Source: New Zealand Labour Party
You may have heard me talk already about my upbringing, and pathway to becoming Labour’s finance spokesperson.
I find the easiest way to describe it is through the experience I have operating at three different tables:
- The kitchen table – where many small businesses and independent contractors, like us, did the books or balanced a home budget. In my case it was both, while I also completed my university assignments.
- The board room table –the insurance industry was the first sector I worked for, where profit margins and dividends can drive decisions, but the value of a business can’t be reduced to just one line on a balance sheet; and
- The Cabinet table – where trade-offs and the responsible management of taxpayer dollars are top of mind, particularly as we steered our country through a pandemic, and two large natural disasters where the work to repair key infrastructure is still underway.
I look at economic policy as being fundamentally about people, and that will shape my approach in this role.
During my first term in Parliament, I served as the Economic Development and Revenue Minister, and had Associate roles in Finance and Cyclone Recovery alongside Grant Robertson. Prior to that I was chair of the Finance and Expenditure Select Committee.
I have advised and studied Finance Ministers and Revenue Ministers for many years. So while I’m very familiar with the technical role of finance spokesperson, I’m using this time – this very busy and visible time mind you – to get out and speak with as many people as I can to listen and learn what people would like to see from me in this role.
I have enjoyed growing my relationship with the Power of Three and the wider chamber throughout the Wellington region over the last four years as a local Member of Parliament.
Last week the Minister of Finance delivered her first Budget.
We knew there would be a change in philosophy.
We expected them to stop funding some things we think are important – for example they’ve cut back the apprenticeship boost scheme, farmed out biosecurity to what appears to be third party contractors/or cost recovery (it’s a bit ambiguous) and made changes so that people on main benefits would get less, meaning more children in poverty.
But it was much worse than expected. Partly because we all expected more financial competence.
Now I wouldn’t be much of a finance spokesperson if I was not across the detail. And over the weekend I’ve taken the opportunity to read the Budget.
The Budget Economic and Fiscal Update shows unemployment will increase to 5.2% and child poverty will increase from 12.6 percent to 13.4 percent this year alone. We see these deteriorating economic conditions and know they are having an impact on everyone.
Because to me economics is about people, moving to a 5.2% unemployment rate means an additional 27,000 people on the Jobseeker benefit.
Being Wellington-based, you may already be feeling the job cuts here much more severely than other parts of the country. You may have seen a slowdown in demand for your services and products.
According to the Child Poverty Action Group, growing unemployment could mean an additional 20,000 children in poverty.
These are the people I care about. I care about the next generation getting a better go, and children getting a better start in life than the last.
So this Budget is worse than expected on that front.
But moving onto the financial and economic mismanagement. The Minister has set aside $2.4 billion for future operating allowances. This was done to help meet surplus in the forecast period. However, we know this won’t be enough. The Treasury has said the future budget allowances are unlikely to be sufficient to cover future cost pressures on existing services.
The Minister is using this to paint a rosy picture, knowing she will need to spend more in the future to keep the lights on.
I lost count of how many times the Minister of Finance said she would not be borrowing for tax cuts. Time and time again she said she isn’t borrowing and almost every economist said it is financial mismanagement to borrow for the tax cuts.
But now we know her Budget is borrowing an additional $12 billion dollars.
She has tried to divert and distract, but it couldn’t be clearer. She is borrowing more.
Debt is increasing, risking our international credit rating. In nominal terms, net core Crown debt increases through the forecast period to peak at 43.5% of GDP in 2024/25.
Forget the constant attacks on the previous government, and all those pledges during the campaign. If you exclude the 2020 Wage Subsidy spending, Small Business Cashflow Loan Scheme and Resurgence Support Payments, which we’d argue saved lives and livelihoods – particularly small business owners – this Budget forecasts Nicola Willis running larger deficits than Grant Robertson ever did.
Future generations will be paying for the borrowing in this Budget for tax cuts.
In my pre budget speech, I outlined the the four tests for tax cuts as first espoused by Sir Michael Cullen:
- That tax cuts must not require borrowing;
- services should not be cut to fund them;
- tax cuts should not exacerbate inflationary pressures; and
- tax cuts should not lead to greater inequalities.
Do these tax adjustments meet these standards?
This Budget required borrowing an additional $12 billion.
A litany of public services have been cut to pay for them.
The timing mismatch between tax cuts and spending reductions results in an additional $700m in government spending this year.
Child poverty is set to increase.
That’s four from four.
The Minister’s tax cuts fail at every single test. Not only have they failed the tests, but they have broken their promises.
Prior to the election, National went up and down the country promising the average family $250 a fortnight in tax cuts. Now we know that the average income household with two children will only be $102 a fortnight better off. And in fact most households will get much less, more like $20-$40, or just $2.50 a week if you’re a pensioner.
National’s own Regulatory Impact Assessment shows 9,000 people will actually lose money in this Budget, due to the way tax changes interact with benefits. Nicola Willis says it’s only 5,000 who will be worse off– but the point remains that more people lose money from the Government’s tax changes than get the full $250 she promised during the campaign.
For many Kiwis, this is a lot worse than expected.
National talk a big game when it comes to infrastructure, but what’s their solution? Instead of providing certainty over the cancelled Cook Strait Ferry project, this Budget allocated $600,000 to explore buying a tug-boat to help when the ferries break down.
That is not a prudent long-term fix.
