National has reinforced its capacity to surprise, but also its capacity for making things up as it goes along. And to make ends meet, Key and English have done several u-turns

A closer look at Budget 2015 shows a government making it up as it goes along. While it's a clever political document, it shows National is trying to plug a lot of political holes with a diminishing amount of capital -- both fiscal and political.

Fair dues should be given to the political strategy employed. It seems now that National is determined to go a little White Queen at least once a year. Where she could believe "six impossible things before breakfast", National likes to do one impossible thing in each budget (and talk a fair bit about "jam tomorrow").

Last year it was free doctors' visits for children under 13; this year it was an increase in benefits of $25 a week. Incremental, small steps they may be, but Bill English is building a body of work that is reasonably described as "compassionate conservatism".

 It's a classic example of the old political rule, that right-wing parties can get away with welfare generosity that would sink left-wing parties; and vice versa on economic reform. It also undermines the 'National is looking tired and out of ideas' line of thinking, by showing the old dog still has some fresh new tricks.

Strategically it gives National reach across the centre and shows some heart, which will help with women voters in 2017. And it undoubtedly, in its own small way, asked the middle class to carry a bit more of the burden and eased a little pain for the poorest New Zealanders. Look at the big picture and you see those who were asked to sacrifice a bit more are those who can afford to travel and to save. Even a few dollars a week were taken from those at the top end of Working for Families.

While it seems a long way from the party of Ruth Richardson and Don Brash, let's not get carried away with the idea that this is the birth of 'New National'. Bill English says "National is still National". The sceptic might say it gives National a softer mask it can wear when it turns to tax cuts and other rewards for its base in 2017. We'll have to wait to judge.

So yes, this looks more tactical than strategic. It rattles Labour for a while and buys National some political time. But, when you think about it, it also looks not a little desperate.

This was a patch-up job of a budget; a bits and bobs affair which ticked a lot of boxes and defused a few bombs (for now). Something on Auckland housing, something on poverty, something on a surplus and tax cuts tomorrow. Tick, tick, tick. (Yet also tick, tick, tick in terms of the bomb still ticking!).

I'd also note the irony that you could call this a bureacrats budget; having asked the public sector to do more with less for seven years now, it seems National has recognised some threads of the public net are fraying and much of the big spending was on more customs officers and tax inspectors, with money put aside for public sector pay increases.

All those little somethings do add up to more than you'd expect in a post-election budget by a government determined to get to surplus soon.

But it was limited by this government's own lack of imagination (and refusal to borrow and build, even when borrowing is as cheap as chips). And it did little to address the big and deep issues facing New Zealand. Good politics, only fair economics.

But the point I wanted to make was that is showed a government making it up as it goes along, and one not afraid to flip-flop to make political and economic ends meet. Look at these examples:

In 2013 Bill English told parliament:

"further extension of the current tax on capital gains is likely to have high compliance costs and that is a conclusion that three tax inquiries and several governments have come to over the last 20 years. If it excludes the family home, it will not raise [sic] much difference, it will not raise much revenue, and it becomes effectively a tax on successful businesses. In overseas jurisdictions is has not improved housing affordability."

Despite that scornful analysis, he extended the current tax this week and on The Nation admitted he did so still with no idea whether it would work or not. As Fairfax's Tracy Watkins pointed out, there was no detail on their housing package in the budget proper, so they clearly came up with the idea late (presumably after the Reserve Bank's Grant Spencer made his unprecedented plea) and as a way of patching a growing hole.

It takes the pressure off for now, but even if it works it won't make much difference for several years. The problem remains.

Then there's the benefits increase. Few would damn the decision, but it is another u-turn.

John Key rejected benefit increases on The Nation in October, saying, "if it was just as simple as a bit more cash and that was the heart of the problem, I would strongly suggest government would have fixed it in the past". 

Then, u-turn.

You can add to that the "no new taxes" promises. As well as the TCG, we got a new tax on arrivals and departures at airports. English calls it a levy, but won't commit to spending it all on border control. If it goes into the consolidated fund, then it's really a tax.

Want another? What about the 2008 promise that "KiwiSaver members will keep their current KiwiSaver entitlements".

Apart from the dishonesty, which voters seems relatively relaxed about if it doesn't cost them, it smacks of a government lacking a firm plan. Arguably this isn't news. But it does reinforce the notion that National is nimble and an effective manager, but is not committed to a clear or consistent vision.

They're a bit all over the place. Because patches only last so long; and looking at the cuts in real terms to health, education, the police and more you wonder whether this government's approach is starting to wear a little thin.

Comments (6)

by Nick Gibbs on May 23, 2015
Nick Gibbs

National is still committed to a budget surplus but not blindly so, which is a good thing. We haven't seen any big ideas, like asset sales being pushed recently, but Key and co are nimble enough to lay a new vision for 2017.

by mudfish on May 23, 2015

You can't count the last one... existing Kiwisaver members will keep their entitlements, it's those who aren't yet members that have missed out.

by Tim Watkin on May 23, 2015
Tim Watkin

Good point Mudfish!

Nick, you're right that it's good to see they haven't obsessed as they might. But is it coincidence that, as Bernard Hickey has pointed out, the KiwiSaver cut and the gap to surplus are almost identical. Arguably that's another broken promise. English said time and again he wouldn't cut to reach surplus, and now, although the cut and the surplus are at least a year apart, it does look like he's doing something to make sure he stays in the ballpark.


by mudfish on May 24, 2015

Another tactical sleight of hand is in the timing...instant cut to kiwisaver vs increases to benefits from 1 April, buys a bit more headroom.

by Katharine Moody on May 24, 2015
Katharine Moody

And also on The Nation - Lance O'Sullivan seemed right confused with this statement;

As a doctor that works in a high-needs community with vulnerable children, I think this will make a difference to my job on Monday, at least when the initiatives start coming into play.

And of course that isn't until 1 April next year, right?
But the kick start take away is effective immediately - as is the departure tax.

But the tax on speculative non-resident New Zealanders - well unsure when that might get off the ground - and the 'bright-line' CGT test - that won't be introduced until October this year.

Coming back to Lance O'Sullivan, I get the feeling that those who have tried to champion those at the bottom end of this widening societal gap have become numb to the circumstances .. losing all hope for any lift in the future fortunes of our most destitute .. pretty resigned to the fact that things for these children will only get worse.  At least that seemed to be the Dr's sentiment with this comment;

Well, look, the communities I serve, you know, the children I’m serving and looking after are typically coming from very chaotic backgrounds, okay, so if they’re on welfare, they’re more likely to be exposed to social dysfunction. Now, that could be alcohol-drug abuse, that could be violence, that could be mental health problems, that could be problems with incarceration of any number of the families, housing problems, so, you know, if we could get an opportunity to get these children out of those environments, and these are 3-year-old-plus or even earlier, perhaps, for six hours a day, five days a week, I think we should. I think we should be able to expose them to positive environments, keep them warm, safe and dry and give them a learning opportunity that will prepare them for school, because I don’t believe we should wait till age 5.

A sort of day time, state run foster care. Very sad state of affairs.

by Tim Watkin on May 26, 2015
Tim Watkin

Katharine, be fair. O'Sullivan was clearly making the point that he thinks the money will have an immediate effect. He realised as he was talking that he was putting it the wrong way and as you quoted, corrected himself in the same sentence.

And obviously if you were going to remove the kickstart (to save money) you had to do it immediately or it'd end up costing you more, whereas the other changes don't have the same implications. So a bit unfair there too.


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