Budgetary hole no-one is really talking about
There’s really nothing like alternative Budget season. I won’t deny that I speak from the tunnel-visioned perspective of a political-fiscal tragic, but alternative Budgets are really where the rubber hits the road when it comes to elections. It’s the clearest and cleanest picture we get of an alternative vision for the country.
Numbers can be spun – they can even be wrong (as Paul Goldsmith has discovered) – but the right numbers rarely lie. Take, for example Labour’s draft Budget from the last election. It’s a decent document that sketches out roughly what the party would like to do in government.
Looking back at the document three years on, it gives a decent picture of the government Labour wanted to be and what the party wanted to do. There are big spending increases for things like the families package and health, but the overall size of the state is roughly the same as New Zealanders were used to.
Labour’s now long-forgotten Budget Responsibility Rules put a 30 per cent cap on how much it as a government would tax and spend over that first term. In other words, Labour wanted a Budget more focused on transferring wealth to the poor – but nothing radical.
Three years later, that’s more or less the government we’ve had.
In the last week, ACT and National have both presented alternative Budgets. These are meant to give voters a contrast to the Government’s Budget, which is what Labour is basing its own plan on.
The Greens have taken a different strategy. They’re not presenting an alternative Budget; instead they’re presenting six major policy announcements, each costed individually.
These are meant to be priorities for any negotiations after the election and anyone so inclined can imagine swapping them in or out of Labour’s plan, depending on how the chips fall.
There’s an art to reading an alternative Budget and political watchers have to be clear about what their purpose is. We want them to show parties are thinking about the long-term impact of their policies – it’s not about getting the calculator out in 2034 and crowing ‘‘I told you so’’ to future finance minister Goldsmith, it’s about making sure ‘‘i’’s are dotted, ‘‘t’’s crossed, and long-term implications thought through.
National is currently licking its wounds for having well and truly failed the rigour test. After repeatedly saying it would wait until Treasury’s Pre-election Economic and Fiscal Update (Prefu) before releasing its alternative Budget, the party decided it couldn’t be bothered using the document to update its final budget figures.
It’s an embarrassing mistake. No-one really cares whether National is off by $4b over a decade (forecasting that far into the future is a fool’s game anyway), but it does matter that the party wasn’t rigorous with its costings.
By the same token, do we really care that Labour’s families package shows up in its alternative Budget as a $5b plan, but was revised up to $5.5b when the party took over the Treasury benches?
But even more important than the rigour, alternative Budgets give us the fullest picture of what kind of government parties would like to form.
The real question National needs to answer is whether its Budget backs up the rhetoric from leader Judith Collins that it won’t take a torch to public services. Collins has promised to increase health spending each year for example.
Its Budget backs this up. Each year, National promises to increase new day-to-day spending, but those spending increases aren’t big.
The current Government is promising
$2.4b-$2.6b of new day-to-day spending on services each year. National wants to trim this to $1.5b a year, a $50b saving over the decade.
Technically, National is right, there will be spending increases each year, but those increases are unlikely to come close to what’s needed to plug persistent funding pressures in areas like health. DHBs alone needed a nearly $1b top-up this year. That means that while spending might not be cut, services could be – as the new spending fails to keep up with escalating costs. It’s an important point.
In the same way that Labour’s 2017 alternative Budget fell far short of the transformational rhetoric of leader Jacinda Ardern, National’s alternative Budget doesn’t soothe fears about austerity.
The funding increases are there, but they’re unlikely to be enough to cater for the demands of a growing, ageing population. What National’s Budget is really about is an impressive investment in infrastructure: roads, schools and possibly hospitals. Where savings have been found is on the day-to-day side of things – operational spending.
That opens up the fear that a National government might build buildings it cannot staff. It’s a question the party will need to answer as the campaign rolls on.
National’s alternative Budget doesn’t soothe fears about austerity.