web analytics

National’s Spending Cap Bill

Written By: - Date published: 12:13 pm, December 6th, 2011 - 11 comments
Categories: debt / deficit, public services - Tags: , ,

National will pass a Spending Cap Bill, under the cover of its Confidence and Supply deal with John Banks. The question isn’t if this Bill is a farcical idea that would hurt NZ if ever enforced (which it wouldn’t be) – even the arch-neoliberals in Treasury oppose it. The question is why National has no better ideas for Parliament’s precious time.

This guest post by Bright Red a few months back spells how a spending cap law that works would spell huge spending cuts. Basically, many major costs to the government (health and super in particular) rise faster than inflation+population growth because of the way pensions are set, how demographic pressures, and high health sector inflation. Which means that, under a spending cap, either those services would have to be slashed or other ones would be. And that’s the fevered dream of the Right, of course – to shrink the services the government provides so that they can have more tax cuts.

So, spending caps are bad law. It’s particularly laughable that National would be proposing a spending cap because they have increased government spending from 31.1% of GDP to 35.2% while cutting revenue from 33.7% to 28.7%, opening up the largest deficit in New Zealand history.
And Treasury was quite clear in its advice to the government that a) spending caps don’t work because they just get bypassed and b) they wouldn’t be desireable if they did work:

any spending rule that is not perceived as serving the interest of the Government and Parliament will inevitably be circumvented, and that “in the absence of this widespread political support, it is doubtful that the legislative status of a spending rule will have any impact on actual policy formulation”. Without widespread political support a government could overturn the rule by amending the legislation – potentially raising the prospect of ongoing changes to what has been a stable and enduring the fiscal framework with a high degree of cross party support.

The spending cap and the results of any referenda will bind the government only to the extent that Parliament continues to agree to remain within these constraints. A future Parliament has the ability to amend the level and/or operation of the expenditure cap or to repeal it outright.

Empirical analysis of the Taxpayer Bill of Rights (TABOR) in Colorado suggests that the combination of a cap on expenses and revenue and a referendum mechanism was successful in reducing the size and scope of Colorado’s state government relative to its economy. However, that analysis also suggests that the reductions in tax and spending generated by the TABOR did not have a positive effect on Colorado’s economy, in part because Colorado reduced relatively high value areas of spending, including education and infrastructure.

However, lower levels of expenses and revenue may also force reductions in the direct delivery of public services and will create incentives for governments to find other ways to deliver their objectives. This could result in greater use of tax concessions, regulation, activities funded by fees or levies, local government, state-owned enterprises, and/or public private partnerships or other forms of contracts to achieve these objectives. All of these approaches can impose relatively higher compliance burdens on individuals and businesses to achieve similar outcomes, relative to expenditure programmes.

The Treasury does not support imposing constraints on the ability of the government to set fiscal strategy via hard parameters in legislation. A legislated spending rule, which a government did not wish to be bound by, could lead to efforts to circumvent the rule – potentially favouring certain types of decisions (e.g. tax expenditures or regulatory changes) and raising the risk of unintended or perverse outcomes.

To be effective, the fiscal framework needs to be reasonably stable over time. This criterion would not be met if a legislated spending rule was likely to be overturned, shortly after its introduction, because it lacked widespread and enduring political support.

In other words, “this is a silly idea – an expensive waste of time – that will be ignored, circumvented, or repealed by the first government – Left or Right – that needs to”. Apparently, Japan has a spending limit written into its post-WW2 constitution, and Parliament has passed an exemption to it as part of the Budget every single year.

So, the real question isn’t why National is seeking to pass a spending cap law. It may as well be seeking to pass a The Moon is Made of Blue Cheese Bill for all the practical effect it will have. It is really just a red herring designed to get the Left all up in arms and let National paint itself as a responsible, restrained government.

The question is, why, in the midst of high unemployment, rising poverty, and ongoing economic and environmental crisis, does National have no better ideas for Parliament’s time than a petty political play?

11 comments on “National’s Spending Cap Bill”

  1. Dr Terry 1

    The government does such things because it can rely on the gullibility of so many New Zealanders.

  2. Zaphod Beeblebrox 2

    Nice bit of inter-generational theft going on there. Pay for tax cuts for the rich by hacking into the future returns of the super fund. If I were under 40, I would be seriously pissed off.

    • Ari 2.1

      The inter-generational theft is that we have an incredibly generous pension program, tax cuts for the rich who haven’t yet retired, yet young people right now have an incredibly ballooning total of student (and credit card…) debt, and nobody is willing to change NZ Super so that it will still be around by the time we’ll need it.

