Bryce Edwards: The other side of the Budget story

Bryce Edwards: The other side of the Budget story

For each Budget, the government of the day spends huge amounts of resources getting its message and branding across about its spending decisions. Careful attempts at framing their Budget are made, and all of this largely gets reported. This year is no different, and so you can read, watch and listen to hundreds of media stories about how Grant Robertson’s Budget is a “wellbeing” one, a “step in the right direction”, or even “radical”.

The front page of the Christchurch Press declared it to be the “Helping Hand Budget”, while for the Dominion Post it was “The People’s Budget”. However, there’s another side to the Budget coverage that also deserves some attention – the more critical examinations, which raise questions about the shortcomings and substance in yesterday’s announcements.

Of course, there are always the usual partisan Opposition criticisms, which can be put aside (and really don’t amount to much this year anyhow). Even the business community’s criticisms were half-hearted and, in fact, many businesspeople seemed entirely positive about the Budget. More interesting, are the leftwing or “critical thinking” analyses, which question some of the fundamentals of what has been delivered – or not delivered.

It’s certainly worth thinking about whether the Government’s own constituency – beyond the cheerleaders – will be satisfied by what’s on offer. This was my thinking in an initial analysis piece I wrote for RNZ yesterday afternoon, in which I suggested that the hopes of many on the left might be dashed by what is a rather pedestrian Budget – see: A status quo Budget when transformation was promised.

I argue that this is not the budget of a “transformational government” and it delivers little for supporters when it needed to deliver so much

Many leftwing commentators have also been critical. The most important analysis comes from Gordon Campbell, who comprehensively eviscerates Robertson’s Budget for being timid and orthodox – see: On the ‘morning after’ feeling from the Wellbeing Budget.

Campbell says that instead of anything like “socialist red”, the Budget is more of a “lighter shade of pink that’s been spread thinly across a slew of social and infrastructural spending initiatives that – with a couple of exceptions – are disappointing in their scale and scope. It isn’t transformational.”

Even the increase in mental health funding, which takes that funding to a total of $1.9bn over five years, isn’t as impressive as it might look: “To some extent, those headline funds for mental health will be met from other areas of operation. For example: about $213 million of the funding to enhance mental health and addiction services will be ‘ring-fenced’ from within the funding boost delivered to DHBs. The downside of that situation is that DHBs have received a limited level of extra funding”.

Campbell argues that if the Labour-led Government really cared about fixing the infrastructure deficit or getting rid of child poverty, they simply could have spent proper amounts of money on those projects. Instead they’re “doing relatively little” because of their fiscal orthodoxy that they share with the National Party.

He points out that even National had been spending up on KiwiRail when it was in government, and there doesn’t seem to be any “transformational” plans for rail at all – just playing catchup on necessary expenditure.

Likewise, on the question of benefits being indexed, Campbell argues much more is needed, and “Nowhere was the gap between the caring rhetoric and substance made more clear than in the Budget’s treatment of beneficiaries.” The lack of any generous funding for this group, as for many others, has him concluding that it all “felt more like well-being on a budget, rather than a Wellbeing Budget.”

So, will the political left be disappointed? Herald columnist Rachel Stewart says today that “The left will secretly feel hacked off. And, if not, they need to ask themselves why” – see: Rail on track but climate challenges ignored.

Stewart suggests that much of the big spending initiatives were inevitable under any government and Labour has simply made a virtue of a necessity. Even on the praise-worthy mental health plans, she says this focus isn’t adequate: “it pays to temper such praise with reality. Poverty is also a driver of family violence. So, again, funding initiatives for family violence are just more ambulance/bottom/cliff stuff. Until the lowest-paid workers and beneficiaries see significant gains in their capacity to pay for the basics, the mental health/violence/addiction stats will remain static.”

In fact, the limitations of both the indexing of benefits and the mental health programme are being criticised by some high-profile campaigners. Although Grant Robertson credits Children’s Commissioner Andrew Becroft as giving momentum to the indexing of benefits, Becroft has come out today to say it’s not enough. Isaac Davison reports that “he also felt there needed to be a ‘catch-up’ increase in payments which took into account the fact that benefit levels had fallen behind over the last 25 years” – see: Beneficiaries will get $17 more a week – eventually.

On the topic of a large increase in benefits, Becroft says “That’s what we are waiting for”. And Davidson’s article points out that the “Welfare Expert Advisory Group said earlier this month that core benefit payments should be raised urgently, and recommended an increase of between 12 and 47 per cent.”

In the same article, anti-poverty campaigner Ricardo Menendez complains that “the lift in benefit payments was small when the costs of living continued to rise”. He says: “The Government needs to introduce a wider range of welfare reforms and invest on public housing if it is serious about the wellbeing of low-income people. This budget, unfortunately, failed to deliver on these two crucial issues.”

