The cost of the alternative

blogged on Monday how if there is a -led Government, it will be unlike any previous MMP Government as the major party will be only 50% to 55% of the Government, not 80% to 90%.

This means that the parties they need to negotiate with to form a Government will have massive power, much more power than any other minority partner under MMP. Because the larger your proportion of the votes the Government needs, the more say you get. This is an issue that as far as I know, no has seriously looked at – what would be the policy mix of a Government that had Labour on 25%, on 15%, NZ First on 5% and the Maori and Mana parties on say 5% between them.

I estimated NZ First's spending and tax manifesto would add up to around $40b over four years. If you doubt that go and look at their list of spending policies which is massive.

Trying to cost the Greens almost as massively long list was beyond me, but thankfully the good Mr Joyce has done it for me. he has it at $25b over four years. The Greens claim they have fiscal costings, but the link they publish comes up as page not found. Probably a reason for that.

Now the Greens would be 30% of a Labour-Led Government and NZ First (if they make it) 10%, so assume they respectively get 30% and 10% of their policies.

Take the $12b extra borrowing I make it under Labour and add on 10% of $40b and 30% of $25b and that is conservatively a total of $24 billion extra borrowing.

At 6% interest, the increase in interest on the debt would be around $1.44b a year by year four. And that doesn't even include working out the compounding  nature of debt.

The one thing which would be very clear is that there is no way a Labour-led Government could actually get the books back into surplus. You simply can not add on around $6b a year of extra spending, and get back into surplus. You will have a permanent structural deficit where debt only increases – the exact situation National inherited in 2008 (PREFU had a decade of deficits, had a permament structural deficit). All the gains and hard work of the last three years to restraing spending growth (including nil growth in an election year) will be wasted.

And imagine if Europe does plunge, and our revenue plunge also. Can you imagine Winston, Hone and the Greens agreeing to spending cuts to match? It would never ever happen. Don't take my word for it – ask them.

Comments (29)

Login to comment or vote

Add a Comment