Kiwiblog

The Herald reports:

Government staff are not yet halfway through the “mammoth task” of compiling the previous Government’s credit card records for release to the media and public, an exercise which is expected to cost about $50,000 and take a further two months.

The Department of Internal Affairs is compiling about 7000 documents detailing spending by Helen Clark’s ministers on their taxpayer-funded credit cards after receiving more than a dozen requests from media for the information under the Official Information Act.

Oh this will be interesting.

Former ministers, including those who are no longer MPs, will get to see the information before it is released to the media, but they have no ability to have content removed. “There’s no get-out clause.”

I suspect we will see some voluntary disclosures once that happens, to try and lessen the impact of the official disclosures.

A spokesman for Labour leader Phil Goff said he “has made it clear that if there are any cases of inappropriate spending he expects it to be repaid”.

Hey, this might even help reduce the $240 million a week we are borrowing

The Herald talks government funding cuts:

Predictably enough, Labour has tried to make a mountain out of the Government’s announcement of funding cuts in the Education Ministry. According to its education spokesman, Trevor Mallard, these will harm education quality because there will be less research and less teacher and curriculum development.

In reality, he is talking about a molehill. The ministry has been asked to make just $25 million in savings by 2012-13. That is a surprisingly small amount, which is being sought in the right area, rather than at what used to be called the chalkface.

All government-funded organisations are being told to cut costs because of the tough economic climate. Cue cries of anguish and alarm.

The key to achieving the savings without fulfilling the grim forecasts of these critics lies in targeting areas that will not disrupt a sector’s core responsibilities. Commendably, this is what the Government is seeking to achieve in both education and health, two of the leading recipients of its spending.

Labour has never met a spending cut they didn’t oppose.

The Dominion Post swipes at NZUSA:

The University Students Association is to be applauded for its egalitarian instincts. They accord with the New Zealand ethos.

However, the association, long a training ground for Labour Party apparatchiks, would enhance its credibility if it spent less time bleating about the cost of university studies and more focusing on the quality of the education on offer.

It makes a habit of engaging its mouth before its brain. The most recent instance occurred on Tuesday when co-presidents David Do and Pene Delaney issued a statement condemning new Tertiary Education Minister Steven Joyce, the Government’s tyre-kicker-in-chief, for saying that from 2012 a percentage of the state funding provided to tertiary institutions will be linked to their academic performance and for adding that he’d also like to restrict student loans to students who pass their courses.

David Do is a former Chair of Princes St Labour.

Here is a newsflash for the association: the quality of the education available to its members, and students at other tertiary institutions, has gradually been eroded over the past couple of decades by underfunding and a bums-on seats-policy that rewards institutions according to the number of students enrolled rather than their performance.

The Government does not have a magic pool of money into which it can dip to make up the shortfall. It is effectively borrowing $200 million a week to maintain existing levels of public services, debt that will eventually have to be made good by the the association’s members and generations yet unborn.

If improvements are to be made to the system, the money has to come from within the existing tertiary education budget. Mr Joyce is doing exactly what the association should be imploring him to do – looking for poor-quality institutions and courses so that money can be redirected from them to institutions and courses that provide value for money.

He is proposing to do the same with students. Good on him. Every student who is not turning up to class, repeatedly failing or using a student allowance or loan to subsidise a lifestyle that has nothing to do with study is wasting money that could otherwise be used to provide a better education for students motivated to make the most of their opportunities.

The association should forget about trying to score political points and focus on advancing its members’ real interests. Students should ask themselves whether they would rather buy a clapped-out jalopy with a wound-back odometer for $25,000 or a modern, reliable warranted vehicle for $35,000.

Mr Joyce knows the answer to that question. It is to buy a quality vehicle that will stand the test of time. The same holds true for education. Forget cheap; think quality.

A wonderful editorial.

The Press talks immigration:

Graven on a tablet within the pedestal of the Statue of Liberty in New York is the poem with the famous words “give me your tired, your poor, your huddled masses”. The latest immigration policy development in New Zealand is somewhat different to this. The new temporary retirement immigration category is more a case of New Zealand being given and welcoming elderly migrants, provided they have enough money to invest here.

