Labour & Green Budget Responsibility Rules are strangling us

By   /   December 17, 2018  /   17 Comments

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The 2019 BPS faithfully follows the Government’s self-imposed Budget Responsibility Rules.  Mr Robertson’s fiscal conservatism is apparent both in his fixation on these rules and in the surpluses which are expected over the next five years.  These surpluses rise from $1.7 billion in the current financial year to $8.3 billion by 2023.

The Finance Minister Grant Robertson released the 2019 Budget Policy Statement (BPS) on 13th December.  This statement signals the Government’s intentions for the 2019 Budget and outlines its fiscal strategy.  It is released alongside the Treasury’s Half Year Economic and Fiscal Update or HYEFU. This update sets out Treasury’s economic forecasts and its expectations of Government’s finances over the next four years.  Both documents are an important part of the open and transparent Government we expect and enjoy.

In a follow up Radio NZ interview with Guyon Espiner, Mr Robertson rejected the accusation the proposed budget settings were a ‘fig leaf for neo-liberalism’.  His rejection was based in large part on the claim that the 2019 Budget will be a ‘well-being budget’ – one concerned with the impact of Government activities on New Zealanders’ well-being.  The argument here is that the previous Government’s budgets were only concerned with GDP growth and that many New Zealanders and especially our poorest children missed out.

It is doubtful that the previous Government’s budgets were only ever concerned with GDP growth but it is true that the poorest New Zealanders did not gain from the rising prosperity which recent economic growth brought.  But it is by not clear how the 2019 well-being budget will change this given the budget settings offered in the BPS.

The BPS confirmed the Government’s five priorities for the 2019 Budget.  These are:

  • Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy
  • Supporting a thriving nation in the digital age through innovation, social and economic opportunities
  • Lifting Māori and Pacific incomes, skills and opportunities
  • Reducing child poverty and improving child wellbeing, including addressing family violence
  • Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds.

These priorities are all well-meaning and worthy but it is not apparent how the 2019 budget will address them with the spending indicated in the BPS.  The apparent priority of reducing child poverty best illustrates this uncertainty.

We could probably expect that child poverty will be reduced through increased spending on income support programmes such as Working for Families and working age benefits.  It is the case that spending on income support programmes will increase from $24.0 billion in 2017/18 to $26.8 billion in 2018/19. Nearly one third of this increase or $836 million is just the annual increase in New Zealand Superannuation while a further $571 million is being spent on increased housing subsidies.  Working for Families budgets grew by $865 million and $442 million is being spent on the new Winter Energy Payment. By 2022 Government is planning to spend $452 million on its Best Start programme which offers up to $60 per week for families with children under three years old.

These are generous amounts but are not particularly targeted.  The additional Working for Families budget for example will be paid as increased entitlements to families who pass the work test and so will offer some relief to the working poor but not to beneficiaries.  The bulk of the winter energy payments will go to Superannuants and the Best Start programme ends when a family’s income reaches $93,000.

Some of these increases need to be seen in the context of the previous Government’s clawbacks.  Increased payments on the Accommodation Supplement were announced by the previous Government and adjusted the maximum payments after a ten year price freeze.  Working for Families budgets have been reinstated to the same value they were in 2010 and before the National led Government gradually reduced entitlements and neglected to index payments to inflation.       

The problem here is that we had high rates of child poverty in 2010 so why would lifting the value of Working for Families back 2010 levels necessarily reduce child poverty?

The 2019 BPS faithfully follows the Government’s self-imposed Budget Responsibility Rules.  Mr Robertson’s fiscal conservatism is apparent both in his fixation on these rules and in the surpluses which are expected over the next five years.  These surpluses rise from $1.7 billion in the current financial year to $8.3 billion by 2023.

There is plainly money available to do more but Mr Robertson’s justification for not doing so is that these surpluses are being banked for future generations.  There is some irony in such a claim given the damage which persistent childhood poverty does for the life courses of those who suffer it. We appear happy to squander the futures of tens of thousands of New Zealand children to conservative budget rules in the belief that low levels of Government debt will benefit their generation in times to come.

