John Key is fond of saying “there is a constituency for every dollar you spend”. So, having borrowed to the hilt for tax cuts for the rich, and refusing to reverse that folly, how can Key cut enough to satisfy the credit ratings agencies without pissing off too many voters? He can’t, but he’s gonna say he can and leave the hard choices to his successor.
When I was Associate Minister of Finance cuts had to be confirmed before they were booked in the budget. Looks like the rules have changed to the extent that cuts aren’t even allocated to individual departments, that’s a long way away from saying where the money is coming from.
And this was the government that campaigned on increasing transparency.
So the new policy is – pretend you have reduced the deficit but wait until after the election to say what the cuts are.
Will be interesting to see the media and especially the financial medias take on this.
Also interesting will be whether the Brash/Douglas party will vote for it.
Report from Key’s presser today :-
Targets for individual agencies would be finalised after the Budget and it would then be up to chief executives to identify how to meet them.
“We believe people who understand their own operations are in the best position to make financial tradeoffs and to introduce innovation which genuinely improves public services.”
I guess Trev is quoting newsroom. Stuff has the same thing:
He said the budget would set an overall saving target for the Government which would start to be realised over the three years beginning on July 1, 2012.
”I think you will be surprised by how much we are looking to save overall from a couple of public sector initiatives,” he said.
”Targets for individual agencies will be finalised after the budget based on size and current funding, then it will be over to chief executives to identify how exactly to meet these targets.”
What this tells us, in essence, is that Key and English couldn’t work out how to get the deficit reduction track they need to avoid a credit downgrade without making politically impossible cuts. But decided to promise big enough cuts to reduce the deficit anyway without saying where the money would be cut from.
I’m no expert on the Budget but according to what is still laughingly called our constitution, the Crown cannot raise or spend money without the authority of Parliament, which is sovereign.
(in fact, as every schoolchild knows, an obese former woodwork teacher is actually sovereign now, but that’s by the by)
So, every year, the government lays out in mammoth detail in the Budget howmuch money it intends to raise and how it will spend it – $70,000,000,000 of spending broken down into thousands of appropriations, some as small as a couple of thousand dollars.
Given all that detail, how do they account for cuts that aren’t allocated? I’m guessing here but maybe at the end of all those books with the carefully worked out spending plans for exactly how much will be spent on everything from “Invalid’s Benefit” to “Administration of Part II Tariff Concessions” there will be a single line saying something banal like “unallocated baseline reductions” with a very big number beside it.
Basically, they’re going to ask us and our international creditors to accept a promise that they have the solution to cutting without causing pain and they will sort out the details later to everyone’s satisfaction.
Yeah, I don’t believe it either.
All we’ll really get out of this Budget is more uncertainty. If the credit ratings agencies buy Key’s line, they’ll still be hovering to see if the cuts eventuate. And every person with an interest in a programme or service that breaths a sigh of relief when its still there in the Budget better not relax too much, because the Sword of Damocles will still hang over them.