Financing failure


For years National has talked about a return to a budget surplus. They were supremely confident that if they did this, this and this, they would get this, this and this. And that when the this, this and this, that they were supposed to get back were added together, it would be a fiscal budget surplus. National even had a date for it. They very tenuously said that 2014-15 would be the year in which the Government books were to come back into surplus. So what did they do to get there?

Against a backdrop of lower taxes, National implemented savings programmes across virtually every department, every Ministry in the country – health, defence, education, social development, police, corrections, among others. They invested in research, science and technology to their credit, but then watered it down so badly by failing to streamline the grants application process and the priority areas of research, that overall the essential gain for the money promised was nearly zero. And they privatized things such as prisons, freeing up money they said would be used to improve thing.

Well, that was the theory with regards to what they would do What about what National got back for their efforts? The reality – after years and years of waiting to see whether it would be proven true – turned out as Bill English reluctantly admitted the other day, to be something else.

What?

A deficit that was never wiped, and is now growing again. Okay, okay I will be fair and admit there were a number of circumstances that certainly did not help National in the 6 1/3 years since they were elected to office. There is no doubt much money was lost when the Global Financial Crisis took down over 60 finance companies. This was all before three days in September 2010 saw New Zealand finances nearly have a collective heart attack. First South Canterbury Finance collapsed and took $1.6 billion with it. 72 hours later an earthquake near Christchurch killed nobody, but did more than just break things. It introduced $4 billion of losses, damaged innumerable houses, businesses and peoples lives.

Then the second most costly earthquake in recorded history hit Christchurch, adding $35 billion to the  bill in less than a minute of frenetic shaking. Nobody could have foreseen the savagery of the event, the full extent of the horrendous additional damage caused by liquefaction and lateral spreading. Suddenly other spending priorities were not so high.

People tend to forget these things or deliberately overlook them. I am certainly not saying National was right all along as it most certainly has not been. But to have so many costly events in such a short time is bad enough for any nation, but when it is one with only a taxpayer base of 3 million or so people, finances have to understandably tighten substantially.

Ultimately though, National IS to blame. Like the Labour Government before it, and the previous National Government before that, it has failed to do several things that economists and alternative parties in Parliament have been pushing for some time. Most notably:

  • The need to substantially increase the export of produce and goods overseas, and lessen the emphasis on imports
  • Diversify  the export base – we cannot stay on timber, dairy and movies forever
  • Make homes affordable – a simple, but possibly politically suicidal answer could be to restrict foreign land ownership to those from countries where New Zealanders can do likewise
  • Increase funding for R&D and simplify the grants application process
  • Broaden the income tax base and consider alternative taxes such as a Capital Gains Tax on holiday homes

None of these ideas are new. They just need someone with someone in a position of authority to make the necessary moves.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s