web analytics
The Standard

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

  • Housing crisis hurting export growth
    If Steven Joyce wants to revive his failing export growth target he needs to make sure the Government gets to grips with the housing crisis, says David Parker, Labour’s Export Growth and Trade spokesperson. “Our exporters are struggling to compete… ...
    2 days ago
  • Gallipoli’s lesson: never forget, never repeat
     A special monument to one of our greatest war heroes should be a priority for the new Pukeahu National War Memorial Park, Labour Leader Andrew Little says.  “This will honour the spirit of Lieutenant Colonel William Malone, who led 760… ...
    2 days ago
  • Minister for who? Women, or Team Key?
    Louise Upston yesterday broke her silence on John Key’s repeated unwanted touching of a woman who works at his local café, to jump to the defence of her Boss. Upston repeated Key’s apology but, according to media reports “she refused… ...
    GreensBy Jan Logie MP
    2 days ago
  • Taxpayer bucks backing US billionaire
    Kiwis will be horrified to know they are backing a Team Oracle subsidiary owned by a US billionaire, Labour’s Sports and Recreation spokesperson Trevor Mallard says. It has been revealed today that a Warkworth boat building company, which is wholly… ...
    3 days ago
  • English’s sins of omission: ‘Nothing left to be done’ on housing
    When Bill English said ‘there is nothing left to be done’ on the Auckland housing crisis he had overlooked a few things – a few things, Labour’s Housing spokesperson Phil Twyford says.  “He’s right if you ignore: ...
    3 days ago
  • Climate change now hurts Kiwis
    Kiwis have twice been given timely and grave warnings on how climate change will hit them in their hip pockets this week, says Climate Change spokesperson Megan Woods.  “The first is the closure of the Sanford mussel plant and the… ...
    3 days ago
  • Clean, green and chocolate!
    Like many people I absolutely love chocolate! But until recently I hadn’t given much thought to how it was grown and produced. Fair trade and ethical food production are core Green Party principles, so yesterday Steffan Browning and I were… ...
    GreensBy Mojo Mathers MP
    3 days ago
  • National admits loan shark law not up to it
    National has admitted new laws to crack down on loan sharks, truck shops and dodgy credit merchants aren’t up to the task of protecting vulnerable consumers, Labour’s Commerce spokesperson Kris Faafoi says. “Paul Goldsmith has acknowledged the laws might just… ...
    3 days ago
  • Power and the Prime Minister
    I’d like to acknowledge the young woman* who has publically told her story. It was a very brave thing to do. She kept her story very simple and focussed on her experience of what happened. It told of unwanted attention… ...
    GreensBy Jan Logie MP
    3 days ago
  • Extra holiday offers time to reflect
    The Mondayisation of Anzac Day provides New Zealanders with an opportunity to spend more time with their families and their communities, Dunedin North Labour MP David Clark says. “This is the first time legislation I introduced, to have Anzac and… ...
    3 days ago
  • More angst and anguish for red zone locals
    Local residents will be bitterly disappointed by the Government’s cherry picking of the Supreme Court’s decision regarding compensation for red zoned property owners, Labour Canterbury Earthquake Recovery spokesperson and Port Hills MP Ruth Dyson says. “Home owners have taken all… ...
    4 days ago
  • Australia shows why we need a sovereign wealth fund now
    Australia has not managed its great mining boom well, says HSBC’s chief economist for Australia and New Zealand, Paul Bloxham. When times are good, governments need to save for the bad times that will inevitably follow, and this can be… ...
    GreensBy Russel Norman MP
    4 days ago
  • Pure Water- pure rip off
    New Zealanders’ rights to fresh water must be protected before commercial allocations are given, but the Government is allowing resources to be taken, says Kelvin Davis MP for Te Tai Tokerau.  “The Government needs to resolve the issue of water… ...
    4 days ago
  • Cabinet paper reveals weak case for Iraq deployment
    A heavily redacted copy of a Cabinet paper on New Zealand’s military deployment to Iraq reveals how weak the case is for military involvement in that conflict, says Labour’s Defence spokesperson Phil Goff.  The paper warns that given the failure… ...
    4 days ago
  • Malaysia’s booty is Kiwis’ lost homeownership dream
    It’s unsurprising the Auckland property market is so overheated when Malaysians are being told they can live large on Kiwi’s hard-earned rent money, Labour’s Housing spokesperson Phil Twyford says. “A Malaysian property website lists nearly 4000 New Zealand houses and… ...
    4 days ago
  • Ministry’s food safety resources slashed to the bone
    The Ministry for Primary Industries’ failure to monitor toxic and illegal chemicals in red meat is a dereliction of duty, Labour’s Primary Industries and Food Safety spokesperson Damien O’Connor says. “MPI compliance officer Gary Orr today admitted National’s much-vaunted super… ...
    4 days ago
  • Ministry must protect organic food industry
    The Ministry for Primary Industries must take urgent action to protect New Zealand’s $150 million organic food and beverage industry by establishing a certification regime, Labour’s Primary Industries spokesperson Damien O’Connor says. “Despite working with Organics Aotearoa on the issue… ...
