One of the biggest themes that helped sink the possibility of a Labour-Greens coalition in the 2014 election was National’s successful campaign that such a coalition would lead to disunity. Televisually, the two were equal. Nice. The two parties’ budgetary leaders, Grant Robertson and James Shaw, launched the following principles this week:
Budget responsibility rules
• Government will deliver sustainable operating surplus across economic cycle.
• The Government will reduce the level of Net Core Crown Debt to 20 per cent of GDP within five years of taking office.
• Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand.
• The Government will take a prudent approach to ensure expenditure is phased, controlled and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.
• The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.
For a whole bunch of reasons, this is good political money in the bank at this time in the electoral cycle.
It reminds people that government budgets are not a simple distribution of funding to Department and projects; they should be a nationwide moment to stocktake and reallocate the goods and services to measure and improve over the long term. It’s also a reminder that in recent decades, Labour governments have been better at that surplus thing than National.
The second and third points remind us that either a government has enough in the kitty to pay for the good stuff, or it puts it on tick. Which mounts and mounts and mounts over time, and weakens us collectively when it remains unaddressed. One of the best illustrations of this both to ourselves as citizens and as the government, is NZSuper. Invest wisely for the long term, and you really can sustain your life and your welfare. Don’t invest, don’t save, and you live in a fantasy that really runs out in a hurry.
The fourth point that they will “take a prudent approach to expenditure” which is “phased, controlled, and directed to maximise its benefits”. That is a hard signal both to any potential coalition Minister who can’t muster evidence to make a really convincing case, and also a signal to any major corporates that there won’t be any more Sky City or Ruataniwha deals under that kind of rule. You want public money, not only will you have to jump through the Treasury investment approach templates, you will have multiple coalition parties scrutinising your proposal. Which I hope makes for far less wasteful interventions into business than we have seen under this governments’ three terms.
The final one is the biggie for New Zealanders. Tax. You can figure out from the surrounding commentary that this will mean addressing the different ways to tax capital, without calling it a Capital Gains Tax.
The collective points remind us that budgets are the vital government instrument of shaping the whole redistribution of our common wealth. We haven’t had that kind of reminder for a bit, and I’ve missed it. The announcement was an excellent signal of a mature and settled coalition relationship from both Labour and the Greens.