Under this scheme foreigners aged at least 66 years can move to New Zealand on an initial two-year permit if they have good health and character, agree to invest $750,000 here, have an income of $60,000 and $500,000 worth of assets.

By international standards the financial criteria for coming here are not huge, which might encourage a reasonable uptake. But even if this did occur the amount which must be invested is also comparatively modest, which suggests that the scheme might not make the contribution to economic growth which the Government hopes would occur.

Rather than encouraging the wealthy elderly to come to our shores, the focus should be on promoting New Zealand as a migration destination for younger people with skills. This would help address this nation’s serious skills shortage and contribute more meaningfully to economic growth.

I don’t think it is an either-or. One can encourage both.

And the ODT focuses on regional rates:

A rare piece of good news emerged for beleaguered ratepayers this week: the Otago Regional Council draft annual plan shows no increase in the general rate. The ORC chairman points out it is a draft budget only, but nevertheless, how refreshing. Why can’t other councils do the same?

Indeed. Most businesses have had to contain costs, as have most households. Even the central Government is doing so. Local Government should follow.

The Herald approves of mooted KiwiSaver changes:

Commerce Minister Simon Power deserves praise for his decision to fast-track tougher reporting requirements for all KiwiSaver providers.

Not so David Ireland, the chairman of superannuation industry body Workplace Savings, who described the move as a “knee-jerk reaction”.

Like some other near-sighted individuals in the funds management industry, Mr Ireland seems to be struggling to come to terms with the idea that investors’ interests must come first.

When the subject is the integrity of KiwiSaver, which holds the investments of 1.3 million New Zealanders, there is every reason to move quickly to plug any gaps in regulation.

What scares me is the poll showing around half of KiwiSaver investors think their fund is government guaranteed.

The Dominion Post wants the public service reined in further:

The public service is a dollar-devouring behemoth that has thwarted many attempts to rein it in.

Prime Minister John Key will need to do better than he has so far, if he is going to succeed in slipping on the halter. It is vital that he does. …

Now the Government is treading so carefully it risks making no progress. Mr Key, through a spokeswoman, has denied there is any proposal that might be described as “radical reform”. Instead, all indications are of a process that smacks of the ad hoc, and of being driven by fear of public reaction as much as by any coherent strategy.

That is not good enough. Despite improvements in government finances, the Treasury is still forecasting deficits will continue to 2016. Finance Minister Bill English rightly wants the focus to remain on getting out of deficit as quickly as possible.

Once we are out of deficit, then we get far more palatable choices. We get to decide whether surpluses are spent on reducing debt, cutting taxes or increasing spending. But until we get back into surplus, it is all fairly unpalatable.

The Press looks at the progress in Iraq:

With so much attention focused on the violence in Afghanistan, there is a risk of downplaying significant events in Iraq, notably its recent election.

The result of this election, in terms of the shape of the coalition which will govern the nation, is likely to take weeks or even months of deal-making.

But the manner in which the election was conducted is one of the most positive developments in Iraq since the United States and its “coalition of the willing” allies toppled Saddam Hussein in 2003. US President Barack Obama could ultimately be proved correct when he declared that the election was an important milestone in Iraq’s history.

The most notable feature of the election was the turnout which defied many observers’ expectations by reaching 62 per cent. This figure might not seem high by New Zealand standards, but it is worth reflecting that it is comparable to the most recent US election.

In a decade or so, Iraq may be doing relatively well.

And the ODT commemorates International Women’s Day:

New Zealand has much to be proud of in its gender equality record, and with the marking on Monday this week of International Women’s Day, there is cause for celebration.

In the most recent Global Gender Gap Report of the Geneva-based non-profit World Economic Forum, New Zealand is ranked fifth out of 134 countries in an index that assesses countries on how well they are dividing their resources and opportunities among their male and female populations – regardless of the overall levels of these resources and opportunities. …

But not so good:

In New Zealand, one in five women will be subjected to violence in their lifetime, compared to one in 20 men.”

The NZ Herald talks charity:

At the heart of John Key’s approach are the concepts that the Government should not be providing everything in social welfare, that, indeed, it may not be the best judge of what is needed, and that charity is a good thing. He has sought to further these ideas by building on work done by the previous Government, most notably in abolishing the $1890 cap on rebates for charitable donations.

