Budget of few gifts looks beyond ballot

When a Government hears the electoral tumbrels coming its instinct is to throw offerings to the mob, as National did in 1972 and Labour in 1990. The present Government, well into its ninth year, can certainly read the omens. Yet its Budget yesterday was light on electoral enticements. Apart from a tax benefit for new parents - a sop to the clamour for paid parental leave - the Budget was cautious yet surprisingly forward-looking.

Tax cuts, a prospect the retiring Treasurer likes to dangle before voters at times like this, were more apparent than real. Few will regard the end of the broadcasting fee as a cut when they know that the revenue will be found instead from taxation, a teat that public broadcasters will probably find easier to suckle. There was only a vague commitment to general tax reductions in National's next term, should voters oblige.

Instead there was much discussion of investment and even of storing surpluses to meet the costs of the baby-boomer bulge in health and superannuation costs early next century. It is timely that the Budget for 1999-2000 should begin to grapple with that problem. The country at large may realise how fast it is approaching the hump once 2000 is on the calendar.

Among the options for "pre-funding" the costs of the age bubble is the idea that the Government should build up some financial assets beforehand so that tax rates can be kept fairly constant for the next generation of income-earners. The same purpose may be served by steadily reducing public debt and this Budget reaffirms a resolve, not much heard of during coalition years, to bring net debt down from 23 per cent of GDP to 15 per cent within 10 years.

But then the Budget also revives a resolution to reduce Government spending (now 35 per cent of GDP) to 30 per cent or lower. That resolve would be more impressive if an improvement in the ratio this year did not depend quite so heavily on hope of 3 per cent growth. The economic and fiscal outlook glows with optimism beside its precursor, the budget policy statement of December. At the time the pall of Asia seemed to be widening. The cloud has since lifted somewhat, thanks to consumers in two of our three principal markets, the United States and Australia, but the outlook remains delicate.

It is too delicate to be opening new vistas of social welfare such as paid parental leave. National obviously hopes its eight-week tax credit for low and middle income households will head off proposals from Labour and the Alliance for a universal parental benefit. But by indulging the cause of paid parental leave even to this extent, National concedes the important principle that priorities ought to be properly established.

Can anyone honestly say, when all unsatisfied social needs are considered, that a baby benefit is the most urgent call on public funds? Considered in isolation, paid parental leave is a proposal to warm the hearts of the electorate. But it should not be considered in isolation from the more mundane needs that might otherwise be met. Paid parental leave is becoming a model of how poor public policy is made and National has just contributed to the process.

The Budget is disappointing also in education. There is more money for computers and a policy to wire all schools to the Internet but nothing to advance the budgetary flexibility of boards ("bulk-funding") and not even the widely touted suggestion that boards would be financed for capital responsibilities.

More might well have been expected, too, for ideas to tackle high Maori unemployment. This Budget was the last chance for the Maori MPs in coalition with National to produce some fruit from the association. It is hard to find it. The only new item, the first dictionary in Maori, might not be quite the monument required for re-election.

And there is precious little to lower the costs to business of tax compliance, privacy, safety requirements and sundry other fields of regulation that have been opened in the name of nanny state. The abolition of stamp duties could help farmers but they were not among the more significant pleas for relief heard regularly from chambers of commerce.

In specific proposals the Budget pales beside last year's, which featured the end of car assembly protection, the green light for parallel importing and deregulation preparations for producer boards. Even the few budgetary gifts, such as the new Auckland hospital, lost their impact by being announced in advance.

There is at least a murmur of attention to some of the underlying problems of the economy, such as the preference for housing over more productive investments, the poor incentives to save generally and the distortions of taxation on different forms of saving.

The Government has managed to produce a Budget that looks beyond the looming election and at a time like this, that is a credit. It is also a little brave. - EDITORIALS & OPINIONS