Fiscal feud

Steven Joyce claimed their was an $11b ‘hole’ in Labour’s fiscal policy today, but Grant Robertson claimed it was a diversionary attack and his numbers stacked up.

Joyce:

$11.7b hole in Labour’s fiscal numbers

The Labour Party has an $11.7 billion hole in its fiscal plan that blows its debt out and breaks its own budget responsibility pledge, National’s Finance spokesperson Steven Joyce says.

“These are significant errors that raise questions about Labour’s whole spending approach and their fiscal competence,” Mr Joyce says. “Their spending numbers were already high and this makes them a lot worse.

“Labour’s recipe would lead to more debt, higher interest rates and a slower economy – not to mention the host of extra and unexplained taxes they would impose on households and businesses.

“All of this would cost jobs and eat into family budgets.”

The five errors are as follows, over four years:

  • Failing to roll out their operating allowances for each year into subsequent years ($9.4 billion).
  • Failing to allow for any increase in paid parental leave in their Family Incomes package despite saying they have included it ($567 million).
  • Counting additional BEPs multinational tax revenue when Treasury has already counted it in the PREFU update ($902 million).
  • Only including costs of their Family Package from 1 July 2018 when they said it would begin on 1 April 2018 ($289 million).
  • Further finance costs associated with extra borrowing ($580 million).

“The biggest error is their failure to continue each year’s operating allowances for additional expenditure into subsequent years. When operating expenditure is added, for example an increase in wages for police, that expenditure continues into following years. Labour’s operating allowances don’t allow for that.

“Once corrected, Labour’s spending plans result in net debt increasing by nearly $20 billion from current levels of $60.6 billion to $79.3 billion over four years.

“Labour was already increasing debt by $7 billion from current levels by their own admission, but this takes it to nearly $20 billion. This would be an irresponsible level of debt increase at this stage of the economic cycle. New Zealand should be reducing debt now, not increasing it, so we are ready for the next rainy day.

“They also would break their fiscal responsibility rules as net debt would not fall below 23.5 per cent of GDP by the end of the forecast period, in fact it would be higher than it is now, and get nowhere near their own plan to reduce debt to 20 per cent of GDP by 2022.

“That level of spending and increased debt can only lead to one thing – higher interest rates for Kiwi mortgage holders.

“Labour’s true spending plans as revealed in this analysis confirms that behind the leadership change we are dealing with the same old irresponsible tax, borrow and spend Labour Party.

“Labour needs to withdraw its fiscal plan and re-work its proposals.”

Robertson:

Joyce gets it wrong on Labour’s Fiscal Plan

Labour’s Fiscal Plan is robust, the numbers are correct and we stand by them despite the desperate and disingenuous digging from an out-the-door Finance Minister, says Labour’s Finance spokesperson Grant Robertson.

“Steven Joyce has embarrassed himself. This is a desperate, cynical stunt to create a diversion. Our plan has been approved by BERL and they continue to stand by this plan. We stand by this plan. These numbers are robust and I refute Joyce’s allegations.

“Our operating expenses are above the line and are clearly stated. For health and education, which represent the lion’s share within any year’s operating allowance, there is around $6.7b for health, and around $1.8b for education, both clearly stated in our Fiscal Plan.

“This is a desperate act from a flailing Finance Minister. He knows that we have accounted for our expenditure in health and education going out into future years, He’s being disingenuous and trying to mislead the New Zealand public. I’m sure they’ll see through it.

“We have quite clearly put in the spending requirements to meet the promises we have made. Our fiscal plan adds up. We are absolutely clear that we have the money to meet the commitments that we’ve made.

“I challenge Mr Joyce. Is he going to fund health and education for the cost pressures of inflation and demographic changes? He needs to be up front with New Zealanders, because that’s what we’ve done.

“Labour’s Fiscal Plan details funding for housing, health, education, transport, police and other priorities, while running surpluses and paying down debt. We can afford to do this because we have put those priorities ahead of National’s plan for tax cuts that deliver $400m a year to the top 10 per cent.

“National has serious questions to answer about their own fiscals – they haven’t allowed $8.5b for cost pressures in health and education. They haven’t funded their GP policy properly. They haven’t said where the money for their $11b of capital spending will come from.

“We’ve been transparent, which is something that the National Party has never been. We’ve produced a detailed fiscal plan, they’ve produced a double-sided piece of A4 that lists their campaign promises,” says Grant Robertson.

Response to Steven Joyce’s claims:

Failing to roll out their operating allowances for each year into subsequent years ($9.4b)

  • National have made a simple mistake – Labour has put the money that National hides within the operating allowance in the accounts. Doing it this way is more transparent as New Zealanders can see how much more money will be going into the system.
  • National on the other hand has not done this, In 2018/19 National will have to provide $650m for inflation in health and education alone. Once you take this from their operating allowance they have less available than Labour.

Failing to allow for any increase in Paid Parental Leave in their family incomes package despite saying they have included it ($567m)

  • The money for this is incorporated within the Families Package Line within the Fiscal Plan. This has always been Labour’s position – and we have led the debate on PPL for the past three years.
  • The costing is based upon the MBIE advice to Ministers that was provided to the Select Committee that examined Sue Moroney’s original Bill.

