Finance Minister Grant Robertson says it wouldn’t be responsible to take any options off the table in terms of how the Government pays for the massive recovery from Cyclone Gabrielle.
He was facing questions at the Finance and Expenditure Select Committee from National finance spokesperson Nicola Willis about not ruling out implementing a flood tax to create revenue.
“Given your explicit acknowledgement of the extra cost of living pressure that will now be placed on New Zealanders together with your claim that we have good fiscal headroom, why yesterday wouldn’t you rule out extra taxes to pay for the rebuild,” Willis asked.
Robertson replied by saying it’s not possible to know the full estimate of how much the recovery will cost. He has previously said it’s likely to be in the billions of dollars and comparable to the Christchurch earthquake.
“We are working our way through both what the quantum will be and how we will pay for that. I don’t think it is particularly responsible to take any options off the table at the moment.
“No one should read into the comments I made yesterday that any decisions have been made about creating extra revenue and what levels of borrowing might be required, or what mix of those two things might exist.
“It is simply a reflection of the fact that we are in extremely unknown territory and we need to have a think about how we will pay what is a very big bill.”
Speaking to reporters on Tuesday morning, Robertson emphasised no decisions had been made about tax reform at the Budget, including a flood tax.
“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 then.
In revealing parts of the Government’s initial response to Cyclone Gabrielle on Monday, Prime Minister Chris Hipkins said a taskforce would be modelled on one established in Queensland after floods there.
Following the 2011 Queensland floods, a levy was imposed on taxpayers making more than $50,000 to help pay for the recovery. Those making between $50,000 and $100,000 paid an additional 0.5 percent tax, while those making more than $100,000 paid an additional 1 percent.
Willis on Wednesday put it to Robertson that his first port of call was reaching into the back pocket of New Zealanders and not reprioritising funds away from other projects. Robertson rejected that.
The National MP also asked the Finance Minister if he stood by Labour’s commitment of no new taxes this term outside of the 39 percent tax rate.
“That is the position that we stand in today,” he responded.
“The member will be very well aware that many New Zealanders have just suffered the impacts of the greatest weather event this century. One of the things I am proud of as a Government is that we have responded as different crises have come across our desk.”
He said the Government had to make adjustments to Budgets over recent years, including throughout the COVID-19 pandemic.
“Our job is to be nimble and flexible. Nothing has changed in terms of what we intend with respect to revenue, but it would be irresponsible to not now sit back, look at the total cost, and work out how we will pay for it.”
Willis told Robertson her view was it wouldn’t be responsible to impose additional costs on taxpayers when the Government could reprioritise its spending.
In a statement following the Select Committee, Willis said National was “alarmed” the Government could impose a new tax.
“Instead, the Government should bring discipline to its own spending, dump expensive pet political projects like Auckland Light Rail, and focus on getting infrastructure built more efficiently.
“In a crisis, the Government’s first port of call should not be the back pockets of cash-strapped Kiwis.”
Robertson earlier said New Zealand had good fiscal headroom to deal with the crisis, noting that New Zealand’s net debt was at 21.6 percent.
“The picture will become clearer over the coming weeks and months but this does have an impact on how we finalise the Government’s Budget. It will mean changes to the forecast and it may mean changes to the Government’s economic and fiscal approach as outlined,” Robertson said in his opening remarks.
“We have not taken final decisions, but we are actively considering how we will meet additional costs and how we will reprioritise what we are already doing or planning to do to meet the needs that are being identified.”
ACT leader David Seymour asked Robertson if ministers had again been asked to look at what can be reprioritised in light of the cyclone.
Robertson replied saying the Government is constantly looking at what can be reprioritised and pointed to recent reprioritisation announcements, such as the end to the TVNZ-RNZ merger.
Seymour has also voiced opposition to the idea of a new cyclone recovery tax.
“ACT says there needs to be a moratorium on expenditures that are not urgent. The country needs to pay for a natural disaster, getting Kiwis lives back on track is the priority. Spending billions on light rail is not,” Seymour said in a statement.
“New Zealanders will never have a chance to fight the cost of living crisis and price rises they already face, which will be exacerbated by these floods, if Grant Robertson can’t cut spending.”
National leader Christopher Luxon told AM borrowing money for the rebuild made more sense.
“I think we should borrow for it because we’re actually making an investment in that region and, when you borrow money to upgrade the roof on your house versus borrowing to pay for your groceries, there’s a difference there in terms of making an investment in a region.”
In a speech to Parliament on Tuesday, Hipkins said even if New Zealand borrows to contribute to the recovery “we would still have lower debt” than many other countries.
Robertson has also confirmed Budget 2023 will be delivered on May 18. He said it will come in the shadow of Cyclone Gabrielle and be focused on both cyclone recovery and the cost of living.
“We are committed to working with local communities to get affected families, farmers and businesses back on their feet and their regions back moving. The economic and fiscal impact is not yet fully known, but we know the rebuild will be in the billions of dollars.
“The Government has taken action quickly to provide certainty and assurance in these early stages of the recovery and further support is coming.”
He said the cyclone damage will affect the Government’s operating and capital spending plans in the current year and subsequent years and “is being factored into planning for Budget 2023”.
“Budget 2023 will also focus on what matters most to New Zealanders, with the cost of living a top priority. We have already extended the fuel tax reductions and half priced public transport fares to the end of June to take some of the pressures on household budgets and business costs. We will be considering further support to lighten their load.”