The Treasury also identifies the future of winding down the ferry project and whatever may replace it as a fiscal risk. Putting aside the cancellation fee of the contract with a large international supplier, what message does this send to the international markets about trading with New Zealand, if even the Government cannot uphold a significant contract?
They are still spending on some capital projects. However, they are focussing on roads at the expense of public housing.
This comes at a time when residential investment over the year to December 2024 is forecast to be nearly 11% lower than in 2023.
Cutting spending on new houses at a time when more people will be unemployed and rents are forecast to continue rising rapidly, can only be described as irresponsible.
There is $1.5 billion less for building and maintaining public houses, which will slow the progress we’ve made as a country to fix the housing crisis. The Government has cut $435 million from the Kāinga Ora house build programme and over $1 billion from the maintenance fund.
We need to build homes if we’re going to solve the housing crisis.
This budget does not deliver on housing as promised.
Long term thinking is not this governments forte. And nothing better encapsulates this than cancelling Wellington’s Science City.
When Labour was in Government we set aside $400m in capital and $62m in operating spending.
This was the largest ever capital investment in science infrastructure. This would have built on the region’s strengths to make Wellington a vibrant, resilient, and adaptable centre of research, science and innovation by 2030.
Wellington Science City was intended to benefit not just Wellington, but the whole of Aotearoa New Zealand. It would have created opportunities to build connections, capability and career pathways across the research, science and innovation system. This is how you increase productivity.
This is something I know has impacted many of you in the audience.
But to be honest, this was not at all surprising.
We know how the government feels about science and innovation. They talk it up, but do not deliver. This Government has cut funding to key research institutions like NIWA, the chief science advisor at DOC, and Callaghan Innovation.
New Zealand’s best and brightest have no other options than to look overseas.
This comes at a time when the Treasury has been revising down its productivity forecasts since last year.
A range of factors are likely to play a role in the productivity slowdown in New Zealand and across the world. These include lower productivity benefits from innovation and weak investment relative to employment growth.
Investing in health should always be a priority. However, in order to balance her Budget, the Minister of Finance has left a few fiscal risks in there. Something she repeatedly accused us of.
Again, instead of waiting to be surprised by this, I take the time to read the Budget documents.
They do not appear to have a plan for when the multi-year capital envelope runs out in 2027 and have only set aside an additional $100m in contingency for capital cost pressures.
However, the Treasury are increasingly concerned about the risks for heath spending. To quote the Budget documents:
- “There remain significant financial pressures on the New Dunedin Hospital Project.”;
- “key risks in the … Whangārei and Nelson Hospitals”;
- “Some existing health sector infrastructure is in poor condition”; and
- “Health infrastructure has a significant pipeline of investment to support future service delivery need.”
This also does not include establishing their promise of a new medical school. Investing in health infrastructure is investing in the lives of New Zealanders.
Continuing the theme of health, nothing hit me harder in this Budget then the failure to fund the 13 cancer drugs that were promised in the National Party manifesto and right throughout the campaign.
As I‘ve said, if that was me during an election and a political party said ‘we can prolong your mother’s life’ – I’d be telling all my family and friends to vote for them on that promise.
This is the worst type of promise to break. These are people’s lives, and I don’t want to speak for them, they will do that for themselves – but I know how angry and upset I would be.
The National Party found no difficulty make a pre-Budget commitment of a $2.9 billion tax break for landlords, but could not find the $280m for cancer drugs.
The question that naturally comes next, is what would I do?
In my role as Labour finance spokesperson, and as we look to put together our manifesto ahead of the next election which would inform future Budgets, I will be focused on some particular areas of policy:
- Costs for households. Not just right now in a cost of living crisis, but ongoing, good decisions that feed, clothe and home our children.
- A level playing field for small business. Too often governments favour the large end of town at their expense. And there was nothing in this Budget for small business.
- Climate change and adaptation. Any serious finance spokesperson or Minister must have this on their list. It is inevitable and will cost our country far more in the future if we don’t invest responsibly today.
- Budget 2024 saw climate funding slashed by $3 billion. The Government is burying its head in the sand if it thinks it doesn’t have to invest now to save us all both money and heartache later.
- It’s much more than roads. Our country must have considered and long-term investment, but also much better planning. Hospitals, schools and basic services like clean drinking water should never be dropped in favour of more palatable political promises. The rates increases in our region are a very real example of what happens when you don’t think long term. Infrastructure also includes human capital, that is the skills, jobs and training that help people to thrive and help the economy to grow.
As I said before the Budget, I will bring a smart-headed and kind-hearted approach to this role.
In politics, as in economics, I am pragmatic rather than ideologically fixated.
To be frank, Budget 2024 demonstrated a lack of economic credibility and a complete lack of vision for addressing some of the big inter-generational challenges we face today.
There was a reduction in funding for the homelessness action plan. Less for rangatahi transitional housing and Māori housing. Jobs for nature cut back. Reduced funding for countering violent extremism. The end of free prescriptions for most people. Funding cut for one of our most productive sectors – tourism – at a time we should be investing in it.
$1.5 billion from public housing build and maintenance. Investment in roads but no other infrastructure like schools or hospitals, and as I said earlier, $3 billion cut from climate initiatives.
As an eternal optimist, I want to encourage those interested in the future of our economy to embrace a more sophisticated analysis of the challenges we are facing.
They are inter-generational. This is what Labour’s Wellbeing Budgets were about and what we aimed to address.
In the same way this Chamber knew to bring three distinct organisations together, I know that so much more is possible when you bring people together.
I hope I can get your support to do that again, my way.
Thank you.
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