Friday 6th May 2011 1 Comment
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Finance Minister Bill English is keeping tight-lipped over changes to KiwiSaver following a reported cut to the scheme's tax credit in this month's budget.
Scrapping the tax credit, worth up to $20 a week, could save the Government up to $600 million to $700 million a year, although a smaller cut was possible, the Dominion Post reported today.
The Government was also reportedly considering changes to contributions for public servants so that they would be made directly from departmental budgets.
English today reiterated previous indications that KiwiSaver would be changed to make it more sustainable, but told reporters they would have to wait for the budget for details.
Asked if the tax credit was safe, English said he would not comment on what parts of the scheme were being ruled in or out.
"There will be some changes announced in the budget along with a lot of other steps the Government's taking to get our deficit under control and increase our savings."
English batted off claims that changes to the scheme would break National's previous election promise.
"We're dealing with a series of events which have led to a very large deficit. At the same time we also need to increase national savings so that we can get more jobs and more investment."
Asked if changes to KiwiSaver would create uncertainty, English said people would save if they wanted to.
"And that's what they're doing. The good news is our savings rates are increasing and we want to keep pushing in that direction."
Prime Minister John Key was also tight-lipped on changes to KiwiSaver ahead of the budget.
"We have signalled that there may be one or two changes there, but overall we're very keen to ensure New Zealanders save. We think KiwiSaver's an important instrument for allowing them to do that."
Labour finance spokesman David Cunliffe said cuts to KiwiSaver would go against National's stated plan to increase savings.
"There is a huge gap between National's rhetoric that savings are crucial, that we agree with, and the reality is that they are doing nothing to improve it, and in fact quite the reverse," Cunliffe told NZPA.
"All we've heard so far is that National is making further short-sighted penny-pinching moves around the member tax credit and forcing government departments to eat their own lunch in terms of their contribution to employees."
Rather than encouraging people to join the scheme, the Government was making it hard for people to save and reducing incentives to do so, he said.
Cunliffe said he was also concerned savings would be turned into tax credits for people not using the scheme.
"Measures of this sort, however, will disproportionately benefit wealthy Kiwis who already have more ability to save."
Council of Trade Unions (CTU) also slammed possible cuts to the scheme, saying the tax credit was vital.
CTU economist Bill Rosenberg said the Government last year gave $14.3 billion worth of tax cuts over four years mainly to those on high incomes and it now appears poised to cut the level of support to help New Zealanders save.
"These are wrong priorities which have created a structural problem for balancing the government's books, while sending a poor message about people's savings habits."
Public Service Association president Richard Wagstaff said changes to the way state sector workers contributed to the scheme would put a further squeeze on departmental budgets.
"Government departments are already stretched. This move would add more pressure and the impact would result in loss to services and jobs."
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