Election 2023: Labour’s policy of removing GST from fruit and veges slammed, but voters support it

By RNZ

Removing GST from fresh and frozen fruit and vegetables is an expensive and “sad” way of saving families a few dollars a week, an economist and spokesperson for the Child Poverty Action Group says.

On Sunday, Labour announced it would be taking GST off fresh and frozen fruit and vegetables if re-elected into power. But there were a number of terms and conditions that came along with it.

The announcement also had changes to Working For Families which would put at least $47 a week into the pockets of eligible families by 2026.

Susan St John said the tax policy had nothing for the 160,000 children living in benefit-dependent homes that do not get the In Work Tax Credit part of Working for Families.

She said the GST policy was “a sad way to give $4 a week, if they’re lucky, to low income families”.

It was an “expensive” way to do it and was unlikely to have any impact on improving nutritional value of what families are eating.

There was no great logic for it, she said.

National MP Nicola Willis. Photo / Supplied

National’s finance spokesperson Nicola Willis told Morning Report Labour’s policy was “pretty mean after three years of the cost-of-living crisis smashing people”.

The cost of “everything” had gone up and all Labour had managed to summon up, WIllis said, was a sum worth the average cost of a kūmara.

“So we want to do much better than that and we’re gong to cut out the middleman.

“We think passing a tax cut through a supermarket or a shop and hoping they will pass on the full benefit is naïve, and we want to have a much more direct approach.”

Willis said National’s tax plan, which is yet to be fully announced, would see the average family benefit by at least $30 a week.

“That’s before you count our additional Family Boost policy which provides a childcare rebate of up to $75 a week.”

But voters had indicated they liked the policy announcement - with the Talbot Mills Poll showing 66 percent in support and even 59 percent of National Party voters were in favour of it.

Willis said Kiwis were “desperate” for cost-of-living relief.

“They have been smashed for year after year, so of course they are going to say yes to something that might make a difference, but we want to do something better, that will give them more relief that won’t rely on supermarkets and shops having to pass on the full cost.”

Willis said National would be announcing its full tax policy “very soon” and the average income household would do better under them than Labour.

Finance Minister Grant Robertson told Morning Report a number of circumstances had changed his mind about the GST policy he had not been fond of just months ago.

“The first is that I was worried the benefits of this wouldn’t be passed on to consumers. We now have the Grocery Commissioner in place whose job it is to be a watchdog over our supermarkets. That person’s now going to have the job to ensure those benefits do get passed on, we haven’t had that possibility before.

“The second is that having looked further at what is done overseas, I can see that this is implementable. We do have to be clear around the definitions, we’ve done that, and thirdly, I was concerned that if we just kept it to fresh fruit and vegetables, not enough New Zealanders would benefit from it.

“By including frozen vegetables in particular, which a lot of low-income families do use as their staple, I’m confident we are now going to reach a wide range of New Zealanders with this policy.”

Robertson said he understood tax purists did not like the GST system being mucked around with - but it was something many other countries did and in a way, New Zealand was catching up.

It was a policy for people who go to the supermarket and worry about what they are going to put together for their family, he said.

It was also important to view it in context with other policies that Labour had announced - including removing the $5 prescription charge, making childcare more affordable, and free public transport for children.

“We’ve done a number of things, as well as dealing with Covid, that I think have transformed and changed New Zealand for the better. This is one policy in a 10-point cost of living plan and I think it’s a good one.”

Working for Families announcement

Willis also criticised Labour’s Working for Families announcement.

Labour said it would increase the In-Work tax credit to $25 a week for those eligible for Working for Families.

The Working for Families abatement level would also rise to $50,000 a year, leaving working families better off by at least $47 a week, but not until 2026.

Willis said Labour was “trying to take credit” for delivering relief - but that relief would not come until June 2026.

It was an “awful long time” for people in a cost-of-living crisis to wait, she said.

Susan St John, of the Child Poverty Action Group, was also critical of the policy announcement.

“They’ve taken the discriminatory part of Working for Families tax credits and put that on steroids.”

St John said the In-Work tax credit should have been folded into other family tax credits so all children in low-income families get the same assistance on the same basis.

She also said having the abatement not come in until 2026 - just prior to the next election - was not going to make the “slightest difference” on the actual budgets of people.