Most recently, legislation has provided for that rebate to be received automatically by wage and salary earners who donate directly to an approved charity from their pay cheque.

Yet such measures amount only to tinkering when compared with the extremely enticing tax breaks that underpin the strong tradition of private charity in the US.

The Dominion Post weighs in to the sterilisation debate:

ACT list MP David Garrett should know by now that, when he thinks aloud, he will almost certainly find himself in trouble.

Like Maori Party bad boy Hone Harawira, he shoots from the lip, and his homespun philosophy is rarely politically correct.

But despite both MPs’ comments ritually provoking outrage, a kernel of truth is often found therein.

Last week, Mr Garrett was in hot water again, this time for daring to suggest that parents who have abused their children be offered $5000 to get themselves sterilised. …

Predictably, Mr Garrett’s comments were compared with the excesses of Nazi Germany. Mr Kahui’s lawyer, Lorraine Smith, called them “outrageous and a disgrace”.

Karl du Fresne blogs on how hysterical some of the reaction was, with the Nazi comparisons.

Back to the Dom Post:

But those who lambast Mr Garrett for initiating an idea that at least attempts to confront the issue need to face an unpalatable fact: programmes in place now to protect vulnerable children are failing. Sixteen children died last year as a result of family violence.

Delcelia Witika, Lillybing, James Whakaruru, Nia Glassie, Chris and Cru Kahui comprise just a handful of the names on New Zealand’s roll of shame, each one killed by people whose responsibility it was to care for them.

And people who knew these little ones were being abused did not intervene. It is not good enough.

There is no doubt that the Garrett proposal is a step too far. However, even his most vehement critics should find an initiative instigated by Social Development Minister Paula Bennett more acceptable.

Last week, an Experts Forum on Child Abuse recommended that state agencies be able to keep track of parents whose children had died, or been taken off them.

The problem is that, at present, files are closed when a child dies, and social workers don’t know another child has been born to the same mother until that child, too, comes to their notice through abuse or, worse, because he or she has died.

I’m amazed we do not already do this.

It is no wonder Mr Garrett is casting around for new ideas. The old ones aren’t working.

And that is why his comments, on this blog, sparked a national conversation.

And the ODT looks at government spending restraint:

It makes sense for governments to regularly review the costs of administration and services and, especially, to look for efficiencies in operating and technology costs.

Some $2 billion is required to be found in the next two years for the latter, which in turn it is hoped should lead to less duplication of office support functions and services.

It is telling that Mr Key has cited last year’s health sector reforms, which pooled district health board payroll and procurement, with estimated savings over five years of $700 million – and the loss of 500 jobs.

The Government does not consider what is planned to be on the scale of the radical reforms of the Rogernomics era, yet it has declined to make public estimates of potential job losses, which rather implies that the reforms will be sufficiently substantial to be job-costly, and the public service unions have not been slow to express their anguish.

The recession knocked $50 billion out of the economy – the public sector can’t be immune from that.

Emily Watt and Colin Espiner report:

The Government is planning a shake-up of state services, with mergers expected in Internal Affairs, MAF and the science sector.

It is not clear how many jobs will be lost, but “back office” functions such as human resources, IT, payroll and communications are likely to be cut back to avoid duplication.

The Dominion Post has been told there will be three mergers, which are to be announced on Wednesday and will see departments, ministries and agencies folded into each other.

Sources say space has been booked at the National Library to announce the formation of what they are calling a Ministry of Information, which would roll National Library and National Archives into the Internal Affairs Department. It is understood Land Information New Zealand and Statistics had also been considered in that merger.

Oh I would so love to be Minister of Information. That would just be the best title, next to Minister of Propaganda. Imagine the first class treatment you would get in all the despotic regimes around the world, when your business card declares you are the New Zealand Minister of Information.

The Agriculture and Forestry Ministry is also due for a shake-up with the Food Safety Authority, with an annual budget of $99.6m, expected to be brought back under its roof.

The science sector will also come under the scalpel, with the Foundation of Research, Science & Technology and Research, Science & Technology Ministry being merged.

I’m delighted to see even this minor reform as it heads in the right direction. We do not need 200+ state sector CEOs, and 200+ IT systems, 200+ HR systems etc. In my ideal would you would have all agencies grouped within a dozen super-ministries.

