By Alex Tarrant
ACT Party leader Don Brash says the government's borrowing programme is irresponsible, and that the economic goal of the ACT Party for reductions in government spending does not call for a 'hard-right' agenda.
Brash said he wanted government spending to be back at the level seen in 2005 at the end of the previous Labour government's second term. The changes - reversing some of the "seriously stupid policies" from Labour's third term - could take place over three to four years, Brash said.
Brash rolled former ACT leader Rodney Hide in a coup last week, which had Labour and other left-wing parties claiming a future National-ACT coalition government would move toward the right due to Brash's influence on the economic policies of such a government.
Brash's latest public role was to lead the contreversial 2025 Taskforce, set up by the National-led government in its election agreement with the ACT Party to look at how New Zealand could match Australian incomes by 2025. However many of the suggestions put forward by the Taskforce, which included former Labour Finance Minister Davil Caygill, were ruled out by centre-right National as too politically unviable.
Brash was talking to interest.co.nz after Treasury's Debt Management Office announced it would increase the government's borrowing programme to NZ$20 billion for the current 2010/11 financial year. See Gareth Vaughan's article here.
The government's operating deficit before gains and losses is expected to be NZ$16 billion this year, before halving in 2011/12, meaning it will already have about NZ$4 billion, or half the required amount, in the bank for next year's budget spending. The government is, however, running a structural deficit of 5% of GDP, the IMF has warned. Less than third of the budget deficit is linked to the Earthquake.
Brash said he thought the government's borrowing programme was irresponsible as National continued to fund policies it had criticised in its final term in Opposition.
"Of course the reason it’s irresponsible is that government spending is irresponsible," Brash said.
"I would say the [previous] Labour government in the first two terms of their three terms was reasonably responsible on government spending. They kept running quite good fiscal surpluses, which, given the age structure of the New Zealand population, was entirely appropriate," he said.
"I think in their last term, the third term, they went bananas, and started throwing money around in all directions. As a consequence government spending rose very strongly. The National Party first under my leadership, and then under John Key’s leadership, criticised most of the programmes which were the most extravagant ones.”
Working for Families was one policy, along with interest free student loans and universal subsidies for doctors visits.
“Originally we used to provide subsidies for people who were low income, and critical health. And then I think we extended it to under-six-year-olds, and you could say it’s important children get access to medical attention," Brash said about doctors subsidies.
“Then I think it went to over-65-year-olds from memory, may have been the other way round, but something like that – it was quite carefully targeted anyway. Then Labour said, ‘let’s give it to everybody’.
“And the logic of that is absolutely straight political. It doesn’t target people on the basis of health, on the basis of income,” he said.
Asked what aspects of the programme he would like to be cut, Brash said he would be reluctant to get into that.
“All I’m really saying is, in third term of Labour’s turn in office, they engaged in very extravagant, very poorly targeted spending," Brash said.
'Smart in Opposition, not in government'
“What I’m saying is, so far, the National government has not wound most of that back. They criticised it in Opposition, but haven’t been willing to explain to the public why these goodies they’re getting are being funded by a massive borrowing programme,” Brash said.
“It’s always true that government’s don’t like removing goodies. That’s the way governments in democratic countries are," he said.
“I don’t want to pretend they can do it without political cost, I don’t want to pretend that there wouldn’t be additional pressure put on families. What I’m saying is, that borrowing NZ$300 dollars a week per family – which is what NZ$300 million a week works out at – makes people feel good now, but saddles those families with a massive amount of debt, which they don’t see right now, but which nevertheless is being taken on on their behalf by the government."
There was no politically or economically painless way out of realistically getting government spending under control, Brash said.
"I’m not saying that’s an easy dilemma to deal with, I’m saying it absolutely has to be dealt with, one way or the other. I’m not saying which particular things they should change, I’m not suggesting they should necessarily change Working for Families, at this point we haven’t made any decision on whether we support that or oppose it," Brash said.
"All we’re saying in general terms, and I’ve been saying it consistently since long before I joined the ACT Party, that government spending is irresponsibly high, it should be cut back," he said.
ACT goal to get back to Labour's 2005 spending levels
"In the last year of Labour’s second term, 2005 roughly, the ratio of core crown expenses to GDP was 29%. It’s currently around 34-35%," Brash said.
"What the 2025 taskforce said was, you can’t get it to 29% tomorrow – that would be ridiculous – but we ought to be aiming to get back to 29% over a three or four year period. That would take us back to the same ratio of government spending to GDP as we had at the end of Labour’s second term of government,” he said
“The question is, did we feel government spending was adequate in 2005? And most people, I think, did – Labour won the election anyway."
'Not hard right'
So what I’m saying is, this is not some hard-right prescription. Labour was [spending that level], at the end of their second term, and that’s the bit I’m stressing," Brash said.
“This is not after some draconian set of policies, it’s a reversal of some of the seriously stupid policies which Labour put in place,” he said.
Meanwhile a number of “quite exciting names” had been brought to Brash’s attention as possible ACT Party candidates for the November 26 election.
“To be honest, since Saturday, I’ve been so utterly immersed in media and caucus issues that I haven’t had a chance to tap anyone on the shoulder," Brash said.
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