PM Key argues quake levy would have to last 15 years as Greens say 57% of NZers support proposal

By Alex Tarrant

Prime Minister John Key is attempting to pour cold water on the Green Party's calls for a five year levy to help pay for the Christchurch rebuild by saying it would need to be applied for 15 years.

His comments came as the Greens released a poll where they claimed the majority of New Zealanders support their proposal.

The Greens say 57% of New Zealanders support their idea for a temporary levy on personal income taxes to help pay for costs from the February 22 quake, although there could be questions on the drafting of the poll the party used to guage public opinion on different options to pay for the rebuild.

Early estimates have the quake costing the government about NZ$5 billion as well as another NZ$5 billion in reduced tax revenue over the next four or five years.

The government has increased its borrowing programme to pay for the immediate costs arising from the earthquake, such as business and wage support packages, as well as civil defence and temporary housing costs. Treasury said last week it was increasing the government's borrowing programme by NZ$1.5 billion to NZ$15 billion for the year ending June 2011.

Government has indicated it will then tighten its budget spending as it looks to get its books back to a "meaningful" surplus by 2015/16 to start repaying debt. So far, only the education, health and justice departments are in line for nominal spending increases, with savings having to be found from other areas. It is not yet clear whether those three departments would receive real increases to cover the costs of inflation, although Key has signalled moves should be "fairly consistent" with government's previous plans to cover for inflation.

'Levy would mean less borrowing'

Green Party co-leader Russel Norman has called for a temporary levy on incomes over NZ$48,000, and a slightly higher levy on incomes over NZ$70,000, to help reduce the government's borrowing requirements in the face of the threat of a credit rating downgrade from international ratings agencies.

A series of different scenarios prepared for Norman by the Parliamentary Library show a levy could raise between NZ$229 million per annum with just a levy, to NZ$1.026 billion per annum if government reversed its April 1 corporate tax cuts and applied a levy. The top scenario would see a 1.5% levy placed on current taxes on incomes over NZ$48,000, and 3% on incomes over NZ$70,000.

Five years of such a levy would cover the government's estimated costs from the quake, Norman claims.

But Key this morning continued to say a levy would have to be applied for much longer than the Green Party was proposing.

"Let’s say you follow the Greens, choose to put a levy on, it will raise around NZ$600 million a year. Well, you’ve still got to borrow. The earthquake’s going to cost a hell of a lot more than NZ$600 million," Key said on Radio Live this morning.

"So if you went to people and said, well you’ve got to borrow, the question is how you repay: Either by the government spending a little bit less than it otherwise would do, or sending you a bill, by the way, for 15 years, then I think you might find that the majority of people would say, ‘I’d rather have the government trim its expenditure a little bit’," Key said.

Greens say public supports levy, Key questions poll

The Green Party last week commissioned a UMR poll to try and guauge public opinion on how to cover the government's NZ$5 billion cost from the quake. The full poll can be viewed here.

The headline question asked:

Several options have been suggested for helping to pay the cost of rebuilding Christchurch. One option is introducing a temporary levy on top of the current personal income tax rates. This levy could be an additional 1.5 percent for those earning between $48,000 and $70,000 and an additional 3 per cent on money earned above $70,000. Do you strongly support, somewhat support, somewhat oppose or strongly oppose a levy along these lines?

Of the 750 respondents, 18% indicated they strongly supported the idea, while 39% said they somewhat supported the idea, giving 57% in the 'total support' category. Seventeen per cent said they somewhat opposed a levy, while 22% said they strongly opposed a levy, while 4% were unsure.

The second question from the poll was:

The government estimates it will have to spend around $5 billion to rebuild Christchurch following the earthquake there. Would you prefer the Government fund the cost of rebuilding Christchurch by:

A) A temporary levy on New Zealanders with incomes over $48,000,

B) The government borrowing, that is taking on more debt to fund the rebuild,

(OR)

C) Making big cuts to government spending on programmes likeWorking for Families?

Forty per cent of respondents said they supported (A), the levy option, 22% supported (B), the borrowing option, and 29% said they supported (C), the spending cut option. Nine per cent were unsure.

However, although the first question said a there were several options to help pay the government's costs, the second question was worded in a way as to signify only one of those options would be possible to pay for the quake costs.

“That poll, like any poll, if you don’t ask the right question you get the wrong answer," Key said on Radio Live.