National’s Nicola Willis has accused Labour’s Grant Robertson of consistently breaking his signalled spending allowances, publishing figures that compare what Labour has promised to spend with what was actually spent.
She released the figures the day after Treasury’s Prefu forecasts showed the forecast surplus had been pushed back yet another year to 2027, and net debt continuing to grow.
Roughly every six months, Treasury publishes an Economic and Fiscal Update, either the Budget Economic and Fiscal Update (Hyefu) at the Budget, or the Half-Year Economic and Fiscal Update (Hyefu), usually in December.
Each of these documents gives the finance minister the chance to signal their future operating allowance - Treasury jargon for “new spending”.
These operating allowances are how Governments pay for the rising cost of existing services or fund new ones.
They are cumulative, meaning that a small increase one year quickly snowballs. Increasing the allowance by $500m in one budget, means a finance minister needs to find that $500m each year every year into the future.
If, in a parliamentary term a finance minister increases each allowance by just $500m, that quickly snowballs into $3b of additional spending over that parliament, and $4.5b over the four-year forecast period.
Willis’ figures show that Labour has significantly increased its allowances above what was signalled.
In Hyefu 2017, for example, it signalled $1.9b of spending in Budgets 2019 and 2020. It lifted this in the next forecasts six months later to $2.4b in each budget.
The actual amount delivered was $3.8b and $3.2b.
The trend continued even after the Covid-19 pandemic. At the 2020 election, Labour promised operating allowances of $2.625b.
It actually delivered operating allowances of $3.8b in Budget 2021, $5.9b in budget 2022, and $4.8b in budget 2023.
“Every single year, Grant Robertson has blown the budget and broken his spending limits - because Labour can’t manage money and wasteful spending is in Labour’s DNA,” Willis said in a press release.
“The result is billions and billions of dollars in wasteful spending, which has driven high inflation and high interest rates that is causing financial pain for households as confirmed by Treasury’s latest forecasts,” Willis said.
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Robertson told the Herald the government “responded to the economic conditions facing New Zealand at the time, including a global pandemic and the country’s second largest natural disaster. This is what a responsible government does”.
He added that the Government had, on occasion, decreased its operating allowances.
“I would note that in 2021 that operating allowances at the Half Year Economic and Fiscal Update were forecast to be $6 billion in 2022 and $4 billion in 2023. In the end the allowance in Budget 2022 came in slightly under forecast. The operating allowance for Budget 2023 was $4.5 billion and included the response to the flooding and Cyclone Gabrielle,” Robertson said.
This is slightly at odds with the budget website which said the “Budget 2023 operating allowance is set at $4.8 billion per annum, a slight increase from what was announced in the Budget Policy Statement 2023 (BPS)”.
Robertson said that one of the reasons the allowances had been increased was to address cost pressures.
“A proportion of the allowances accounts for cost pressures, which made up 79 percent of the total in Budget 2023. We have also reached pay deals with the nurses and teachers to keep them in New Zealand. The National Party’s approach appears to indicate that they would rigidly stick to their forecasts regardless of the impact of evolving economic circumstances or a natural disaster on New Zealanders,” he said.
“Our fiscal strategy is on track in what is a volatile and uncertain environment. The Government has continued to respond and ensure we meet our balanced and responsible fiscal goals of a surplus at the end of the forecast period and to keep debt levels below the limit of 30 percent of GDP,” he said.
The last National Government ran six years of deficits in the aftermath of the Global Financial Crisis (forecasts show the current Government will run seven years of deficits).
It kept a lid on large operating allowances early on, running two budgets with close to zero new spending.
But National was not immune from increasing its allowances either - although its increases were in the realm of hundreds of millions of dollars rather than the billion-dollar increases often seen under Labour.
Ahead of its third term, the last National government’s’s Prefu promised operating allowances of $1.5b in 2015, rising by 2 per cent each subsequent budget. These were re-phased slightly in December 2014, after the election, so that less spending was delivered in early budgets to pay for promised tax cuts in later ones.
The rephasing totalled $1b in 2015, $1b in 2016 and $2.5b in 2017 and National stuck to this plan in 2015.
However, it broke those commitments in 2016, lifting the allowance in each budget by $600m.
The 2017 budget was given an operating allowance of $1.8b.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
