OPINION
If Nicola Willis tumbles into a “fiscal hole” this election, Grant Robertson might have had a hand in digging it for her.
On Monday, Robertson announced he’d found about $3b in savings that he was going to book. He also made the surprising decision to trim his operating allowance - which is “new Budget money” in the Treasury argot - for the 2025 and 2026 Budget by $250m and $500m respectively ($1b over the forecast period).
In the Tom and Jerry show that is Grant vs Nicola, it was as if Robertson laid out hundreds of marbles upon which Willis may meet a sticky end.
It’s the first time Robertson has had the upper hand in the contest for a couple of months.
After dispatching National’s finance spokesquad of Steven Joyce, Amy Adams, Paul Goldsmith, Andrew Bayly, Michael Woodhouse, and Simon Bridges, Robertson had been having a tough time with Willis, who managed to have plans for a wealth tax, Labour’s GST policy, and even today’s savings initiative leaked to her, each time putting Labour firmly on the back foot.
But this savings exercise shows Robertson using all the perks of incumbency to lay the path ahead with landmines.
First, he has booked savings National would itself quite like to make itself, robbing National of potential fiscal campaign promises.
The most obvious is the promise to trim consultant spending by about $165m a year. This is money National had already allocated to fund its childcare tax credit policy.
Instead, Robertson has booked it, saving the money and putting it towards improving his path to surplus. National could decide to reverse that decision, but that would mean spending money Robertson promised to save, deteriorating the fiscal position, and kicking out the surplus - unconscionable decisions for a centre-right government.
Second, Robertson cleverly trimmed the operating allowances in the 2025 and 2026 Budgets, which had been set at $3.5b for each of those years. At $3.5b they are already smaller budgets than anything Robertson has delivered this term, at $3.25b and $3b, they are very small indeed.
As Willis will no doubt point out, Robertson has little credibility when it comes to sticking to these allowances, having increased them dramatically from what he promised at the 2020 election. There’s every chance he will hike them back to where they were - and possibly higher.
But that is a problem for another day.
What this actually does is fillet money National would have wanted to play with. It has not yet released its fiscal plan, saying that will come after PREFU. It would have either spent this money on its own policies or booked it, trimming its operating allowances so that it could get to surplus faster.
Trimming the allowances means National has $1b less money to play with over the forecast period. It has less money for its own policies, and less scope to promise that it would return the books to black faster than Labour.
Robertson’s third trick is an old finance minister classic, playing down expectations of largess only to pull a rabbit out of the hat on Budget Day.
The slowing economy has hit the Government’s tax revenue - the Government has admitted enough and Robertson said the same today. That means, without a reduction in spending, a delayed surplus and more debt.
Treasury is putting together its PREFU forecast. The forecasts are produced independently by Treasury, but they reflect the most recent government decisions. The Beehive gets to see the forecasts ahead of time and ministers can decide to make changes to their spending if they wish.
The decisions announced today suggest PREFU will not be a bloodbath, but a continuation of the Budget - a not strong, but not weak either fiscal position.
PREFU day won’t be a win for Labour, but it doesn’t have to be a loss either. The forecasts are yet to be finalised, but those operating allowance decisions will have a massive impact, ricocheting through the out years to accumulate into massive savings.
The $250m saving in Budget 2025, equates to a $1b saving over the four subsequent years, the $500m saving in the next year, equals $2b over the next four budgets from that year. It’s easy to see how these medium-size decisions will have a massive impact on the forecasts, particularly when the path to surplus is so tight - it’s currently set to be just $600m in 2026.
The changes mean the PREFU may show the politically important surplus and debt numbers in better health than feared.
The “optics” (get used to that word - it’s election season) of today’s announcement were poor for Labour. As National and Act pointed out, it’s risible that after two years of being told to trim spending in light of inflation, Robertson used his last post-Cabinet press conference to announce a suite of savings.
But Labour can wear one last post-Cab pillory.
They have shifted the fiscal goalposts in ways that are both subtle and radical, that will no doubt force a line-by-line rethink by National of its own fiscal plan in the coming weeks.
The pressure is on. National being forced to adjust its plan this late in the piece increases the likelihood of an error. Remember, the fiscal holes that have caused National so much humiliation in the past have not been errors of complicated mathematical modelling, but mistakes as basic as not copying and pasting the most up-to-date figures from one spreadsheet to another.
Fiscal holes are not sophisticated errors, but the kind of mistakes that tired staff working under pressure can very easily make. You’d have to say there’s an elevated risk of that happening now.
At the very least, it will force National to make a few tweaks to its fiscal plan, while Labour can crow about its improved fiscal position and path to surplus.
At best (for Labour), it could be the undoing of National’s plan.
It’s a field of very clever fiscal landmines.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
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