The Finance Minister’s conservatism may however not be entirely misplaced. It is easy to work out how to spend forecast surpluses before they are earned and in doing so to overlook the fact that these forecasts are normally based on optimistic projections of economic growth and growth in tax revenues.   Already the OECD is warning of a modest slowdown in global economic growth pointing in particular to rising trade tensions as a source of some concern.  Without steady and consistent economic growth the Government’s accounts can quickly look fragile as we saw immediately after the GFC.   

Banking surpluses and lowering Government debt as insurance against the next economic downturn makes some sense.  The problem is that in doing so the trade-offs often impact on the poorest people whose needs get ignored. The Government’s well-being rhetoric obscures this trade-off in part because we struggle to reconcile the different values at stake.  Budget rules which placate financial markets are never likely to be comparable with our understandings of such things as mental illness or the impacts of material deprivation on child development.

It is fine that the Government has five priorities which it believes will enhance our collective well-being but the real priority was set when Grant Robertson and James Shaw dreamed up the Budget Responsibility Rules.   

 

Alan Johnson is a policy advisor to CPAG and Salvation Army 

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17 Comments

  1. Sam Sam says:

    Well we have Tory parties from 1991 onwards putting the gears in neutral. Where we grind to a halt in nowhere land. The early years of the 1990’s was in nowhere land with a dependency on commodities that couldn’t pay for our imports. This is the golden age where vast numbers of New Zealand’s most vulnerable never got a look in. Where woman never got a look in with no equal rights or equal pay. Where migrants were factory fodder. Where brown people was excluded from the system, where we had these xenophobes running around for Britain and that awful cultural cringe of Don Brash that almost held us back for a generation.

    Well we now have a caucus and government ministers deciding whether parliament will be a museum or apart of New Zealand’s heritage and cultural history. And we’ve got a government putting cultural icons in positions of change. When the kids come along the Tories of New Zealand can say no to the kids, get back down the time tunnel to the past.

    When I went to school I learnt about self respect and self regard for New Zealand. Not some cultural cringe of a movement deciding not to worry about mental health, say don’t worry teen suicide, and saying don’t worry about youth unemployment. They’re not saying keep our communities free from domination by transnational gangsters. And even as the youth walk out on the Tories they are still looking for there doctorates and knighthoods instead of doing what must come with high honours.

    Now that’s why Tory parties fighting every document, trying to tip there hats to every New Zealand kid trying to get a technical education and get all these monkeys off of their backs and kick out the same old sterile policies that produces doctorates and knighthoods with out any honour in them at all. Tory muppets can go back to there nostalgic 50’s with there bibles and there capes and the whole lot because they are not aggressively kiwi and they are not aggressively proud of our culture and we’ll have nothing to do with Tories or their sterile ideology.

  2. Denny Paoa says:

    Yep. It looks like welfare for those that dont ‘need’ it, are the recipients, again. Labour are incrementalists in their thinking. Too frightened of their own shadow to do anything brave or substantial to eliminate poverty.

    Benefits have had a 2% increase in 28 years whilst the buying power of the dollar has lost 56% & inflation has increased for the last 28 years is more than 53% for that same period. Its not hard to figure out which part of society is getting screwed again.

    This government is too timid and lacks courage … too many slogans and photo op’s and not enough dooey.

    • Sam Sam says:

      Brave? Yawn, don’t be square. Māori in general are suffering from Settlement fatigue. On the subject of the Waitara Lands Bill and the boos of stolen land with in certain hapu supporters and crown leadership. Now we sit here and Jacinda is winning the leadership race. How ever with the settlement process it’s not a straight forward process because there are no straight forward outcomes. Although Jacinda is clearly the preferred Prime Minister, settlements show the depth of opposition when she faces what ever she brings up at the next Waitangi Day events in terms of retaining that Māori vote.

      So for the people who are vaguely familiar with internal political history, what Jacinda faces is the Labour Party Māori caucus in her own party voting for the best interests of all Māori. This means that there is considerable opposition to any deals that don’t match the promise made last Waitangi Day, of essentially elevating the status of Māori to Treaty Partner. Now why that will be problematic is because the Government rely on Crown Law which is one of the gore stones of Iwi-crown relations, in order to get things pushed through parliament.

