Crampton and Nolan on Greens spending claims

August 25th, 2014 at 10:00 am by David Farrar

at TVHE blogs:

This one is genuinely disappointing as it seems to be an almost explicit misinterpretation of Budget forecast figures.

The numbers for claiming falling real expenditure come straight from the Treasury forecasts here, but are then deflated.  This sounds good on the face of it, and people do this all the time.  However, it ignores that there is both unallocated spending, and allowances for additional spending in future Budgets – both which largely get allocated to Health and Education on the day.

It is an “open” secret that the Health and Education numbers work this way – as both Labour and National want to announce increases in spending on these items on the day. [Note: It is just like "tax cuts to get rid of fiscal drag" - political marketing all the parties do].

In that context, saying that the real value of spending is going to fall on these items is empty rhetoric.

It is almost a lie.

also explains:

So what do we have here? For each line, we have the expenditures by spending area. For example, health rises from $12,368m in 2009(actual) to $15,274 in the 2018 forecast. BERL then goes and deflates that by expected inflation; the Greens then claim that there’s a real cut in spending.

Now take a look at the line reading “Forecast for future new spending”. That’s the line where Treasury makes its best wink-wink-nudge-nudge guess as to future operating spending announcements, some of which it’s possibly already had to cost for future government policy announcements, and some of which will be based on expectations of future inflation adjustments.

When BERL runs its inflation adjusted accounting on Core Crown Expenditures, it finds a 9.9% nominal and 2.8% real spending increase over the next three years. That total Core Crown Expenditures categoryincludes the future spending increases. Those future spending increases have not been allocated across spending categories. If it were allocated proportionately across all categories, the weighted average of the different categories’ increases would wind up being 2.8% real. But BERL doesn’t assume that. It just takes each line from the BEFU and inflation adjusts it while ignoring the forecast future new spending.

This sort of manipulation does not help the credibility of BERL or the Greens. They knew they were being misleading.

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19 Responses to “Crampton and Nolan on Greens spending claims”

  1. hmmokrightitis (1,590 comments) says:

    BERL and credibility are strangers who have never and will never meet. Gun for hire, and what answer would you like with that wedge of cash sir?

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  2. virtualmark (1,531 comments) says:

    In summary then … BERL are either ignorant, or complicit.

    Not sure just which of those they’d prefer to see themselves as …

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  3. burt (8,275 comments) says:

    The Green party, like all left parties, claim socialism works. Socialism has failed everywhere it has been tried, it always ends in economic tears. Yet they claim it’s sustainable. Surely this a clue that anything they publish supporting their willfully dishonest assertions that their ideology will work is also willfully dishonest ? Why is anyone surprised ?

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  4. Paulus (2,632 comments) says:

    Remember who is paying BERL to produce this report.
    He who pays the piper calls the tune.
    I was closely associated with the founders of BERL in the1970’s who will be turning in their graves at what their company has become.

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  5. JC (958 comments) says:

    It raises the question of what is a “dirty trick”.

    If its produced by suits who don’t swear.. is it somehow less of a dirty trick?

    Thats been my beef with the Greens for a long time..

    For example the carbon tax they propose is done by marginalising several sectors of the economy, farmers, manufacturers using fossel fuel, miners, trucks, cars etc so that they face higher costs so the hoi palloi can get a tiny reduction in tax (and falsely claiming its similar to the seemingly successful British Columbia tax).

    Other funding initiatives involve marginalising those earning over $140,000 and those who have trusts so that the less productive can enjoy larger social benefits.

    Producing rubbish science or research to justify all this crap.

    To me these are worse dirty tricks than what we see from the back rooms of most political parties.

    JC

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  6. I Say Look Here (57 comments) says:

    Is it not possible for this kind of blatant misrepresentation to be made illegal somehow?

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  7. polemic (460 comments) says:

    The irony of it all is that the Greens, to remain in the Illustrious Co -Boat have to show they have some economic experience to the table.

    What’s wrong with some selective manipulation of the facts.

    According to Green Party Public Watchdog Penny Bright everything becomes a fact once it is written down in a book or on paper.