Mr Robertson said it appeared Mr Key had broken his pre-election promise not to radically reorganise the public service.

Oh Grant. This is not radical. Three small mergers is a welcome but cautious step. It is such a shame to see Labour oppose every measure to reduce bureaucratic duplication and costs in the state sector. Their sole state sector policy seems to be to borrow and spend more money.

Labour should welcome these changes, as they continue a trend started under Labour to bring smaller agencies together. National went the other way in the 1990s and in hindsight got it wrong. Again it is a pity to see Labour oppose something they should support.

The Public Service Association has not been briefed on the plans, but said it was supportive of the Government “sticking things back together” after several decades of splitting departments up.

Indeed. On this one, I agree with the PSA.

Too early to know if he will follow the rhetoric up with substance, but it is pleasing to see this language from Obama:

Mr Obama said he welcomed all suggestions on cutting spending.

“It’s time to hold Washington to the same standards families and businesses hold themselves,” he said.

“It’s time to save what we can, spend what we must, and live within our means once again.”

He added that spending could not continue “as if the hard-earned tax dollars of the American people can be treated like Monopoly money”.

This is in great contrast to NZ Labour which seems to think borrowing $240 million a week is not enough, and constantly calls for more spending.

It would be great to hear Phil Goff or David Cunliffe talk about protecting the hard-earned tax dollars of New Zealanders.

Politico report:

President Obama plans to announce a three-year freeze on discretionary, “non-security” spending in the lead-up Wednesday’s State of the Union address, Hill Democratic sources familiar with the plan tell POLITICO.

The move, intended to blunt the populist backlash against Obama’s $787 billion stimulus and an era of trillion-dollar deficits — and to quell Democratic anxiety over last Tuesday’s Massachusetts Senate election — is projected to save $250 billion, the Democrats said.

This is a massive move to the centre, if true. It would also be a very good thing economically.

So in the UK Labour are talking spending cuts. In the US, Obama is talking a spending freeze. But in NZ, Labour’s only response to every issue is to demand more spending and more borrowing.

I’ve been saying for months and months that NZ Labour do not realise the world has changed. People understand that with huge deficits, there can’t be massive spending increases, big pay increases for public servants etc.

The SST reports:

BUSINESS BOSS Phil O’Reilly is predicting 2010 will be a year of industrial strife and an “ugly” budget that will bump up the GST rate.

O’Reilly, the chief executive of Business NZ, said he expected “fireworks” from public sector unions as the government tightened the screws on spending, and Finance Minister Bill English has said total government spending cannot increase more than $1.1 billion in the May budget, a difficult task considering that public hospitals alone have been soaking up an extra $700 million a year in recent budgets. English has warned public servants such as teachers and nurses not to expect pay increases that are “out of line with realistic expectations”.

More than 50,000 primary and secondary teachers will negotiate a new pay deal with the government when their current agreement expires at the end of June.

“I think we will see quite a few sparks fly,” O’Reilly said. “Government departments are being told how much they can spend so you’re going to see an ugly budget from the perspective of government spending and that will impact people like the state sector unions, the teacher unions and so on. I wouldn’t be at all surprised if some of that was turned into industrial action.”

NZ Council of Trade Unions president Helen Kelly said O’Reilly was being “hysterical” but warned that public sector workers would not tolerate zero pay increases or cuts in services.

“We are ready for that kind of a year but we hope commonsense will prevail.

I am all for common sense. Common sense is that the economy has grown only 0.4% in the last six months, so pay increases greater than the rate of economic growth are not common sense. Likewise borrowing more money to fund pay increases is not common sense when you are borrowing $240 million every week just to pay for current salaries.

The Dom-Post provides a slap-down:

Finance Minister Bill English should listen carefully to his Labour opposite David Cunliffe and then do the exact opposite.

Mr Cunliffe is a clever man who proved a capable minister of health, but he is either out of his depth in the finance role or has completely abandoned principle in pursuit of popularity. There is no other explanation for his absurd criticism of the Government for refusing to loosen the purse strings in the wake of a Treasury report suggesting the recession has ended and New Zealand is in better economic shape than forecast seven months ago.

“Basically what they are saying is our books are $2 billion better off but we the Government are going to keep all of it and you the public will get none of it,” Mr Cunliffe told National Radio on Wednesday.

