Budget v Labour’s campaign plan

Coalition agreements, higher costs given as reasons why spending is higher than in original fiscal strategy

Acomparison of Labour’s campaign fiscal plan with its first Budget shows things are not tracking quite as Labour planned during the campaign, something it puts down to its coalition agreements and higher costs than expected.

Analysis by data journalist Keith Ng shows total Crown spending is forecast to be almost $12.5 billion higher over the five years to 2021/22 than Labour forecast in the “fiscal plan” it campaigned on in the last election. That takes it to $24b more than National had planned over that period.

Labour campaigned on its fiscal plan against criticism from National that it had not allowed enough to cover the costs of its policies as well as increases in government spending such as wage increases.

The higher spending also indicates the cost of securing the support of NZ First and the Green Party was higher than Labour allowed for in its plan and some policies were costing more than expected.

Finance Minister Grant Robertson said the Budget should not be compared to Labour’s fiscal plan because the latter was based on party policy while the Budget reflected the Government arrangement with NZ First and the Greens.

“It is not comparing apples with apples to look at a one party’s preelection document against postelection negotiated arrangements involving three parties. There are differences, that is what political negotiations are about.”

He said the Government had stuck to the fiscal responsibility pledge to reduce debt over time and remain in surplus.

The comparison shows welfare and social security spending forecast to be $2.2b higher than Labour had forecast. Robertson said that was because of increased costs for its Families Package as well as more people being on benefits, higher housing costs and accommodation subsidies.

Despite increases in the Budget the forecast spending on health was currently $3.35b lower than in Labour’s plan while education was $3.26b lower over the next five years.

Robertson said the shortfall would be made up in the next two years and more was likely to be spent than Labour had planned in those two areas.

“There will be further allocations across the next two Budgets in these areas, and given how much has been allocated already we are likely to exceed the track in the fiscal plan.”

Forecast operating allowances in the Budget total $10.3b more than Labour’s plan, however once the expected future health and education boosts are taken out that falls to $3.7b.

Labour has increased its operating allowance by $24b more than National planned, the money coming from an extra $9b in debt, higher tax revenue than expected and scrapping National’s tax cuts.

National leader Simon Bridges said despite its insistence all its policies were costed, Labour had still had to delay or drop key promises such as extra police and moves to pay schools which dropped donations.

“It shows the fiscal plan had some dodgy numbers in it and that it was false advertising. The voters thought they were getting a credible plan where promises would be kept but actually it doesn’t do what it said on the tin.”

The fiscal plan was the centre of controversy on the campaign trail after former Finance Minister Steven Joyce claimed there was an $11.7b hole in the operational allowance — a pool of money allocated by a government for higher or new ongoing costs.

That was widely discredited after Labour said it had moved each year’s new allowance to areas such as health or education for subsequent years rather than let it build up in the “operating allowance” line.

However, Joyce and ex-National leader Sir Bill English insisted Labour had not allowed enough for its promises and expected increases in government spending such as wage rises.