John Roughan: Labour sets about rewriting recent history

Some things never change. Every new government likes to pretend it has inherited a disaster. Remember National's "decade of deficits"? It was true but completely misleading.

The previous Labour Government had in fact left the books in excellent condition, running budget surpluses until the economy went into recession in its final year. It was the global financial crisis that left the new Government with deficits projected for 10 years.

All the while National pretended to be alarmed, it ran deeper deficits to carry us through the crisis and the Christchurch earthquakes, which it could afford to do thanks to the low government debt Labour's surpluses had left.

Now we have Middlemore Hospital, Labour's newly discovered evidence of "underinvestment" in state services. That is also true but equally misleading. The previous Government presided over standard public service capital management.

Middlemore may have been particularly poorly constructed but the problems that supposedly have shocked the new Government — mouldy walls, leaking sewers, a faulty power supply — sounds like what often happens to state hospitals, schools and the like. Capital maintenance is just about the last of their accounting provisions.

Every available dollar goes into their services because they know that when their buildings have deteriorated to a certain point, the Government will write them a cheque. Governments always do.

Counties Manukau District Health Board has let Middlemore deteriorate to this point and the new Government is going to the chequebook, as National would have done, just as it wrote one for Dunedin Hospital. It's a long time since we had a government that would really fix this sort of problem.

The solution is obvious. Commercial property owners don't let their buildings fall into disrepair. When you walk into any health facility you can instantly tell whether it is publicly or privately run.

Commercial firms usually lease their accommodation rather than own it, for the very reason they too would be tempted to scrimp on maintenance. Under a lease they have to pay the right amount for its upkeep.

A government that really wanted to fix underinvestment in its buildings would sell them and lease them back. Or at least set up a Crown agency to own and maintain the buildings leased by district health boards.

That is so obvious it is hard to avoid the conclusion no government really wants to pay for the proper upkeep of hospitals. The public puts them under constant pressure to satisfy immediate service demands, nobody cares about capital depreciation until it's too late. Let a future government fix that.

This Government is making the most of the bill for Middlemore. Its Prime Minister and Finance Minister both came to the post-Cabinet press conference on Monday to announce the burden it would be for their first budget. "I have always said it would be bad," said Jacinda Ardern. "We didn't know it would be this bad." Reportedly she was talking about schools as well as hospitals.

This is in fact very good news. It gives Grant Robertson a good excuse to deflate any expectations in the coalition parties and among their supporters that the surpluses National restored are now ripe for the plucking.

If I read him correctly Robertson is no less committed than was Sir Michael Cullen to maintaining the budget surpluses he has inherited. The press conference was told to expect more examples of "underfunding" to emerge before the Budget on May 17 but Robertson sounded determined to keep to the debt reduction schedule Labour had taken to the election last year, which was just two years slower than National's.

Middlemore is not only a pretext for fiscal caution, it is being used by Labour's spin merchants to rewrite our recent economic history. National's surplus, they are saying, was built on underfunding of health boards and other social services. That is as misleading as National's pose of fiscal conservatism while it was blowing out the deficit through its first three years.

The truth is the surplus was quite slow to return after the economy started to recover from the GFC in 2013, sooner than almost all others. The growth was spurred by the Christchurch rebuild and an unexpected turnaround in net migration. It has been sustained now for five years, with record immigration in each of the past three years, along with good export prices and a tourism boom.

That is what generated the revenue that finally produced a solid surplus last year, and for the years ahead if Labour is careful.

We have had a succession of good governments. This one has inherited an economy strengthened by John Key's contagious international confidence and a budget built on Bill English's measurable spending results. When it pretends the surplus was due to "underfunding" you need a short memory to be fooled.