Rainbow Wellbeing Legacy Fund

Government establishes Rainbow Wellbeing Legacy Fund

Improving the mental health and wellbeing of young members of the rainbow community is at the heart of the establishment of the Rainbow Wellbeing Legacy Fund, Prime Minister Jacinda Ardern said today.

The Fund is an acknowledgement of those New Zealanders who were convicted for homosexual acts before the law was changed in 1986. In 2017 the Government apologised to them and in 2018 passed a law to allow for convictions to be expunged.

“In the wake of this the suggestion was made by some of the men involved that a fitting legacy would be to establish a fund that supports the young people of the Rainbow community. That is exactly what this fund will do.” Grant Robertson, Minister of Finance said.

“This is a community proposed and driven idea that has come from one part of the community for another and the Government is proud to make it happen,” Jacinda Ardern said.

“The Government is proposing to establish a charitable trust with a one-off endowment of $1 million. The trust will administer the payment of annual grants to support organisations that improve mental health and wellbeing outcomes in New Zealand rainbow communities, with a particular focus on organisations that support young people.

“The Government takes mental health seriously and this fund helps to tackle one of New Zealand’s long-term challenges of mental health,” Jacinda Ardern said.

A million dollars is a very small part of the budget (compared for example to the $1 billion a year Shane Jones political wellbeing fund). It should be money well spent.

 

 

Bridges claims ‘deceit and dirty politics’ – but who did the dirty?

Simon Bridges and National continue to go hard out on the leak of budget information two days before Budget day.

But who is playing dirty here?

RNZ Week in politics: National set the trap and Robertson walked into it

National used the information it found on Treasury’s website to set a trap – and it worked far more effectively than Simon Bridges could have imagined after Gabriel Makhlouf made his “we have been hacked” announcement.

Finance Minister Grant Robertson walked into a trap set by National when he linked the Budget “leak” to illegal hacking.

It was no such thing, and National had known it all along. A simple website search had given the Opposition details of some of the spending in yesterday’s Budget.

At the same time, Mr Bridges was giving a hand-on-heart assurance that National had acted “entirely appropriately” while refusing to say how it had obtained the information.

At that point, National had probably expected the usual response to a leak – condemnation of such behaviour and the announcement of an inquiry.

What it could not have expected was Treasury Secretary Gabriel Makhlouf dramatically announcing that his department’s website had been systematically hacked, and that he had called in the police on the advice of the GCSB.

That was a game-changer, and Mr Robertson seized it. “We have contacted the National Party tonight to request that they do not release any further material, given that the Treasury said they have sufficient evidence that indicates the material is a result of a systematic hack and is now subject to a police investigation,” he said.

The implication was obvious – National had either hacked the website or received the information from someone who had. Whoever did it, their actions were illegal.

It turns out what National did wasn’t illegal – but I still think it was highly questionable. They were trying to do a dirty on the Government to grandstand prior to the budget going public.

Mr Bridges raged about unjust smears on his party and accused Mr Makhlouf and Mr Robertson of lying. The Treasury secretary’s position was untenable and Mr Robertson should resign.

He claimed Treasury had quickly discovered the huge chink in its security and had “sat on a lie” while his party was being accused of criminal behaviour.

This leaves some very big questions which have not yet been answered. If Treasury’s IT people knew what had happened, why did Mr Makhlouf go public with his hacking announcement?

Was he misled by his own department, by someone who didn’t want it known that a blunder had been made with the uploading? That’s hard to believe, because it must have been realised that National was going to blow the whistle on the website search.

Did Mr Makhlouf make the decision to call in the police on his own? Mr Robertson says he didn’t know until after the fact, but Mr Bridges rejects that. It’s unthinkable, he says, that a department head would make a call like that without first informing his minister.

The way Mr Bridges sees it, the hacking was a cooked up story to smear National and take the heat off the government and the Treasury.

But the whole thing was cooked up by National in the first place.

Bridges acted offended when accused of hacking, but he hasn’t hesitated accusing Robertson, without any evidence. And he is also accusing Treasury.

