Friday, May 29, 2009

More random budget thoughts

A few more random thoughts on the budget:

The more I look at it, the more I see it as a "do nothing" document. Yes, National's promised tax cuts to the rich were "deferred" (likely indefinitely, and a good thing too!) Yes, it "suspended" contributions to the Cullen Fund (more on that later). But apart from that, nothing really changed. It was a "continuation of the status quo" Budget, with even the centrepiece (if you can call it that, because its awfully small) home insulation package being an evolution of a Labour-Green policy. It spoke volumes that the biggest applause line in the whole thing was the statement that benefits, superannuation entitlements, and Labour's Working For Families package would all remain untouched.

(We have MMP to thank for this, I think. Under FPP, an election like 2008 would have produced an enormous majority, with all the arrogance that entails. But by ensuring the distribution of seats in the House reflects the actual votes cast, MMP has ensured that parties are acutely aware that it takes a shift of only a few percent to cause a change in government. Which means they have to keep their promises. National promised centrism, and so it has to deliver on that; otherwise they won't be saved by an unfair electoral system as they were in 1993).

But while National didn't do anything really bad (but see below), they didn't do anything good either. Most importantly, there is no package for jobs in this Budget. The government is simply going to leave the market to sort itself out - and if that means another hundred thousand unemployed and enormous suffering at the bottom end of the social scale, then so be it. It's a telling example of National's ideological belief that government can't or shouldn't do anything - and of the callousness of that ideology.

The "permanent money diet" caused by the reduction in the future spending allowance is going to cause serious and compounding problems. We saw it in the 90's - a "sinking cap" (no or sub-inflation increases) on government expenditure led to the running down and hollowing out of the health and education systems, not to mention the public service. It's the TransRail scam - buy something, then defer maintenance in order to milk it for profits. But eventually the bill for that comes due, in the form of rotting infrastructure and increased crime. National can probably get away with this for another two years. But after that, the problems are going to become increasingly obvious.

Currently National does not plan to restart contributions to the Cullen Fund until the government returns to surplus - a process which is expected to take about a decade. This will effectively wreck the fund, rendering it unfit for purpose and reducing it to a large pot of money, which future right-wing governments will then be tempted to raid for tax cuts to their rich friends. One of the first steps of any future left-wing government should be to restart those contributions, to ensure that future superannuation entitlements are protected.