Menendez has also spoken out on the limitations of the large mental health spend, saying that the “Budget may be handing an impressive boost to mental health but without addressing what’s causing mental health problems, the $1.9 billion investment won’t mean much” – see 1News’ Anti-poverty campaigner says Budget 2019 gives ‘breadcrumbs for people on the benefit’.

He says: “We welcome the fact that there’s been an injection of cash for mental health wellbeing but what has been left behind is the determinants of mental health which is incomes and housing… Access to adequate incomes and adequate housing is one of the most important things for your wellbeing.”

Of course, such large spending on wellbeing isn’t being considered by the Labour-led Government. Victoria University of Wellington’s Max Rashbrooke argues the government is being held back by its fiscal conservatism: “the Government’s predetermined fiscal rules severely limit its ability to enhance wellbeing. It plans to keep public spending at 28.8 per cent of GDP by 2023, even though many developed nations spend 40 per cent or more. Yet greater wellbeing is going to require a greater tax take” – see: For term wellbeing to be meaningful, Budget spending must be assessed across society.

Rashbrooke says that although the Budget “doesn’t deliver a transformation”, he’s still hopeful that the new wellbeing approach will lead to that. But ultimately more taxation and spending is necessary: “We’re also going to need to spend serious cash on things like renewable energy if we’re to avert disastrous climate change. The absence of any notable spending here is the Budget’s greatest blind spot.”

Others such as Greenpeace’s Russel Norman have raised similar concerns. And in her column, Rachel Stewart also draws attention to the lack of spending on climate change: “Where is the money for massive solar projects, or battery tech to start the huge task of reshaping our transport and industrial systems? If the Government won’t change their emphasis on solving the biggest crisis facing all of us, when will they? After the next election? After the next climate calamity?”

For a similar critique, see No Right Turn’s blog post, A deckchairs budget. Here’s his main point: “It’s the only policy that matters, and next to it everything else is deckchairs on the Titanic. But that’s what we got: deckchairs. No money for a major decarbonisation of our electricity system. No money for a major decarbonisation of our transport system. No money, in short, to stop us poisoning the planet. Governments show what they value with money. Jacinda Ardern’s government has shown what it values today, and it is not the future.”

Not spending money to deal with these issues was a deliberate choice made by the Government, according to Bernard Hickey: “it is essentially deciding that keeping interest rates low is more important than getting kids out of poverty and reducing the stress of painfully high housing costs. New Zealand could easily increase its net debt to 50 percent of GDP over the next 10 years without either hurting our credit rating much or sparking a spike in interest rates. The Government should be using that flexibility to address New Zealand’s massive infrastructure and social deficits” – see: What the Wellbeing Budget should have been.

Hickey argues that the Government should be borrowing “$150 billion over 10 years to rebuild the housing and transport infrastructure in our major cities in a way that drives down housing and transport costs and sets us up for a carbon neutral economy by 2050. That extra investment would drive up productivity and then flow through to increases in both GST and income tax revenues to pay the slightly higher interest bill. That $150 billion could be invested in rail lines, bus networks, brownfield housing infrastructure, EV vehicle subsidies, and better education and health spending to improve the health and skills of young workers, who’ll be needed for that re-engineering of New Zealand.”

Similarly, economist Ganesh Nana said in the Herald today that the Government had the fiscal ability to be much bolder in the Budget: “Is it transformative? Sadly, not really. Debt is is projected at a meagre 18.7 per cent of GDP in 2023 – and there is a surplus track of $1.3b, $2.1b, $4.7b and $6.1b. With these numbers it is somewhat surprising that this Government did not use more of this elbow room to trigger a dramatic transformation in business, economy, and communities across Aotearoa.”

If not borrowing, the Government could be raising more money to pay for such necessary spending according to The Spinoff’s business editor Maria Slade: “Tax is the elephant in the room. If the government wants to continue down the wellbeing route it has to be able to pay for it. It’s in the ballpark this year with an expected surplus of $3.5b and new spending of $3.8b, but at some stage New Zealand will be forced to face the fact that a large proportion of our revenue comes from taxing salaries and wages” – see: The well-meaning budget.

Slade says although the Budget is “a well-meaning start… it could hardly be described as transformational.” She acknowledges change takes time, but says it’s not clear much is being achieved at all: “Rome wasn’t built in a day. Nonetheless you’d hope the Romans achieved a metre or two of roading in a 24-hour period.”

Similarly, RNZ’s political editor Jane Patterson argues the Budget was a long way off “creating a seismic political shift” – see: Wellbeing Budget: Laudable, but not transformational. Patterson says many of the changes were more about easing “some of the pressures that have been building up since the election of the coalition”.

In the area of welfare, she says despite “promised transformation” Labour and the Greens “have delivered only incremental changes.” Other traditional areas of leftwing importance are also being neglected financially – for example we’ve seen “in education not enough money to keep up with operational spending.”

Finally, from a distance much of yesterday’s Budget seems bigger and bolder. Looking at the international coverage of the Budget, Alex Braae says they seem to be getting it all wrong – see: ‘A beacon for the world’: What foreign media is saying about the Budget.