RNZ:  Treasury knew there had been no hack on Budget information – National Party leader

The National Party is confident the investigation into Treasury’s claim Budget information had been hacked will prove that Treasury “sat on a lie”.

National Party deputy leader Paula Bennett, who asked the SSC to investigate, said her party would let the inquiry play out but stands by its assertion that Mr Makhlouf mislead New Zealanders.

It has previously said Mr Makhlouf should resign.

Mr Makhlouf says he acted in good faith.

National Party leader Simon Bridges told Morning Report today there were two possible scenarios, and the situation was likely a bit of both.

“You’ve either got bungling incompetence, and I think we can all believe that could well be the situation, or you have some broad form of deceit and … dirty politics.

“And we need to see what’s going on here.”

He said the GCSB told Treasury and the Minister of Finance that there had been no systematic hack, but Treasury came out after this and said there had been.

“The reality of this situation is it’s pretty black and white isn’t it.

So as a result of a deliberate and concerted effort by National to exploit a data vulnerability at Treasury in an attempt to embarrass the Government we now have two inquiries, and National have called on the Minister of Finance and the head of Treasury to resign. It has also jeopardised Makhlouf’s new job in Ireland.

MSN:  Gabriel Makhlouf’s next job at Ireland’s top bank under threat

Irish politicians say they’re concerned New Zealand Treasury Secretary Gabriel Makhlouf will become the country’s next Central Bank governor amid the Budget “hack” scandal.

Pearse Doherty, finance spokesperson for left-wing Irish republican party Sinn Féin, told The Irish Times Maklouf should not start his role with the Central Bank until the investigation has concluded.

Doherty said it “wasn’t a small issue”.

“We need to make sure that someone in the highest position in the Central Bank has proper judgement,” he told The Irish Times.

Ireland’s Fianna Fáil party member Michael McGrath has also reportedly sent a letter to the Irish Finance Minister.

“The governor of the Central Bank is one of the most sensitive and important roles in our States,” the letter says.

“It is vital we have full confidence in the holder of the office.”

So National may succeed in ruining Makhlouf’s career. Robertson is unlikely to resign – and I think it would be a disturbing result if he is forced to.

Sure Makhlouf and the Government may not have handled the budget leak well. But this was a dirty politics style hit job by National, serving no positive purpose, and highly questionable as ‘holding the Government to account’.

They would have hoped to cause some embarrassment, and got lucky when it precipitated a shemozzle, leading to two inquiries and careers in jeopardy – not because of the initial problem, but because of how it was mishandled. This is classic negative politics.

For what? Some budget information was publicised two days before it was going to be made public anyway. National well know that budgets are kept secret until announced in Parliament, and there’s good reasons for this.

This sort of thing really puts me off politics – especially off politicians who try to engineer scandals that really has nothing to do with holding to account.

If there wasn’t other things keeping me going here I think I could happily pack up and go and do something else as far from politics as I can get.

This political debacle sets a very poor example. It is a form of bullying – political bullying, where dirty means are employed to cause problems that needn’t happen. Shouldn’t happen.

Another thing that may keep me involved is looking at ways of getting our politicians to set positive examples, and save the hard ball holding to account to when it really matters.

Is there any chance of that? I’m probably wasting my time here.

Budget falls short of child poverty targets

This year’s budget was promoted as a Wellbeing Budget, but it has been criticised for not moving far enough towards addressing things that will improve the well being of the less well off, especially children.

Newsroom:  Budget moves not nearly enough to meet child poverty targets

This is the first Budget under the new Child Poverty Reduction Act rules. The Act is perhaps one of the most concrete and far-reaching changes the Government has introduced. From 2019 on, the Minister of Finance must report each year on progress towards preannounced three-year and ten-year child poverty reduction targets.

So how did Grant Robertson go first time out? How much progress towards cutting poverty was there actually in the Budget? The short answer is a bit, but almost certainly not enough to meet all three short-term targets by the deadline of June 2021.

The big Budget announcement was to index main benefit rates to changes in average wages rather than just the Consumer Price Index. It’s a great move, one which the Welfare Experts Advisory Group, and many other commentators in the field have called for. It means that part of the welfare system will keep pace with growth in wages instead of slipping further and further behind.