That is populist nonsense. The improvement in the Government’s books does not translate to money in a bank account. It is money the Government no longer needs to borrow from international financiers. The choice Mr English faces is not whether to spend or save; it is whether to borrow more or borrow less.

We’re borrowing $250 million a week. There is a slight upturn and now we are borrowing only $240 million a week, and Labour says time for a big spend up. They just do not get it.

If he were to act upon Mr Cunliffe’s urgings, he would borrow and pass the debt on to future generations – generations that will already be burdened with servicing the billions of dollars of extra debt the Government has taken on this year and will continue to take on over the next few years to stave off the worst effects of the global economic crisis.

Fiscal restraint is needed not just for a few years. First we have to reduce the deficits and get back into surplus. That may take seven years or so of fiscal restraint. But even after that, we will want to get our debt levels back down to what they were pre-recession (in case we have another one at some stage, which is likely), so we will want several years of surpluses of around 1% of GDP. So fiscal restraint is needed for at least a decade.

If Mr Cunliffe really thinks the Government should be spending more now, he should have taken a greater interest in financial matters during Labour’s last nine years in office. If the government of which he was part had spent less on middle-class welfare, overpriced train sets, hip-hop study tours and shonky tertiary courses, its successor would have more to spend now on health, education and welfare. Seedcorn eaten today cannot be turned into cornflakes tomorrow. …

Money borrowed has to be repaid with interest. Mr English should ignore Mr Cunliffe’s rantings and enforce the strict spending limits detailed in the Budget.

And the limit is a limit, not a target.

Also the ODT:

Government surpluses are expected now to return two years earlier, by 2016, but government debt will still rise to an extraordinary $64.9 billion by 2013 and the burden on the public will continue to grow.

By comparison, it is $17.1 billion this year.

This means tighter conditions are a certainty – unless the Government decides future administrations can worry about the problem of paying the higher debt burden in years to come.

Considering the future cost of superannuation and healthcare, that would be very unwise.

The moment there is a small upturn in the economy, Labour is already pushing for a splurge o Government spending. This is reckless, and fiscal restraint is needed for not just a year or two, but probably a decade. Brian Fallow explains:

The net effect of a reduced tax take and much higher public spending will have given a boost roughly equivalent to 6 per cent of gross domestic product over the two years to June next year.

That was entirely appropriate.

But the recession’s legacy of a shrunken tax base, a string of deficits and mounting debt servicing costs will cast a dark and cold shadow over next year’s Budget. …

It will be 2016, if we are lucky, before surpluses return, and every year in the red adds to the public debt burden.

It is a recipe for interest costs to eat up more and more of the future tax dollar, well before the echo of the baby boom sends health and superannuation costs through the roof. It is not sustainable.

Spending needs to be restrained, and to shrink as a proportion of the economy.

Fran O’Sullivan writes:

It doesn’t want to “rip the guts” out of the Government’s expenditure line. But if the Government holds new Budget spending to a constant $1.1 billion increase each year, over time this will have the effect of pulling Government spending back down towards 30 per cent of GDP and, in Key’s words, “force change through the system”.

This is around half the new spending that Labour had, and keeping spending increases to this level for more than a couple of years will be pretty bloody difficult. But we do need to get Government spending down to under 30% of GDP.

And Colin Espiner reports:

The Government remained committed to a new spending limit of $1.1b and was investigating a total spending cap, English said.

Total Crown spending is expected to reach $65b this year and rise by about $3b each year.

“Demand-driven” expenditure such as health and education, benefits, superannuation and KiwiSaver payments are not currently included in the Government’s sinking lid on public spending.

Under a total cap, any increases in expenditure would have to be offset by cuts in other areas or approved by the Cabinet. English said he was looking at “better and more coherent methods of knowing where spending is occurring and what the alternatives are”.

The Netherlands and Sweden had spending caps, he said. “We’ll be talking more about that in Budget 2010.”

I think the Fiscal Responsibility Act should be amended so that the Government has to set a target (like it does for CPI for the Reserve Bank) for spending as a percentage of GDP and for what level of surplus is desired. This would require political parties to be more transparent about what they propose. If Labour wants to spend an extra $6 billion a year, then they’ll have to be open about it, and let people see the consequences.

