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Cuts! Cuts! Cuts!

Written By: - Date published: 12:42 pm, March 21st, 2011 - 41 comments
Categories: education, health, police, prisons, public services, same old national - Tags: ,

When John Key did his State of the Nation Speech and announced that he was cutting “new spending” to $800 million, I wrote a post on what that level of cut could mean for public services.

But now, in the wake of Christchurch, John Key says they will try to cut even that $800 million.

Rejecting the Green’s idea of a small levy which would raise over $1billion per year1, they plan to borrow $5billion and pay it back over time by slashing public services.  That would be $5 billion of borrowing that was, of course, previously impossible to do according to Bill English.

But what will those new levels of cuts mean?

John Key says there will still be “$600, $700, $800 million” extra for health and education.  This will still not be enough for any pay increases for Nurses, Doctors and Teachers.  It will not be enough to match the increased number of people wanting to use the health service as the population ages.  It will not even be enough to stand still.  But they will not bear the brunt.

Beyond Health and Education, the other big expenses are Superannuation and Benefits; but these don’t fit into public service spending budgets, and cannot be controlled in the same way.

So far worse is in store for the other departments.  They were facing cuts in excess of 10% – now they face cuts in excess of 20%.

Prison officers can’t hold out much hope of a pay increase this year, despite having to deal with ever more dangerous double-bunking; but the prison budget can’t really be cut with an ever-increasing prison population meaning that the department will soon be the government’s largest.

So even bigger cuts for the rest then.  What does a 25% cut to the police budget mean?  A 25% cut to social services, that Paula Bennett is already scape-goating for being too stretched to cope?  A 25% cut to bio-security which already let through a number of outbreaks last year (incl. the potentially crippling kiwifruit canker)?

Hopefully a big cut will be made to Transport in the areas of the Holiday Highway, Transmission Gully, and other Roads of NationalTM Significance that don’t make economic sense.  One gets the impression that Auckland’s Central Rail Loop won’t get funded, despite an astoundingly good return on investment (if Steven Joyce ever went on an Auckland commuter train he’d soon see why it’s so necessary).

But more than that will be needed to save other departments.  Justice?  Department of Labour?  Housing?  They’re coming after you….

1 Green’s proposal is for 1.5 per cent on income between $48,001 and $70,000 and a 3 per cent levy on income above $70,000, no change in corporate tax

41 comments on “Cuts! Cuts! Cuts!”

  1. Lanthanide 1

    “A 25% cut to bio-security which already let through a number of outbreaks last year (incl. the potentially crippling kiwifruit canker)?”

    From what I’ve gleaned (since this is no longer in the MSM), it appears the kiwifruit disease has been in the country for at least 3 or 4 years, and maybe as long as 7+. So it isn’t recent cuts in funding that has allowed it through.

    “Roads of NationalTM Significance”
    I’ve come up with two nicknames; Roads of Notional Significance, or Roads of National Impotence.

    “Green’s proposal is for 1.5 per cent on income between $48,001 and $70,000 and a 3 per cent levy on income above $70,000, no change in corporate tax”
    Some political commentator or another was saying it’s only fair that the corporate tax rate be raised as well. It just so happens they’re getting their rate cut from 30% to 28% starting in April. If the government had moved fast enough, they could have easily scrubbed that, or cut it to just 29% instead.

    • Bunji 1.1

      Kiwifruit: It would appear that there are 2 strains – the less aggressive Japanese strain has been here for a while. The Italian strain that does so much damage is new and currently only in a handful of orchards at one end of Te Puke.

      I like your nicknames… and yes, a delay in the corporate tax drop was just about the first thing Bill English ruled out (in the sentence after “we’re not ruling anything in or out). National will continue to rule it out as not cutting would apparently pose a dangerous risk to the (non-existent) recovery; but of course putting civil servants on the dole and cutting the remaining one’s wages (in real terms), or cutting benefits (all the people that spend money), none of that will endanger the recovery at all…

  2. Zaphod Beeblebrox 2

    Sarah Palin eat your heart out. Tax cuts to the rich and wholesale dismantling of public housing, welfare support and public transport. We are about to get the IMF treatment without the IMF.

  3. just saying 3

    Yeah.

    It’s a pity Goff has announced that there will be no new spending if Labour becomes government, and that funding for any new initiatives (or increases to existing ones) will come from cuts to current services.

    So, austerity all round.

    (But it’s okay because those most affected (or outright devastated) usually don’t vote anyway.)