      We should absolutely address the problems with NZ Super- but we should do that by making payments compulsory and means-testing it.

  3. tc 3

    Just biding time till the national cycleway panda taecupgate enablement act is up .

  4. Bunji 4

    Keith Ng has a great post on the Spending Cap. Worth a read.

  5. Draco T Bastard 5

    …does National have no better ideas for Parliament’s time than a petty political play?

    It helps distract from the theft of NZs wealth that they’re orchestrating.

  6. mike 6

    This is what we’ve come to. Passing rubbish purely for political propaganda.

  7. Hanswurst 7

    Labour need to oppose this bill visibly, constantly and vociferously throughout this parliamentary term, icluding if and when it is enacted into law. They need to have it thoroughly discredited, or at least have a strong narrative built up around its repeal well before the election campaign, otherwise their opposition to it will be an easy concrete target for National on which to hang their attack lines that “Labour just wants unlimited freedom to take NZers’ money and spend it on their pet projects like policy XYZ.”

    That has to be a big part of why National really want this law; it’s a stick to beat future or prospective governments with if they promise or choose to repeal it or raise the limit. They’ll be guessing that it’s most likely to be a Labour government that first has the necessity or inclination to do this. 

  8. Colonial Viper 8

    John Banks, the 1% fossilised tail wagging around the weak gutless supposedly Right Wing hide-behind-ACT John Key.

  9. randal 9

    what is happening here is that the wonks in the act orbit have been reading all this material from the right wing loonies in the USA and now they are trying it on here.
    they are totally bereft of ideas except killing democracy by hamstringing parliament.
    this country gets crummier and crummier by the day.

  10. anne 10

    A spending cap bill! ,key, english and national know nothing about restraint in austerity,because
    it only applies to those who are not surrounded by a honey pot of wealth.
    Key in all his rant about tightining belts,money is in short supply,but hey, key can find $500 grand
    to give to a millionaires golf game for key’s affluent buddies to have 18 rounds,while salvation army are on the news concerned the amount of people in despair,while all social agencies are
    feeling the pinch because they are helping people living in poverty,if key thinks the finances of
    NZ are strained then he shows no thought whatsoever for the people or the agencies who are
    at the coal face,by handing out tax payers money to mates to play 18 rounds.
    English also helped his buddies in the scf fiasco,what he did was use his political powers,warned
    by treasury he wasn’t acting under the terms and conditions of the retail deposit scheme,so what did he do? changed the terms and conditions to allow scf investors into the scheme, he called a meeting with the investors and told them they now had the benefit of a crown guarantee,a rush on deposits and english sat on his hands, now what would we call that ?costing tax payers 2billion,but what is also dispicable here is that in parliament english and key continually blamed labour and clark for the retail deposit scheme,when in fact key and english were knee deep in the conspiracy of fraud.
    So does key,english or national know anything about fiscal control, except help out their buddies,business mates etc,NO,tax payers money is their money to do what they please,if it
    pleases them.
    They both need to be held accountable for the waste of tax payers money.