We have a $10 billion deficit, and Labour still wants to spend even more. And Chris Hipkins details the priorities:

I visited a Day Skipper course for people who were interested in boating. Now this does fit the definition of a hobby course, but it’s actually providing a valuable public service. Which would you rather see the taxpayer subsidising, a cheap course or more search and rescue operations when amateur boaties get themselves into trouble?

My visits to a floral arranging course, a stained glass window course and a Spanish course all reinforced the tremendous social value night classes bring to the wider community.

I’m speechless. Floral arranging. Stained glass windows. Spanish. How to be a day skipper. This is what Labour wants to borrow and tax more money from workers for.

Chris did also mention a painter doing an excel course. While that is laudable, there is a sensible business imperative for people in business to take such courses regardless of taxpayer subsidies.

I continue to be staggered at the judgement of Labour MPs who highlight stained glass window courses and floral arranging courses as part of their campaign. I almost wish there was an election in a few weeks, just so one could have creative fun doing TV ads showing what Labour’s priorities are. Hell given time over summer, maybe we can shoot our own ads.

Hat Tip: Gooner at No Minister

Not often I agree with Phil at Whoar, but he blogged this article from the Guardian:

All government contracts worth more than £10,000 would be published online, unleashing in the words of Maude “armchair auditors” happy to crawl over government accounts. …

Councils would also be required to publish online details of all expenditure over £500, a policy already piloted in Windsor and Maidenhead.

This is a great concept. I first heard about it in July from Grover Norquist of Americans for Tax Reform. This was implemented by one State Governor and proved so popular (and effective) that many other states and cities have adopted the same policy.

In fact some states list every single cheque and payment online. You can see the Alaska one here.

PSA National Secretary Richard Wagstaff blogs:

A shift in the right direction

The news that Treasury is looking to save 30% of costs and increase productivity in the public sector by centralising back office services may surprise some people. …

While the PSA is concerned for the interests of individual staff caught up in the process to centralise these functions, there is sense in bringing back a whole of government approach to much of the states activities, including the back office functions.

All too often unions are seen as instinctively anti-reform, no matter what its merits, and anti anything that may save money.  I’m pleased to see the PSA take a more nuanced position on this issue.

I want to see more stories like this:

The Treasury is looking at plans to cut the Government’s administrative staff and costs by almost one third with a centralisation of back office services.

Recruiting, IT, finance and “a range of corporate services” in the public sector in offices nationwide are being earmarked for consolidation to save 30 per cent of costs and increase productivity.

We have in the public sector around 250 IT systems, 250 HR systems, 250 accounting systems etc etc. I am sure there are very significant gains to be made out there.

I have blogged a bit in the past about how the Government sometimes funds lobby groups to then lobby the Government. One example was the Obesity Action Coalition whose funding has now been stopped.

I do not know how big the problem is in New Zealand, but the UK Taxpayers Alliance has discovered that around NZ$100 million a year is spent by the Government on lobbying the Government. Some examples:

• Nearly £1.8 million is spent on health policy campaigns, including £515,000 paid to Alcohol Concern, £191,000 paid to Action on Smoking and Health (ASH) and £130,000 paid to the Family Planning Association.
• Environmental policy campaigns received over £6.7 million, including funding for the Sustainable Development Commission, Friends of the Earth, the Islamic Foundation for Ecology and Environmental Sciences and numerous other groups.

Those who wish to change or defend government policy should not have the Government funding that advocacy. Can be okay to fund them for genuine services but not for advocacy.

Hat Tip: Fairfacts Media

Mu weekly Dispatch from St Johnnysburg is online at NBR. It is called Spend Baby Spend. Extracts:

Labour activists will be wondering if their party is ever going to do due diligence on the people it puts forwards as victims of the National Government. The choice of Natasha Fuller as battling underdog is looking to be just as flawed as their choice of Bruce Burgess as am impoverished property owner and Neelam Choudary as a timid helpless victim of harassment. …

I point to the recent Populus poll in the United Kingdom on how the UK government should reduce debt and balance its books.

Only 11% of voters said they do not want any cuts in public spending. A further 11% said they want the main emphasis to be on tax increases with fewer cuts in public spending.