Approximately 55 percent of children in poverty live in households reliant on benefit as their main source of income. Indexation of the benefit to wages is an important long-term change, but indexation to inadequate basic rates is not enough. It will simply not be feasible to address child poverty without either (or both) raising benefit rates or the Working for Families tax credits paid to parents on benefit. We did not see either of these in this first Wellbeing Budget.

A budget is a budget, not an open chequebook as some seem to want it to be, Minister of Finance Grant Robertson has done a pretty good job of balancing economic prudence with the pressures to spend more on a wide range of things.

The last government was already nudging things towards more ‘social conscience’ spending. The current government has nudged things a bit more. Perhaps they will push things further towards wellbeing in the next budget, which is in election year.

Digital services tax proposals to target multinationals

The avoidance of paying tax by multinational companies is well known, but an effective solution is difficult to come up with. The Government has proposed two options.


Ensuring multinationals pay their fair share of tax

Finance Minister Grant Robertson and Revenue Minister Stuart Nash today proposed two broad options to ensure offshore digital companies no longer enjoy tax breaks which are not available to local businesses.

“Our number one preference remains an internationally agreed solution through the OECD,” says Mr Robertson. “However if the OECD cannot make sufficient progress this year we need an interim solution. Other nations have already taken this step.”

“The UK has announced it will introduce a two percent DST from April 2020. Austria, the Czech Republic, France, India, Italy and Spain have also enacted or announced DSTs.

“We need to protect our economy and the integrity of our tax system. Modern business practices, digitalisation in particular, mean that a company can be significantly involved in the economic life of a country without paying tax on income or turnover.

“Multinational companies like social media platforms and e-commerce sites generate income through cross-border digital services rather than face-to-face retail,” says Mr Robertson.

The DST outlined in a discussion document released today would apply to:

  • platforms which facilitate the sale of goods or services between people, such as Uber and Airbnb and eBay;
  • social media platforms like Facebook;
  • content sharing sites like YouTube and Instagram; and
  • companies which provide search engines and sell data about users.

“A DST would be narrowly targeted at certain highly digitalised business models. It would not apply to sales of goods or services, but to digital platforms who depend on a base of users for income from advertising or data.

“The value of cross-border digital services in New Zealand is estimated to be around $2.7 billion. The estimated revenue of a DST is between $30 million and $80 million, depending on the design,” Grant Robertson said.

Revenue Minister Stuart Nash says the Tax Working Group concluded New Zealand should continue to participate in the OECD discussions but also stand ready to implement a DST if a critical mass of other countries move in that direction.

“The OECD is seeking approval for its digital economy work programme from the G20 group of large economies at a meeting in late June. The progress made at the OECD to date has not been sufficient to allay the concerns of several countries, who have announced or introduced DSTs as unilateral interim measures.

“Any DST in New Zealand would be an interim measure. The Government would look to repeal it if and when the OECD’s international solution was implemented,” says Mr Nash.

The two options are:

  • Changing the current international income tax rules, to allow more taxation in market countries.  This option is currently being discussed by the OECD and the G20 group of large economies.
  •  Applying a separate DST of three per cent to certain revenues earned by highly digitalised multinationals operating in New Zealand. The discussion document seeks feedback on how a DST might work in practice.

“The Government is committed to future-proofing the tax system to ensure it can handle changes to how people work and how business is done,” Mr Nash says.

“The significance of the digital economy is only going to grow over the coming decades. We need to keep adapting to ensure multinationals who do business here are paying their fair share of tax.

“We’ve passed legislation to collect GST on remote services, and to ensure multinationals pay their fair share of tax if they have a physical presence in New Zealand, and we have legislation before parliament to ensure we collect GST on low-value imported goods,” says Mr Nash.

The discussion document can be found at taxpolicy.ird.govt.nz. Consultation closes on 18 July 2019.

 

Grant Robertson on Newshub Nation

Minister of Finance Grant Robertson was interviewed on Newshub Nation yesterday.