      Now, Crown Law is know to be deadset against Māori interests, case in point Simon Bridges ex Crown lawyer, deadset against Māori, and now we’ve got a number of Māori that would go with Crown Law and halt all settlement processes. So that’s not exactly the same subject as they would appeal against because last Thursday’s third reading of Waitara Land Bill is not a motion against Jacinda Ardern as opposed to settlements. It gives an idea the 13 Māori MPs are prepared to back Jacinda and do. So this is the kind of magnitude of the challenge Jacinda accepted when she takes what ever she takes to the next Waitangi Day. The consensus is that she won’t get a great deal added to what ever is already negotiated in the plethora of Iwi settlements.

      So is there any scoop to make additions to next years budget? With 13 Māori MPs each with there own vote budget, not including the greens or other Māori MPs or NZ1st. There fore are we looking at a “New Settlement option” when looking at settlements. Clearly likelihood of a New Settlement option has gone up. Of course we are probably well aware that Iwi/ Hapu leadership in terms of these negotiations will always maintain a particular philosophical mantra, and then at the very end they tend to be a lot more expedient shall we say, and we are seeing that with Nga Puhi Settlements where everything is going down right to the last moment and then hey presto there’s a revision.

      So anything could happen in settlement processes because there’s difficulty assigning likelihoods of those percentages. So if we’re looking at potentially a financial outcome to settlements then hapu negotiators should potentially look at what can be done around the government budget.

      So what I would say in my own personal opinion, is a lot of the negative news that could possibly be incorporated into the governments budget has already occurred. It’s still quite likely that if we end up with protests marching on parliament, the headlines will spook MPs and we’ll probably see knee jerks, reacting against Māori and the Prime Minister respectively.

      Possibly the more intelligent or more risk adverse thing to do, might be to look at the New Settelmemt options. So looking out into next year really with 6 month Whanua Ora programmes basically, maybe even land buy backs, backed by government asset programmes.

      One outlier I’d look at is the further the kiwi dollar falls, that’s inflationary for Māori settlements, being a big importer / user of the colonial box house economy. That then leaves The Reserve Bank of New Zealand with a tricky situation where they have old settlements process and a consensus vs the government they certainly won’t raise interest rates but possibly flatten them. And actually no one save maybe Grant Robertson could talk to Māori about Settlements and say what about inflation, accurately.

      So let’s say generally when Reserve Banks signal inflation target spikes, then they’re not looking to raise rates. So no ones talking about that. That’s a talent Māori negotiators need to level up. It could be a bit of an outlier, would obviously give a growth agenda kind of argument to settlements. At the least I would like Māori negotiators to think about the advantage and disadvantages of settlement processes, and how to take advantage of every opportunity that comes our way. These things are not thought about or discussed a great deal at all with in Māori. In fact when bringing these types of issues up in settlement processes immediately the labels pakeha heretic and so on start flying. Alternately on the left the alt right labels ect start flying.

      But I think it’s much better remaining agnostic about settlements. In terms of the other things that the government are doing we’ve got Kiwi Build, The Regional fund, Kiwi Saver fund and ACC fund. They’re widely expected to back stop a lot of government asset purchase programmes and just to give a positive history. They buy sovereign bonds, corporate debt, collectively there balance sheets have grown to over $80 billion dollars and is set to double by 2050. To put that into context, that’s a growth of over a 120% with little to none of,it backstopping Iwi Māori interests. These balance sheets would account for 400% of today’s $42 billion dollar Māori economy.

      To put this into perspective this would only account for $20 billion dollars of total government debt today, so serviceable. So that puts the $40bln Māori economy into context, serviceable. So actually, in terms of investment grade corporates with in Iwi negotiators and sovereigns. Māori are basically backing away from the advantages of the Settlement process in favour of the the disadvantages of The Foreshore And Seabed disapprovals. So we are kind of asking ourselves (Māori) what is this all worth but more importantly we’ve got Waitangi Day coming up and it’s a bit like the poison chalice of being Māori, and pro settlements, and pro financialisation and surrounded by people who haven’t a clue about any of this stuff. Is this a job that you would want to take on at Waitangi Day. It’d be a bit like replacing Steve Hanson as All Blacks coach with Jacinda. It’s a case of increasing the unstable predictabilities of Aotearoa-New Zealand at the same time as massive resource stimulus is being withdrawn.

