Has National over played its hand trying to discredit Labour’s spending plans?
That was the question last night as debate raged over Finance Minister Steven Joyce’s claim that there is a $9.4 billion hole in Labour’s spending plans.
Joyce argues that Labour has failed to account for that much spending it is proposing between now and 2020-21.
The argument rests on a line by line table that is published in Treasury’s Pre Election Fiscal Update (PREFU). The first figure Joyce disputes is Labour’s estimate of its “Forecast New Operating Spending”.
He says that Labour has included its new spending only in the first year and failed to repeat the spending each year after that.
Thus, he argues, there is a $9.387 billion gap between what Labour has estimated and what it should actually be forecasting.
Certainly, Labour’s estimates look suspiciously low given that they are $4.775 billion lower than what the Government is proposing to spend and Labour is boasting about how it will spend more on health, education and police.
So Joyce says Labour has underestimated its own spending.
Joyce is arguing that the shortfall is $9.387 million.
But Labour says this is an accounting argument because it has allocated the extra expenditure it needs beyond 2017 to different lines in Treasury’s PREFU tables.
As an example here are the estimates of expenditure year by year till 2021 for some selected categories from the PREFU table compared with Labour’s own estimates.
SOCIAL SECURITY & WELFARE (Millions)
Labour is arguing that its “Forecast New Operating Expenditure” has been reduced because it has transferred that expenditure to the line by line PREFU forecasts.
Labour’s economic consultants, BERL, says it boils down to an argument of where to put new spending in out years.
It says some Governments prefer to put the spending in “Forecast New Operating Spending” where the spending is known but not yet allocated (e.g. population adjustments for health and education funding.
“The Labour Party Fiscal Plan explicitly allocates these items to their relevant spending lines.
“This leaves the resulting ‘operating allowance’ as a clear measure of what is available for future spending for policies or initiatives currently unknown.
“In essence, the alleged ‘hole’ is a fiction arising from a disagreement over definitions.”
Understandably Labour’s Finance spokesperson Grant Robertson was concerned about the headlines Joyce was getting with his claims and called an urgent media conference yesterday afternoon at Parliament.
“This is a desperate act from a flailing Finance Minister,” said Robertson.
“He knows that we have accounted for our expenditure in health and education going out into future years.
“He’s being disingenuous and trying to mislead the New Zealand public.”
“We have quite clearly put in the spending requirements to meet the promises we have made.
“Our fiscal plan adds up.
“We are absolutely clear that we have the money to meet the commitments that we’ve made.”
Despite Robertson’s media conference and the statement from BERL, Prime Minister Bill English was repeating Joyce’s argument on last night’s NewsHub debate between himself and Jacinda Ardern.
English claimed Labour had altered numbers on its web site to try and make the numbers add up.
He said the way Labour had calculated the expenditure meant it would have no money left over for anything other than social welfare, education and health.
“Now the Government runs security services, it runs defence forces, it runs services for vulnerable children.
“There’s nothing in the Labour budget for those.
“They have to fill the gap either with higher taxes – which I believe will now be inevitable under Labour, or borrowing.”
Ardern said the figures had been based “on exactly what the Government books said themselves.”
“This is from PREFU, Bill, so if it’s not in there, it means you haven’t budgeted for it either.”