Monday, April 2, 2018

About that $11 billion fiscal "hole" in Labour's budgeting


Remember how, before the election, Stephen Joyce made much of a supposed 11.7 billion dollar gap between Labour's proposed spending and the budget they'd have available?  Economists ridiculed him, but Joyce stuck to his guns:

...Steven Joyce says Government spending announcements indicate he will be proven right about his widely derided $11.7 billion "fiscal hole"...

What was it that made him so sure, despite all the experts telling him he was wrong?  Well, probably the fact that he knew how he'd been cooking the books and the experts didn't.  


...the $20 billion programme ... was unveiled with much fanfare last year.
But the National Government never accurately costed it and made no provision in any of its long-term forecasts to pay for it. 
No allowance was made in the capital spending forecasts of the Pre-election Economic and Fiscal Update for the procurement programme. 
This has left Labour facing a multi-billion dollar hit to its budgets each year over the next 13 years...

As if that wasn't bad enough, he and "quiet achiever" Jonathan Coleman underfunded the public health system such that it's going to cost billions to fix.  The current government puts the shortfall in health funding at $2.3 billion by mid-2018 when they're going to have to budget for health expenditure, and it's recently been revealed that deferred maintenance forced on DHBs by Coleman is going to cost $1.6 billion in Counties Manukau alone.   

That deferred maintenance is a fine example of National's approach to governance. Much like when your employer gets taken over by asset-strippers and they focus on making the books look good at the cost of everything else, Coleman's approach as minister was to require surpluses from the DHBs at the expense of their actual purpose.  The outcome is that the shysters running the previous government get to say "We've left the books in good order for the incoming government" while sniggering to each other about the disastrous mess the books are concealing and the new government's going to be stuck with.

So, yeah - it looks like Stephen Joyce was actually being pretty conservative with his "fiscal hole" estimate of $11.7 billion.  The weird thing is why the media allowed him to get away with calling it "Labour's" fiscal hole, and why they gave him and Coleman such glowing reviews for their self-aggrandisement at the nation's expense.  I guess that one's easy enough to answer - actual journalism is harder than looking on Kiwiblog to see what invented scandal you should be chasing now.

14 comments:

Snowflake said...

Yep. The Stacey Kirk hagiography of Coleman was nauseating. The guy was worse than incompetent and nasty to boot. Actually that sums up the previous government in seven words. They have their shills though, right Vet?

Adolf Fiinkensein said...

Poor Snowflake is off projecting again.

Nauseating = Hipkins
Nasty = Mallard
Incompetent= Ardern

You are their shill, right?

Snowflake said...

No Adolt, wrong again. BTW you totally pwned yourself by falling for Farrar’s April fools day post didn’t you? You specialise in spectacular self-humiliation don’t you old guy? Now stick to the point of the post and defend Coleman and Joyce. Can’t can you?

Shelldrake said...

We still don't know what is in Winston's secret coalition agreement. Wait till Winston gets his grubby little fingers on the levers. What new magic and witch craft does Shane have up his sleeve as the NZ First conjuror?

macdoctor said...

Gosh, this is a load of hooey, PM! The first round of defense spending was due in the upcoming budget, so it is hardly surprising that National have not bothered to cost it. As Labour blithely ignored the actually budgeted tax cuts and spent the money elsewhere, I hardly think they will give $20 billion of defense spending the time of day, let alone allow a fiscal hole caused by a National promise they have no intention of keeping.

As for the oft cited figure of $2.4 billion "cut" in health spending, that figure is the difference between the extra $40 billion that National have budgeted to health and the prospective amount that Labour would have budgeted, assuming a straight line increase in their spending. This assumes Labour would have continued their rate of increase in health spending throughout the GFC (not a likely scenario). The report cited also came out prior to Nationals last budget, which gave an extra 1.8 billion to health, substantially reducing the "shortfall"

Joyce's "fiscal hole" is just an observation that Robertson's figures seem to ignore the very kind of increases one sees in the health budget that you are berating Coleman for.

DavidW99 said...

Aw Milt, you wouldn't be setting up strawmen here would you, just when the Fairy Princess is getting a pasting in the media and all!

Hey look everyone,..... a squirrel !!!

The Veteran said...

DavidW99 .... leave Milt alone, he's feeling the pressure and people backed into a corner tend to lash out.

But one point needs to be made and understood. The Health budget is a black hole and the profession is adapt pressing the buttons in presenting the case for more and more and more ... in the industry it's called 'shroud waving'. The dilemma for all Health Ministers ... do we sacrifice bricks and mortar in favour of the here and now. It's a balancing act and, given the black hole bit, very few Ministers (with the possible exception of Tony Ryall) manage to emerge unscathed from their time at the helm.

Psycho Milt said...

The first round of defense spending was due in the upcoming budget, so it is hardly surprising that National have not bothered to cost it.

Oh, right, I forgot that thing about having to cost out and budget for the promises that you trumpet to the media only applies to Labour governments, not National ones. Of course National announced a shitload of new stuff for Defence without doing any work on how they were going to pay with it, that's what Tory governments do. Sorry, my mistake.

As for the oft cited figure of $2.4 billion "cut" in health spending, that figure is the difference between the extra $40 billion that National have budgeted to health and the prospective amount that Labour would have budgeted...

The piece I linked to was pretty clear that it was the amount needed to match population growth and inflation if real expenditure were to be maintained at 2009-10 levels, not some made-up figure that Labour might have spent if they'd been in power. There's a downside to relying on immigration to keep your GDP growth figure in positive numbers.

And I notice you don't mention the billions worth of deferred maintenance, a direct effect of letting spoilt rich kids like Coleman loose on your public health system.

Psycho Milt said...

Aw Milt, you wouldn't be setting up strawmen here would you, just when the Fairy Princess is getting a pasting in the media and all!

I think you mean a distraction rather than a straw man. And, no - every Labour government gets to clean up National's mess against a barrage of hostile media stories. That's been true since the first Labour government in 1935 (albeit that one wasn't cleaning up National's mess), and this time will be no different.

The Veteran said...

PM ... Labour's mess that National inherited in 2008. A decade of deficits according to the Treasury briefing papers and then came the earthquakes ... bit like John Cleese ... don't mention the war. Highly selective memory old son.

Psycho Milt said...

Labour's mess - what? That awful, bowel-loosening realisation that the previous government has, er... paid public debt down to near zero and left you with a strongly-functioning set of public services that you can strip for parts like the pack of wasters you are. Oh, how the incoming Key regime must have suffered, inheriting the best ability to weather the GFC of pretty much any of the western democracies! Well, certainly that's what it told us for nine years, the bunch of weasels. Someone should have given them a slap or something.

The Veteran said...

C'mon Milt ... stop interviewing your typewriter. NZs public debt as at June 2008 was $39,913.8 billion dollars ... if that's 'near zero' you're on the money but really!!!

Psycho Milt said...

Have a look at the graphs in this story, they lay it out nicely. Labour inherited government debt of nearly 23% of GDP from National in 1999 and took it down below 6% by the time they left office. National's efforts to combat the GFC took it up to 25% of GDP before it started falling again. No complaints about them using public debt to beat the GFC, but let's not pretend they didn't inherit a very low level of debt to start with.

Anonymous said...

These ideological arguments are stupid. Socialism is a failure everywhere it spreads its tentacles, democracy is governance by the mediocre and politicians are manipulative, self serving, lying mongrels. Those on the left and in NZ First look to be particularly stupid as well which does not bode well for NZ in the short term.

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