Opposition leader Christopher Luxon says Government spending needs to be more closely tracked so people can measure how effectively public money's being spent.
In a speech to the Auckland Chamber of Commerce on Monday, Luxon announced three new initiatives to encourage fiscal discipline.
A National government would require the Treasury to report on the performance of major spending initiatives, alongside the annual budget documents.
This would provide some insight into the effectiveness of spending in key areas such as health, education, and social development — which need better funding.
“I won’t put up with pouring more money into broken programmes that don’t work; even while we need more funding for frontline services like health and education,” he said.
Secondly, it would link public sector chief executives—and other senior executives—pay packages to the performance of their agencies and programmes they oversee.
Luxon said Wellington needed a culture of high performance and accountability, which would begin with rewarding people based on outcomes.
Second tier executives, or deputy secretaries, would also have their base pay determined in part by performance.
Performance pay in the public sector can be much more complicated than in the private sector, where the primary goal is to turn a profit.
Corporate pay is generally linked to an increase in total shareholder value, while government agencies deal with competing priorities, multiple stakeholders, and goals that can be hard to measure.
Finally, Luxon said a National government would provide every taxpayer with an annual receipt that detailed spending in simple terms. This would increase accountability and make spending more visible to the general public.
“Unless you’ve worked in the machine in Wellington, or you’ve trained for years in accounting or economics, it’s impossible to work out just how much money the Government spends, and where it all goes,” he said in the speech.
Inland Revenue would write the receipt—showing total revenue and spending—while Treasury would produce an annual “Report Card for Taxpayers” that reported revenue, spending, and debt on a per household basis.
Hard times
These new efforts were necessary, Luxon argued, as wasteful government spending had worsened inflation, run up debt levels, and had nothing to show for it.
He criticised the Reserve Bank for printing large sums of money, offering cheap lending to commercial banks, and for "taking an axe to the" Official Cash Rate.
“New Zealand was flooded with money, asset prices exploded, and inflation soared,” he said.
It was now experiencing “whiplash” as the central bank attempted to pull excess demand out of the economy with higher interest rates.
Meanwhile, Government spending rose in response to Covid-19, but wasn’t sufficiently pulled back once lockdowns ended.
“It’s one thing to be spending heavily and operating deficits as you revive an economy with high unemployment and stagnant inflation – as the automatic stabilisers of welfare spending rises and tax receipts fall,” he said.
But responsible governments should cool fiscal pressures at the top of the economic cycle, when unemployment was exceptionally low and inflation was taking off.
The two pillars of National’s economic approach would be firing up NZ’s engine of economic growth—i.e cutting regulation, encouraging immigration, and building infrastructure— and restoring fiscal discipline.
Luxon warned NZ would have to earn its way out of recession, as any Keynesian fiscal rescue spending would run the risk of triggering a credit downgrade, higher interest rates, and a wider trade deficit.
The former Air New Zealand chief executive said while he was a relative newcomer to politics, his corporate experience could be an asset in the Beehive.
“Government isn’t a business, but Wellington could do with some commercial discipline”.
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