How we'll take care of the Government books - Grant Robertson and James Shaw


By Grant Robertson and James Shaw 

Recently, the Labour and Green parties unveiled a joint set of rules that set out how we will manage spending on essential services that all New Zealanders rely on. These 'Budget Responsibility Rules' make it clear that we'll balance our investments in critical areas with responsible economic stewardship.

Being responsible with the nation's finances will allow us to deliver on our promises - to lift children out of poverty, fix National's housing crisis, clean up rivers, tackle climate change, and address the $1.7 billion shortfall in health. These are issues that have festered while Bill English has shown a lack of leadership. Labour and the Green Party will fix them in government.

Being good with the Government's books is a pre-requisite for good government. New Zealanders rightly demand that the finances of our country are managed responsibly, prudently and sustainably. The Budget Responsibility Rules enable the Greens and Labour to invest wisely in the things that matter to New Zealanders.

So let's look at each of the rules in turn.

1. The Government will deliver a sustainable operating surplus across an economic cycle.

There is no point in crowing about a multi-billion dollar surplus when people are living in cars and garages. In office, the last Labour government delivered nine surpluses in a row - while delivering flagship social programmes such as Working For Families, 20 hours free early childhood education and Kiwisaver. It is possible to both balance the books and put aside something for a rainy day.

2. The Government will reduce the level of Net Core Crown Debt to 20 percent of GDP within five years of taking office.

National has delivered the largest increase in public debt - ever. Core Crown Debt has now reached $65bn – its highest dollar figure in history. No one denies that in the face of the Canterbury earthquakes and the Global Financial Crisis that there was a need to increase borrowing, but debt has kept growing and having a clear plan to reduce it is essential.

By setting a target, we will be able to make responsible debt reductions and invest in housing and infrastructure that strengthen our country and prepare us for future challenges. In short, we will build for the future without leaving future generations a big bill.

3. The Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand.

Our first priority for investment will be in those areas that will promote our long-term needs. National has presided over the creation of an infrastructure and social deficit – they have not invested in public assets while population pressures on services have continued to grow. This ensures that it will be future taxpayers who face the costs of paying that deficit.

Sensible investments actually save money for taxpayers. Spending on primary health saves spending on emergency medicine. Spending on state housing saves spending on emergency housing in motels and hostels. Spending to reduce climate pollution saves both on the cost of offsetting that pollution later. The New Zealand Super Fund is now more than $20b behind where it would be if contributions had been continued by this government. We are committed to re-starting contributions immediately. We will announce the level of our first contribution once we have seen the Budget numbers in May.

4. The Government will take a prudent approach to ensure expenditure is phased, controlled, and directed to maximise its benefits. The government will maintain its expenditure to within the recent historical range of spending to GDP ratio.

During the global financial crisis under the current National government, Core Crown spending rose to 34% of GDP. On average for the last 20 years, Core Crown spending has been around 30% of GDP and we are proposing a responsible and balanced approach to the implementation of our policies that will continue this trend.

We will be looking closely at all current government expenditure, to ensure that it is best directed where it will improve security and opportunity. There are examples, such as spending on charter schools that will be revisited and reshaped. But we do not shy away from the importance of quality spending to improve the lives of New Zealanders. We are setting out transformative policies in areas such as housing, health and education. These require investment that has been missing under National – it is what a responsible government would do, and it's what we will do.

5. The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

The best taxation systems have three key characteristics: they are fair, simple, and collected. The current taxation system fails this test and needs reform. In government we propose to establish a tax working group of experts to examine how best to deliver tax changes that are positive for the economy and New Zealand taxpayers.

National have reduced the level of taxation for those who have the most, and at the same time increased the levels for those who have the least. National have also stood by while property speculators have use the taxation system to make a quick buck – both through negative gearing and through flipping housing.

Finally, in government we will establish an independent body to assess that the rules are being adhered to.

The credibility of our Budget Responsibility Rules means there needs to be a mechanism that makes the government accountable. We will establish a body independent of politicians who will be responsible for determining exactly this. The body will also provide an independent assessment of government forecasts to the public, and will cost the policies of opposition parties.

We'll measure our success by running stable budgets and achieving our social and environmental policy goals like reducing child poverty and cleaning up rivers. What gets measured gets managed, the old saying goes, so in government we're committed to developing a new set of key indicators that give an accurate picture of quality of life, economic prosperity, and the state of the environment.

These Budget Responsibility Rules represent a framework that enables the Labour and Green parties believe to act on our vision for a better and fairer New Zealand with a responsible and disciplined approach to managing the country's finances. We know New Zealanders want a government they can trust to deliver on its promises. We want New Zealanders to be absolutely clear that we get this. These rules demonstrate that we will provide the stable, progressive and responsible government that all New Zealanders deserve. 

James Shaw is co-leader of the Green Party. Grant Robertson is finance spokesperson for the Labour Party.