First, the sideshow.

imon Shepherd: It’s the highlight of the political year, for the government and one man in particular, the Finance Minister. I asked Finance Minister Grant Roberson if he was disappointed that the unauthorised early release of budget details overshadowed his first wellbeing budget. 
Robertson: I don’t think that it did. The reaction that we’re getting from New Zealanders to the budget is that they’re really pleased that we’re focused on a big, long-term issue like mental health. I don’t think New Zealanders are focused on the political games in Wellington.
But there were so many of them. There was the leak of the documentation, the allegations of a hack — you sort of seemingly linking the National Party to that, and then it wasn’t a hack. It was shambolic.
Look, I’ve expressed my disappointment in the fact that the Treasury system could be infiltrated this way and also that the Treasury didn’t do more to find out what had happened before they referred it to the police. The reality is that that’s now in the hands of the State Services Commissioner, who is doing an inquiry, and we’ll await the outcomes of that.
Well, how do you think you handled it all?
Look, I invite you to put yourself in my shoes. On Tuesday night the Chief Executive of the Treasury arrived in my office and said about an hour ago I have referred to the police 2000, of what he called, hacks into the system. I said to him, ‘Do you know how that’s happened?’ He said, ‘No, I don’t.’ I said, ‘Do you know if any other areas of the Treasury system have been compromised?’ He said, ‘No, I don’t.’ So at that point, I’m going to take that matter pretty seriously. That’s what we did. Obviously more information has now come to light. That’s what the inquiry will cover.
Do you think you acted too quickly? Do you think you should’ve waited and got some more information before you put out that press release just then, which seemed to indicate that National was linked to the allegations of a hack?
Like I say, I think most people in my shoes, having received the information I did, would react and say, ‘Well, we need to make sure, regardless of how the National Party might’ve got the information, that they were aware of what the Treasury had advised me. We all now know that the situation is somewhat different. The inquiry will look into how that happened.

Then the meat of the topic.

