Birch got to read it, English must work it

Colin James says National ministers have confirmed that there is a level of social services below which politics (and Tory consciences) will not allow cuts.

This is still a coalition Government. The Budget reads like a hard-bargained agreement between the departing Treasurer, Bill Birch, and the Treasurer-elect, Bill English.

The multi-fingered hand that is the hallmark of Mr Birch's tenacious protection of the Government's fortunes can be seen at all points in the document, most tantalisingly in the various references to the future tax cuts he would like to have spelled out but had to leave for someone else nearer the election.

The tax cut formula is no simple affair: the next significant cut in income tax will be cobbled from savings in money set aside for new policy initiatives, other spending savings and changes to the tax system - and maybe a lower fiscal surplus "buffer."

A disinterested observer, taking him at face value, would estimate the timing as July 2001. But between now and then a National cabinet will become much more the instrument of the other side of the governing coalition.

So Mr Birch had to content himself with "cuts" that are mostly not cuts at all: increases in tax credits (the baby bonus and other assistance to low and middle-income families) and abolition of the broadcasting licence fee.

What was that? A licence is a tax? On that basis the drastic rise in the cost of drivers' licences is a tax increase. Now that the semantic pretence has been officially abandoned, have a happy weekend working out whether you are ahead or behind.

One of the problems with tax cuts that can't quite be afforded, as the English side of the coalition argues, is that they turn up partially elsewhere on the expenses side of household balance sheets - and the punters increasingly are not fooled. And in any case there is a another, bigger, difference between the ascendant group and the fadeouts.

The English-led Brat Pack ministers made it clear to the National Party's divisional conferences in late April-early May that they believe there is a level of social services below which politics (and Tory consciences) will not allow cuts.

Where Mr Birch since 1993 has concentrated on holding spending in the aggregate, as a fiscal exercise, the new broom wants to achieve its fiscal gains by (as the Budget fiscal strategy report puts it) improving "quality and effectiveness," using private-sector agencies to deliver the services "where the private sector can provide value for money" and not by withdrawing Government funding.

This sentence in the Budget is telling: "We will also ensure that further tax reductions are consistent with continuing to maintain a high standard of the Government-funded services that are valued by New Zealanders."

That is miles from the dessicated Birch-speak we used to marvel at before that interloper Winston Peters.

Ministers say the Budget was a breeze to put together. This is partly the result of Jenny Shipley's creation of ministerial teams that have encouraged ministers to sort out differences and develop priorities that reach across portfolios.

So the "bilaterals" - the annual bargaining between spending ministers and Treasury ministers - generated a lot less angst (partly also because Mr English's more persuasive and less arm-breaking style is markedly different from that of Mr Birch and Mr Peters).

More to the point, the spending ministers are now pretty much in agreement. The problem was how to get their line run in the Budget. For Mr Birch, one feels, social programmes have been a politically necessary evil, to be constrained.

The Brat Pack ministers want to talk of social programmes in strategic terms, with paybacks on spending that can take up to a generation, as in the case of "breaking the cycle of disadvantage" through the strengthening families cluster of programmes.

And they think that if you are going to spend roughly $25 billion on those services, it doesn't do to skimp on accountability and quality. Today's consumers demand the same of public services as of private services.

In that context, capping spending is seen as counterproductive - both for the programmes themselves and politically.

So what do we see threaded through the Budget page after page? Lots of talk about "low and middle-income mums and dads." First among the priorities this year is not tax or spending or debt or even "prudence"; it is that the Government is "strongly committed over time to boost priority social programmes."

Bill Birch read the Budget. From July 1 Bill English will argue it. He will be able to do that comfortably. This is halfway his first Budget.