tax cuts stimulating the economy, when tax cuts for those on lower incomes are more stimulatory as these people must spend their increased incomes rather than save them.”