The pressure is mounting

Finance Minister Grant Robertson yesterday made his first appearance as Minister at the Finance and Expenditure Committee and faced a barrage of questions from his predecessor, Steven Joyce.

The result was a revealing insight into the pressures facing the Government — both the Labour Ministers and the first signs of tensions between Labour and NZ First over the way the $1 billion Provincial Growth  Fund would run..

The fund is a key political plank for New Zealand First also under pressure last night over another poll showing their support is plummeting.

And to underline the pressures facing Robertson,  after he had left the Committee room, Treasury Secretary Gabriel Makhlouf emphasised how tight the budgetary process was this year saying the Government faced some tough choices.

Altogether it was a morning in which Robertson (and Makhlouf) were busy lowering expectations.

The Opposition Finance spokesperson (and former Minister) Steven Joyce focused on the $1 billion Provincial Development Fund which was set up as part of the coalition agreement between NZ First and Labour.

Outside the committee room, he said he was concerned that the fund would be a political slush fund.

“I do have concerns about that because of the comments from some of the individual Ministers about the things they’d like to see this fund spent on,” he said.

Joyce said that so far most of the comments from Ministers about potential uses of the fund had been about areas north of Auckland — which also happens to be the political heartland of NZ First.

Inside the Committee, though he seemed to strike a chord with Robertson when he asked what the Minister was doing to ensure there was probity around the decisions that the fund made; that there was going to be some form of independent process.

“The process we are working through now is the way the fund will be developed; the criteria, the decision making process,” said Robertson.

“That’s exactly what we are working on now.

“What I can absolutely assure you is that it will meet the highest standards of probity.

“This is a fund that we want to work across a range of regions in a number of different ways.

“This will be a rigorous process.”

Robertson conceded that coalition agreement did define some areas (Northland rail for example) where the fund would work.

“That is the nature of the way the fund was developed, but we want to do it and deliver it in partnership with regions.”

Though the Minister might have reassured Joyce the reaction inside NZ First was unlikely to have been quite so sanguine.

There is a fear within NZ First that the bureaucracy could easily submerge the fund and divert it from its intended role as a stimulus for jobs in the regions – particularly those regions where NZ First’s vote was strong at the election.

There will be added stimulus to this view following last night’s Newshub poll showing the party down to 3.8% which would (theoretically) see it out of Parliament altogether if an election were held now.

An example of how Labour and NZ First could end up at cross purposes over the fund comes with the promises made by NZ First Leader Winston Peters at the Karaka yearling sales over the provision of one or even possibly two all-weather race tracks part financed by the Government.

Robertson said it had been proposed but emphasised that it was a “budget bid”.

Peters, however, was more emphatic.

 “We’ve got a number of avenues for financing that we are looking at and I’m very confident that in the Budget we will be able to announce it,” he said.

And he confirmed that the proposal could be for two tracks – one in the North Island and one in the South.

However, there is little doubt that the relationship between New Zealand First and Labour is starting to develop friction points.

There are reports that Peters is demanding to be consulted on a wide range of Government decisions, many outside NZ First’s immediate portfolios which are starting to frustrate some Ministers.

This all comes at a time when it is becoming clear Labour is under its own internal pressures.

Robertson told the committee that Labour was are that there were a number of large public sector wage claims in the wings.

“We’ve to manage those within the budget responsibility rules.

“We’ve been very clear.

“We have an ambitious programme, and I’m not surprised Ministers are out there talking up their ambitious programmes.

“But Ministers are very well aware that with the ambitious programme that we have outlined and the cost pressures that are there, that’s where the phrase ‘tight” comes from.”

Robertson said that was why he had asked Ministers to go line by line through their budgets and to have a look at what was possible to be reprioritised.

But as Joyce was later to comment, Treasury Secretary Makhlouf, addressing the same issue was more cautious.

“The Government has made clear that it wants to stick to its Budget Responsibility Rules and it’s made clear it wants to continue to reduce net debt as a proportion of GDP, albeit on a slightly slower timescale than the previous Government

“That does mean that there won’t be any easy decisions.

“They are all going to be pretty tough.

“But I don’t feel at the moment that what the plans are aren’t deliverable.”

Makhlouf said he had made it clear to his public sector chief executive colleagues that they were still going to have to run their departments extremely efficiently and extremely well.

“And they are going to have to be ready to support Ministers in reprioritisation decisions or making sure evaluations of policy proposals are made extremely carefully and extremely well.

“If the Government is going to deliver its Budget Responsibility Rules there is no reason for me to conclude that it won’t, it is going to have to stick to those plans, and there is no reason for me to doubt that it will.

“But it will have to make some tough choices.”

Thus Robertson may be begining to be finding himself in the position of every other Finance Minister whose most usual response their colleagues was “no” — that may be easy enough with Labour Ministers but with NZ First. Who knows what sort of a response he will get from a party that is already wounded regarding popular opinion.