Recent Comments

Recent Posts

  • Regions miss out again in Joyce’s Koru Lounge Fund
      The regions have missed out yet again with Steven Joyce offering just $10m a year for key regional development projects while trumpeting a bunch of re-heated announcements, says Labour’s Economic Development spokesperson David Clark. “The dairy downturn has put… ...
    11 hours ago
  • Children’s Commissioner misses out in Budget
      The Office of the Children’s Commissioner has missed out on a much needed boost in this year’s Budget, meaning they will be forced to continue their reduced monitoring role of CYFs residences, says Labour’s spokesperson for Children Jacinda Ardern. … ...
    13 hours ago
  • Communities miss out in Budget
    Budget 2017 has left community and NGO providers feeling exposed about the services they provide to vulnerable families especially in smaller towns and communities, says Labour’s Whānau Ora Spokesperson Nanaia Mahuta. “Approximately $40m will go into Whānau Ora to work… ...
    1 day ago
  • Budget2016: Two Worlds
    Sometimes I feel as if I live in two worlds. The world created by the National Government where everything is great and they’re doing a great job and the world as seen through the eyes of child advocates, community workers,… ...
    GreensBy Jan Logie
    1 day ago
  • Parekura would be proud – MTS gets boost
    The Labour Party is ecstatic that the Māori Party have shown support for one of Labour’s proudest policies, says Labour’s Māori Broadcasting Spokesperson Peeni Henare.  “The Māori Television Service was launched in 2004 by the late Hon Parekura Horomia. ...
    1 day ago
  • Māori housing in state of emergency
    The Government needs to declare a state of emergency for Māori Housing, says Labour’s Māori Development spokesperson and Te Tai Tokerau MP Kelvin Davis. “The extra $3 million a year Māori Housing Network fund will not scratch the surface in… ...
    1 day ago
  • State house sell off in disarray after provider pulls out
     The Government should cancel its planned sell-off of state houses after the second big community housing provider pulled out leaving the process in disarray, says Labour’s Housing spokesperson Phil Twyford.  “It is time for the Government to back away from… ...
    1 day ago
  • Nothing in Budget to help police to solve crime
    The Police Minister has failed to make communities safer with virtually no new money in yesterday’s Budget for police to address the appalling burglary resolution rates, says Labour’s Police spokesperson Stuart Nash.  “It’s a disgrace there’s no money or aspiration… ...
    1 day ago
  • Blog – Budget 2016: What about ordinary working people?
    Ordinary working New Zealanders don’t fare very well from this Budget. Setting aside the spin from the Government, it contains a lot to be concerned about and a fudging of the numbers. Green Party workplace relations spokesperson Denise Roche For… ...
    GreensBy Denise Roche
    1 day ago
  • Real wages go backwards for next two years
    New Zealanders’ real wages will fall for the next two years as the cost of living outpaces forecast pay rises, says Leader of the Opposition Andrew Little. “New Zealanders have been doing it tough for far too long. They expect… ...
    1 day ago
  • The Attack on Public Education – by a thousand cuts
    Budget 2016 is another step towards the free public education system being a memory from the past. The Budget freezes the operations grant for schools and does not sufficiently cover the real increase in numbers of students entering the education system.… ...
    GreensBy Catherine Delahunty
    1 day ago
  • The Attack on Public Education – by a thousand cuts
    Budget 2016 is another step towards the free public education system being a memory from the past. The Budget freezes the operations grant for schools and does not sufficiently cover the real increase in numbers of students entering the education system.… ...
    GreensBy Catherine Delahunty
    1 day ago
  • The give with one hand – take with the other Budget
    The Minister of Health has pumped out media releases to 20 District Health Boards heralding increases in funding for their regions, says Labour’s Health spokesperson Annette King. “But when you add population growth and inflation into the figures you get… ...
    2 days ago
  • Budget offers no hope of fixing housing crisis
    The Budget’s underwhelming housing measures will give New Zealanders no hope that National is capable of fixing the housing crisis, Labour’s Housing spokesperson Phil Twyford says. “There isn’t a scrap of an idea to help desperate young Kiwi families into… ...
    2 days ago
  • How the budget fails new New Zealanders
    Greens co-leader James Shaw was absolutely correct to say the 2016 budget is just papering over the cracks. There’s nothing in this budget to increase wages, address inequal pay for carers or deal with the shocking pay rates and employment… ...
    GreensBy Denise Roche
    2 days ago
  • Parents will pay more as school budgets frozen
    Parents will pay more for their kids’ education as a result of this year’s Budget after the Government froze operational funding for schools, Labour’s Education spokesperson Chris Hipkins says. “This means schools are effectively going backwards. They will need to… ...
    2 days ago
  • Sticking Plaster Budget fails the test
    Bill English’s penultimate Budget fails to tackle the structural challenges facing the economy – a housing crisis, rising unemployment, underfunded health and creaking infrastructure, says Labour’s Finance spokesperson Grant Robertson. “This Budget applies a sticking plaster to a compound fracture.… ...