You named it the Wellbeing Budget, but mental health aside, what is actually transformational about it?
I think the work that we’re doing in domestic and sexual violence is absolutely transformational. We’re talking there about breaking a cycle that has bedeviled New Zealand for many years. $320 million going into that. We’re going to transform the lives of people who are on benefits by indexing that to the average wage. That’s going to lift their incomes consistently.
Okay. Well, let’s talk about that. Obviously the Welfare Expert Advisory Group said 12-47 per cent boost to benefits is needed, something like $5 billion. You didn’t go near that. You’ve done $300 million. Why not?
Well, because we’re doing this in phases. And we’ve actually done three things —we’ve done, not only the indexation of benefits, but we’ve also lifted the abatement rate — the rate at which your income drops if you’re working while you’re on a benefit. And we’ve got rid of the sanction that was on mothers who didn’t identify the fathers of their children. That’s stage one. We absolutely acknowledge that there’s further work to do in this area.
Do you think that you missed a chance to be transformational by not implementing a capital gains tax?
Well, as you well know, I would’ve like to have implemented a capital gains tax. That, of course, would not have come into force until after the election. That was always the plan, but the realities of coalition government are we didn’t have the numbers for that.
What about a greater focus on business? If you lift them and provide incentives for business, that changes the whole economy, doesn’t it? So why didn’t you do that?
Well, we are. There’s a great deal of focus on supporting business. One of the things I’m really excited about in this budget is the $300 million fund for venture investment in those businesses that have got past the start-up phase and are looking to grow to be international companies, and Peter Beck from Rocket Lab has raised this issue with us and said, ‘Too many of these companies head offshore because there isn’t investment here.’ The government’s now got $300 million of skin in the game.
But I would say to you, that this country is made up — the backbone — is small to medium enterprises, and the businesses you’re talking about there are start-ups that want to go internationally. You’re not addressing the small to medium enterprises.
Well, I’d argue we are. The biggest issue raised with me by business is skilled staff, infrastructure, making sure we get those trade agreements going so people can export. They are the issues we are working on.
Could you have been more transformational if you’d relaxed your debt rules earlier? Is there a chance you could look back at this and say, ‘I wish I hadn’t played it so safe’?
It’s always about a balance. We have to make sure that we do keep our debt under control. We’re a small country. We’re susceptible to significant economic shocks and natural disasters. We are actually borrowing more money in this Budget. The economy is growing as well. That means the percentage of GDP stays steady, but we are borrowing to invest in those areas like infrastructure, building up KiwiRail, building more schools and hospitals. But it is all about a balance, and I think we’ve got it right.
Well, what about the balance — you’ve just mentioned shocks like natural disasters or international shocks. You are actually borrowing more. You are running down the projected surpluses. Are you leaving us vulnerable to something like that?
No, I don’t believe so. I mean, we still have a surplus of $1.3 billion here. We still have debt at a relatively low level. We are creating that balance, but we made a decision in this Budget to spend more than we had originally allocated, and that’s because the need was there. The need was there in infrastructure, but the need was also there in services like mental health. We always said, Simon, is that a sustainable surplus would be one where we’d met the needs that were there, so therefore this Budget that surplus is a bit lower, but it still exists.
Are you meeting the health needs though? Because National’s Amy Adams points out that policies for midwives, no free health checks for seniors, reduced GP fees — those kinds of things are not addressed in this particular budget. And in fact, figures from the Child Poverty Action Group show that spending on public health is forecast to be the lowest in a decade by 2023.
Well, what we’ve done is prioritise mental health, and we’ve been completely upfront about that from day one. We have a mental health crisis in New Zealand. It’s been ignored, but there’s still significant resources going into the rest of our health system, around $2.9 billion into supporting DHBs, more money for ambulances. There are other areas, within our coalition agreement, within our confidence-and-supply agreement that we’ll look to address in next year’s Budget, but we made mental health a priority.
Such as?
Well, you’ll have to wait till next year.
What about teachers, though? They’re crying out for some more love from the government, and they’ve just announced more disruptive action. So why couldn’t you address that in this Budget?
We believe we’ve got a fair offer on the table, the $1.2 billion offer. The Budget also addresses some of the non-pay-related issues that teachers have been raising. Six hundred learning support coordinators for what we used to call special ed. 2480 more teachers—
And yet they’re still unhappy?
Well, that’s the reality of the world. What I hope is happening, and I’m pretty sure it is happening right now, is that the Ministry of Education and the unions are sitting down together to say, ‘Look, how can we resolve this?’ We want it resolved. We understand the frustration of teachers after 10 years of not getting supported. Let’s take these first steps together now.
What is there in this Budget for middle New Zealanders? Sort of, those low to middle income families. There doesn’t seem to be anything.
Well, I’d give you one example. We’re removing school donations for decile one to seven schools.
But in the hip pocket there’s nothing like tax bracket creep or anything like that.
Well, look, we’ve made a commitment not to change tax rates in this term of government because we believe that we need the resources that are there to meet the needs that are there.
Well, let’s talk about housing. There is nothing actually, really, apart from the Housing First — the transitional housing — there’s nothing else for housing in this Budget. You’ve got KiwiBuild, which has stalled at the moment because it’s not delivering.
We put $2 billion in last year’s Budget for KiwiBuild for the life of the programme—
And it’s not delivering.
And as you know, there is a housing reset coming forward, and actually in the Budget documents we state that we’ve put some money aside to help manage that housing reset.
How much?
You’ll see the details of that when the reset’s released.
What about the policies that you agreed with the Greens, like a shared equity scheme to get more people to be able to afford to buy into our houses. What happened to that?
As I say, you’ll have to wait for the housing reset that Minister Twyford’s going to announce, but clearly we’ve got a large-scale building programme for housing that’s not just about KiwiBuild. It’s about state housing, transitional housing. Mr Twyford’s now going to come back with that reset, and you’ll be able to see—
But there’s 11,000 people on the state housing list, and there’s nothing extra in this Budget for them.
Well, we made a significant investment in the building of 6000 state houses in the last Budget. We’ve got an integrated programme with transitional housing and affordable housing. Phil Twyford’s going to announce a housing reset. We’ve set some money aside to support that.
What would you say to business-owners, teachers and say, middle income, low-income earners — some of those feel left out by Budget 2019. What would you say to them? What hope will you offer them for next year?
Look, I’ve always said that the three budgets of this term are a trilogy. Last year we did the foundation-building of making sure we got spending back into those core areas. This year we’ve targeted areas like mental health that all of those people will benefit from. We’ve got a third Budget to come as well.
So is that going to be the blockbuster for these people?
No, I see them all as part of an attempt to start turning around a decade of neglect in a lot of important areas in New Zealand. Two-thirds of the way through, I think we’re making good progress.

