Clear choices are on offer
Who knows best about spending your money – you or the Government? In many ways it is an absurd question to ask, because private citizens are not going to spend their own incomes on infrastructure and services we expect the state to cover – schools, hospitals, police, armies, and so on. But the question has been illuminated by different approaches to political budgets.
Tax cut or social spend? Which is affordable? And if both are, which choice is better for New Zealand in the long run?
As political journalist Vernon Small says, Labour’s recently released draft budget is relatively careful and even middle of the road. Only a ‘‘Right-wing warrior’’ could call it reckless. That warrior turned out to be Act leader David Seymour who quickly dubbed the Labour plan economically irresponsible. He was joined by National’s Steven Joyce, who attacked it as tax and spend.
But others have shown it is entirely manageable. Labour plans to spend an extra $17 billion over four years without going into deficit. Nearly half will come from cancelling the proposed tax cuts that National has dangled before voters. That gives Labour an extra $8.3b to play with, according to an analysis by Newsroom financial commentator Bernard Hickey. He calculated that Labour’s spending plan still allows it to run budget surpluses and keep debt at the magic number of 20 per cent of GDP, which it settled on in the Budget Responsibility Rules it drew up with the Green Party. In a reverse fiscal arms race, Joyce has already pledged to go lower and reduce debt to just 10 to 15 per cent of GDP.
Labour hopes to spend an extra $8b on health, $5b on a families package, including a baby bonus that was decried by Act, $4b on education and greater contributions to Superannuation, Kiwi-Saver and economic stimuli such as regional development and training. Along with the cancelled tax cuts, Labour intends to pay by taxing multinationals to the tune of $1.1b and reducing debt repayment.
The costings are sound on both sides of the fence. The chief difference is rhetoric. A stronger emphasis on social spending, especially on public health services it perceives as rundown, is classic Labour. The Greens hitched to the Budget Responsibility Rules to bolster an image as unthreatening and ready to govern.
Joyce and Prime Minister Bill English’s strong focus on tax cuts is equally strategic. This election gambit has served National well in the past, even if the end result – just $20 per week more for average earners – seems largely symbolic. While not quite austerity, the technocratic emphasis on fiscal caution mirrors the ‘‘strong and stable’’ rhetoric of British Prime Minister Theresa May.
Joyce counters that reducing debt creates a rainy-day fund, which is no small claim in a country plagued by natural disasters and weather events. New Zealand First is as unpredictable as any weather event and likely to be sought as a coalition partner by both sides. Labour’s decision to not raise the superannuation age helps court Winston Peters and another $878 million is put towards the coalition demands of the Greens and the everexpanding bottom lines of Peters.