Bryan Gould

Bryan Gould, CNZM, writes an occasional column on current events

Bryan Gould: Cuts come with consequences

91 comments
The National Government seems unaware that slashing spending reduces the economy.  Photo / Steven McNicholl
The National Government seems unaware that slashing spending reduces the economy. Photo / Steven McNicholl

The National Government has never hesitated to put cuts in public expenditure firmly in the front of its shop window. "Smaller government" is in many senses the defining objective of John Key's administration.

In adopting this stance, our Government has made common cause with right-wing politicians across the western world. From David Cameron's Tories in the UK to Angela Merkel's insistence on eurozone austerity to Mitt Romney's Republicans, all have sought recovery from recession and a brighter future by reducing the role of the state.

None has been deterred by the obvious difficulty, now more than ever confirmed by recent experience across the globe, that cutting government spending in a recession means a smaller economy and a longer and more arduous route to recovery - and a sterner struggle to reduce government deficits.

But an apparent absence of economic rationality is not the only reason for questioning the Government's sense of priorities over this issue.

Ministers seem to assume that not only does cutting public expenditure help the economy, but also that it can be done without losing anything of value.

They largely escape criticism for this because most people have only a partial view of the value of public spending. They make a clear distinction between spending for essential purposes, which they define as those that suit their own interests, and all other spending which they deride as a waste of money. The difficulty is that, not surprisingly, everyone has a different view on which areas of spending fall into which category.

The further problem is that when government support is provided, it is so quickly seen as a natural part of the landscape that it is scarcely recognised as such. So, we are constantly told by those whose activities depend hugely on the help they get from government that the best thing government can do is to "get off our backs".

Recent events, however, remind us yet again that - contrary to so much popular wisdom - most government spending goes to purposes that matter greatly, both to those who are directly helped and to our efficiency, health and integrity as a society.

Sometimes, for those who care to learn, the lesson is especially direct and painful. If government cuts back on inspecting mines, mine safety is jeopardised and miners can lose their lives. If bio-security border controls are not adequately maintained, destructive bacteriological pests from overseas, like PSA, can decimate a hugely valuable export industry.

If our public service is under-resourced and undervalued, mistakes are made. Standards that we should expect to be maintained are not met; we find, for example, that the privacy of those who reveal their most personal details to government agencies is betrayed or negligently misplaced by an Accident Compensation Commission or an Inland Revenue Department or a Ministry of Social Development.

And that is on top of the inexorable erosion of services that must now make do with reduced resources - from the defence forces and the police to schools, health care and community law services. Those who rely on those services, and that means most of us at some time or another, may not recognise what is happening until a crisis point - the collapse of a platform at Cave Creek, for example - is reached.

The damage done to our public service is not just financial; the impact on morale and professional competence means that we are trying to maintain a first-world performance with what threatens to be a third-world standard of public service. We can go on with this process of attrition, but do we understand how gravely we handicap ourselves as a modern economy if our public administration is significantly weaker than in comparable countries?

It is already the case that the Government seems increasingly accident-prone. There is a sense that ministers are poorly directed from above and poorly served from below. The whole process of government seems to be unravelling.

This sense of drift has its origins at the top. We can gain an inkling of what lies behind this from a little-noticed remark made by the Prime Minister in a television interview earlier this year in which he said that "any tax sucks money out of the economy. There's a limited amount of money in the economy. So when you put up a new tax, or you tax people more, then it sucks that money out".

Let us put to one side the dubious assertion that "there's a limited amount of money in the economy"; the really interesting part of Mr Key's brief foray into economic theory is his apparent belief that money raised through taxation and spent on public purposes is somehow no longer part of, or of any value to, the economy.

If it is "sucked out" of the economy, where does he think it goes - into the stratosphere? And are all those elements that are critical to our living standards and that are paid for out of taxation of no economic value? If that is his belief, perhaps his emphasis on cutting public spending becomes easier to comprehend, if not to support.

Bryan Gould, former vice-chancellor of Waikato University, was previously a British Labour MP.

- NZ Herald

Have your say

We aim to have healthy debate. But we won't publish comments that abuse others. View commenting guidelines.

1200 characters left

Sort by
  • Oldest

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on production bpcf04 at 24 Oct 2014 00:33:21 Processing Time: 520ms