So only one in five voters there said that there should be no or minimal spending cuts. If this proportion holds true in New Zealand, Labour is running a campaign that at best will appeal to 22% of New Zealand. And bear in mind that the UK population is generally more left-wing than in New Zealand, so that 22% may be generous. …

Labour do not seem to be able to understand that many Kiwi families are struggling during this recession. They have cut their spending and are making sacrifices and expect the state to do the same. This partly explains the absolutely ferocious reaction to Natasha Fuller’s demands for further welfare, despite earning on the DPB $715 a week – the equivalent of a gross wage of close to $50,000 a year. Hundreds of thousands of low to middle income working class families resented the hell out of the fact she is earning well above the average wage for being a solo mum, and that Labour champion even greater levels of taxpayer assistance to her.

The full column at at NBR, where feedback and comments can be left.

A good piece by Brian Fallow:

The government is a large part of the non-tradeables sector, which over the past five years has grown by 15 per cent. The tradeables sector, said Whitehead, where the country earns its living as a trading nation, contracted by 10 per cent.

Even without the global recession, this was going to catch up with us.

“In other words the public sector has to raise its productivity – provide more for every dollar spent – and grow more slowly than the private and export sectors, to rebalance the economy.”

This is key. The Government sector should not grow faster than the private sector. The private sector funds the Government sector.

Easier said than done, one suspects, but they will need to all the same. The budget allowance for new spending has been slashed and as debt mounts a growing share of revenue will be pre-empted by higher interest costs.

And this is worth remembering. Every daft proposal by Labour to borrow and spend means greater financing costs for the next decade or two. That means either less spending in other areas or tax increases.

The bottom-line arithmetic is that, even with serious fiscal restraint, chronic deficits and mounting debt will be part of the legacy of this recession. All else being equal, this represents upside risk to interest rates.

It will also make it much harder to accomplish the kind of tax reform that the economy needs.

Significant structural changes to the tax system are a lot easier to accomplish in the context of fiscal surpluses, to lessen the extent to which it is an exercise in robbing Peter to pay Paul.

I regard the Cullen years as a horrific wasted opportunity to reform the tax system. The massive surpluses allowed options that just do not exist anymore.

But there are some good signs. Not a lot of money, but it is about the culture. The Dom Post reports:

Wellington Hospital chiefs will axe percolated coffee for staff from next month to save $190,000 a year.

Excellent.

The headline on Stuff:

‘There are no pixies printing cash’ Key tells Labour

Says it all really.

The NZ Herald reports sound words from the Treasury Secretary:

In a speech to government department chief executives in Wellington yesterday, Treasury Secretary Mr Whitehead said the public service needed to move out of its traditional comfort zone and take some risks to ensure it delivered services as cost-effectively as possible.

“There is a stark alternative to mobilising ourselves as public servants. If we don’t rise to the challenge and make real progress, change will occur – but it will be done to us rather than by us.”

Absolutely. To be fair some CEs have risen to teh challenge.

The Government’s edict was for better services without spending increases – and Mr Whitehead said nothing should be off the table to try to lift the productivity of the state sector.

Options included contracting out more services to the private sector, merging administrative services with other departments to lower costs and cutting projects despite the possibility of staff cuts.

I am interested in the merging of admin services.

If you add quangos to core departments, we now have 250 or so public sector CEOs. It also means we have 250 IT systems, 250 payroll systems, 250 HR systems etc etc.

I would advocate creating around a dozen sector super-ministries. One for the justice sector, one for the social services sector, one for health sector etc. You might still have different agencies within that super ministry, but they would all use the same IT, HR, payroll systems etc. And there would be just one CEO over them all who is in charge of strategy and ensuring the whole sector works together.

You see this in the UK where the Home Office is in charge of all law & order – corrections, police, courts etc etc.

In the speech, Mr Whitehead says “tough decisions” are needed. Staff numbers working in the core bureaucracy had grown by 44 per cent since 1999 – a far greater number than those affected by recent redundancies.

Mr Whitehead told the government departments more savings would be sought through the “line-by-line” reviews of spending that have become a regular part of the Budget process.

So trying to reduce costs won’t be a one off exercise, but an annual event. Excellent.

