Budget 2023: Steven Joyce - Is that all there is?

OPINION:

When I turned on the radio news at 2pm on Thursday to hear the potted highlights of this year’s Budget, I was surprised at how underwhelming it seemed. Was that truly it? A few tweaks to early childhood education, prescriptions and public transport and ... not much else? I listened longer and yes, that was the whole enchilada. How disappointing, for almost everyone I suspect. And for a country that has so much work to do.

The initiatives in this Budget are the sorts of things you dig out of the bottom drawer when you can’t think what else to do. The prescription charges, for example. Sure, some people won’t have to pay $5 for their prescriptions anymore but a big chunk of people weren’t paying anyway. Government boosters point to low-income people, but they already don’t pay. They point to heavy users of medications, but their costs are capped. And in large parts of the country, the aggressive new pharmacy players mean people don’t pay anyway. This initiative is largely a tax cut for the Chemist Warehouse.

The gaming tax concession is another one. That idea has been hanging around so long it has whiskers on it. As Minister of Science and Innovation, I was lobbied to give that industry a subsidy to match the film credit in 2012. Then, as now, it was pitched as New Zealand’s fastest growing industry, which begs the question as to why it needs a subsidy. It’s grown rapidly in the intervening decade as well, apparently. Yet the Finance Minister has hauled a subsidy out of that bottom drawer and handed it over.

It is hard to believe these are the priorities for increased expenditure in New Zealand in 2023, even assuming the funds are available. What about cancer drugs? What about hip operations? Anything really. And what about the cost-of-living crisis and controlling expenditure? It just feels so intellectually lazy.

I’m sure working parents with 1 and 2-year-old children will be in favour of the extra hours of early childhood care and fair enough. Although passing it off as a cost-of-living measure surely highlights the fact that for everyone else the Budget doesn’t do anything for living costs. In fact according to Treasury, the increased spending and what’s known as the fiscal impulse in this Budget will only make those pressures worse.

The real wonder is the amount by which government expenditure is increasing and yet this is all that ministers have to show for it. Just like last year, the Finance Minister has signed off a massive $20 billion increase over four years. Last year’s increase was huge, and according to Grant Robertson at the time, not to be repeated. This year turns out to be the same again and apparently also not be repeated. Where does all this money go, given that it’s patently not coming back to New Zealanders in the form of tax reductions or better services?

The Minister himself says nearly 80 per cent per cent of it is to pay for cost pressures in the public sector.

No new or improved services, mind. Just more money for the public service to keep doing what it is already doing, which appears to be overseeing a decline in education, health and public safety.

I’m sure the public will be comforted to know that at least their servants in Wellington are being fully protected from the ravages of inflation.

The Prime Minister and the Finance Minister both speak of these cost pressures as if they are powerless to do anything about them. They just exist and have to be met.

Never mind that the two of them have done more than anyone to create the giant maw that is today’s bloated public service, which they now have to keep feeding.

All this would be almost comical except for the negative impact on people’s lives that these choices create, and the trouble we are storing up for the future.

Treasury now expects government expenditure to grow nearly 20 per cent more in the next four years, on top of 60 per cent growth in the last five. To cover that, net government debt is now apparently going to peak at 43 per cent of our economy next year, up from 20 per cent five years ago.

Tax revenue is predicted to grow nearly 30 per cent over the next four years, mostly as the result of inflation pushing taxpayers into ever-higher tax brackets. Stand by to be squeezed some more.

Even this gloomy picture is the optimistic one, requiring you to believe two things which are more akin to fairy tales. First, that Treasury is right this time, after being so badly wrong last year, and inflation will quickly revert back to normal levels. And second, that Grant Robertson will change his spots and discover fiscal rectitude next year, just as he predicted last year and the year before.

All the signs for the latter are bad, unfortunately. Treasury points out in its documents that he has already pre-spent 50 per cent of next year’s Budget allowance, so he won’t stick to that. He has also left a whole bunch of things to run out of funding in the next couple of years, making the books look better than they are. These include money for the school lunch programme which finishes at the end of next year, the $17m-a-year kapa haka subsidy which finishes after two years, and staffing and cost pressures in areas like GeoNet and the Ministry of Social Development, which magically disappear after a year or two.

There are questions to be asked of Treasury here. If something is 50 per cent or more likely to continue, it has to be included in the forward expenditure lines. There is probably around a billion dollars annually of stuff this Government plans to continue but isn’t included in these projections. This is politically helpful when it comes to showing a small surplus in a couple of years’ time — the same surplus which has already been postponed twice and would no doubt be postponed again.

Ultimately this Budget is a case of same old, same old. Same hikes in expenditure. Same growing debt mountain. Same fleecing of taxpayers. Same lack of spending discipline. Same lack of performance. Same Finance Minister shrugging his shoulders and saying it’s the best he can do.

It’s a barren Budget, bereft of ideas and showing no willingness to seriously address the country’s issues. So at least it achieves one thing. Now you know beyond any doubt that if you want change you will have to use the ballot box.

- Steven Joyce is a former National Minister of Finance. He is director at Joyce Advisory.