Financial management is at the core of good government. Labour blew its economic credibility last week in announcing it is going to break its own Budget Responsibility Rules by raising more debt.
The public is naturally cautious of Labour over finance because of a long history in Government of big spending and reckless borrowing. Labour sought to reassure the public in Opposition by promising strict Budget Responsibility Rules and Rule 2 stated “Labour will reduce debt to 20% of GDP within five years.” Jacinda Ardern and Grant Robertson called these “cast iron guarantees”. Grant Robertson abandoned this rule last week saying the debt cap is now 25%.
This increase in the debt cap from 20% to 25% of GDP allows Labour to borrow another $15 billion. Nelson and Tasman’s share of this extra debt is $300 million. This is greater than the total debt of both our councils. It equates to $3000 more debt for every man, woman and child in New Zealand. The interest and debt of this extra $15 billion debt has to be paid for in future taxes.
New Zealand’s debt is low by international standards. It rose to 25% in 2012 because of the Global Financial Crisis and the $20 billion cost of the Christchurch earthquakes. National reduced it to 21% by 2017. National’s policy was to get it down to 15% by 2022. We need low debt as a small remote country so we can handle future shocks.
Labour was quite entitled to argue at the last election for a 20% debt limit rather than National’s more cautious 15%. The problem is breaking its commitment and undermining the public trust.
Labour’s core problem is that it did not properly cost its policies. Remember the controversy when National’s Finance Minister Steven Joyce stated that Labour had an $11.7 billion hole. Independent economist Cameron Bagrie and commentator Duncan Garner both said this week’s increase in the debt limit proved that Steven Joyce was right.
This financial mess is also the root cause of the strikes in our schools and hospitals. Labour told junior doctors, nurses, teachers and other workers from Opposition that they were being underpaid by 20%. These groups then lodged pay claims for big increases. Labour is now saying in Government they can only afford a fraction of this. The teaching and health professions understandably feel cheated and are striking.
Children are losing out on their education with this week’s teacher’s strike, the largest ever in history. The hospital strikes have seen thousands of operations cancelled. I am seeing dozens of Nelson patients in awful pain from operations at Nelson Hospital being cancelled and delayed.
Labour needs to stop wasting money. Over $500 million is being spent on working groups. $3 billion is being spent on NZ First’s slush fund. $2 billion has been spent on just 82 KiwiBuild homes. $50 million is going on tax breaks for gamblers and the racing industry. New Zealand does not need more debt. Government needs to spend more carefully and wisely.