Spending well not up

Finance Minister Bill English’s fifth Budget is characterised by spending well rather than spending up.

Budget 2013 has freed up a further $1.5 billion by redirecting spending to where it delivers the best results, Finance Minister Bill English says.

This takes the total amount of reprioritised government spending since Budget 2009 to $14.9 billion.

“At a time when the Government’s finances are constrained, reprioritising spending allows significant additional funding for new or proven initiatives that get better results for New Zealanders,” Mr English says.

“It’s about spending well, not spending up.”

In total, Budget 2013 includes new spending initiatives worth $5.1 billion in the current year and over the next four years, paid for by a combination of new spending and $1.5 billion in reprioritisation and new revenue initiatives. Those savings and revenue initiatives include:

  • Tax and revenue changes that net an extra $313 million over four years.
  • Reprioritisation of $641 million to new spending initiatives within Budget votes.
  • Reprioritisation of $252 million of savings from across budget votes into significant new spending initiatives in areas like health, education, welfare reform, and science and innovation.
  • $303 million from existing contingencies.

“These savings are consistent with the Government’s approach across its five Budgets, which have together reprioritised almost $15 billion of spending,” Mr English says.

“New Zealanders were conditioned in the 2000s to believe that Budgets should be about the novelty of new, expensive spending programmes that held out promises of economic and social transformation. Those promises were illusory.

“There was no sustainable revenue stream to pay for the increased spending and there was nothing genuinely transformational to show for it.

“Governments should be judged on what they achieve rather than on what they spend. The value of our spending is a better measure than the amount of our spending. This Government is focused on results, and it’s paying off.   

The idea that a government should be judged on its achievements rather than its spending is a relatively new concept.

Budgets used to be focussed on spending and people waited with excitement to see what was in it for them.

The steep increases in spending from 2005 until 2008 show the cost of Labour’s pre-election lolly scramble.

National changed that, improving results rather than increasing expenditure, even going so far as to deliver a Budget with no increased spending in election year.

John Key, Bill English and their team changed that, making a virtue out of restraint and they’re getting results.

“For example, recorded crime is at a 24-year low, and we’re rolling out new technology for frontline police officers, but the baseline funding for Police is not being increased.  Instead, Police are finding more efficient and effective ways of doing their job which is generating savings they can reinvest.

“At a time when many governments overseas are undertaking radical cuts to get their books in order, we are enhancing high-quality frontline public services while maintaining support for our most vulnerable citizens. That is a real achievement.

“The Government will ensure future Budgets continue to focus on improving frontline public services to deliver better results for New Zealanders, at the same time as improving value for money from more than $70 billion of public spending every year,” Mr English says. . .

A friend who worked in Wellington in the late 80s and early 90s saw the results of spending cuts. She was back there during Labour’s last few years in government and was horrified to see the increases in spending, including steep growth in public service employees, without commensurate improvements in services and results.

National had to change that but its restraint has been restrained rather than radical – focussing on protecting people from the worst impacts of the recession, reducing expenditure, improving efficiency and maintaining services.

The LabourGreen reaction to the Budget shows that they still don’t understand the necessity for such measures, they would undo the good National has done just as the 1999-2008 Labour-led government undid the good done by those which preceded it.

They spent up, they didn’t spend well and LabourGreen would follow that bad example.

9 Responses to Spending well not up

  1. Dave Kennedy says:

    The biggest winner in this budget is tourism (40% increase) followed by the Prime Minister’s Office and the Cabinet (18% increase). The Biggest losers are Statistics NZ (a 30% cut) and environmental protection (10.2%). Health will have cuts in real terms with the smallest increase (2%).

    It does appear to me that there will be more money spent on Government spin, while the data revealing the real state of our nation will be limited (five yearly environmental reporting and analysis has already been wiped). $36 million extra will go to promoting our apparent clean green environment for tourists and another $14 million will be cut from the already struggling departments that are charged with protecting it.

    270,000 children are suffering in substandard housing, third world diseases and from malnutrition. After four years there is still very little in the budget to address it. The $3.4 million of extra funding being spent on the Cabinet and Prime Minister would buy a lot of lunches for hungry kids.

    The Government is determined to maintain the $2 billion a year loss in revenue through the non-neutral tax cuts to upper income earners. It has allowed another bubble to occur in the property market so that the average house price in Auckland has rocketed to $735,000, and is predicted to reach a million in 3-4 years. The $15 billion the Government promised Christchurch is being drip fed and only a fraction has been spent, while many families have spent 2 years in shocking conditions.

    I guess if you are Sky City, a property developer, into motorway construction, or in the top quintile of earners then this budget is great. If you are working on a low wage, homeless, caring for a family, living in a broken Christchurch home, are a hungry kid or are waiting for your local river to be cleaned up then it is a case of making the most of the crumbs being dropped.

