By Alex Tarrant
“If Grant Robertson did something like this, there’d be calls for him to resign.” A senior Labour Party staffer hit me up in Parliament Tuesday lunchtime. “Is anyone going to call Steven Joyce out on this?” Well, actually, I've just returned from questioning Bill English on that exact subject.
Hopefully it’s clear now that National’s claim of Labour underestimating spending by $11.7 billion – by way of numbers in its own fiscal plan – was not correct. But it made for some bloody good headlines, reinforced perceptions and gave National a base for its main attack line this election – tax (which also happened to be its main attack line from previous elections).
As Grant Robertson said on Monday, it boils down to a matter of semantics. For the neutral, it was perhaps unfortunate that what Labour termed its ‘operating allowance’ on page 14 of its fiscals (not written up by Treasury) isn’t the same as what the Treasury describes as government's 'operating allowance' in the government financials.
‘Spare cash each year after extra spending commitments’ would have been a more appropriate description from Labour. Grant Robertson fronted up to media on Monday to accept and explain exactly that.
Labour’s fiscal plan details spending the party is looking to allocate above and beyond what is already booked in Treasury’s Pre-election fiscal update (Prefu) projections over the next five years. Planned extra health spending is included in a line called ‘health’. Planned extra education spending is booked in a line called ‘education’.
You can listen to Brian Fallow explain this on Radio NZ here. Also, a rather surprisingly good review of the situation is here at satire website, The Civillian, under the headline, Nation deeply divided over whether to put expected operating spending in categorised expenses row or operation allowances row.
National’s move was expected – no matter what
National were expected at some point this campaign to attack Labour on fiscal management. You could have bet the house on it (if you owned one). This is the backbone for National’s number one attack line on Labour: Watch out for a bunch of dirty new taxes if they’re elected.
By putting the focus on Labour’s spending plans, and planting doubt into peoples’ minds that Labour might have to spend more than it’s promising, National argues that Jacinda Ardern and Grant Robertson will need to scramble to raise extra tax revenue after the election.
They’re aided by the fact that Labour has promised to set up (yet another) Tax Working Group (TWG) after the election to review the ‘fairness’ of New Zealand’s taxation system. Because Ardern has maintained the right to act right away on whatever the working group says, National is able to argue (and fair enough – so would I if in their position) that Labour might whack a great bunch of new taxes on everybody.
(I personally think if Labour weren’t going to run on a more detailed tax policy this election, then Ardern should have stuck to Andrew Little’s pledge to take TWG recommendations to the electorate in 2020 – it would have kept the tax scaremongers back from the gate.)
So, now we see National combining the two lines: That, not only do Ardern and Robertson merely want new taxes, but in fact they will need new or higher taxes to pay for their cost over-runs.
Let’s just be clear. Those cost over-runs don’t exist. And, at no point have Ardern or Robertson said the Tax Working Group is being set up to raise extra revenue. In fact, they’re been very careful to say this is about fairness across the tax system rather than looking for ways to raise revenue above and beyond what government already brings in – Ardern’s comment that Labour doesn’t need to raise the top tax rate being case in point.
Let’s get over this
The media, politicians and commentators pay way too much attention to the minutiae of ‘spending plans’. Yes, it makes for great headlines. Yes, it makes us look like we’re scrutinising everything extremely carefully so the government doesn’t go bankrupt.
It has been a central theme particularly since the 2008 pre-election update, with echoes back to 1990 when Jim Bolger and Ruth Richardson were called in on Day 1 to be told the BNZ was collapsing.
Bill English and Steven Joyce are delighting in highlighting that Labour were forced to ‘shift’ a date on their website from 1 April to 1 July, effectively pushing back $250 million worth of spending by a quarter.
“It raises the question of trust, and whether they know their own numbers or not,” English said with glee on Tuesday morning – watch his comments in the video above.
Labour’s owned up to that the date for when their families package would come into play was labelled wrong. Let’s get over that now. It’s three months between two different press releases.
By the way, $250 million is 0.3% of the $94 billion of Core Crown Expenses. Keep that number in mind whenever some politician talks in millions of dollars. Government is actually pretty big, in the scheme of things.
That National can generate headlines haggling over 0.3% of government spending indicates just how precious we have become. Yes, it sounds like a lot of money talking in a couple of hundreds of millions. But it is a fart within the standard deviation of expected tax revenue ($86 billion) and government spending plans. Let’s get over it.
If the National Party’s argument is that Labour needs to be more transparent on whether $250 million will be allocated from April 1 or July 1, then Labour’s response should be given many times the amount of coverage: It is calling on National to be more transparent on $10 billion of unallocated spending sitting around for the next five years, with no indications about what it might be spent on.
It’s a fair call from Labour. And National has every right not to say. If you want transparency on what money will actually be spent on, then Labour is out in front. Ardern and Robertson have highlighted a desire to put it into health and education. Whether you think this is right or wrong in terms of priorities is another matter.
Another way of coming at it is this: Try and imagine if Labour was sitting around not telling people what it expects to do post-election. We’d be accusing them of not having any policies. We’d be accusing them of not having any vision. We’d be accusing them of not having a plan. We'd be saying, 'hey the Budget is in surplus, so why not increase spending on public services?'
If all this is taken on board, then all it leaves National with for criticising Labour on is, ‘ok, well even if that’s all true, then this leaves you with very little room for new spending outside of health and education.’ (See English’s comments in video above.)
That basically boils down to this: ‘Once you’ve spent money on the things you want to spend money on, then how will you find extra money for extra spending on other things?’ This is a bog-standard election campaign criticism of any party’s policy/spending plans.
Yes, it is a fair question to ask. Of all National’s criticisms of Labour’s spending plans it is the only one worth asking - and could also be used for the 'aha, new taxes!' attack line. It was asked to Grant Robertson on Monday, and he didn’t shy away from the fact that some things might be a bit tight, but that there were options available through reprioritisation of spending (ie. not new or higher taxes).
Because of the media’s perceived role of itself being the Public Finance Act reincarnated and getting excited by every few millions of dollars one way or the other, Labour has set out five Budget Responsibility Rules. They include government spending not rising above 30% of GDP in any one year, and repaying government debt to back below 20% of GDP within five years’ time.
Of course, this will limit the level of government spending under a Labour-led government. Of course, this will mean that if the initial focus is health and education, then all else being equal, there will have to be less of a focus on other spending areas.
But all else might not be equal. If Labour leads a government after September 23, they will be allowed to make decisions on existing government spending programmes - you can't bind a future government on spending plans. Just like the current government from time to time decides to reallocate spending from one area to prioritise another (particularly during the GFC).
Robertson uses the example of not spending money on new prisons. Defence spending has also been earmarked. Spending can be reprioritised. This is not new. Every new government does this. Governments that Bill English and Steven Joyce have been in, have done this.
Of Joyce’s $11.7 billion, the $9.4 billion operating allowance hole doesn’t exist. Let’s be nice to him and put it down to a misunderstanding, and let’s slap Labour with a wet bus ticket for not calling one line in their fiscals ‘spare cash for extra policies, potentially for coalition negotiations’. To the remaining $2.3 billion worth of criticisms, Labour has responded, saying these are based on estimates from government agencies.
This won’t stop National from banging on about it. This is because their main attack line – tax – rests on people buying into it. This is politics. This is the closest election campaign in a long time. So, we shouldn’t be surprised.
But my goodness, let’s get over this.