    5 days ago
  • Tony Abbott, indigenous rights, and refugees
    This week, Tony Abbott has visited Aotearoa New Zealand, bringing with him his racist policies against indigenous Australians and his appalling record on refugee detention camps. Abbott has launched a policy “to close” remote aboriginal communities, which is about as… ...
    GreensBy Catherine Delahunty MP
    5 days ago
  • PM’s housing outburst bizarre
    Labour’s Housing spokesperson Phil Twyford has described the Prime Minister’s latest comments on the Auckland housing crisis as bizarre. “John Key is deep in denial. He must be one of the only people left who are not concerned about the risk… ...
    6 days ago
  • Deflation: Another economic headache linked to housing crisis
    National’s housing crisis is causing even further damage with the second consecutive quarter of deflation a genuine concern the Reserve Bank can do little about, as it focusses on Auckland house prices, says Labour’s Finance spokesperson Grant Robertson. “This is… ...
    6 days ago
  • Pot calling the kettle black over fossil fuel subsidies.
    Over the weekend alongside nine other countries the New Zealand Government has endorsed a statement that supports eliminating inefficient subsidies on fossil fuels. Fossil fuel subsidies are a big driver of increasing emissions. Good on the Government for working internationally… ...
    GreensBy Gareth Hughes MP
    6 days ago
  • At last – a common sense plan for Christchurch
    The Common Sense Plan for Christchurch released by The People’s Choice today is a welcome relief from the shallow debate about rates rises versus asset sales, Labour’s Christchurch MPs say. "Local residents – who have spent weeks trawling through the… ...
    1 week ago
  • National must lead by example on climate change
    The National Government must meet its own climate change obligations before it preaches to the rest of the world, Labour's Climate Change spokesperson Megan Woods says. "Calls today by Climate Change Minister Tim Groser for an end to fossil fuel… ...
    1 week ago
  • Biosecurity rethink a long time
    The Government has opened New Zealand’s borders to biosecurity risks and its rethinking of bag screening at airports is an admission of failure, Labour’s Primary Industries spokesperson Damien O’Connor says. Nathan Guy today announced a review of biosecurity systems in… ...
    1 week ago
  • Chinese rail workers must be paid minimum wage
    KiwiRail must immediately stop further Chinese engineers from working here until they can guarantee they are being paid the New Zealand minimum wage, Labour’s MP for Hutt South Trevor Mallard says. The Ministry of Business, Innovation and Employment today released… ...
    1 week ago
  • Better consultation needed on Christchurch asset sales
    The Christchurch City Council (CCC) should be promoting wide and genuine public consultation on its draft ten year budget and plan given the serious implications for the city’s future of its proposed asset sales, outlined in the plan. Instead, it… ...
    GreensBy Eugenie Sage MP
    1 week ago
  • ‘Healthy Families’ a good start but not enough to tackle obesity relate...
    Today the Government is making a the meal out of the launch of its ‘Healthy Families’ package to promote ‘healthier decisions’ and ‘changing mindsets’ over nutrition, physical activity and obesity. Great! The programme is based on a successful model from… ...
    GreensBy Kevin Hague MP
    1 week ago
  • ‘Healthy Families’ a good start but not enough to tackle obesity relate...
    Today the Government is making a the meal out of the launch of its ‘Healthy Families’ package to promote ‘healthier decisions’ and ‘changing mindsets’ over nutrition, physical activity and obesity. Great! The programme is based on a successful model from… ...
    GreensBy Kevin Hague MP
    1 week ago
  • No more sweet talk on obesity
    The Government should be looking at broader measures to combat obesity rather than re-hashing pre-announced initiatives, Labour’s Health spokesperson Annette King says.  “While it is encouraging to see the Government finally waking from its slumber and restoring a focus on… ...
    1 week ago
  • Government two-faced on zero-hour contracts
    The Government should look to ban zero-hour contracts in its own back yard before getting too high and mighty about other employers using them, Labour’s Health spokesperson Annette King says. “Information collated by Labour shows at least three district health… ...
    1 week ago
  • Scrutiny of battlefield deaths should continue
    As New Zealand troops head to Iraq under a shroud of secrecy, the Government is pushing ahead with legislation to remove independent scrutiny of incidents where Kiwi soldiers are killed in hostile action overseas, Labour’s Defence spokesperson Phil Goff says.… ...
    1 week ago
  • Damp-free homes a right for tenants
    Labour is urging tenants to use a little known rule which gives them the right to live in damp-free rental homes. Otago University researchers have today highlighted the Housing Improvement Regulations 1947 as a way tenants can force landlords to… ...
    1 week ago
  • National must take action on speculators
    The Government must take action on property speculators who are damaging the housing market and shutting families and young people out of the home ownership dream, Labour Leader Andrew Little says.  “There are a number of options the Government could… ...
