Thawing after the BRR

Stuff reported a few days ago that the Greens have dumped their policy on the Budget Responsibility Rules (PDF).

The most stringent rules include a commitment to reduce net core Crown debt to less than 20 per cent of GDP within five years, and to keep government spending at or below 30 per cent of GDP.

These rules have caused serious upset within the Green Party base and caucus, with both female co-leadership candidates committing to get rid of them during the 2018 leadership race.

The rules went out for review earlier this year and the party’s policy group has now decided to scrap them, replacing them with a new economic policy that promotes greater public spending.

Economics is not my area so I’m hoping for some thoughtful discussion in the comments.  A few points on process. One is that many Green Party members will be pleased. This allows the Greens to shift policy back closer to core values. The review and its outcome strike me as what would be expected, and they are consistent with the kaupapa of the party (economic and internal process).



There’s been criticism of the Greens and Shaw in particular over the BRR, that it was an intentional push of the party to the right. I don’t see the Greens as going right so much as making the pragmatic choices necessary to advance their policies via mainstream politics and the limited power that New Zealanders give them.



So it’s possible that both these things have been needed. That the BRR helped change the government in 2017 by undercutting the right and the MSM’s drive to present the Greens as economically dangerous (thus preventing leaching of votes). Now that Labour and the Greens have proved they can work together and provide stable government, it’s time for the Greens to shift back to their more cutting edge approach. If it is true both were needed, I’m grateful for a party that can accommodate this degree of diverse opinion.



I’m also very happy to see the party front footing that unlimited material growth is impossible. An obvious key component of meaningful action on climate change, the Greens are opening the door for serious mainstream discussion about this. Very exciting.

The policy change is more than just dropping the BRR. An email from the Green Party to its membership explained,

Policy Committee has recently confirmed a new section of the Party economic policy. Because this policy has received a lot of attention from members, and also from the media, we’ve decided to let you all know about the changes and what they mean. 

A new section of the economic policy has been adopted which sets out our approach to government spending, debt and other matters which were covered by the Budget Responsibility Rules we agreed with the Labour Party in 2017. One consequence of the changes we’ve adopted is that they overturn the Budget Responsibility Rules. We have reaffirmed our commitment to moving beyond GDP, focussing on wellbeing and building a strong public sector.

Our updated economic policy is part of the Green change we are bringing into government, and means we can advocate more strongly in government for better public services and significant spending on public housing, and infrastructure to help tackle climate change, inequality, and the protection of nature. It also means we can start work on our 2020 election platform with a strong mandate from the membership

You can read the new policy here.

We believe there is a strong argument for more public spending by this Government because of the infrastructure and social spending deficits we are grappling with, and the need to tackle the challenges we face.

We’re looking forward to a strong election campaign next year and this new economic approach is a key part of that. 

Mā te aroha tātou hei ārahi,

Green Party Leadership Group

Caroline Glass and Leighton Thompson (Policy Co-Convenors), Penny Leach and Wiremu Winitana (Party Co-Convenors), and Marama Davidson and James Shaw (Party Co-Leaders)

The new fiscal policy section (PDF),

10. Fiscal Policy
 
Government investment, expenditure and revenue raising are all means that need to serve broader environmental, social and economic goals. The current approach to fiscal management embeds neoliberalism in both legislation and in the way the national accounts are prepared and so, for example,leans towards austerity measures in response to economic crisis. The Green Party will promote a broader and more balanced approach to fiscal policy in line with both the overall principles of this Policy, and the recognition that unlimited material growth is impossible.
 
The purpose of fiscal policy should be to ensure ongoing wellbeing for all and the health of our environment.
 
A. Reform of the Public Finance Act 1989
 
The Green Party will seek significant reform or replacement of the Public Finance Act 1989. The Fiscal Responsibility section (Part 2) of this Act should be reformed by:
 
1. Replacing the emphasis on controlling specific measurements with a broader view based on the purpose of fiscal policy set out above.
 
2. Adding a new aspect of revenue strategy, which ensures adequate revenue in the long-term to pay for necessary investments to support the purpose above (see also C5 below).
 
3. Framing ‘fairness’ with an emphasis on broader equality of wealth and economic power, rather than merely the predictability and stability of taxes.
 
4. Reframing the approach to debt to focus on both private and public debt, and ensuring any debt strategy addresses both of these and supports the purpose in 1.
 
B. Adequate and timely information for fiscal policy
 
The national accounting system provides information on which economic management decisions are based. The Green Party will update the national accounting system to provide information in a form necessary to support effective and timely management of the economy as a whole. This includes:
    1. Broadening the definition of investment to include investment in social, cultural, human, natural and physical (including infrastructural) capitals
    2. Classifying expenditure and revenue on the basis of their impact on the economy as a whole rather than on the basis of analogies with private sector accounting
    3. Providing sufficient timely and accurate information at a level of details needed to support good economic management in line with the purpose of fiscal policy

C. Government’s fiscal strategy

Government expenditure is a critical part of its central role in guiding and developing the economy and must be sufficient to ensure ongoing well being for all and the health of our environment. It is currently insufficient. The Green Party will implement a fiscal strategy which:

    1. Incorporates the need to transition to a circular economy which does not rely on unlimited growth
    2. Ensures government expenditure is sufficient to maintain and enhance the well being of our people, our planet and our economy
    3. Considers the capacity of the economy, such as the availability of raw materials and skills, when making decisions on expenditure, revenue and investment
    4. Maintains macroeconomic stability, including full employment and controlled inflation
    5. Uses the full range of tools available to finance government expenditure, and chooses the mix between them on the basis of their effects on broader goals. (See also Monetary Policysection of this policy)
    6. Recognises the multiple roles of the tax system as set out in the Taxation section of this Policy
    7. Recognises fiscal, social and environmental costs of both government action and inaction
    8. Strengthens the resilience of our nation to sudden shocks and systemic ecological and social crises, including natural disasters. The Green Party opposes fiscal strategy which includes arbitrary point targets for government debt and government expenditure. Any debt and expenditure targets must be based on evidence and clearly derived from the purpose of fiscal policy set out above.You can read our full Economic Policy here
 

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