Which one of these does not belong? (a) Returning to surplus. (b) Reducing net debt. (c) Cutting ACC levies. (d) Cutting income tax. (e) Reducing debt quicker. The answer obviously is (d). The Government calls these its five fiscal priorities but the fourth, projecting income tax cuts from 2017, has no right to be in a Budget that has just failed to return to balance and projects a negligible surplus next year.
Without a sustained return to surplus none of the Government's responsible priorities will be possible. It will not have spare cash to start paying down debt from 2018, let alone (e) finding the revenue to get the debt down to 20 per cent of GDP sooner than 2020. That is the target that matters, it is where the net government debt needs to be in case of another international economic upset. The Labour Government's surpluses and low debt enabled National to run deep deficits in the last crisis. It is taking its time to restore a fiscal cushion.
Finance Minister Bill English declared yesterday, several times, "The Government does not intend to make cuts to services, programmes or income support simply to chase a surplus." Why not? The Budget did in fact include a notable cut, to the $1000 KiwiSaver starting incentive. That was ripe for the plucking, a subsidised savings scheme never really needed a "kickstart" gift from taxpayers. A more determined government would cut more waste of that sort.
But even one which is content to follow a more leisurely return to surplus cannot justify tax cuts as early as 2017, not coinciding with the next election year. Though Mr English says the prospect is conditional on fiscal and economic conditions at the time, his budgeted future allowance already provides for cuts that the Government says will be weighted to low- and middle-income earners.
There are better ways to help meet their needs than tax cuts at lower rates that everybody pays. The better way was in fact the best feature of yesterday's Budget: a tighter targeting of child support supplements for wage earners. Those on the lowest incomes will get more and those earning above $88,000 a year a little less. There is more room for savings in payments to large families on incomes at the upper end of the entitlement.