Budget begins poll countdown

By Vernon Small

Political reporter

Tired of picking the Blues and losing every Super 12 office sweep?

Why not take a punt on the election date?

After the Budget next Thursday, and a pile of legislation under urgency, the Government has a clear run to polling day.

Essential background information for your election-day pick are the dates of the World Rugby Cup final (November 7, NZ time) and the Apec leaders' forum (September 12-13).

Add the unsurprising data that Prime Ministers like being photographed with Bill Clinton, that a campaign is generally about six weeks long, and that the last sitting of Parliament is a de facto start to the campaign, and take your punt.

Others to have a say are the law (the last legal day is December 18), the National Party (the last feasible day is November 27), and the Labour campaign team (best pick: November 6).

The shortest odds are on mid to late-November; enough time for a six-week campaign and a quick parliamentary sitting after Apec.

On that timeframe Bill English, who swaps titles with Bill Birch on July 1, will have about 100 days to make his mark as Treasurer.

In many ways the May 20 Budget draws a line under the minority Government's programme and opens the way for National, under English, to begin campaigning on a true-blue platform.

While no one would say National is anything but firmly in the driving seat for Thursday's statement (or that Bill English was other than deeply involved) there are elements that would likely not have been included without pressure from within the Parliament and without the party.

Paid parental leave, albeit as a benefit-in-drag, is a case in point. The bill giving West Auckland's Waipareira Trust extra, iwi-like powers is another.

One area that should be watched closely is any move to change last year's work-for-the-dole scheme, the policy that characterised Winston Peters' final Budget and was the brainchild of single-issue Employment Minister Peter McCardle.

Certainly benefit numbers have declined since the policy was introduced, but the long-term effects of the scheme are yet to be assessed.

Did it do more than provide cheap labour for work that might otherwise have cost central and local government?

Was it a helping hand or an impediment to those seeking permanent paid employment?

The answer will be in the Budget-night figures.

More funding and an expansion of the scheme will be a vote of confidence; no increase, or a reduced allocation, will signal that the scheme has passed its political use-by date.

If last year's Budget was about moving people from welfare to work, this year's will focus on improving the lot of those in work or upskilling.

"Investing in the next generation," as the Budget slogan runs, will be manifested in a large number of small, targeted initiatives for education, technology in schools and plans to better link education, science and research.

Large wads of cash for health and education will not be a feature.

They had their fill in the last two Budgets and, if you believe the Government, new delivery systems can better target funds to need and to outcomes.

Moreover, the Budget will not be expansionary.

Extra spending is set to fall short of the coalition Government's original $5 billion limit by some $800 million.

Broad parameters for this year's spending were set back in October at a Premier House meeting and fleshed out in the December economic and fiscal update and the concurrent Budget policy statement.

At that time the economy was still reeling from the Asian crisis and the drought.

Then the Government was facing three consecutive deficits and little chance of credible tax cuts.

Now the economic bounce-back is there for all to see.

Forecast deficits have evaporated - it would be a real surprise if Birch doesn't forecast a surplus for the 1999-2000 year - and the Government may well signal a possible tax cut during the next three years.

Whether it can depends on the surplus buffer the Government has set itself, currently 1.5 to 2 per cent of GDP.

Indications are that as long as progress is being made towards its target of net debt at 15 per cent of GDP, cuts will be contemplated. (After the Contact Energy sale net debt will be down to about 22 per cent of GDP.)

But "progress" needs further definition.

A surplus of $1 billion is roughly equivalent to a neutral cash position (because the surplus contains retained earnings of state entities and other non-cash items).

So a surplus of more than $1 billion is needed before there is actually any debt reduction.

A growing economy can also lower the debt ratio without any debt actually being repaid, so it may be that the Government is looking at a combination of debt repayment and a growing economy as the conditions for future tax cuts.

Whatever the conditions, actual tax cuts announced in the Budget are likely to be limited to an end to stamp duty and a lowering, if not scrapping, of the broadcasting fee.

All in all, pre-Budget billing has tax cuts as a minor key.

Will the Budget be enough to lift the prospects of an accident-prone Government?

To some extent this comes back to the succession of Bill English and his ability to put National on the front foot.

If his more human face to economic policy is seen as only merely presentational, then maybe not.

If his brave attempt to brand National as a party of real social policy success and one that cares for families wins through, then he might be able to steal enough of Labour's traditional clothes to make a difference.

But there is still the fear on National's backbench that elections are won and lost on the amount parties promise to spend on social policy.

If that is the case, National has more to fear from the Alliance than from Labour's ascetic pledges.