The early childhood education cuts have hit – families will face an average $20-$45 a week increase in the cost of sending a kid to kindy. And Anne Tolley is signaling more to come. But it’s not just the education of the next generation that’s for the chop as National seeks to balance the books after its tax cuts for the rich binge.
This year, the government will spend $70 billion. With inflation expected to be 5% this fiscal year and population growth of 0.9%, just to stay even in real per capita terms government spending needs to go up by about $4 billion. That’s just reality. Instead, the government will only increase it by $700-$800 million, a 1% nominal increase but a 5% cut after inflation and population growth.
Where will it come from?
Key (aping David Cameron) says Health will get the basic increase it needs. A 6% increase on its $14 billion budget is enough to eat all the extra budget allocation and a bit more once you count the extra needs of the aging population.
The increase in the cost of social welfare, including superannuation, is unavoidable. Benefits and super are automatically adjusted for inflation and people will keep on hitting 65. Even if unemployment numbers finally start to fall a little, it’s a drop n the ocean compared to the $9 billion a year bill for super. Key has pledged not to alter the pension and I seriously hope he’s not stupid enough to prolong the recession with benefit cuts like National did in 1991. So, that’s another $22 billion, rising by $750 million next year, locked in.
We can also rule out cutting finance costs – the money we pay in interest to our debtors, which is projected to rise by $600 million to $3.6 billion next year. And the Crown’s legal obligation to the Government Superannuation Fund – $300 million rising to $360 million.
$40 billion gone, $30 billion to go and we need to cut $1.4 billion just to cover increases in the welfare, borrowing, and health bill.
I’m going to rule out nominal cuts for Police, Transport, and Defence – leaving them just the 6% cut due to inflation and population growth.
$22 billion left, $1.4 billion in cuts plus no inflation and population adjustments.
The only thing of any significance left is education with its $12 billion budget. Either it takes a big 10% cut or the assorted other small budget departments (Conservation, Housing, MFAT/aid, Customs/Biosecurity, MED, IRD, Morst etc) and Kiwisaver inducements will have to take savage cuts on the order of 20% in real terms.
I think we’re going to see cuts to early childhood and tertiary education, possibly the re-introduction of interest on student loans. Kiwisaver tax credits will be canned and there will be widespread cuts of 10-20% for departments, which means a less capable government (pray for no more major disasters) and more costs being lumped on to households.
All of this is completely unnecessary, just like asset sales. National did not have to borrow billions for tax cuts for the rich. And public debt is not at crisis point – we’re projected to be back in surplus in four years. No, this is all about ideology.
National has manufactured a ‘crisis’ to justify an agenda of tax cuts, public service cuts, and privatisation, which will undermine our future by weakening education and research, reducing private savings, and increasing foreign ownership of our strategic assets.