$11b ‘hole’ creates rift for experts

Steven Joyce’s so-called fiscal hole is causing a rift, with economists unable to find the alleged $11.7 billion gap but National Party financial leaders insisting it exists.

On Monday, National finance spokesman Steven Joyce launched a stinging attack on Labour, aimed at discrediting the party’s fiscal ability. It came with the allegation Labour had an $11.7b hole in its fiscal plan. Labour finance spokesman Grant Robertson quickly defended the numbers, saying Joyce intentionally misinterpreted the party’s operating allowance.

Joyce has refused to back down, saying he staked his financial reputation against those who have said the hole doesn’t exist. So let’s have a look at what the experts say and whether this is a case of Joyce digging himself a hole.

Joyce: On Monday, he said: ‘‘The Labour Party has an $11.7b hole in its fiscal plan that blows its debt out and breaks its own budget responsibility pledge.’’

On Tuesday, he said: ‘‘So Labour either have their budget allowances wrong or they’ve simply left out billions and billions of dollars of government spending in future years from their plan.

‘‘One of these things must be true and either way they have an $11.7b fiscal hole. Their plan is fatally flawed and would lead to billions and billions of extra taxes or debt.’’

On Wednesday, he said: ‘‘They made some fundamental errors and I actually corrected those for them. And now they’ve changed their story, and said they’ll have zero Budgets outside of education and health for the next two years.’’

National leader Bill English: English said the fiscal hole exists and he backs his team.

ANZ chief economist Cameron Bagrie: Bagrie told Newshub there was no hole.

‘‘But [Labour] don’t have a lot of money to play with in the 2019 and 2020 budgets. They’ve basically computed up front to what they are going to do for three years.

‘‘That’s fine but the wheels of government still need to turn and be funded.’’

BERL chief executive Ganesh Nana: ‘‘In essence, the alleged ‘hole’ is a fiction arising from a disagreement over definitions ... We stand by our work.’’

Economist Shamubeel Eaqub: There is not an $11.7b hole, ‘‘from what I can see’’.

NZ Initiative research fellow Sam Warburton: ‘‘It looks like National’s mistake came from only looking at the operating allowance and expecting to see a greater amount of flexibility for future expenditure, eg inflation. Labour has effectively said: we’ll book in some of that future expenditure now. Whether providing that certainty to health and education now is best or keeping things more flexible in case of unknown future demand or events is best is a judgment call. But there is no $12b hole,’’ Warburton told Newshub.

Public policy and economics data journalist Keith Ng: ‘‘Ultimately, there is no missing money. The money is accounted for ... it’s literally a question of whether you put the numbers on row 239 or row 228 in the spreadsheet,’’ he wrote in The Spinoff. ‘‘I know the question of whether to pre-allocate forecasted future operating spending to an expense category is contentious, fraught with emotions and deeply entrenched beliefs, but we must ... hold on to the deep truth that, despite our accounting differences, we are one nation, under one Crown account.’’

Newsroom Pro editor Bernard Hickey: ‘‘There is no hole in Labour’s fiscal plan. It’s just a political argument about cost inflation and spending priorities.’’

Stuff deputy political editor Vernon Small: ‘‘What we have here is a small unallocated spending pot and poor word choice by Labour and a huge over-reach for a political hit by National. Labour has about $900m to spend through to June 2020 on things either not in the Treasury forecasts nor in the spending plans they have already announced. That’s very tight, but not impossible if you remember National ran a couple of years of ‘zero budgets’. But there is no $11.7b hole in the fiscal plan.’’

Financial commentator Pattrick Smellie: They’re both wrong, and the truth is likely to be somewhere in the middle.

The Taxpayers’ Union: The Taxpayers’ Union says National is partially correct. There’s a hole, it’s just not a gaping, $11.7b hole.