      So now the time when we are getting to the end of the year and we must take stock and think about what’s going to happen next year and it seems like every month we are at a pivotal moment, and I think it’s worth thinking about the relative advantages and disadvantages of what we think should happen with Māori interests.

      • Denny Paoa says:

        Yeah! Fuck Capitalism & Colonialists! The Pakeha have overstayed their welcome.
        Ooops! Sorry Alan!

      • Denny Paoa says:

        Sam. You are so ill informed, its embarassing. You have absolutely no understanding of all things Maori. Personally, the word “Maori & Maoridom” is over used and is thought of by people when the maori are labelled with that, that theyre speaking for Maori or for Maoridom. This is entirely untrue. Those people can only speak for their own people, and only if they have a mandate to do so. So youre mixing up your Maori(s), which in turn, your premise falls apart.

        Amene.

        • Sam Sam says:

          Dafaq? Could give a shit about nouns or pronouns

          I’m talking about treaty settlement funds talking up a really sweet game for the last 10 years and then one by one, they all fucking blowing up in peace time, let alone because they’re dogmatic pea brains can’t handle it when the markets or what ever turns on them for a year, a little, or a fucking lot, can’t handle the small differences.

          Now is the time to be objective & flexible not only to survive & make money when everyone loses (fuck all this holier than thou academic bullshit), give yourself and your people a fighting chance at the big move that comes next. Everyone else wont have the cash or the will to take the next big move.

          Asuming that te reo should be universal , and that your idea isn’t utterly worthless, why should it be Te reo? Why not wait a few hundred years; let the languages that will have morphed into x be the universal language of New Zealand?

          I don’t believe sufficient Moneys can be made available to make everyone learn Māori ; not everyone will want to even if they get payed to.

          The question is, how should Māori go about making te reo universal, and especially how will we get 2nd and 3rd world countries to learn it?

          Is it simply a matter of throwing cash at it to make people adopt it? How much would be saved in the long run from not requiring costly and confusing translations, and allowing for easier worker mobility between countries?

          At any rate, forcing a language requires balls, a war of conquest followed by either the extermination of non-language speakers or an extremely harsh occupation lasting for generations. Which is something we can’t do, and even if we could it would cost far, far, far more money than any you think is wonderful. And don’t ever cross me.

  3. Helena says:

    May I suggest a wording amendment to Bullet #4 of the Government’s five priorities.
    Would it not make more sense to …Reduce parental poverty in order to improve the well-being of the child.

  4. sc says:

    1. The current government in its HEYFU is forecast to spend less as a % of gdp than all the previous governments since the 90s. Even Conservative economists are very surprised at this government’s commitment to penny pinching.
    https://croakingcassandra.com/2018/12/17/hyefu-bits-and-pieces/

    2. Whether or not a government like NZ “saves” by taxing us more than it spends and pays down public debt now has no impact on whether it can spend and how much it can spend in the next recession. There is always a magic money tree when the capitalists need it – as the GFC plainly proved.

    3. The Central Bank can always control the interest rates on the debt the NZ government issues if it wants to (see Japan). The Central Bank can directly fund government spending if it is mandated to. And if such financing doesn’t cause inflation during deflationary contexts – why would you not do it?

    4. Excess surpluses by the government now is not necessary in these deflationary times. It is like a homeowner trying desperately to pay down the mortgage but not maintaining the house in the process. You’ve paid your debt off but the roof is so damaged that the property is a write-off.

    The NZ populace ascribe way too much power to the “bond vigilantes”. And the latter like it that way. Heavy indoctrination keeps our progressive politicians from making substantial policy changes.

    If the NZ government started to spend a bit more and tax a bit less my guess would be that the impact on interest rates and inflation would be small given 10 years of high labour underutilisation but the impact on growth and “well-being” could be substantial.