    1 week ago
  • Milk price halves: A $7b economic black hole
    Global milk prices have halved since the peak last year, creating an economic black hole of almost $7 billion that will suck in regions reliant on dairy, crucial industries and the Government’s books, says Labour’s Finance Spokesperson Grant Robertson. “The… ...
    1 week ago
  • Kitchen plan set to swallow up health boards’ funds
    The financial impacts of implementing a proposal to outsource hospital food, forced on them by a crown-owned company which is now facing an auditor-general’s inquiry, are being felt by district health boards across the country, Labour’s Health spokesperson Annette King… ...
    2 weeks ago
  • Reserve Bank scathing of Government
    The Reserve Bank’s most scathing critique to date of National’s inability to handle the housing crisis shows the Bank is sick of having to pick up the pieces, Labour Leader Andrew Little says.  “John Key continues to deny there is… ...
    2 weeks ago
  • Time for McDonald’s to upsize work hours
    Labour is calling on McDonald’s to have more respect for their workers and offer them more guaranteed work hours. McDonald’s is proposing to guarantee its workers 80 per cent of their rostered hours, Labour’s spokesperson for Labour Issues Iain Lees-Galloway… ...
    2 weeks ago
  • Brownlee misses the boat on asbestos
    Gerry Brownlee has once again missed an opportunity to improve the lives of Cantabrians post-earthquakes, Labour’s Canterbury Earthquake Recovery spokesperson Ruth Dyson says. A new report from the Royal Society of New Zealand and the Prime Minister’s Chief Science Adviser,… ...
    2 weeks ago
  • Government must come clean on troop deployment and protections
    New Zealanders deserve more than to hear about their troops’ deployment overseas from Australian media, Opposition Leader Andrew Little says. “News from Australia that Kiwi troops are on their way to Iraq this week is another example of the culture… ...
    2 weeks ago
  • Cancer prevention calls gain momentum
    Research showing bowel cancer treatment sucks up more public health dollars than other cancers once again highlights the need for a national screening programme, Labour’s Health spokesperson Annette King says. A study by Otago University, which found colon cancer is… ...
    2 weeks ago
  • Burger King shows zero-hour contracts not needed
    The abandonment of zero-hour contracts by Burger King is further evidence good employers do not need to use them, Labour’s spokesperson on Labour Issues Iain Lees-Galloway says. "Congratulations to the Unite Union and Burger King for settling an employment agreement… ...
    2 weeks ago
  • Kiwis deserve more than reheats
    The Government looks set to rely on regurgitated announcements for this year’s Budget if today’s speech is anything to go by, Labour Leader Andrew Little says. “National has been building up to this Budget for seven long years, promising a… ...
    2 weeks ago
  • Landlords not cashing in on insulation schemes
    The fact so few landlords have taken up the generous taxpayer subsidy for retrofitting shows it is time to legislate minimum standards, says Labour’s Associate Housing spokesperson Poto Williams. “Many landlords aren’t using Government insulation schemes because they don’t want… ...
    2 weeks ago
  • Zero excuses, end zero hour contracts now
    It’s time Workplace Relations Minister Michael Woodhouse cut the weasel words and banned zero hour contracts, Labour Leader Andrew Little says. “Michael Woodhouse today acknowledged zero hour contracts are unfair. ...
    2 weeks ago
  • We’ve reached Peak Key with ‘artificial target’
    John Key’s attempt to redefine his cornerstone promise of two election campaigns as an artificial target suggests his other promises are works of fiction, says Labour’s Finance spokesperson Grant Robertson. “For seven years and two election campaigns, John Key has… ...
    2 weeks ago
  • Top 10 need to know facts on climate change
    All the numbers and stats around climate change can be confusing, so we’ve put together a handy list of the top 10 numbers about climate change that we should all know- and then do something about. You can sign up here to… ...
    GreensBy Frog
    2 weeks ago
  • Campbell Live a bastion of investigative journalism
    The announcement that current affairs programme Campbell Live is under review and may be axed has sparked outrage from the New Zealand public, for good reason, says Labour’s Broadcasting Spokesperson Clare Curran. “Investigative journalism is a precious resource in today’s… ...
    2 weeks ago
  • Ground Zero for ‘disastrous’ contracts
    Yesterday the Green Party called on the Government to follow the leadership of Restaurant Brands and ditch zero-hour contracts. Currently it looks like the Government is a large part of the zero-hours problem. It allows these types of “non-jobs” to… ...
    GreensBy Jan Logie MP
    2 weeks ago
  • Trust in National will disappear with deficit
    Bill English is set to break his promise to get the books back in the black this year and lose the trust of Kiwis who have had to do it too hard for too long, says Labour’s Finance spokesperson Grant… ...
    2 weeks ago
  • Dorothy Jelicich passes away
    It is with sincere sadness that the Labour Party conveys its sympathies and condolences to the bereaved family of Dorothy Jelicich who passed away last night at the age of 87 years, says the MP for Mangere, Su’a William Sio.… ...
    2 weeks ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere