ACT’s Spending Cap Bill is coming to Parliament. It would cap government spending and only let it grow each year by inflation and population growth. At first blush, and assuming that you don’t want the government to do anything it doesn’t do now, this might seem like a way to maintain current services without adding more – which means more tax cuts without losing anything! But reality ain’t that simple.
First of all, sometimes you’re going to want the government to spend money on things it doesn’t spend money on at the moment. Say the unthinkable should happen and there was a global financial crisis and to maintain the integrity of the system the government had to do what every other country had done and guarantee retail deposits to stop a run on the banks and finance companies. That would be illegal under this Act as would any form of stimulus spending. You couldn’t budget more for more mums going on the DPB during a recession unless you cut money from elsewhere either. (there are exceptions for ’emergencies’, which means natural disasters, and the unemployment benefit)
And even in normal times you’ve got trouble. See a lot of costs don’t go up at just the rate of inflation and population growth. Take superannuation, which is 13% of government spending. The cost goes up at the rate of the average after-tax wage and the number of superannuitants. You would hope the average after-tax wage is rising faster than inflation in the long-run, or everyone’s getting poorer. And it’s well known that our aging population means the number of pensioners is increasing at a faster rate than the general population. In fact, while the population will grow 3% in the next 4 years and inflation by 8%, the cost of super will rise 22% by 2015. What happens if there’s a spending cap in place? Super gets slashed or something else does.
Then there’s health, which is 20% of government spending. It’s costs are also growing faster than inflation because of demographic change and higher sector inflation. In fact, restricting the increase to ‘inflation’ in the form of the Consumers Price Index is stupid full stop. The CPI is made up of things like the cost of housing and milk. What’s that got to do with the cost pressures facing a hospital?
Next, consider what we are spending most of our money on when we purchase public services,after you take out super, benefits, and WFF? Wages. 300,000 government employees, most of them nurses, doctors, teachers. If there was a spending cap and the number of these workers increased in line with population growth, then their wages would essentially be restricted to the rate of inflation. Isn’t that a problem for goal of closing the wage gap with Australia – having 15% of our workforce never able to get a real payrise? Especially when these are highly skilled people who are already being attracted to higher wages abroad?
The truth of it is that ACT knows all this. They don’t want to cap government spending, they want to strangle the government and get the public services we all use slashed so that they can get more tax cuts. This is a 2% party trying to force its self-centred ideology on the rest of us.
So why is National letting this stupid law, that could never work without hurting millions of Kiwis, go up as a government bill? And why now? Well, they promised ACT that they would introduce the legislation as part of their coalition agreement. And why now: because it’s too late to pass the legislation before the election.
But make no mistake, if we re-elect a National/ACT government this dangerous, destructive bill will become law. Until it’s repealed by the first government that needs to break the cap, of course.
– Bright Red
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