John Armstrong: Budget 2020 - Jobs, jobs jobs or spend, spend, spend?

John Armstrong
Source: 1News

Boil last Thursday’s Mammoth of All Budgets down to its bare bones and you are confronted with two seemingly simple, but diametrically opposed verdicts on the document.

You can choose to line up alongside Jacinda Ardern and Grant Robertson and label the pair’s handiwork as the “jobs, jobs, jobs” Budget.

Alternatively, you can echo Simon Bridges and tag this year’s depiction of the state of the Government’s accounts as the “spend, spend, spend” Budget.

By stressing the unprecedented and mind-boggling scale of the Labour-led administration’s borrowing programme and the veritable mountain of debt that the country will incur as a result, Bridges is simply going down a path well-trodden by leaders of the National Party.

The notion that putting Labour in charge of the Government books is akin to walking along the production line of a fireworks factory carrying a flamethrower going at full blast might well be regarded as tiresome in some quarters. In other words, a bit old hat.

You would struggle, however, to recall an election campaign when National has not sought to raise or reinforce doubts about Labour’s fiscal rectitude.

Sure, then-Finance minister Steven Joyce made a complete hash of things at the last election with his claim that an error in Labour’s costings of its policies had left an $11.7 billion hole in that party’s planned spending programme.

Despite that line of attack backfiring badly on that occasion, it is no surprise that Bridges is deploying it. And why wouldn’t he? In short, it works.

When it comes to displaying fiscal prudence, Labour has frequently been its own worst enemy.

Even the likes of Helen Clark and Michael Cullen, who were well-versed in their party’s dismal historical track record of being viewed as a bunch of spendthrifts and the political price Labour ended up paying as a consequence, proved to be prone to such a lapse.

Now in charge of a $50 billion “Response and Recovery Fund”, the incumbent Minister of Finance must ensure history does not repeat.

The immediate response from the public to limit the impact of the Covid-19 pandemic on New Zealand’s economy suggests the majority opinion is overwhelmingly in the “jobs, jobs, jobs” camp.

Despite the fact that the Budget’s foundations are buried deep in borrowings, the document has received favourable reviews across most sectors of the economy. The is seen as yet another astute contribution from the Prime Minister and her most trusted lieutenant in their handling of what is dubbed as a “one-in-a-century” economic shock.

Robertson’s third Budget is an absolute behemoth. It is a beast devoid of vision, however. Bridges is correct. It isn’t a plan. It is a patchwork of job creation schemes, wage subsidies, business advisory packages, infrastructure projects, vocational training initiatives, social assistance measures and other stop-gap action masquerading as a plan.

It is the Treasury’s equivalent of MacDonald’s. It is the “super-size me” Budget. It as if Robertson took the drive-thru lane with the intention of ordering nothing more than a basic hamburger, only to emerge with a couple of Triple Cheeseburgers, several servings of large fries plus plenty of large shakes to wash it all down.

On a more serious note and perhaps above all, the Budget pays huge homage to the Gods of Political Pragmatism. That is most evident in the absence of any mention of a possible interlocking of the Budget’s theme of “Rebuilding Together” with the construction of a new “sustainable” economy.

That proposition argues that the Covid-19 crisis is a rare opportunity to tackle deep-seated problems such as must-be-addressed climate change matters, the must-happen introduction of a capital gains tax and much-needed revision of the state-funded pension scheme.

When tackled on the absence of any discussion in the Budget on how the current economic crisis might be utilised as a means of achieving hard-to-implement structural reform of the economy, Robertson makes suitably polite noises in return. Pool all his remarks on the notion together, however, and it is soon apparent he is paying little more than lip-service to the concept.

It is easy to understand why. The stark truth is that no matter how much Robertson might want to address problems which threaten to turn into humongous problems in the long-term, he has other priorities in the short-term pressing down on him and the rest of the Government.

First, the threat of Covid-19 to jobs and livelihoods is immediate. The response has to be likewise. The short-term rules, okay. There is simply no time to contemplate and then implement longer-term policy changes.

Second, an election beckons. The firing of the first salvoes in the campaign which kicks off around a month prior to election day is now little more than three months away.

Third, there is now only one issue at stake in the weeks leading up to the start of advance voting — the competence of the current administration in its handling of the economic shock.

Fourth, although there has been little reference to the election in the wake of Thursday, the pre-election Budget is a very large component of the governing party’s heavy artillery. It is as important for what is left out of it as much as what goes into it

In that respect, Ardern has put a new twist on proceedings. Her strategy is based on the belief that you can’t fool all of the people all of the time, but you can fool some of the people long enough to make it count. She has sought to take the politics out of the Budget. She has sought to be inclusive. She talks of the Team of Five Million.

In what has become a concerted effort on her part, Ardern is endeavouring to persuade voters that she is above politics; that the Labour Party she leads acts only in the national interest rather than merely in its own interest.

Such an artifice won’t get much pick up from party loyalists. But they aren’t the target audience.

The gambit is aimed at floating voters who don’t identify with any particular party and who might not need much convincing to swing Labour’s way.

Fifth, the lesson from living in the shadow cast by the coronavirus is that the attendant uncertainty means Governments now have to expect the unexpected — and accordingly be ready to respond.

That is why Robertson has taken the sensible precaution of retaining some $20 billion of the cash allotted to the Response and Recovery Fund as unallocated spending.

Sixth, if the Ardern and Robertson double act continues to impress with its deft political management, a big prize potentially awaits them.

For reasons alluded to earlier, New Zealand voters have long regarded National as a better manager of the economy. The current crisis offers Labour a heaven-sent opportunity to persuade voters to ditch such thinking — and permanently. There is a flip-side to all that, however.

There is much to commend in the content of the Budget. The obvious example is the expansion of the state-funded social housing programme.

In terms of the benefits to society of putting a roof over the heads of the poor, one might ask why it took Labour so long to get round to doing it.

But never mind. At least it has happened — finally.

On the other side of the value-for-taxpayer dollar equation are the temporary job creation schemes whose purpose has more to do with making the unemployment level look slightly less worse than otherwise would be the case.

You don’t need a shovel — ready or not — to dig into the screeds of papers and reports that accompany the release of the Budget to come across a potential example of such a scheme where success may well end up being measured by the extent it lessens the queues at Work and Income offices.

As part of a “ramped up” pest eradication package, some $27 million has been earmarked for slashing the numbers of wallabies in the wild who are chewing through the vegetation in the back blocks of the Bay of Plenty, Waikato, Canterbury and Otago.

That’s right. That figure is not a misprint. That kind of money for that kind of venture might be regarded as the definition of overkill, so to speak. In the context of the $50 billion being poured into the Response and Recovery Fund, it is a mere droplet. And that could spell big trouble for the Ardern Government.

Such make-work programmes caused much angst for Governments back in the 1980s when they were last in vogue. They created jobs of a kind. But they also generated headlines full of words like “waste”, “mismanagement”, “rort” and even “fraud”.

The sheer scope of the current “Rebuilding Together” programme means there are going to be schemes that go off the rails and taxpayer-sourced revenue consequently flows down the drain. You can take that as read.

You can also take it as read that when that happens Bridges and National will do their utmost to change the sweet refrain that Labour is about jobs, jobs, jobs to a far more discordant melody that Labour is really about nothing else but spend, spend, spend.