  4. The Baron 4

    What sort of fantasy land are you in, Bunji? Is $250m a week in borrowing not enough?

    Yeah yeah, raise taxes, rich pricks, blah blah broken records etc.

    • Pascal's bookie 4.1

      How is plan austerity working in the UK?

      Yeah yeah tighten your belts, trickle down, supply side, blah blah, shrinking gdp while debt still soars, broken record.

      • Jim Nald 4.1.1

        Go on, go on, and raise taxes for the top 5% … and close the tax loopholes as well.
        The elite rich won’t feel it much. Just a teenie eenie weenie prick on their massively well-endowed assets.
        Go on and prick. Help it trickle down. Even better, make it piss down.
        They have a choice – take the prick or take on the guillotine.
        Go on. You know we want to.

        • Colonial Viper 4.1.1.1

          And it could be done in a way which wouldn’t stop the wealthy from attending their $14,000 dinner parties.

    • Bored 4.2

      Actually Baron, its not a fantasy. Not too long ago books were being balanced and debt paid off by a government who taxed the “richer” amongst us by 3% more at the top rate. Along come the bribesters saying tax cuts are affordable, promptly drop the top rate, add to GST then borrow to make it affordable. Great maths, which bit of the sums dont you understand?.

      All we hear from RWNJs is drop tax, drop tax, fekkin broken records. No substance, just dull and boring. Makes me bored.

    • Bunji 4.3

      The country seemed pretty ready to have a temporary levy to pay for it. That way we could’ve done it without debt, unlike National’s plan. And it’s about $300mill/week borrowing now, incl 120mill/week from National’s tax cuts. So obviously Bill doesn’t think it’s enough borrowing.

      And PB’s comment about the UK’s austerity plan killing their recovery is very valid. Although of course National have already killed our recovery here.

      just saying: I believe Goff’s “no new spending” is beyond the Budget Operating Provision (which is what we’re talking about here). So maintain current levels of services, but not increase them. As opposed to National’s big cuts.

      • Lanthanide 4.3.1

        Labour needs to re-frame the budget process.

        Instead of “new spending” being “increase in spending for inflation + new initiatives” they need to break it out into 3 categories:
        1. Existing spending
        2. Increase in existing spending due to inflation and population growth
        3. New initiatives

        This would make it clearer that Labour isn’t touching #1 much (maybe a few trims around the edges), is increasing #2 at the required rate and is introducing #3 where they think it can make a real positive difference.

        It would then be much more difficult for a National government to come along and publish a budget that was 1 and (2+3) as everyone would say “why are you lumping 2 and 3 together?”. So they’d be forced to lay out 2 and 3 separately and we could clearly see that their spending on #2 isn’t sufficient.

        • handle 4.3.1.1

          If you are serious about reframing, how about:

          1. old spending
          2. keeping up this year (inflation, population changes)
          3. new spending

          • lefty 4.3.1.1.1

            Rearranging the deck chairs on the Titanic is not enough. Until we get a government prepared to challenge the economic policy settings we have put in place over the last 30 years our economic decline is going to continue to gather pace.

            Get rid of the Reserve Bank Act. Take control of our currency. Run an economy geared to production either for export or import substitution. Build up KiwiBank and regulate the Aussie banks to the point they actually have to contribute something to our economy or bugger off.

            Put a national public transport strategy in place so we don’t have to spend as much on oil.

            Invest in research and development (set up a government agency to do this so we all benefit).

            Beef up bio security – people working in this area say they are so under resourced and poorly managed it is only a matter of time before we have a major disaster.

            Begin training programmes for the unemployed. Start building houses throughout the country.

            Start adding value to our primary products.

            Stop doing stupid free trade deals.

            Ignore the finacial sector and give incentives for productive activity.

            Lift wages and training so we develop and retain a skilled work force.

            Build a publicly funded media with an obligation to foster intelligent discussion and expose useless greedy capitalist bastards.

            The list is endless. There is so much that could be done but the political elite of all the parliamentary parties are in a state of learned helplessnes as a result of years of listening to economic bullshit, managerialist nonsense and focus group driven politicians.

            The working class needs leaders that dare to dream and an organisation dedicated to make those dreams come true. This needs to happen before too long, because there does come a point where all hope is extinguished through betrayal and half measures.

            And the real nightmare would then begin.

      • just saying 4.3.2

        National’s Budget Operating Provision?

        • Bunji 4.3.2.1

          Budget Operating Provision is (2) that Lanth & handle are talking about there. It already exists, it just has a dry technical economic name.