A pretty good budget

I despair about the circus leading up to and surrounding yesterday’s budget. Media even investigated the person on the cover photo of the printed budget in a bizarre sideshow. And there were a number of ‘what’s in it for you’ angles, despite lolly scramble budgets largely being very historic,

But for what really mattered, I think that yesterday’s budget was pretty good, delivered by someone who increasingly looks like a pretty good Minister of Finance, Grant Robertson.

A significant boost to mental health related initiatives is long overdue, and very good to see,

Indexing benefits to wages is also a long overdue fix to the erosion of benefit value over the years.

There’s a bunch of other stuff that can be praised or quibbled about, but generally it seems ok to me.

There is always a limit to how much a Government can spend of our money, and there’s a limit to tolerance of how much we are taxed. Robertson and the Government seems to me to have found a fairly good balance. They will never please all of the people all of the time, but I don’t think there’s much to be worried about.

Treasury refer claimed hacking to police following budget leak

The budget leak publicised by National yesterday has got a lot murkier, with Treasury now saying they have been hacked. The matter has been referred to the police, but Leader of the Opposition Simon Bridges is unrepentant for trying to hijack Thursday’s budget announcement.

The leak looks embarrassing for the Government, and also for Treasury, but I think the leak stunt also reflects very poorly on Bridges and National. Bridges has demanded that Minister of Finance Grant Robertson resign over the leak.

1 News: Budget 2019 leaks by National came after Treasury was ‘deliberately and systematically hacked’

Earlier today the National Party leaked what it claimed were highly secretive details of the Government’s wellbeing Budget, due to be delivered on Thursday.

Treasury has confirmed in a statement it was the source of National’s Budget 2019 leaks today after its “systems were deliberately and systematically hacked”.

Confirming the hack this evening Treasury released the following statement:

“Following this morning’s media reports of a potential leak of Budget information, the Treasury has gathered sufficient evidence to indicate that its systems have been deliberately and systematically hacked.

“The Treasury has referred the matter to the Police on the advice of the National Cyber Security Centre.

“The Treasury takes the security of all the information it holds extremely seriously. It has taken immediate steps today to increase the security of all Budget-related information and will be undertaking a full review of information security processes.

“There is no evidence that any personal information held by the Treasury has been subject to this hacking.”

Responding to confirmation of the the hack, Finance Minister Grant Robertson said is a statement:

“This is extremely serious and is now a matter for the Police. We have contacted the National Party tonight to request that they do not release any further material, given that the Treasury said they have sufficient evidence that indicates the material is a result of a systematic hack and is now subject to a Police investigation.”

But Bridges continued on the attack:

If it turns out that budget documents were hacked from Treasury will Bridges resign for using hacked material to try to undermine the Government?

 

Reforming public finance beyond the ‘wellbeing budget’

The Government has been consulting with ‘a group of experts’ – including Michael Cullen – on a new approach to managing the government’s finances, which could have a massive impact on future budgets.

Newsroom:  Cullen consults on massive Budget shake up

Treasury has brought in former Finance Minister Michael Cullen to consult on government budgeting as it tries to shift the focus away from surpluses

Dubbed a “stewardship” approach, it aims to take a more long-term view of public finance. A paper released to Newsroom under the Official Information Act shows Treasury has already begun work on reforming the public finance beyond the ‘Wellbeing Budget’ which will be delivered on Thursday.

The briefing notes that the current public finance system is 30 years old and may not adequately serve the needs of today’s governments. It said that the current work on the Wellbeing Budget and the Living Standards Framework will “only take us so far”, and further work was needed to fix “underlying issues with our public finance settings”.