    2 days ago
  • John Key fails middle New Zealand with no fix for housing crisis, more underfunding of health
    Middle New Zealand has again missed out in this year’s Budget with not a single fix for the housing crisis, and health and education woefully underfunded again, Leader of the Opposition Andrew Little says. “This Budget is just a patchwork… ...
    2 days ago
  • Labour Bill would back Kiwi jobs
    The Government’s $40 billion of buying power would go towards backing Kiwi businesses and jobs under a Labour Member’s Bill which will be debated by Parliament, Leader of the Opposition Andrew Little says. “My Bill – which was pulled from… ...
    2 days ago
  • Julie Anne Genter: My Budget 2016 wish is fairness
    When my parents first visited me in Auckland ten years ago, they remarked on how there were no homeless people on the streets. Coming from Los Angeles, they were used to seeing the impacts of horrendous inequality and a lack… ...
    GreensBy Julie Anne Genter
    2 days ago
  • Steffan Browning: Pesticide reduction and Organic Growth Strategy in Budget 2016
    Pesticide reduction The Budget is an opportunity for the Government to launch a pesticide reduction strategy that multiplies the Environmental Protection Authority’s (EPA) and the Ministry for Primary Industries’ capacity to reassess pesticides and other toxins.  The Agricultural Compounds and… ...
    GreensBy Steffan Browning
    2 days ago
  • Steffan Browning: Pesticide reduction and Organic Growth Strategy in Budget 2016
    Pesticide reduction The Budget is an opportunity for the Government to launch a pesticide reduction strategy that multiplies the Environmental Protection Authority’s (EPA) and the Ministry for Primary Industries’ capacity to reassess pesticides and other toxins.  The Agricultural Compounds and… ...
    GreensBy Steffan Browning
    2 days ago
  • Minister won’t fess up on wrong figures
    The Minister of Health was caught out telling porkies in Parliament today when he was asked about the number of people getting access to mental health and addiction services, says Labour’s Health spokesperson Annette King. ...
    3 days ago
  • Budget 2016 and our LGBTQI communities
    LGBTI people make up about a tenth of our population, and our communities face a unique set of needs and challenges. These challenges are caused or exacerbated by discrimination, invisibility and barriers to appropriate support. We have a long way… ...
    GreensBy Jan Logie
    3 days ago
  • Budget 2016 and our LGBTQI communities
    LGBTI people make up about a tenth of our population, and our communities face a unique set of needs and challenges. These challenges are caused or exacerbated by discrimination, invisibility and barriers to appropriate support. We have a long way… ...
    GreensBy Jan Logie
    3 days ago
  • Scrambled announcement policy on the hoof
    Paula Bennett’s scrambled desperate announcement that she will pay homeless people to move to the regions is just the latest evidence of the disarray this Government’s housing policy is in, Leader of the Opposition Andrew Little says. “This is policy… ...
    3 days ago
  • Police Minister admits resolution rates fall short of expectation
    Police Minister Judith Collins has admitted in Parliament current burglary resolution rates are not meeting the expectations of our communities, says Labour’s Police spokesman Stuart Nash “Out of 284 police stations in New Zealand in 2015, 24 stations recorded zero… ...
    3 days ago
  • Mojo Mathers: A better deal for animals in Budget 2016
    Currently we are failing animals in NZ. On the face of it farmed and domestic animals in this country have strong legal protection from abuse, cruelty and neglect. In reality it seems that only the very worst, most extreme cases… ...
    GreensBy Mojo Mathers
    3 days ago
  • Metiria Turei: What we need from Budget 2016
    Every family deserves a warm decent home.  Everyone believes that. This housing crisis is just the latest consequence of a Government who puts the interests of the few wealthy people above the needs of NZ families.  Families are doing it… ...
    GreensBy Metiria Turei
    3 days ago
  • Dairy exports fall of 11%: Budget action on diversification needed
    Dairy exports have fallen 11 per cent compared to this time last year, a fall of almost $1.5b, showing the Government must take clear action on diversifying the economy in tomorrow’s Budget, says Labour’s Trade and Export Growth spokesperson David… ...
    3 days ago
  • Investors driving families out of homes in South and West Auckland
    Investors cashing in on skyrocketing Auckland house prices are driving families out of homes in South and West Auckland and causing homeownership rates in some of our poorest suburbs to plummet, Labour’s Housing spokesperson Phil Twyford says. “New analysis shows… ...
    4 days ago
  • Budget must deliver on paid parental leave
    Budget 2016 must deliver 26 weeks paid parental leave by April 2018 – anything less will be short-changing families, says Labour MP Sue Moroney. “My Bill which is before Parliament this afternoon has majority support and does just that. I… ...
    4 days ago
  • Key’s “brain fart” on tax cuts news to English
    John Key didn’t tell his own Finance Minister he was about to go on radio and announce he wanted $3b of tax cuts, just days after Bill English ruled them out, says Labour’s Finance spokesperson Grant Robertson. “In Parliament today… ...
    4 days ago
  • What I’m looking for in Budget 2016 – A better start for our tamariki
