Matthew Hooton: $7000 per household - that's the cost of Govt's Covid vaccine delay

Prime Minister Jacinda Ardern and director general of health Dr Ashley Bloomfield arrive for a post-Cabinet press conference at Parliament. Photo / Mark Mitchell

Opinion

OPINION:

Labour's failure to order the Covid vaccine on time looks to have cost the average Kiwi household around $7000. Don't worry. That average household has already forked out around $5500 in extra taxes to help pay for it. We'll pay the rest later.

Remember last year's halcyon winter, with no Covid in New Zealand and the All Blacks beating the Wallabies twice at Eden Park? Back then, the Treasury thought Finance Minister Grant Robertson would spend about $114.7 billion to get us safely through 2021/22.

Then, in late August, our still largely unvaccinated population was hit by Delta. Prime Minister Jacinda Ardern had no choice but to order what became the long lockdown of 2021/22. It contributed to yesterday's Budget Economic and Fiscal Update (BEFU) estimating Robertson will end up spending $128.4b to get us through 2021/22.

That's $13.7b more, or over $7000 for each of New Zealand's estimated 1.9 million households. The "good news" is that Robertson expects to collect an extra $10.6b in tax this financial year compared with the forecast a year ago, or around $5500 more per household.

Inflation is one reason why, fuelled by both monetary and fiscal stimulus being needed for much longer than if we had been vaccinated before Delta arrived.

That, of course, is only the start of the cost. In Auckland in particular, the preventable lockdown also drove more family businesses broke, ruined a second school year for tens of thousands of students and worsened already fragile mental health.

Yet no one in the Beehive or the bureaucracy has even apologised for the failure to begin our mass vaccination programme six months earlier.

In June, despite tight rationing, New Zealand came within days of running out of vaccines entirely. When Delta hit in August, vaccine deliveries had remained so low that the Government hadn't even completed the vaccination of health, border and MIQ workers. It wasn't until October that the programme began to ramp up, including the much-mocked but highly successful Super Saturday.

Even then, it wasn't until mid-December that Covid-19 Response Minister Chris Hipkins could announce that 90 per cent of eligible people were double-dosed — the bare minimum to avoid future lockdowns.

Prime Minister Jacinda Ardern and Covid-19 Response Minister Chris Hipkins. Photo / Mark Mitchell

Had we got there six months earlier, the August lockdown would have been unnecessary and Robertson would have saved a big chunk of the extra $13.7b he ended up spending.

Inevitably, Beehive strategists blame the bureaucracy for the delay. They say the Ministry of Business, Innovation and Employment (MBIE) wasted months trying to design a multi-vaccine strategy which meant none of the manufacturers was interested in prioritising New Zealand. They claim it was the Prime Minister herself who eventually lost patience and ordered MBIE to pursue a single-vaccine strategy with Pfizer.

But the Prime Minister and Hipkins can't be let off that easily. If the Beehive story is true, why did they let MBIE flounder for so long before taking charge? And why was MBIE even involved, when Pharmac — love it or hate it — has decades of experience driving hard bargains with pharmaceutical companies?

As early as June 2020, Pfizer had written to the Government offering a deal. "We have," it said, "the potential to supply millions of vaccine doses by the end of 2020, subject to technical success and regulatory approvals, then rapidly scale up to produce hundreds of millions of doses in 2021." It took six weeks for its offer to even be acknowledged.

The vaccine fiasco underlines that it is more often managerial competence than the amount of your money ministers boast they are spending that determines the efficacy of government programmes. Government didn't ignore Pfizer's 2020 offer because it was underfunded but because it was gormless.

Yesterday, Robertson boasted that he plans to spend more money than any of his predecessors. For 2022/23 alone, core Crown spending is now picked to be $127.1b, up another $6.9b over what was estimated as recently as December, already factoring in Robertson's planned $6b of extra spending. This is not a sign of success but of failure, or at least that things are going wrong.

The increase over the December forecast is an extra $3500 per household. In 2022/23, Robertson now expects to spend $35.9b more than he and his predecessor Steven Joyce did in 2017/18. That is a 45 per cent increase, or nearly $20,000 per household.

To pay for it, Robertson estimates he will collect over $14,000 more per household in tax than he and Joyce did together in 2017/18. By the middle of next year, each household will carry over $50,000 more in net core Crown debt than when Robertson took the job — and debt will grow again in 2023/24.

New Zealand's long-term fiscal outlook is even more alarming. Absent policy changes, the ageing population will see the cost of superannuation increase from 5.0 per cent of GDP in 2021 to 7.7 per cent within 40 years. Health is worse, picked to increase from 6.9 per cent of GDP in 2021 to 10.6 per cent in 2061. Politicians have known about this for decades, as have all of us.

But if ministers, the media and the public continue to see increased government spending as a sign of success, not failure, then future finance ministers should do nothing. Demographics alone will allow them to boast big increases in spending, yet with no improvement in access, services or outcomes.

The failure of Kiwibuild and 2019's $1.9b extra for mental health are the most-cited examples of government incompetence. But those costs pale into insignificance compared with the billions of your money that have been lost because no one answered Pfizer's letter in June 2020.

New Zealand will never face our unfolding fiscal, economic and social crises if the measure of governmental success remains things like Robertson feeling forced to open the chequebook a little more for his $350 one-off handout to 2.1 million people, the centrepiece of his $1b so-called "cost-of-living relief package".

That money will further fuel inflation, but some voters will feel happy about it in the meantime.

The lesson from the 45 per cent increase in spending over which Robertson has presided is that the Government is taxing and borrowing quite enough. It has more than enough money to do a reasonable job at providing the services and support expected of it. But none of those services and support will in fact get better until the conversation turns to competence — and where governments at least apologise for things like unnecessary multibillion-dollar lockdowns.