Bill English

Wellington, Jan 30 NZPA - Treasury has come out against several of the National Government's policies in a briefing paper out today.

It recommended the Government retain Labour's Fast Forward Fund and tax credit for research and development and has suggested reconsidering the timing and size of tax cuts.

The briefing to the new Finance Minister Bill English was released today.

The National Government ditched the 15c in the dollar research and development tax credit and is scrapping the Fast Forward Fund aimed at promoting research to help food and farming.

The Labour government was to invest $700 million and industries were to match the government's commitment on an annual basis, bringing the fund, with interest, to $2 billion over the next 10 to 15 years.

Treasury said the R&D tax credit should be kept and evaluated after five years.

It said the policy was likely to be more effective than grants.

"Our judgment is that the overall benefit in terms of higher productivity is likely to be greater than the cost and complexity of tax credits."

Treasury said the Fast Forward Fund was unwieldy but had got industry buy-in and recommended keeping it.

National has also changed the last Government's KiwiSaver scheme, reducing the minimum contribution to 2 percent.

Treasury said there was no evidence the higher level was a barrier to people joining the scheme and said the lower rate could reduce its value for middle income workers.

It also said changes to contribution levels could increase uncertainty and damage confidence in the scheme.

Treasury also did not think the employer tax credit should be stopped.

Another government plan -- to target 40 percent of the Super Fund for investment in New Zealand -- was not "the best way to grow New Zealand capital markets", Treasury said.

It said the investment may push out other investors. As a long term investor it would hold shares for a long time reducing the number of shares that can be freely trading.

Treasury said forecasts had changed since National developed its tax package and if the Government could not find ways to reduce spending it should reconsider the size or timing of the package.

It recommended taking the top person tax rate down to 30 percent or lower.

Labour leader Phil Goff said the briefing highlighted Labour policies focused on lifting productivity and savings that should have been kept.

"Treasury gave (the Government) responsible advice that key Labour policies were sound and worth retaining."

Mr Goff said that was ignored for party political reasons and the Government should admit it was wrong and admit the policies were on the right track.

"It's time National started making sound decisions to get New Zealand through the effects of the global recession."

He accused the Government of releasing the report on a Friday afternoon to minimise attention.

Mr English was unavailable for comment but a spokesman said the new Government made considered policy choices to face immediate economic challenges and set the economy on a longer term growth path.

"Those policies were spelled out clearly before the election and the Government's now acting on them."

He said the Treasury agreed with many policies and disagreed with some.

Since the report was written the economic and fiscal situation have deteriorated.

"We are now operating in a much more difficult environment and the Government's had to make some policy choices which it's done."

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