    If they don’t loosen up a bit, some other kind of political force will replace them. See Europe.

  5. Siobhan says:

    Labour are ideologous to austerity and neoliberal free market spending principles.

    Its not like they didn’t advertise the fact.

    And as long as people try and console themselves with mutterings about future financial apocalypses then..well, why would Labour change tact? You can’t have it both ways.

    I wonder..would the UK have ever had the NHS if they worried about the next financial crash, especially at a time when UK national debt measured a 230% of GDP.

  6. countryboy says:

    Can I please write a word or two on banking.

    Watch this.
    The Idiocrats of Nu Zillind should get it. It’s a cartoon. No real thinking required.

    The collapse of the american dream
    https://youtu.be/mII9NZ8MMVM

    Now ponder this.

    Jonky/Tv1
    https://youtu.be/pHSHk4y4Dh8
    If we lynched jonky? Would that be irony?
    Merrill Lynch Wealth Management is an American wealth management division under the auspices of Bank of America. Along with Bank of America Merrill Lynch, the investment banking arm, both firms engage in prime brokerage and security dealings. Wikipedia

    Trust not one single political fucker. The foreign banking ‘industry’ is entirely corrupt and they’re entirely here and now and they’re stealing away with your hard earned gold and more urgently, your time alive on this, your pale blue dot.
    I was right all along.
    Told you so.
    Nya nya.
    grant plump-jowls robertson is all your over billions like a horny octopus on P on cheap E day while we have to walk past the wretched homeless along K Road as they rot and die right fucking there in the street. The banks have got us so head-fucked that we think that, that is kind of normal.
    You’re being swindled by the very best if that’s of some comfort. Personally? I think we’re dumb as fuck and we should be ashamed of ourselves for our lack of direct action.

    • David Stone says:

      Banks don’t lend money to beneficiaries or low income earners because they are a bad risk. Or no risk at all of repayment actually.
      This means that they are dependant on folks a little better off to operate. So these folks who take out loans could if they were determined, get by without borrowing too. If everyone would do that Shonky Jonkey and the rest of the banking world would be relegated to they appropriate position in the world …prone… The government would have to go to a positive money system.
      Going straight into this job was amazingly derisive wasn’t it! Talk about a two finger salute to the country.
      D J S

  7. dennis dorney says:

    Five priorities from this government and not a single word about global warming.So thats not a priority then, even though we will probably die of it.

  8. DOC HORRORDAY says:

    WATCH: Prime Minister Ardern discusses “Thousand chunks of chocolate” budget;

    https://www.youtube.com/watch?v=xUEah4fgyxc

  9. manfred staab says:

    Despite all good fiscal intentions behind the “Budget Responsibility Rules”, at the end of the day, politically they are not much more than self-created handcuffs.

    Clear socio-economic needs (poverty reduction) and ecological essentials (climate resilience) call for initiation and stimulus of adequate responses by the NZ government now, and in future.

    If existing income and expenditure under the national budget cannot sufficiently address these two priorities, additional finance may have to be generated from other sources.

    Focusing on these two priorities, too, an enormous potential for small business income or employment, coupled with effective climate adaptation, lies in a) climate proofing of public infrastructure and private assets, b) coastal and slope erosion control, c) forestry and fisheries conservation and value chain development.

    > Further readings:

    https://www.cbpp.org/topics/climate-change

    http://www.governing.com/gov-institute/on-leadership/gov-fiscal-resiliency-natural-disaster.html

    > And a special dedication to the inventors of the “Budget Responsibility Rules”:

    https://www.youtube.com/watch?v=sE73giFnLBs

  10. sumsuch says:

    I love Robertson’s profound profession of love of the people prior. Robbie, me profaning myself by joining your party to vote for D. Cunliffe, and then his designation, Andrew Little. I was right. You think you can look after the people on the excess the rich allow you? You and JACINDA are certainly better communicators.

  11. sumsuch says:

    Alan, James Shaw helped dream up the budget responsibility rules?! I can’t support such a party.


 
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