    “Spending well”? I guess it depends who you are.


  2. Dave Kennedy says:

    Also according to the Financial Times’ chief economics columnist it is not Government deficits that caused the collapse of the Irish and Greek economies but the state of the current account. As Russel Norman has pointed, our current account deficit is one of the worst in the world, a ticking economic time bomb.


  3. JC says:

    There are *not* “270,000 children are suffering in substandard housing, third world diseases and from malnutrition”\

    That is the sum total of those children who met a definition of “poverty” and who receive billions of dollars of assistance from the taxpayer to ensure they have a basic income. Its an absolute insult to suggest that the majority of these families live in poor conditions and don’t feed their children properly.

    Further, the Housing Economic Survey 2012 says that half the poor move to the median income or higher in any 7 year period, that the bottom deciles and Superannuates are fully protected by inflation adjusted benefits and transfers and those lower paid up to decile 6 are protected by WFF. As it says:

    “Redistribution through the tax and transfer system reduces inequality very significantly compared with what it would otherwise be. An example is that single-earner two-child families with income less than around $55,000 from wages pay no net income tax. They receive more from WFF tax credits than they pay in income tax and ACC.”

    As for your $2 billion in lost tax revenue from “upper income earners.. check Key Facts For Taxpayers for 2008 and 2013..

    In the 2013 budget the top 11% of earners paid 49% of all income tax and in 2008 the 11% paid 46%.

    Incidentally I understand the “rich pricks” are now paying 75% of all income tax net of benefits.. up from last year.



  4. JC says:

    Well then.. you’ll be pleased to know that National has almost halved the current account deficit since 2008.



  5. Dave Kennedy says:

    JC, I think you will find that the median income is such that most people can’t pay much tax. If incomes were more evenly spread there would be a greater share of tax as well. Also for the top quintile of earners, a good amount of their income is through untaxed capital gains, many wealthy actually pay less tax on their total income than the average worker.

    You are right about the 270,000 children, it is unlikely that they are suffering from all three problems but all of them will have at least one of those to deal with and a good number, perhaps around a quarter will suffer from all three.

    The Government is taking on board the idea of a housing warrant of fitness, but this only applies to state housing, as they have pushed a lot of low income housing provision to the private sector, the same standards should apply to other housing as it does in many developed countries. Our average housing standards are considered to be about fifty years behind nordic countries.

    Also the richest 100 New Zealanders had a total wealth of $52 billion and I think you will find that although the top 11% paid 49% of tax that they actually earned more than 49% of the total income (when you include capital gains). New Zealand actually taxes at a lower rate for top income earners than Australia and far more heavily for low income earners (our paper boys even have to pay tax). http://tvnz.co.nz/q-and-a-news/pays-price-tax-cuts-rich-3344459


  6. Dave Kennedy says:

    Which is really good but it has actually been increasing since 2009, and is still high internationally and private debt has increased also




  7. homepaddock says:

    “Also for the top quintile of earners, a good amount of their income is through untaxed capital gains,”

    There’s no income on an increase in the value of an asset unless, and until, it’s sold. Surely even the Green Party isn’t suggesting taxing unrealised capital gains?


  8. Dave Kennedy says:

    However, those involved in property investment buy and sell and we also have no inheritance tax. Friends of mine have struggled to keep their actual businesses profitable during the recession and have kept themselves afloat through their property investments. One can also save a lot in taxes through the “losses” generated from a portfolio of rented properties, it is a way of dodging tax while at the same time building capital from growing values: http://www.propellorproperties.co.nz/real-estate-investing/

    If you look at the NBR rich list, most have property investment as part of their business. Property values have increased by 12% in Auckland over the past year so anyone would be stupid to invest in the productive sector when the returns are so strong elsewhere. http://www.qv.co.nz/onlinereports/propertyvaluemap.htm


  9. homepaddock says:

    Property investors who buy and sell are deeemd to be trading are subject to tax on the profit. The NBR reports the Budget included a provision of $6.65m for the IRD to chase property investors who haven’t paid tax on capital gains on property sales: http://www.nbr.co.nz/article/budget-2013-more-and-less-meets-eye-property-tax-changes-rh-p-140276

    The rich list has people with a lot of property investments because it’s generally easy to find public information on property ownership. People on the list will have other investments that are much harder to trace and there’s a lot of very wealthy people who have a range of investments who never appear on the rich list.

    Please tell me even the Green party isn’t deluded enough to think a return to death duties is a good idea.

    If only the left put the energy into ideas which promote economic growth which would help everyone instead of working out ways to take more so they can spend more.


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