David Seymour on balancing the books before tax cuts, how he plans to save more than $2.4b from the public service and what to do with debt

Interest.co.nz is talking money, tax and delving into political parties' financial and economic policies ahead of this year's election. In this installment, ACT leader David Seymour also discusses his view on debt and how he plans to save money in the public service. 

ACT's tax plan will look quite different this election. Leader David Seymour in the past has proposed major reform to the income tax brackets in the party's ‘alternative budgets'. Due to be released in October, this year's won't paint a picture similar to that of 2023 of shaving the tax brackets down to two. 

That's a decision based on the state of the economy, the deputy Prime Minister says. "And because of frankly how the government's balance sheet is, the savings that we signed up to in this government have not been made by Nicola Willis and the wider Cabinet. That is a shame."

"We're still proud of the savings we have got, but we're not where we ought to be. We still need to do a repair job, and that means balance the books without giving into the temptation of new taxes. The ACT Party has stopped three new taxes in this government: a bed tax, a stamp duty on houses, and a bank tax. All of which would have been put in place if it wasn't for us."

"You've got to get the sequencing right. Balance the books. No new taxes. Then cut taxes."

ACT's tax plan

He said he would much rather be in position where the government's in surplus first, before asking, "should people be able to keep more of what they make, and then start getting back to a balanced budget, but with less tax."

"We're not in that situation. We're borrowing $14 billion a year. We're borrowing over a million dollars an hour just to pay interest on the debt that we already have. So the number one priority is balance the books. Number two priority is do it without adding new taxes, and then - and only then - you can start to talk about reducing tax."

Seymour said it was irresponsible to cut taxes "if it means you're going to increase borrowing, because that's not really cutting taxes, that's just putting more tax onto future generations that will have to pay back that debt with interest". 

"What's responsible is to get back to a balanced budget, and that's going to involve the government getting smaller and more efficient. And we've got a few ideas about that. And then, once you're paying back debt, then you can say, okay, time to cut taxes."

Debt

Seymour wants debt to get down to 20% over the next decade, with net core Crown debt just over 40% of GDP, forecast in the last Budget to peak at 46% in 2028. 

Seymour said it was critical to get debt that low to absorb the next shock.

"I'm talking a big one that's going to add $80 billion of cost.... You can imagine a big earthquake, you could imagine a prolonged separation from the world due to some sort of geopolitical issue, maybe something in the cyber world will be the next big disruption."

Public Service

ACT wants to drop the number of government departments, currently about 40, down to 19, with only 18 ministers.

The Government is already hoping to save $2.4 billion over four years from changes in the public service, but while Seymour doesn't have a figure on it, he thinks his plan can save more. 

"We haven't put a cost on this, and the reason why… is that if you think about what it means to be a minister right now, you could be the minister of hunting and fishing, or the South Island, or Auckland, there is no department for those things." 

"They're just sort of ghost portfolios. There are departments that answer to 23 different ministers. The net effect of this is that everybody and nobody is in charge of everything and nothing, I want to redefine what it means to be a minister," Seymour said.

"It's one person in charge of one budget, with the ability to fire their CEO and some KPIs [key performance indicators] to achieve, and have only 19 of those departments."

"Now, if we were to do that, I think we'd suddenly find that there's a huge amount of efficiency that can be gotten, but right now ministers don't have that function. They basically exist to express something about the government's love for a group of New Zealanders."

Also see Seymour on aiming to prevent his coalition partners' plans to break-up Foodstuffs, and Leader Qiulae Wong explains Opportunity Party's land tax and retirement savings overhaul, plus her take on KiwiMart, crypto tax breaks and AI.