Friday, May 25, 2012

Mike Butler: Deficit reveals cost of bad govt

Fed up with Finance Minister Bill English’s “death by 1000 cuts” Budgets, and disgusted with the whole range of commentators who believe in either big or bigger government, I went to Treasury’s Budget appropriations to see by how much I could reduce the deficit. This is what I have found.

In his Budget speech, English blamed a recession that started in 2008, the global financial crisis, and the Canterbury earthquake for the difficulties he faces as finance minister. I suggest the real culprit is the long shadow of barmy policy of successive governments, including his government.

He has run net government debt from $10-billion in 2008 to $50-billion today, and he expects it to go to $70-billion. The government faces an operating deficit before gains and losses of $8.4-billion in the 2012 June year.

So what could happen if a courageous finance minister did away with some barmy policy, and how far would it go to reducing the deficit?

First, there are the blatant attempts by the Clark-Cullen to buy votes. English called interest-free student loans irresponsible when the policy was announced, but the policy remains intact but for a few tweaks. A total of $1835-million is budgeted to cover student loans.

Another vote-buyer, Working for Families, the scheme that extends benefit dependence deep into the class of tertiary educated white-collar workers, costs $2678-million, according to Budget appropriations.

Buying back the nation’s train set was intended as a vote-buyer, but it failed, and has turned into a costly liability, with KiwiRail’s Turnaround Plan costing $250-million this year.

KiwiSaver, the locked-up lifetime savings scheme that is only worthwhile if you take the government’s kickstart and on-going subsidies into consideration, costs $688-million a year. Look at the substantial fees that come out of your KiwiSaver scheme. This is a little something direct from the government to the financial services industry.

On to the weird and wacky – the emissions trading scheme that purports to save the planet from devastating global warming, plus associated climate change initiatives, will cost $613.6-million in the coming year.

There are the lame, “keep the Maori Party happy” policies of English’s government including the family reunions for the bro’s Whanau Ora policy, which will cost $39.6-million this year, and Waikato River co-governance and co-management that will cost $3.743-million.

Then there is the really long shadow cast from 1985, when Geoffrey Palmer convinced the Lange government to look into grievances back to 1840. Palmer said that he did not think that it would open a can of worms, and believed it would all be over in 10 years, but here we are 27 years later with 47 settlements yet to be completed and the costs skyrocketing.

The bad news is that in this year’s Budget, the policy will cost $170-million just to run the show, and there is a five-year multi-year appropriation of $1.4-billion to fund settlements. None of this was deemed important enough to make it into English’s Budget speech.

The barmy policy total is $4.999-billion, which includes one sum of $1.4-billion as multi-year appropriations for treaty settlements. If this amount were deducted from the current deficit of $8.4-billion, the deficit would reduce to $3.4-billion.

So there you have it. No other cuts are suggested. Even worthless ministries such as women’s affairs remain intact. Therefore, the cost of bad government is around $5-billion a year.

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