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Labour leader Phil Goff - Source: ONE News -
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Prime Minister John Key says it is unlikely interest will be put back on student loans to help fund the Christchurch rebuild, but he has suggested eligibility for the loans and Working for Families will need to be tightened.
It comes after Finance Minister Bill English yesterday refused to rule out cuts to Kiwisaver , Working for Families and interest-free student loans as the government reconsiders its spending priorities to pay for the clean-up bill.
Estimates suggest the cost of rebuilding Christchurch could be up to $20 billion.
"Certainly Working for Families and student loans will survive, but there are areas where the eligibility of them is too generous," Key told Newstalk ZB.
Key said he did not anticipate seeing interest going back on student loans, but that increases to EQC levies will be inevitable.
"From June to June, in that 12 month period, my guess is that we've lost $12 billion in GDP. In other words, just less activity," Key said.
"Crudely from the government's point of view, that's $5 billion of tax we don't get, because our revenue goes down, and on the other side of the coin, our outgoings go up because we're paying for all these programmes."
English said the government would have to "roll with the punches" and that there would be "significant re-prioritising" of spending.
"We'll just get on with finding the money to do it," he said yesterday.
But Labour says there is no need to "slash and burn" government programmes to carry the economic cost of the earthquake.
"The recovery effort will take years. We can spread the cost over time. The best way to pay for the Canterbury rebuild is to grow the economy, create jobs and keep money in the pockets of people who will spend it," said Labour leader Phil Goff.
Goff said cutting financial assistance to families and students who rely on that support will slow the economy down.
"We must keep money in the pockets of people who will spend it, " said Goff.
Tax cuts mooted
Act deputy leader John Boscawen says now is the time to cut taxes further so there is an incentive for people to stay in New Zealand.
"We need to face the fact we are likely to have an even greater number take their skills to Australia and further afield. They're likely to be a permanent loss to New Zealand," Boscawen said in a speech to the Penrose Rotary club yesterday.
"Far from increasing taxes, as some have proposed, to pay for this tragedy now is the time to take a good hard look at government expenditure and cut taxes to ensure there is an even greater incentive for New Zealanders to stay in this country and others to return."
The government introduced tax cuts to businesses in its 2010 budget, down from 30% to 28%, taking effect in April.
English said while the government intends increasing its borrowing short term, its intention is to keep to its target of returning to surplus by 2014-15.
But Goff does not think that is prudent.
He says the country's second largest city has had almost two-thirds of its CBD wiped out, and that because of the extraordinary circumstances, borrowing to pay for them should not affect the country's credit rating.
Greens' co-leader Russel Norman has proposed a levy on everyone who earns more than $48,000 to fund the rebuild.
Norman said the levy would be similar to what was introduced in Australia to pay the $9.75 billion fix-it bill after the Queensland floods.
"We need a pragmatic response to the situation we're in," Norman said in his blog.
"A levy at those levels would raise an additional $457 million per year and be directly tagged for disaster relief and reconstruction."
English said the government has not looked at changing its tax cuts programme.
United Future MP Peter Dunne says the government will inevitably have to re-prioritise its budget and that there's a case for something similar to a wartime cabinet, where party leaders can be brought together to get buy-in on recovery plans.
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