The media, as its critics regularly point out, is far too easily diverted by political sideshows and slanging matches, from its duty to cover the real issues. Yet this week gave an interesting example of how hard it is to untangle the reality from the slanging matches. The issue that emerged early this week could hardly be more important. Does the government intend to cut spending in health, education and on the environment if re-elected, or not? For clarity’s sake, here are the arguments, as they unfolded.
Act One. Early on Tuesday, the Greens released an independent report from the BERL consultancy that indicated yes, the government does apparently intend to make significant cuts in spending on health, education and the environment if it gets re-elected. Using simple arithmetic and the projections contained in the Budget in May, BERL economist Ganesh Nana pointed to a planned “real” (ie, after adjusting for inflation) cut in health expenditure of 4.5% between this year and 2017. Moreover, Nana added, since inflation in the health sector routinely runs well ahead of general inflation, the projected cut in health spending is more like 9.8%. Again, using the same Budget projections, a similar exercise shows that a 1.7% cut in education spending is looming between now and 2017. By the same calculations, spending on the environment is set to decline by a massive 13.9%.
Surely, this should be a major election issue. As the population ages and income inequality fuels the diseases of poverty, we should be planning to increase – not decrease – our real spend on the health system. Especially since, as Treasury itself has conceded, almost all the “efficiency” savings that can be wrung out of the health system have already been made. In education, the same kind of arguments can be put forward. If spending on state education is planned to be cut, there is at the very least, no room for the government’s ideologically-driven experiments with charter schools.
Act Two. The response from Finance Minister Bill English was that the Greens were wrong, mainly because they were ignoring a significant Budget line item in their calculations. Namely, the amount set aside for new and discretionary spending of about $1.5 billion a year – much of which, English argued, tends to be spent on the health sector. Even if this were true – and even if the discretionary fund was sufficient to make up the projected shortfall, which it isn’t – it seems an oddly opaque form of book keeping. Trust us, English was saying in effect. The health system may look as if it is being underfunded but if things get too tight we can and do routinely transfer a few hundred million ad hoc, out of our treasure chest for new and discretionary spending. Unless of course, English has already spent those funds on:
Act Three. Tax cuts? Simultaneously this week, English also talked about tax cuts in the government’s next term, if National is re-elected – even though the economic recovery is slowing, and the operating surplus has shrunk.
With a surplus, albeit a smaller one of $297 million still in his sights this year, Finance Minister Bill English has confirmed his Government has budgeted for tax cuts some time over the next four years but this morning ruled out announcing them ahead of the election.
And where, pray, will the money for those tax cuts be coming from? Why, out of the very same treasure chest that was supposed to be the back-up reserve if the projected cuts in health, education etc really started to bite:
He confirmed his Government’s operating allowances which rise by $1.5 billion a year over the next four years included some headroom for tax cuts but none would be announced before the election.
Clearly those operating allowances are going to be working over time – in double shifts, no less. Possibly, English is bluffing. He could well be holding out a mirage of tax cuts merely as a lure to the greed impulse among potential National and Act Party voters. No wonder though, that the Opposition has felt compelled to commit that discretionary spending upfront – because otherwise, the health and education systems will be driven into the ground over the next three years. And for what purpose? So that National can hand out another round of tax cuts, that on past performance will disproportionately benefit the wealthy and thus worsen the social problems of income inequality. Voters may well begin asking themselves: is this what all the talk for the past three years about the need for belt tightening in public services has really been about? To bankroll tax cuts for the wealthy?
As I indicated at the outset, it could be hardly be less clear what the actual policy intent really is. Over the next few weeks, English has to be put on the spot as to what the bulk of those $1.5 billion a year in operating allowances are being kept aside for – to spend on health and education, or on tax cuts – or on all three? Otherwise, what the events of this week indicate is that (a) there will be significant cuts in health, education and environment spending in real terms if National is re-elected unless (b) the government uses its $1.5 billion a year spending allowance to soften the blow. Which it would be able to do unless (c) it has earmarked that allowance entirely, or in large part, for tax cuts. Which it would have to do if those tax cuts were to offer more than a few paltry dollars a week to the majority of voters. When English talks tax cuts, how big a handout does he have in mind ?
See how difficult it is to talk about the core issues in this election campaign, free of ideologically driven suspicion and name-calling? Best working rule of thumb – IMO, that Bill English can’t be trusted.
Presents. And if you can’t trust the government to meet the essentials, still try to follow this excellent advice from Agent Cooper :