Budget 2024: Labour’s Barbara Edmonds warns of Govt’s ‘smoke and mirrors’ in upcoming Budget

Labour finance spokeswoman Barbara Edmonds says she isn’t convinced the Government will fulfil its promise to provide tax cuts in the Budget without increasing debt or worsening inflation.

It comes as Edmonds uses her first pre-Budget speech to warn New Zealanders of the “smoke and mirrors” the coalition Government might employ in its attempt to address long-standing issues such as homelessness, and the quality of health and education infrastructure.

“What you will see on Budget day are big numbers. But I ask you to be aware of the smoke and mirrors,” she said.

“Is it really a meaningful budget increase or just what was set aside by the previous Labour Government bundled together to make it look big, plus a little bit more that doesn’t even meet inflation?”

She refused to shed any further light on the tax policies Labour would take to the next election, saying she didn’t have a “juicy soundbite on wealth tax or a capital gains tax”.

Earlier this month, Finance Minister Nicola Willis promised 83 per cent of New Zealanders over the age of 15 and 93 per cent of households would benefit from tax cuts in the forthcoming Budget on May 30.

The Government has come under pressure to justify the tax cuts at a time of fiscal restraint. It justified them by saying they would be funded by new revenue tools and spending cuts, meaning they wouldn’t require borrowing or increase inflation.

Speaking at the Hutt Valley Chamber of Commerce, Edmonds was critical of the Government’s proposed public service spending cut of between 6.5 and 7.5 per cent, which had led to about 4500 job losses so far.

“In Government, we knew that there were efficiencies to be made to the public service post our Covid-19 response, and a pathway back to black.

“[Former Finance Minister Grant Robertson] had already asked departments to find 2 per cent savings which is a sensible first sweep.

“These current cuts go too deep, too fast and we are seeing the repercussions already.”

Finance Minister Nicola Willis will deliver her first Budget next week. Photo / Mark Mitchell

She claimed the cuts had led to retailers in Wairarapa and Kāpiti Coast laying off staff and reducing their operating hours, which she used to show the cuts had made an impact beyond Wellington City.

Some of the speech focused on Edmonds’ upbringing and her experience growing up with her sole parent on a benefit. She also referenced her struggles making her own books balance when she had children while studying.

However, there were few specifics about her party’s approach to tax in her address, instead outlining her own economic priorities: addressing the high cost of living, reducing compliance costs for small businesses, inter-generational economic planning and infrastructure investment that lifts business confidence.

“They will guide the choices we make when Labour comes back into Government.”

Questions over Labour’s tax policy haven’t faded since party leader Chris Hipkins stated a wealth tax or capital gains tax was back on the table as Labour considered what policies it would campaign on in 2026. Its 2023 proposal to take GST off fresh fruit and vegetables failed to appeal to voters.

Robertson, now retired, and Labour MP David Parker worked up a wealth tax policy ahead of the 2023 campaign but that was scrapped by Hipkins.

Barbara Edmonds drew on her personal experiences during her speech. Photo / Mark Mitchell

In March, Edmonds told the Herald she was not looking to announce a wealth tax or capital gains tax any time soon, but thought both taxes have pros and cons in terms of raising revenue for a government.

She said she wanted to have a discussion as a country about the coming economic challenges and what sort of society people wanted.

“As we step through this sort of party process to get to our manifesto in 2026, we’re going to have to bring the public along wherever we go. So I think actually having that wider public debate [is due], because we didn’t really get to have it when the tax working group report came out in 2019,” Edmonds said in March.

That report, after years of consultation, recommended a capital gains tax, but that was ruled out by then Prime Minister Jacinda Ardern.

Adam Pearse is a political reporter in the NZ Herald Press Gallery team, based at Parliament. He has worked for NZME since 2018, covering sport and health for the Northern Advocate in Whangārei before moving to the NZ Herald in Auckland, covering Covid-19 and crime.