Prime Minister Jacinda Ardern unveiled yesterday what appears to be a political campaign designed to lower expectations for the Budget and to sheet home blame to the previous National Government for the constrained expenditure.
The Prime Minister referred to recent news reports about Middlemore Hospitalwhich had an extreme mould outbreak, decaying timber and asbestos in some areas, and raw sewage leaking behind some wall panels.
“You will have already seen in the past couple of weeks, the vivid picture of what happens when a Government prioritises the books looking good even if this is at the expense of the health and well being of a country’s people,” she said.
“You will see that as a strong theme in the lead up to the Budget.
“We will be creating a picture and sharing more publicly what we have found sitting in front of us from the moment that we took office and we opened up the books.”
There is little doubt that the much of the country’s state-owned infrastructure has had maintenance and replacement neglected and is in bad shape.
Treasury’s March 20 Investment States estimated there was $20 billion of liabilities facing the Government over its social asset portfolio — housing, schools and hospitals.
But Labour’s Fiscal Strategy allows only $10.1 billion for unallocated capital expenditure through to 2021/22 and that also has to cover the Defence re-equipment programme.
This squeeze in the capital budget explains why the Government is so keen to pay for transport with fuel taxes rather than from general revenue.
But the situation in the health sector might not be as straightforward as Ardern would imply.
The state of the infrastructure is not necessarily entirely explained by National’s unwillingness to fund it.
Whilst there is little doubt the health sector has had its operating expenditure underfunded but the situation surrounding expenditure on assets like buildings is more complex.
Where Labour has an uncontestable point is that for the eight months of the current financial year, up to the end of February this year, Ministry of Health figures show District Health Board deficits were running at a total of $73 million while at the same period last year they were reporting a $12 million deficit.
Labour, in its Fiscal Plan of last August, promised to spend $293 million to wipe out accumulated DHB deficits and to increase annual funding by another $554 million.
The former Health Minister, Jonathan Coleman, is understood to have sought $200 million at the last budget to wipe out the accumulated deficits but his pitch was rejected by Finance Minister Steven Joyce backed by Prime Minister, Bill English.
However it is the capital account which covers replacing buildings like the dilapidated Middlemore one that is more complex.
District Health Boards have persistently underspent their capital allowances.
The same Ministry of Health report for the financial year to the end of February shows that capital expenditure was $140 million below budgeted levels with actual expenditure of $225 million against budgeted expenditure of $365 million.
In 2016, the Auditor General Lynn Provost, reviewed DHB management of their assets.
She concluded that there had been sizeable over-budgeting or underspending of capital, suggesting that DHBs might not be investing the capital needed to continue to deliver their services in the future.
She painted a picture of a sector under considerable stress.
“Our audit work since 2009 shows a sector strongly focused on delivering short-term results within a challenging operating environment and financial constraints,” she said.
“But I am concerned that DHB asset management does not seem to have gained much traction in this time.”
The scale of the task facing the Government was acknowledged by Finance Minister, Grant Robertson.
“One Budget cannot make up for nine years of neglect,” he said yesterday.
“This has to be a long-term plan to invest in our future and it is one that we are committed to.
“We are equally committed to our Budget responsibility rules.
“They remain important not only in providing a discipline to us in how we go about making our spending decisions but also because they future proof us in terms of any other external or internal shocks, as we saw with the Canterbury earthquake.
“We know we can deliver to New Zealanders important progressive changes that can deliver to New Zealanders the services that they need and keep the books in a healthy picture and that is what you will see when the Budget is delivered.”
Ardern was also careful to balance the need to rebuild the social estate against responsible economic management.
“One of the issues that comes up time and time again from voters is that, yes, they want us to invest in those core services
“They want to know that their school is the best school available and that when they get sick they will have the health system they need to make them well again.
“But they also want us to be careful.
“They want us to prioritise what is important.
“They want us top be ready for any potential shocks we might face in the future.
“We have to be careful we balance all those competing demands from voters and I believe we can do that.”
in other words, don’t expect the budget to provide a magic fix.
The challenge will be to get voters to understand that. Hence, presumably, the campaign to blame National.