KEY POINTS:
Labour is preparing to offer more detail about how it will manage the costs of its policies as it emerges that spending promises have eaten up much of the Government's available new money for at least the next three financial years.
A Herald analysis of how much money is left for politicians to spend in the next few years reveals just how tight the situation is - in the 2009-10 year the $1.75 billion set aside for new spending is almost fully committed if expected pressures come to bear.
And by phasing in policies such as increasing student allowances so that the full impact is not felt for another three or four years, Labour has also left itself little room to move in 2011-12.
The worsening global financial crisis is forcing a re-think of spending policies by all political parties and Prime Minister Helen Clark this week said Labour would not be making any more major pledges during the election campaign.
The Herald understands Finance Minister Michael Cullen's office is preparing to release more information about spending plans this week as senior figures work on a post-election stimulus package for the economy.
Yesterday Dr Cullen said strong leadership was needed to ensure the overseas crisis did not lead to a "depression" in New Zealand.
"Labour is simply not prepared to let that happen," Dr Cullen said.
"We will bring forward spending on infrastructure to create real jobs and build the potential for future growth ... now is not the time to slash spending as our opponents are proposing."
Without either cutting or deferring expenditure already announced, Labour's further stimulus measures will increase debt beyond what was in the Pre-Election Economic and Fiscal Update and lead to potentially larger deficits because of higher debt servicing costs.
National faces the same pressures as its main opponent - though many of its spending promises have been made based on a plan to shift existing funding out of one area and into another.
National is also planning to make savings in the public service to fund its new policies and to cut back on KiwiSaver and research and development tax credits.
However, National left some questions over funding with the announcement this week of more police in South Auckland - its costing failed to take into account equipment for the officers and extra patrol cars.
Spending pressures have come into the spotlight as promises build up despite the worrying picture painted in the traditional pre-election update.
Deficits were forecast for the next 10 years and debt was tipped to rise.
In each fiscal year through to 2012-13, $1.75 billion has been allowed in the books for new operating expenditure.
At the time of the update there was only $496 million of that left in the 2009-10 year, and $614 million left in the following three financial years.
Those funds must provide for Labour's phased-in student allowance policy, $1 billion over 15 years to insulate homes, future costs of keeping the New Zealand Superannuation floor at 66 per cent of the average wage, a 'pay jolt' for support staff in the education sector, allowing beneficiaries to earn more before their payments reduce, and a new retraining allowance.
The Treasury warned in the books of several risks that could also put further pressure on the spending allocation, including district health board deficits, costs associated with deployed defence forces, and rising costs from the Schools Plus programme.
Treasury advice to the Government has warned that there are "significant" pressures on the allowance for the 2009-10 year, and it would be "very tight" to stay within the $1.75 billion.
COUNTING THE COST OF PROMISES
What was left before the election campaign started:
2009/10
Operating allowance: $1.75 billion.
Pre-commitments and charges:
* $169 million for teacher and principal pay rises
* $148 million for KiwiRail
* $750 million for health
* $93 million for 'innovation'
* $86 million for defence
* $8 million for MFAT
Leftover: $496 million
2010/11
Operating allowance: $1.75 billion.
Pre-commitments and charges:
* $192 million for teachers and principals' pay rises
* $750 million for health
* $100 million for 'innovation'
* $86 million for defence
* $8 million for MFAT
Leftover: $614 million
2011/12 AND 2012/13
Operating allowance: $1.75 billion
Pre-commitments and charges:
* $192 million for teachers and principals' pay rises
* $750 million for health
* $100 million for 'innovation'
* $86 million for defence
* $8 million for MFAT
Leftover: $614 million
Announcements by Labour that aren't factored into the figures:
* $1 billion over 15 years for home insulation
* $420 million over four years to boost student allowances
* $133 million over three years to adjust benefit abatement rates
* $7.5 million a year for pay rises for school support staff
* Future costs from keeping superannuation payments at a minimum of 66 per cent of the average wage
* A small amount for a retraining allowance for workers made redundant
