As we brace for this year’s budget it’s important to remember that no change is a cut. A dollar today buys nearly 5% less than it did a year ago and there are 1% more New Zealanders.
Not every piece of government spending is affected by domestic inflation or population growth but the bulk of it is. And that means that no nominal change in funding is a 6% cut.
Even Bill English has admitted as much, in response to questioning from Russel Norman:
Dr RUSSEL NORMAN (Co-Leader—Green) to the Minister of Finance: Does he agree that due to inflation, no new spending in the upcoming Budget is the equivalent of a cut in real terms?
Hon BILL ENGLISH (Minister of Finance) : It depends on which part of the Budget—and I am not trying to be clever about it. Some services will continue to get somewhere near an inflation adjustment, such as health and education. Inflation adjustments will continue to be made to income support programmes such as superannuation and benefits, which are very large components of the Government’s annual Budget. There will be services that will have no increase in spending, and that means they will be cut in real terms. We have a strong expectation that everyone supplying public services needs to focus on providing more services for less money, and that is not a new message.
This is the most subtle and insidious way that the Right can undermine public services, by letting inflation and population growth do the work for them. Even when it comes to health and education, the Nats can say ‘we’ve spent more than ever before’ but if that increase doesn’t match inflation and demographic needs, it’s a cut.