    The authors character and/or trustworthiness (i.e track record of accuracy, lawfully obtained and verified before release) has no bearing upon whether is is fact, based on fact or a work of fiction.

    BERL credibility is in question for this twist but if you were paid to release a report showing a particular twist on the info you wish to display then why worry.

    A vote for Labour is a vote for the “ Co-Boat” !!

    The Green Party has an absolutely stellar record of economic performance.

    I received a green party flyer over weekend and all they were really offering was that they would keep a nearby river safe to swim in…………

    I mean seriously what have they really got to offer the country except for “Saving the Whales” but even then that is very selectively applied because they want to save the whales but not their oil !!! ;-)

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  8. hmmokrightitis (1,590 comments) says:

    Agreed Paulus. An old school friend of mine still works as an economist (we did our degrees together as well) where I branched out into the wider IT sector. BERL have, by generally consent, sold their soul to the devil – whichever devil is currently writing cheques. The problem most encountered is that their politics gets in the way as well. Shame really.

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  9. James Stephenson (2,191 comments) says:

    I believe that dictionaries will shortly be adding another definition for the word “Green”: Intellectually dishonest.

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  10. simonway (387 comments) says:

    Don’t they both explicitly say that the Greens might not have known it? That they might have just trusted in the erroneous BERL report?

    Nolan:

    The BERL tables on the other hand do imply what the Greens take from them – and that is very disappointing as they are misleading.

    and Crampton:

    they could have been misled by the BERL tables

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  11. Grizz (605 comments) says:

    BERL and Ganesh Nana have long been the economic advisors of left wing groups. They promote and justify throwing money down black holes in the face of criticism from all other economists worth their weight. I have long stopped paying any attention to anything they say.

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  12. alloytoo (546 comments) says:

    @Simonway

    So the Greens are either complicit or incompetent?

    That’s a nice choice for voters.

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  13. Ross12 (1,432 comments) says:

    I read the other day that they got Infometrics to audit their work and Infometrics also said there were faults in the figures.

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  14. Yogibear (366 comments) says:

    Ah BERL…….

    The organisation that said the Hillside Workshops could produce internationally competitive rail cars with “the right level of government support and subsidy” (i.e. not internationally competitive)

    Also the organisation that decried (with much help from Duneden Labor MPs) the “economically irrational” severing of the connection between AgResearch’s Invermay Facility and Otago University – happily ignoring the fact that Invermay is 10km away from Otago, and AgResearch was relocating to a super-hub for agricultural science on-campus at Lincoln, along with a host of other CRIs

    Leave your independence at the door boys.

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  15. simonway (387 comments) says:

    alloytoo: Well, if somebody relies on information given to them by an expert adviser, and that information turns out to be wrong, I hardly think it’s fair to say they’re incompetent. That seems like a mistake virtually anyone could make.

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  16. ben (2,380 comments) says:

    The Government takes absolutely no notice of anything BERL produces, except to rebut attacks on policy, which is usually not difficult. If it has BERL on it, it is presumed unrelated to the truth, it is not downloaded and it is not read. And the question asked of any organisation that commissions BERL over other more reputable institutions to do some work is: what does that organisation have to hide?

    It all adds up to zero influence.

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  17. hj (7,033 comments) says:

    BERL and credibility are strangers who have never and will never meet. Gun for hire, and what answer would you like with that wedge of cash sir?
    ….
    And the NZIER. Increase the population… follow the money.

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  18. hj (7,033 comments) says:

    Neither finance spokesman (or minister) sounded very credible on Nine to Noon.
    The finance minister is blaming council inefficiency and the RMA whereas Parker is going to fix it with a capital gains tax. Neither was pressed (or mentioned) immigration. As you don’t on Radio Liberal/Left-wing.

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  19. Ross12 (1,432 comments) says:

    While talking about the Green’s figures –what is this bit about them challenging the Nats over not being able to afford tax cuts. Have I missed something –I don’t think the Nats have promised tax cuts. I thought English “nothing at the moment”

    Or is this some diversion from Norman to take notice away from the criticism of his fairyland economic figures ?

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