          National are planning at having it at $0, instead of the needed couple of billion.

          • Lanthanide 4.3.2.1.1

            Ok, so it might already exist, but National are talking about an increase of $600-800 in “new spending” for Health and Education. What they’re actually talking about is #2, but they’re dressing it up as if it is #3. Meanwhile everything else will get negative #1 and zero #2 and #3.

            Then, when Labour come out and say they’re providing the minimum required increases into health and education of $1.2B, they’re really talking about $1.2B directly into #2, but National portray it as actually being ‘wasteful’, ‘unnecessary’ and ‘bloated’ #3.

            • handle 4.3.2.1.1.1

              The opposition and allies need to firmly and consistently make the case that slashing (2) below break-even means not even keeping up with inflation. It is a cut in services per person in real terms. Less to go around; not enough to get by on.

              Make it tangible by talking about waiting longer for hip operations because of not enough doctors and nurses, class sizes of 35 due to not enough teachers employed – whatever resonates with the public. Tie it to stretching your household budget when food, transport and schoolclothes for your children are all costing more and your income is not going up.

              The left had sure better not talk like detached economists or worse, sit back and say nothing while the Nats spin this as a generosity or fairly-shared sacrifice in the name of Christchurch.

          • just saying 4.3.2.1.2

            Thanks for the clarificiation.

  5. mcflock 5

    Step 1: cut taxes to the rich, raise them for the poor, the middle break even, so the majority of people will cut their spending.

    Step 2: reinforce the outcome of step 1 by putting retirement and healthcare support from the state in doubt, and increasing education costs. This will scare those few people with remaining disposable income into accruing modest individual savings or paying down debt, rather than injecting money back through business outlets.

    Step 3: make biggest spender of money in the economy cut its real expenditure. Also known as cash injections into the wider economy.

    Step 4: wait for recovery.

    Step 5: repeat step 4
    Step 6: repeat step 4
    Step 7: repeat step 4
    Step 8: repeat step 4
    Step 9: repeat step 4

    Best case: that’s their plan if they’re being honest about working for NZ as a nation, rather than setting it up for them and their rich mates to loot us.

    • Lanthanide 5.1

      “Step 1: cut taxes to the rich, raise them for the poor, the middle break even, so the majority of people will cut their spending.”

      Sorry, but what? The only people’s spending you’re cutting is “the poor” because they have less money. The middle class people still have to pay to feed, clothe and house themselves. You haven’t somehow made it easier for them to save. At the same time you’ve made it easier for “the rich” to increase their spending because they have more money.

      Your foundations don’t make any logical sense and are flawed before you even get started, so I won’t bother addressing 2 to 4+.

      • mcflock 5.1.1

        Even if people might be “breaking even” from the tax give&take the uncertainty would encourage reductions in discretionary spending. In favour of things like health insurance. Which is essentially a tax hike by another name, because a decent health system that’s taxpayer funded costs less than private insurance, and the money from private insurance goes overseas rather than being recirculated by the govt.

        Additionally, the “increased spending” by the rich is not the same as increased spending by the general population because it becomes isolated into self-circulating geographical-economic eddies, rather than percolating throughout the econom in the traditional sense, from the productive rural sectors into urban service sectors through to financial hubs and back again. Think of the high dollar boom a few years back, where small towns to cities were doing well – a lot of that eas export led from products made across NZ, rather than occasional fashion house here and vineyard there. It wasn’t perfect by any means (I’m no clarkist), but it was better than what we got from tax cuts in the 90s and recently.

        • Lanthanide 5.1.1.1

          “Even if people might be “breaking even” from the tax give&take the uncertainty would encourage reductions in discretionary spending.”

          Citation needed. As far as I can tell, you just made that up and don’t have any basis for it except for ‘gut feeling’. A gut feeling which sounds like utter nonsense to me.

          You might as well just say the government should announce that 1,000 houses somewhere in the country are going to be demolished and the occupants kicked onto the street, so everyone better save money up in case it happens to them. That creates uncertainty that would “encourage reductions in discretionary spending”.

          Nevermind that to achieve your magical “savings-compelling” uncertainty you’re actually punishing those you deem as “poor” for no reason whatsoever. Why can’t you just increase the money that poor and middle income people have so that they can ACTUALLY save the excess, if that’s what you’re so desperate to achieve? If you can’t trust them to actually save the money, make kiwisaver accounts compulsory and put the money in there instead.