Treasury says the approach is about moving from a “management” to a “system stewardship” approach to the public finance system. This could involve further changes to the Public Finance Act, a piece of legislation drawn up in 1989 that forms the cornerstone of public finance in New Zealand.

Finance Minister Grant Robertson told Newsroom the Government was “certainly moving forward” with the ideas in the paper.

Treasury believes the public sector is “not working well for everyone”. It singles out struggles in responding to “complex needs and issues” as well as “longer-term opportunities and risks”. It lays the blame, in part, on “a range of underlying issues with our public finance settings”.

It says the current settings encourage “silos” and a short-term focus. These settings mean it can be difficult to move funding across several years when it makes sense.

The reporting requirements placed on the Government focus on “outputs not outcomes,” and it incentivises “compliance and risk aversion,” rather than “innovation”.

Treasury said the new approach would “support better collaboration”, and place “more emphasis on the long-term to support innovation, asset management and capacity-building”.

One change being discussed would substantially alter how baseline funding is appropriated. Currently, bids for cost pressure funding is bid for on an annual basis, which Treasury says is “resource intensive”. This could change to a multi-year “defined period” bid, which would be more flexible.

Government budgets should have medium and long term considerations. I don’t think this is particularly new – the Cullen Fund was designed as a long term  means of financing superannuation as the population grew older. And many budget items are for multiple years (four years is common).

Last September, Treasury officials met informally with a panel which included former Finance Minister Michael Cullen, former ACT candidate and ex-Treasury Secretary Graham Scott, Victoria University Professor Jonathan Boston, and former State Services Commissioner Iain Rennie.

The group urged caution before changing “what is internationally a very good public finance system”.

Speaking to Newsroom, Cullen said there was merit in looking at long-term risks so long as a balanced approach was taken.

“So long as focus on the long-term doesn’t become an excuse for doing stupid things in the short-term then there’s a great deal of sense in getting that long-term focus,” Cullen said.

He said long-term risks like the costs of super and health care, combined with unexpected risks like earthquakes meant a prudent approach should still be taken.

“We are a country which faces quite significant risks that will suddenly descend upon us. We don’t have the slightest clue they’re going to happen,” he said.

Jonathan Boston told Newsroom that moving away from a narrow focus on GDP as a measure of the economy was wise.

“GDP is a flow measure; it measures the value of goods and services but it doesn’t tell you what’s happening to income distribution and to other financial measures, more particularly it doesn’t tell you what’s happening to the stocks of capital in a society or your human capital stock,” Boston said.

Reassessing how budgeting is done is a good thing. We will have to wait and see whether changes that happen as a result of this consultation turn out to be a good thing – and that could take many years to determine.

 

National – “Robertson concedes defeat on budget rules”

National’s finance spokesperson Amy Adams has responded to Minister of Finance Grant Robertson’s announcement yesterday that the Government core debt target would change to a range (see Grant Robertson: shift from net debt 20% target to 15-25% range).


Robertson concedes defeat on budget rules

Finance Minister Grant Robertson has today thrown in the towel by scrapping his self-imposed debt target, National’s Finance Spokesperson Amy Adams says.

“Grant Robertson has been backed into a corner by allowing the economy to slow, over promising and making poor spending choices. Now, instead of a fixed target Grant Robertson has lifted the debt limit by 5 per cent. That loosens the purse strings by tens of billions of dollars.

“This is a blunt admission the Government can’t manage the books properly, it is not wriggle-room. This makes the fiscal hole look like a puddle.

“You can almost guarantee that means debt at the upper end of the range of 25 per cent. This is an admission of defeat from a Finance Minister who has repeatedly used these rules to give himself the appearance of being fiscally responsible.

“This decision will mean billions of dollars more debt because the Government can’t manage the books properly and wants to spend up on big wasteful promises in election year.

“This will pay for things like Shane Jones’ slush fund, fees-free tertiary and KiwiBuild – in other words, it’s wasteful spending.

“Debt isn’t free. It will have to be paid for by higher taxes in the future.

“The debt target is the latest broken promise by the Government as the ‘year of delivery’ continues to be an embarrassing string of failures.

