Govt vetoed plan for $300 gift to everyone

Bill English. Photo / Mark Mitchell

Every New Zealander over the age of 18 would have been in line for a one-off, lump-sum payment from the Government of $300 next month - and pensioners and beneficiaries might have got up to $1200 each - had the Cabinet adopted the Treasury's advice early this year.

In the lengthy lead-up to last month's Budget, the Treasury put forward options to ministers for a lump-sum payment to individuals.

This was to compensate them for a separate recommendation that further tax cuts be cancelled as part of a package of belt-tightening measures designed to start dragging the Government's accounts out of the red.

One option would have divvied up $1 billion from the forgone tax cuts among the country's 3.2 million adults, giving each $300.

Another would have seen the money given solely to superannuitants and beneficiaries on the basis they were likely to spend it, rather than saving it, thus softening the impact of the recession.

Couples would have got $1800 between them and singles would have got $1200.

The advice is contained in a wad of previously confidential Budget-related documents released by the Treasury yesterday.

One report written in late February shows the Treasury arguing tax cuts scheduled for April next year and the year after be cancelled and replaced with the one-off payment.

The proposal echoed the "fiscal stimulus" package Australian Prime Minister Kevin Rudd unveiled in early February which included one-off payments of A$950 to low- and middle-income households and individuals.

The NZ Treasury argued that a one-off injection of $1 billion would bolster the considerable stimulus to the economy provided by the October and April tax cuts, further interest rate cuts and - at the time the document was written - a lower dollar.

To save money at the same time, the Treasury also suggested an eight-year "contributions holiday" for payments into the NZ Superannuation Fund and a big cut in the sum set aside for new spending in future Budgets - advice that ministers accepted.

However, the Cabinet opted to "defer" - rather than cancel - the final two tranches of tax cuts until economic conditions improved.

Finance Minister Bill English said yesterday that the one-off, lump-sum payment idea was rejected because the Government was focused on stopping debt rising to unacceptable levels.

"A number of options like that did not achieve our objective."

Moreover, the Government's books had deteriorated further in the period between when the report was written and the delivery of the Budget, making such a payment unaffordable.

The Treasury paper shows officials canvassed a universal payment of up to $1000 to all adults and as much as $3000 for couples getting NZ superannuation or on a benefit.

The officials ultimately narrowed down the options to three possibilities: a universal lump sum of $300, a $1200 payment to single beneficiaries and superannuitants and $1800 to couples, and a hybrid option that would have seen the latter grouping getting $200 while all other adults would have received $400.