    Ensuring the best start for our tamariki is a priority for me in everything I do. And so in Budget 2016, my first budget as an MP, I looking for the Government to make a real investment in the wellbeing… ...
    GreensBy Marama Davidson
    4 days ago
  • What I’m looking for in Budget 2016 – A better start for our tamariki
    Ensuring the best start for our tamariki is a priority for me in everything I do. And so in Budget 2016, my first budget as an MP, I looking for the Government to make a real investment in the wellbeing… ...
    GreensBy Marama Davidson
    4 days ago
  • Denise Roche: What I’m looking for in Budget 2016 Pt II
    Aotearoa’s new New Zealanders,  come to our country in vulnerable position: – often away from the culture, communities and families they know, sometimes in neighbourhoods without familiar faces and often encountering barriers to employment. With net migration at 50,000+ a… ...
    GreensBy Denise Roche
    4 days ago
  • Equal Pay and Budget 2016
    The last few years we’ve seen equal pay for women flagged as an undefined risk in the budget. This year we should expect to see this, as well as budgeted money to deliver equal pay to caregivers and funding for,… ...
    GreensBy Jan Logie
    5 days ago
  • Equal Pay and Budget 2016
    The last few years we’ve seen equal pay for women flagged as an undefined risk in the budget. This year we should expect to see this, as well as budgeted money to deliver equal pay to caregivers and funding for,… ...
    GreensBy Jan Logie
    5 days ago
  • A great Budget would
    A great Budget would embrace the challenge of our polluted rivers and move the money away from justifying the status quo water rules into cleaning up waterways. A great Budget would take the Ministry for the Environment freshwater budget and… ...
    GreensBy Catherine Delahunty
    5 days ago
  • Budget building materials policy backfires
    On the eve of this year’s Budget official figures show Nick Smith’s Budget 2014 centrepiece to reduce the cost of building materials has backfired, says Labour’s Housing spokesperson Phil Twyford. “Ministry of Business, Innovation and Employment officials have spent the… ...
    5 days ago
  • Smarter, Better, Cleaner, Stronger
    This Thursday Bill English will deliver his eighth Budget. Will it continue the trend of previous National budgets, making tertiary education less affordable, putting only token funds into innovation, and subsidising polluters? Budgets aren’t what they used to be. Once… ...
    GreensBy Gareth Hughes
    5 days ago
  • Govt must come clean on tax cuts in Budget
    National is making a mockery of the Budget process by dangling the promise of tax cuts but failing to include them in the Budget, says Labour’s Finance spokesperson Grant Robertson. “National’s tax cut promises have turned into a farce. One… ...
    5 days ago
  • Grant Robertson Pre-Budget Speech
    Today I want to talk about success. As we know success can come in many different forms, from the fact you all made it here at such an early hour on a Monday, for which I am very grateful, to… ...
    5 days ago
  • Budget must deliver for middle New Zealand
    The Government must ensure next week’s Budget stops the squeeze on middle New Zealand and delivers shared prosperity for all New Zealanders, Leader of the Opposition Andrew Little says. The call follows new research commissioned by Labour that shows working… ...
    6 days ago
  • Our housing emergency – why we have to act
    Marama and Metiria at Homes Not Cars launch On Thursday, Metiria Turei announced the Green Party’s plan to start addressing the emergency housing crisis facing our country. Too many people are without homes right now – homeless. It is the… ...
    GreensBy Marama Davidson
    1 week ago
  • Will funding boost for sexual violence services go to the right places?
    This week the Government announced $46million for sexual violence services. This announcement was a result of decades of work by advocates and everyone who submitted to the Select Committee inquiry into funding for sexual violence services that I initiated with… ...
    GreensBy Jan Logie
    1 week ago
  • Will funding boost for sexual violence services go to the right places?
    This week the Government announced $46million for sexual violence services. This announcement was a result of decades of work by advocates and everyone who submitted to the Select Committee inquiry into funding for sexual violence services that I initiated with… ...
    GreensBy Jan Logie
    1 week ago
  • Denise Roche – What I’m looking for in this year’s Budget
    Two of the things I’ll be looking for in the Budget next week are more funding for refugees and for our arts and culture sector. More funding for refugees I’m a strong supporter of the #DoubleTheQuota campaign and its goals… ...
    GreensBy Denise Roche
    1 week ago
  • Denise Roche – What I’m looking for in this year’s Budget
    Two of the things I’ll be looking for in the Budget next week are more funding for refugees and for our arts and culture sector. More funding for refugees I’m a strong supporter of the #DoubleTheQuota campaign and its goals… ...
    GreensBy Denise Roche
    1 week ago
  • Car rego victims must get a refund
    Motorists who have been overcharged for their car registration should get a refund, says Labour’s Transport spokesperson Sue Moroney.  “Minister Nikki Kaye’s ‘faulty risk’ rating scheme has blown up in her face with over 170 different models of car having… ...
    1 week ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere