PM Chris Hipkins says communities may have to make some 'tough calls about managed retreat' following the destruction from Cyclone Gabrielle. Video / NZ Herald
The Government is open to raising taxes at the Budget in May to cover the cost of the Cyclone Gabrielle clean-up, potentially reversing a position taken earlier this month to stick to former Prime Minister Jacinda Ardern’s revenue policy.
Prime Minister Chris Hipkins and Finance Minister Grant Robertson have both said they will look at both expenditure and revenue options at the Budget, likely to be delivered in May, which is being rewritten in light of the impact of the cyclone.
When asked about a one-off “cyclone levy” of the kind used following the Queensland Floods, Hipkins told RNZ’s Morning Report, “the issue of how we pay for all of this in the medium term will certainly be front of mind in the budget. It is certainly not something we will make immediate decisions on”.
When directly asked whether it could be ruled in or out, Hipkins said “at this point I am not ruling things in or out”.
This is a change from how Hipkins answered question about changing tax settings soon after he became prime minister.
In January, when asked about tax changes, he said he would be honouring the Labour 2020 election manifesto, which promised to make no tax changes beyond those Labour campaigned on like introducing a new top tax bracket.
“We’ll honour the commitments we made around tax at the last election; I absolutely stand by those commitments,” Hipkins said in January, adding that any tax changes would be part of Labour’s 2023 manifesto that has yet to be written.
“In terms of our tax policy for the next election, New Zealanders will know it well in advance of the election. I’m not going to announce a tax policy on day one,” Hipkins said.
Robertson equally said he would look at both revenue and expenditure in the Budget.
On Monday, he said “no decisions have been made” around revenue gathering policies, rather than reiterating that the revenue side of the equation had been fixed.
“When I come to put the Budget together, I consider revenue and I consider expenditure,” he said.
Heading into caucus on Tuesday morning, Robertson was asked whether he anticipated any changes to Labour’s revenue policy from the election.
“We obviously have to reassess where we are at in terms of the cyclone. It is a very significant bill the Government will have to meet.
“We haven’t made any decisions to change it - so right now things are as they were, but clearly we have to reassess the extent of this and what it will mean for the Budget,” Robertson said.
Finance Minister Grant Robertson announcing business support. Photo / Mark Mitchell
He said a decision about whether to fund the cleanup with additional borrowing or additional tax revenue would be made as the Government got more information ahead of the Budget.
Robertson said “no decisions have been made” to reform the tax system in the Budget.
“We have done our major tax reform for this term. What I am saying is this is a significant event and the Government has to work through both how we’re going to pay for things, and what we have to pay for,” he said.
This Government has typically made big revenue decisions outside of the Budget announcement, announcing and legislating changes separate to the Budget itself.
The new top tax rate was implemented outside of the budget, as were the Government’s property tax changes.
There is an awkward issue around timing. The tax year begins on April 1, meaning most changes would need to be implemented before April 1 this year, creating a high level of uncertainty, or announced at the Budget and implemented for the next tax year - in which case the policy would essentially become Labour election policy anyway, given there is an election between when it had been announced, and when it would be implemented.
National leader Christopher Luxon did not agree on funding the rebuild with additional revenue and argued that it should be funding with increased borrowing, like the Kaikōura and Canterbury Earthquakes.
“We’re going to have to borrow that money and we support that. We support doing a proper rebuild,” Luxon said.
“We’ll support the Government about saying, ‘here’s the pool of money that we need’ - let’s be real, we have to borrow for it, that’s fine, but let’s make sure that money delivers outcomes,” he said.