          “Additionally, the “increased spending” by the rich is not the same as increased spending by the general population because it becomes isolated into self-circulating geographical-economic eddies”
          You mean it goes overseas to places like Australia and Hawaii when they go on their annual winter holiday?

          • Colonial Viper 5.1.1.1.1

            “Even if people might be “breaking even” from the tax give&take the uncertainty would encourage reductions in discretionary spending.”

            Citation needed.

            Why is a citation needed?

            We can see it happening in front of our eyes.

            Apart from the ultra rich who can afford $14000 dinner-outs, every one else is acting far more cautiously.

            Remember, although you may be well off, it still hurts plenty when your $1M freehold house gets revalued to $910,000 when you receive that piece of paper.

            so everyone better save money up in case it happens to them. That creates uncertainty that would “encourage reductions in discretionary spending”.

            People don’t have to be told Lanth. They can see the uncertainty and volatility of the current age.

            And they are adding to their reserves and their resilience right now, instead of spending and increasing leverage.

            • Lanthanide 5.1.1.1.1.1

              “They can see the uncertainty and volatility of the current age.”

              Of course. But mcflock is specifically talking about a policy where you raise tax rates on the poor and drop tax rates on the rich, as if this, everything else being equal, is somehow going to make people in the middle save more money. I think people in the middle would just think the government were fuckwits.

              It simply doesn’t make sense.

              If you want people in the middle to save money, how about you make an actual policy that directly addresses that, instead of making other changes that you then justify on the basis of what is effectively a side effect of your policy. If you want C to happen, then implement a policy for C, don’t implement policy A that has outcomes B with the justification that C (what you really wanted all along) will also be a side effect of B.

              • Jim Nald

                Good news. John English and Bill Key have suddenly seen the light.
                They confess to their own systematic rorting of the system all this time and are claiming they have reformed.
                They are reversing the GST hikes. They can see that GST is regressive and they are so regretful of their recent lousy decision that they are now announcing they will drop GST to 10%.
                This is truly an epiphanic moment.

              • McFlock

                Actually, I’m “specifically talking about” said policy being applied in the current New Zealand situation. It has already been implemented to a limited degree, and when you take into account the pillaging of skilled staff from government departments (e.g. the ministry of health, where few people should feel safe in their jobs at the moment) and the fact that this means that equivalent staff in the private sector face greater competition from the ex-govt workers. . . well, I’m beginning to save my ass off, andI know I’m not the only one. And I’m not as poor as most.

                As I say, best case scenario that’s the NACT plan. Personally I think it’s an almighty cockup, mrs haversham obsessing over a trickle-down recovery that will never appear (although in this case I’m not aware that it ever existed).

                It’s the best case scenario because the alternative is that they are perfectly happy to drive a hefty chunk of the population into below-subsistence credit-laden minimal living standards, with concomitant effects on health (especially child health) and crime.

                • handle

                  “equivalent staff in the private sector face greater competition from the ex-govt workers”

                  You mean ‘crowding out’?
                  Quick, someone tell Key and English

                  • McFlock

                    Not sure about the terminology – all I know is that lots of places need data analysts, managers and people with a bit of legal or policy training, but there’s a glut on the market.

                    Must just be the unemployment rate. affecting everyone.

                • Lanthanide

                  Ok, it looks like I’ve read your original post in completely the wrong way.

                  I thought your original post was a list of suggestions as to how things should be done to increase growth. So I was disagreeing with you that that prescription would achieve anything.

                  It turns out you are actually describing what National have been doing. In which case I agree with you.

  6. Bored 6

    Hmmm, I smell the rancid reek of “justification” for asset sales, benefit cuts and “smaller government”. Never mind, salvation comes hot on its heels, the market will deliver (fekk all).

  7. todd 7

    I’m moving to Australia.

    • Jim Nald 7.1

      This Government is hollowing out the country’s economy.
      As someone had written: under Nats, we’re better off. In Australia.

    • higherstandard 7.2

      Yay

      [Either come back sober, or lift your game. …RL]

  8. tc 8

    well todd you’ll be joining alot of kiwis who voted for that brighter future under sideshow john and that gap they had a ‘plan’ to close…..LOL talk about classic banker deception the electorate fell for.

    The number of skilled workers leaving the NACT’s big businesss day out (show starts late 2008 and is still going folks) is simply scary and any attempts to mitigate with migrattion will not work as they’ll choose oz first, where unions protect their working conditions.

    Not that they’re trying to do anything except bumble about and fawn over prince willie.

  9. RobC 9

    Bunji, are you sure you haven’t left out an ‘N’ (thrice) in the title post?

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