Inflation increases the cost
of delivering our public services every year, simply put, the price of maintaining the level we currently enjoy keeps going up.
To fund this, governments will tap into the operating allowance and last Budget, Treasury said an extra $2.5b would be needed “to maintain the existing level of services”.
To make the maths work, the Government will need to axe spending in several places and redeploy it elsewhere. As many households have had to contend with, anticipate a no frills Budget this year.
There will be no lolly scramble, as Willis said, stealing an often used cliche.
This year there may not even be a lolly.
This is also not a problem unique to central government. Our local councils are facing similar issues to the extent that Local Government Minister Simon Watts is introducing legislation to essentially force local government to return to a back-to-basics approach.
Watts said in an interview with the Bay of Plenty Times a rates cap could also be considered in the future.
Councils needed to focus on core activities to control excessive rate rises, he argued.
“That’s what local government should do.”
At a time when the economy is facing a tough slog most would advocate for more cuts rather than increased rates or new taxes. Every government, like every business, should cut and redeploy when necessary.
The concern, however, is once you amputate a service it is highly unlikely to grow back.
Willis had already pre-allocated $1.37b in new funding for health and about $150m to fulfil the promise to fund cancer medicines at Pharmac.
So, before we look to fund anything beyond our already beleaguered health system, the fund is gone.
On Tuesday, Willis said she had “freed up billions of dollars”.
Right now, the scale of cuts feel like we are going to get close to nicking the bone.
We shall wait and see where Willis has operated and if she has used a scalpel or a saw.
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