Busy day today, so I only managed to catch up with John Key’s interview on Q and A just now. It seems the big story is that the (revised) new spending allowance in the Budget is gone.
GUYON Are you still going to spend $800 million more in the May Budget?
JOHN Well, I think the answer to that is no. What we are going to do is spend more on health and education. That may well be in the order of 600, 700, 800 million, but we are asking ministers and what they are working on is looking to reduce expenditure in other areas so that can be reprioritised to pay for the more in health and education we want and ultimately the Christchurch earthquake.
Leaving aside, for a moment, the thought of what is going to be cut in other areas (think housing, social development, Police etv) it could be easy to say, thank goodness that health and education will get more money. But with the sums of money John Key is talking about this will effectively be a massive cut for both sectors.
Let’s take Health. Before last year’s Budget , the CTU calculated just for spending to stand still it would take at least $555 million a year of new spending. The Budget fell at least short on that figure by more than $150 million a year, and that has delivered health cuts across the sector.
Add that investment deficit to what is required for this year just to stand still and John Key’s delightfully vague numbers above indicate that there is no chance of health getting anything like the money it needs. And remember that is not for any new services, wage increases etc. It is just to stand still.
We are going to hear a lot of spin in the next month or two about money going to health and education, but on the PMs words today it is cuts on the way. There will also be spin that anyone who proposes government spending is somehow committing economic heresy.
Of course we need to adjust to the new reality of the economy post-earthquake. It does require careful economic management, which might actually include sensible investments (spending) in our future. It needs to include support for innovation and job growth, and to give opportunities to future generations. What it does not need is a slash and burn mentality.
