Vote 2020: Is there a $4 billion hole in National's alternative Budget?

National's finance spokesman Paul Goldsmith and leader Judith Collins revealed the Opposition's fiscal plan in Wellington on Friday. Photo / Mark Mitchell

ANALYSIS:

In the scheme of the tens of billions of dollars being spent on the response to Covid-19, a $4 billion error, which accumulates over a decade, is chump change.

Nevertheless, National plugged the wrong numbers into its fiscal plan when calculating how much it would save by cutting contributions to the New Zealand Superannuation Fund.

For it to then hint that this was a sneaky play by Labour to cut contributions to the fund without telling anyone is a wimpish way of apologising for making a mistake.

On Sunday morning Finance Minister Grant Robertson announced that "National has $4 billion mistake in its economic plan".

Robertson later told reporters the mistake went to the issue of accountability.

National's economic and fiscal plan, which was checked over by the New Zealand Institute of Economic Research (NZIER), claimed that it would run the Government in such a way that debt would be significantly lower over the next decade than under Labour.

NZIER will eventually have to say whether or not it should have spotted the mistake.

National's analysis relied in part on its claim that it would save $19.1b over a decade by stopping contributions to the Super Fund, which was set up to raise money to try to help cover the future costs of providing universal superannuation payments in the coming decades.

But in getting to the claim it used out of date figures, which means the savings would be less than it assumed.

In May's Budget, Treasury estimated the contributions to the Super Fund would be $19.1b over the next decade.

In the pre-election economic and fiscal update (Prefu), released by Treasury last Wednesday, the total contribution over the next decade would be around $15b.

National finance spokesman Paul Goldsmith immediately claimed that the error amounted to an unannounced cut in contributions to the Super Fund by Labour.

He is unlikely to be able to substantiate that claim and making it opens him up to the question: did you not know that's how the contributions are set?

Contributions to the Super Fund are calculated using a complex formula set out in legislation, which include current growth rates and future anticipated costs of providing New Zealand superannuation.

Treasury changes the calculations at least twice a year (the Budget and the half-year update) and three times in election years.

According to Robertson's office, the changes in the contributions between May's Budget and the Prefu purely reflect changes in the different inputs being entered into the funding model for contributions.

National has owned up to the error, but claimed that once the error is fixed, it would see core Crown debt as a share of gross domestic product fall to 36 per cent by 2034, instead of the 35 per cent it claimed on Friday "which is a lot lower than their 48 per cent" Goldsmith said.

Robertson's office has hinted that it cannot yet be sure if this is the only error, as National has not released all of the calculations it has used to come to its lower debt track.

Conclusion: Robertson's claim is correct. National's plan includes an error. In the scheme of the hit to the Government's books the $4b may not be massive, but it is an embarrassing mistake from National which claims to be better managers of taxpayers' money.

Comparisons were quickly drawn between this and former Finance Minister Steven Joyce's infamous claim that Labour's 2017 fiscal plan contained an $11 billion hole.

In fact Joyce's argument was different (making the headline misleading), arguing Grant Robertson could not fulfil the commitments he was promising within the money available.

The same charge could arguably be made of Goldsmith's draft plan, while leaves little in the way of unallocated money. Today's episode also has National admitting to an error which does put a hole in its Budget.