Conflict between support parties. The government without the majority needed for legislation. The Nats’ economic plans in turmoil. Confusion reigned yesterday.
The so-called “spending cap” was cooked up by National and ACT in their 2011 confidence and supply agreement. Somehow forgetting the fact that the Nats had borrowed their way through their first term, the proposed legal cap would limit the growth of core government spending: “Under this limit expenditure will grow no faster than the annual increase in the rate of population growth multiplied by the rate of inflation”. While any such legislation would be more symbolic than binding (see the good post and discussion on Pundit here) the intention was clearly to provide their supposed next term in office with political cover for starving the state. Sorry voters, we can’t pay for that, our hands are tied!
Yesterday the proposal was dropped, amidst some confusion, and accounts which changed as the evening progressed. At time of writing it was reported that:
Budget spending cap shelved
The Government has shelved a cornerstone of its support deal with ACT that would have capped spending after Revenue Minister Peter Dunne refused to back the move. … He said yesterday the spending cap was ”part of an unnecessary right-wing agenda” and was not consistent with constitutional principles which prevented one parliament binding another.
While he would listen to the arguments ”I am not eminently persuadable”. ”Discussions are ongoing, but I am sceptical about caps as an attempt to bind future Parliaments,” he said. …
So the cap is off? Or is it?
But Banks would put forward a separate Government Bill, containing the spending cap provisions, and it had the support of the Maori Party and Dunne to first reading. “It does not make sense for any centre-right Government not to support this bill.”
But Dunne said he had not pledged to support it to first reading, because he had not yet seen a draft. “As a rule I might support a first reading … it depends what it said.” Dunne said his comments critical of a spending cap still stood.
With the landscape changed since the 2011 election, do the Nats actually still want the cap or not? If they still think they’ll win the next election then (with their promise of a balanced budget by 2014-2015 in tatters) it looks like more borrowing will be needed and the cap will only end up embarrassing them. But if they think they will loose then the answer is yes, because then it will be Labour’s problem. At the moment they don’t seem to know what they’re doing:
Labour leader David Shearer said three days ago English had told him the Government would not proceed with the spending cap. But now he had released a statement from overseas saying the spending cap is back on. “Bill English has done a complete u-turn in the space of three days and now his support partners Banks and Dunne are having a public spat.
Are we clear now? No? Me neither. Thank goodness the economy is in such safe, steady hands.