Comment: In New Zealand politics, the road to power is littered with fiscal holes (real or imagined) that must be carefully navigated.
Every three years like clockwork, a political party – usually the opposition – faces allegations of failing to accurately cost its policies, leaving an economic chasm that must be filled through some nefarious combination of tax rises, increased borrowing or spending cuts.
Given that, Finance Minister and National deputy leader Nicola Willis’ speech levelling such claims against the Labour Party on Sunday was not surprising because of its content, but because of her decision to go so hard and so early.
National’s advisory to journalists billed the press conference as an opportunity to hear Willis “discuss matters related to the economy and fiscal strategy” – a deliberately vague description that failed to do justice to the theatrical nature of proceedings.
Alongside a press release, reporters were handed a black-covered dossier titled ‘Labour’s Hidden Bill’ outlining an alleged $18.2 billion gap between its spending plans and revenue intentions, as well as a list of no fewer than 20 questions that the party needed to answer.
“The simple reality is this: the New Zealand government can’t continually borrow to fund uncosted election promises. That way lies credit downgrades, interest rate hikes, and a dangerous debt spiral,” Willis declared.
“New Zealand actually needs a government made up of people who pay attention to the detail, not politicians who are seduced by marketing slogans and sound bites and can’t get their hands on a calculator.”
The finance minister stopped short of specifically alleging Labour had a ‘fiscal hole’, but said such status was inevitable unless the party fully answered questions about its spending.
The attack is aimed at an obvious Labour soft spot: Chris Hipkins and his colleagues have been quick to criticise the impact of the coalition Government’s policies, but rather more reluctant to confirm whether it will roll them back, and at what cost.
The vast bulk of the $18.2b figure comes from Labour’s plan to reverse the controversial pay equity changes, costed by National (via the Treasury) at almost $11b over the next four fiscal years.
Hipkins and his finance spokesperson Barbara Edmonds have questioned the reliability of the Treasury numbers but are yet to offer alternative figures of their own, much to the chagrin of Willis.
“They cannot have it both ways: either they don’t intend to fully reinstate the pay equity regime, or they are saying they no longer think Treasury is a credible costings unit for the Government, and either way that is a very significant claim to be making.”
Similarly, Labour has pledged to bring back the previous school lunches programme and scrap the coalition’s centralised provider model, but without confirming whether it will revert to the original per-meal budget (costed by National at $427m over four years).
The estimated $2.8b cost of Labour’s ‘Future Fund’, seeded with dividends from state-owned assets to invest in infrastructure, comes from National counting dividends from the five largest payers of dividends to the Government, even though Hipkins and Edmonds have been studiously non-commital about which assets it would use.
More dubiously, Willis’ numbers include the cost of reversing changes to income-related rent subsidies ($542m over four years), even though Labour has not actually announced such a policy; she justified its presence by citing Hipkins’ critique that the Government’s changes would drive public housing tenants “deeper into poverty” as implicit backing for a reversal.
Willis is right that Labour still has a fair amount of work to do as far as showing voters its sums will add up … Where she is on shakier ground is in demanding the opposition provide detailed costings on every policy when we are still the best part of five months out from the election.
It is hard to marry such decisions with the suggestion that National has been conservative in its calculations. The party has at least taken Labour at its word on the $65m annual cost of its public transport cap policy, although that did not stop Willis from repeating National campaign chair Simeon Brown’s risible suggestion that the ‘real’ figure could be $1.6b.
Willis is right that Labour still has a fair amount of work to do as far as showing voters its sums will add up if returned to office come November 7.
Where she is on shakier ground is in demanding the opposition provide detailed costings on every policy when we are still the best part of five months out from the election.
When in opposition itself, National did not release a detailed fiscal plan until one month out from the 2020 election and barely two weeks ahead of the 2023 election.
Indeed, Willis and Christopher Luxon brushed off pressure to release detailed costings on its tax cut policy in the weeks after the 2023 Budget, despite claims of a fiscal hole in its numbers; the following year, that hole was estimated by some commentators to be as high as $5.6b.
Labour’s Edmonds has tried to brush off National’s attack as “a distraction from their own record”, suggesting Willis should investigate a $56b ‘hole’ in its own Roads of National Significance programme and saying the opposition would release a fully costed fiscal plan later in the year “so New Zealanders can see exactly how our priorities stack up and how they will be paid for”.
While Labour has often been the victim of ‘fiscal hole’ claims, National has also copped flak at recent elections – most notoriously in 2020, when the party’s numbers were out by as much as $8b.
It is hard to know why Willis and National have chosen to prosecute their case at this advanced stage, although the mini-furore over the cost of Labour’s public transport policy may have encouraged them to go on the front foot.
The party may be gambling that any whiff of desperation is outweighed by further shaping the election campaign into a battle of fiscal prudence – terrain on which it may feel it has a stronger chance of success, given the economy is the one issue where it still enjoys a lead over Labour.
But with no sign of a post-Budget bump for the coalition in the latest public polling – and the opposition’s numbers similarly stagnant – this may just be the start of sharpening political attacks.
