Wednesday, September 10, 2008



The poison pill

In Question Time today, Bill English asked a useful question about the government's finances:

Hon BILL ENGLISH to the Minister of Finance: What is Treasury’s best estimate of how much is available for new spending in Budget 2009 after pre-commitments and future charges against it are deducted from the allowances signalled in the 2008 Budget?
Cullen's answer was "pretty much nothing". Future new spending allowances had been slashed in Budget 2008 as a poison pill in case of a National victory, and now some large public sector wage deals and Treaty settlements have eaten what is left over. In short, whoever is elected in November will be broke, and unable to pursue large expensive policies without either cutting existing commitments (such as KiwiSaver, the Cullen tax cuts, or health spending), or borrowing.

English's target in asking the question was to question whether the government could actually pay for the spending promises it had made to the Greens and NZ First to get the ETS passed. Cullen seemed to think they could - barely - but that would be it. But I can't help but think English is also setting himself up to claim crisis so as to justify a sudden shift in policy, in exactly the same way National did after being elected in 1990: "we're broke, so we have to cancel KiwiSaver, gut the public sector, and give it all out as tax cuts to the rich!". This would be predicated on a lie - the government isn't broke, it has simply pre-committed its spending in ways that National doesn't like, and which are politically hazardous to unravel - but National has never had a problem with that, and it is the only way they could justify the spending shifts required for their tax cuts to the rich. So, watch this space - and be afraid.

Update: Full transcript here.