Counting additional BEPS multinational tax revenue when Treasury has already counted it in the PREFU update ($902m)

  • Page 202 of Vote Revenue shows that for every dollar spent on investigations $7 of discrepancies are found. This has been a consistent message from IRD in select committees and in their publications. We are going to provide them with $30m of additional revenue for investigation activities so that they properly assess multinationals’ taxation statements.

Only including costs of their Family Package from 1 July 2018 when they said it would begin on 1st April 2018 ($289m)

  • Both versions of the Fiscal Plan have been clear that the Families Package will commence on the 1st July 2018. We will need to pass legislation to make this happen and to undo the $400m tax cut for the top 10 per cent of earners.
  • The website of the Labour Party did have a statement saying under the Families Package when it was first announced that it would be 1 April. But in terms of the numbers in the fiscal plan they have not changed at all, it has always been 1 July 2018.

Further finance costs associated with extra borrowing ($580m)

  • This is an erroneous figure. If indeed we were missing $11b in spending then we would need to find that finance cost. However, as is clear from P.14 of the Fiscal Plan we have accounted for the additional finance costs that our fully costed programme would deliver (see line “additional finance costs”).

I have no idea who is right.

It’s unlikely to be a coincidence there is a leaders debate tonight. We may get an idea who is confident about their calculations/assertions by seeing who avoids this and who pushes it tonight.

19 Comments

  1. duperez

     /  September 4, 2017

    It would be most unusual for Steven Joyce to make things up. It would be most unusual for Steven Joyce just before an election when things weren’t going as he expected, come up with something. Like 10 bridges. 😊

    • PDB

       /  September 4, 2017

      Sounds like you’re in deflection mode, at face value it looks like Labour can’t count unless they can show where they have put the missing billions elsewhere in their costings.

      But what’s $11-12 billion? Robertson thinks it’s just ‘semantics’. Just like he thinks using everyday economic terms in a way they’re not meant to be used is fine;

      Stuff: “Where Labour uses the term “operating allowance” it means something quite different to what Treasury, or anyone else, would assume it would mean. Robertson actually admitted the term meant “leftover cash”. 

  2. PDB

     /  September 4, 2017

    Evidence thus far is pointing to Robertson being somewhat economical with the truth.

    https://www.stuff.co.nz/business/96486359/does-labour-have-an-117-billion-hole-or-a-poor-choice-of-words

  3. Comeonbro

     /  September 4, 2017

    All Labour can do right now is say they relied on an “independent economist”.
    How about checking the numbers themselves?

    • PDB

       /  September 4, 2017

      Berl are the go-to outfit for the left, would take what they put out with a grain of salt. Strangely enough the tax payer union also signed off on Labour fiscal plan but are now saying (on ZB) they shouldn’t have as Joyce has picked up major errors that their own economists didn’t.

    • PDB

       /  September 4, 2017

      You’d think a ‘successful economic company’ like BERL may have said to Labour upon reviewing their fiscal plan that perhaps ‘operating allowance’ is not the best of places to put (as Grant says) “leftover cash”.

  4. Corky

     /  September 4, 2017

    Perception is everything. That little bit of unclarity with a dash of semantics from Labour has allowed Joyce to pounce. While only a shadow of his former self, this old dog is far from lying down and whimpering.

    • duperez

       /  September 4, 2017

      Well I never, all this rubbishing of how Ardern being in the news, apparently having some impact on the polls, being all media driven and not being about substance.

      And the acknowledgement to the results of Joyce’s endeavour is “Perception is everything.”

      How about in the Ardern thing, for people be they silly or not, “Perception is everything.”

  5. There’s been a number of people trying to determine who is right and who is wrong. The latest:

    • PDB

       /  September 4, 2017

      Sounds like a few things being made up as they go along;

      “However Robertson did concede that with the operating allowances it was allowing for areas of Government other than health and education – $835 million in the next financial year; then $879 million; $1.5 billion and $3.4 billion – ‘we will be looking for departments to reassess their spending” and said Labour would have some “different priorities than the Government does in those areas.”

      “Like any Government we will make those choices when we get into Government.”

      http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11916799

      • Blazer

         /  September 4, 2017

        apparantly National introduced 18 NEW TAXES in the last 9 years!!!OMG…where do we turn to…next ,true blue b/s?

  6. Blazer

     /  September 4, 2017

    its all a leftie conspiracy..BERL,TREASURY,J.B WERE,OECD,Brian Fallow….they’re all just plain wrong,we don’t agree with them….wow!!!!

    • duperez

       /  September 4, 2017

      Spoilsport Pete, spoilsport Tim Murphy, spoilsport Bernard Hickey … but at least for some it was a good day earlier with orgasmic responses to Joyce.

    • PDB

       /  September 4, 2017

      Bernard Hickey is a left-wing stooge – he wouldn’t say anything else.

  7. Blazer

     /  September 5, 2017

    Joyce takes the Goebbels approach,if you are going to tell a lie….make it a BIG…one.

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