“It took the last Labour Government two terms to lose its fiscal discipline. This Government has given up in 18 months. This confirms you simply can’t trust Labour with the economy.”

Grant Robertson: shift from net debt 20% target to 15-25% range

One of the biggest talking points coming out of Minister of Finance Grant Robertson’s pre-budget speech to Craigs Investors Conference yesterday was a shift from a net debt target of 20%, to a much more flexible range of 15-25% dependent on economic conditions.

The 20% target was a feature of the Labour-Green fiscal responsibility agreement prior to the 2017 election.

Robertson 24 March 2017: Labour and Greens commit to rules for responsible financial management

The Labour Party and the Green Party have agreed to Budget Responsibility Rules, which will provide the foundation for sound fiscal management after the election.

“New Zealanders rightly demand of their government that they carefully and effectively manage public finances. We understand that and are committed to delivering this,” says Labour Finance Spokesperson Grant Robertson.

“These rules demonstrate how Labour and the Greens in Government will manage the economy prudently, effectively and sustainably.”

Under the Budget Responsibility Rules the Government will:
• Deliver a sustainable operating surplus across an economic cycle
• Reduce the level of Net Core Crown Debt to 20 per cent of GDP within five years of taking office
• Prioritise investments to address the long-term financial and sustainability challenges facing New Zealand
• Maintain its expenditure to within the recent historical range of spending to GDP ratio
• Ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

The Government will establish an independent body to make sure the rules are being adhered to.

Since the Labour-Green-NZ First Government took over in late 2017 the target (and fiscal prudence) has been strongly criticised by people on the left who have been demanding much more spending for ‘urgent needs’.

Relevant section of yesterdays speech under Budget 2019 Economic Priorities – Fiscal sustainability:


We are reducing the level of net core Crown debt to 20 percent of GDP within five years of taking office. New Zealand has low levels of Government debt by international standards, but we remain vulnerable to shocks that are beyond our control, such as earthquakes and other natural disasters. We have made our commitment to keeping debt under control to ensure that future generations of New Zealanders are in a position to be able to respond effectively to any such shock.

This Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand. This is apparent in the intergenerational wellbeing priorities we have identified in this year’s budget and restarting contributions to the NZ superfund and our focus on issues such as climate change.

We will maintain Government expenditure within the recent historical range of spending to GDP, which has averaged around 30 percent over the past 20 years. We are also focussed on the quality of spending, with Ministers running prioritisation exercises across their portfolios to identify spending that doesn’t fit with the Coalition Government’s priorities.

I am pleased to announce today that on the 30th of May the Budget will show that we are meeting these rules again, as we did in last year’s budget.

I know there has been some criticism of this approach – particularly around the debt target. For me it is a question of balance. We have made, and will continue to make, significant investments in our future, but we also know that the volatility of the world, be it economically or through natural disasters, biosecurity incursions or unexpected events, is never far away.

The Public Finance Act obliges Governments to outline their long-term fiscal strategies at Budget time. One of the key elements of this is the Government’s approach to debt.

People in this room will all have different views on what it could or should be. That in part depends on the levels of investment you believe the Government should be making and in what areas.

We also have to take into account capacity constraints at any point in time – like in our construction sector. With this in mind, I am comfortable with the 20% point that we have been targeting. But circumstances can obviously change.

Beyond the Budget Responsibility Rules, our fiscal intentions in this budget will signal a shift to a net debt percentage range, rather than a single figure. At this point we are looking at a range of 15-25% of GDP, based on advice from the Treasury. This range is consistent with the Public Finance Act’s requirement for fiscal prudence, but takes into account the need for the Government to be flexible so that it can respond to economic conditions.

Essentially, our current 20% target falls in the middle of the new range that will exist from 2021/22 onwards.

A range gives governments more capacity to take well-considered actions appropriate to the nation’s circumstances – circumstances that change over time. It establishes boundaries within which debt is kept to sensible and sustainable levels and where fiscal choices are driven by impact and value.

For example, a government may choose to move higher up the debt range to combat the impact of an economic recession, or where there are high value investments that will drive future economic dividends. At other times it may be prudent to reduce debt levels to the lower end of the range to provide headroom for future policy responses.