The Government must once and for all put its unaffordable Income Insurance Scheme proposal to death following new revelations the scheme would increase unemployment and cost billions more than claimed, National’s Finance spokesperson Nicola Willis says.

“The Income Insurance Scheme proposal was to be funded by a Jobs Tax on every employer and employee, stripping an extra $834 from the pay of a worker on an average income. National knew this scheme was a bad idea, but documents I’ve obtained under the Official Information Act show it’s even worse than we thought.

“It’s astounding that despite a cascade of significant issues Ministers are determined to keep the policy alive so they can foist it on New Zealanders at some undetermined date in the future.”

Cabinet papers prepared by the Ministry of Business Innovation and Employment (MBIE) explicitly warn that the scheme would:

• Increase unemployment, noting: “social unemployment insurance can create an increase in the unemployment rate”.
• Impose massive costs on small businesses - with a typical small business potentially paying $13,617 extra in taxes as well as bridging payments of around $3400 every time an employee is made redundant.
• The cost to taxpayers of covering the scheme on public sector workers could run to $450 million.
• Likely cause longer wait times for health services including GPs, specialists and planned care.
• It would have a large negative impact on 250,000 or more people already experiencing poverty and hardship, noting that levies would “place additional financial stress on some families (especially but not only low-income families)” and that “low-income workers may struggle to meet the cost of the proposed new levy”

A Regulatory Impact Statement prepared by MBIE further warns the likely annual cost of the scheme once implemented is a whopping $4.7 billion, $1.2 billion more than Ministers first claimed.

In September, MBIE in September warned the levy rate may have to rise, increasing the annual cost of the Jobs Tax to a median wage worker to $945 a year. MBIE also warned that if claims are higher than forecast, the scheme could run a cumulative $21.2 billion deficit over ten years.

“These documents make abundantly clear what National has been warning for months: A gold-plated income insurance scheme funded by a Jobs Tax is the last thing New Zealanders need,” Ms Willis said.

“It’s concerning that the Minister of Finance has been allowed to keep this disastrous policy on life-support. In Parliament today the Minister once again confirmed taxpayer-funded work on the concept continues. The Prime Minister must now act decisively to put an end to it.

“It’s time Labour realised the Jobs Tax dream is well and truly over, it’s now the stuff of nightmares and not a single extra dollar of taxpayers money should be spent on it.”

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