That is the theme song Bill English and Peter Dunne are probably humming to themselves, after the IRD won a court case with the BNZ, resulting in a judgement for the Crown of $645 million, and a potential precedent for the total $2.4 billion in dispute.

The decision will of course be appealed all the way to the Supreme Court, so Bill and Peter shouldn’t rush to the mailbox to look for a cheque.

With credit rating agency Fitch placing NZ on negative outlook, the Government will want all the money it can get. The potential downgrade reinforces how vital it is to keep the pressure on low quality spending to prevent a downgrade that will cost consumers, businesses and taxpayers. This shows how reckless Labour’s contnual demands for more spending are.

From the Herald:

The number of Budget bids from Government departments for extra money halved from last year, and 25 per cent of them were “savings” bids, says Treasury Secretary John Whitehead.

“That’s a significant and positive change in approach,” he told an invited audience of analysts, officials, academics and journalists at the Treasury yesterday. .

Departments need approval even for spending cuts, to ensure they are areas the Government wants cut.

25% of budget bids were bids to save money. My God. I doubt in nine years of Labour there even a single budget bid to save money, let alone 25% of all bids.

“We focus too much on new spending and not enough on the very significant base, even though polices introduced five or 15 years ago, may no longer be as effective or fit Government objectives.”

He criticised the public service “year-end spend-up”, in which departments spend any spare money they have, fearing that if they don’t, their grants will be be reduced the following year.

In the private sector, you get rewarded if you underspend your budget. In the public sector, you may get sacked if you underspend!

After growing criticism of his massive spending programme, Obama has instrcuted agencies to find savings – of $100 million.

The chart from Silent Running illustrates nicely how small they are.

Bill English has sent out his strongest signal that the future tax cuts will not be implemented. I’m going to cover the details of this at a later stage – for now want to look at the overall fiscal situation.

The Herald reports:

Mr English said without a change to the present spending track, preliminary Budget forecasts showed recurring operating deficits of more than $10 billion a year indefinitely.

“Most worrying of all, debt would continue climbing, with no sign of levelling off.”

At the predicted 2023 level, Crown gross debt would equate to about $30,000 for every New Zealander and it would force the Government to pay an extra $8 billion a year in interest costs than forecast in the October pre-election update, Mr English said.

This simply can not be allowed to happen. Every dollar extra in interest costs is a dollar less for health, education, Police etc.

Mr English said his Budget would allow for more spending than Labour’s last year.

But the rate of growth of Government spending in recent years could not be sustained, he said in a speech to business executives in Auckland yesterday.

Core Crown expenditure this year was expected to be $63.5 billion – up $21.6 billion or 51 per cent in the past five years.

He contrasted that to estimates that the economy had grown by just 23 per cent in the same time, and tax revenue by 24 per cent.

Cullen massively increased spending on the assumption that the economy would never falter. They intrdouced interest free student loans, KiwiSaver, Working for Families – and now there is not enough money to pay for them.

The responsible thing to do with a growing economy, is to have every year modest incraeses in spending, modest tax cuts and significant surpluses. Peter Costello did this. But for nine years we had massive increases in spending.

Labour leader Phil Goff said last night that Mr English was “softening the public up” to breach the basic promise National made in the election campaign last year – that people would be better off through tax cuts.

He said National had misled the electorate.

Labour would by now have not only cancelled their tax cuts (I will touch on this at a later stage) but would be copying UK Labour and actually hiking taxes in a recession with a new top tax rate of 50%.

No Right Turn is claiming that National has given an edict for 10% spending cuts across the board. I don’t know if he is deliberately misrepresenting the situation, or genunely does not know the difference between identifying potential savings/cuts and automatically cutting them.

The actual article he quotes, makes it clear the Government has not mandated 10% cuts:

The Government has denied having an overall target for cuts from its current “line-by-line” review, and the advice to public sector chiefs stops short of saying cuts of that magnitude will be made.

What the Government has said is:

Using your detailed knowledge of both the department and sector … can you identify the spending that delivers the lowest value for money, say, the bottom 5 per cent and 10 per cent.

To be honest this should happen every year, not just in a fiscal crisis. The scandal is that this never happened under Labour it seems.

This is not saying every programme in that bottom 5% or 10% will be cut. Iit is saying we want you to go through those programmes of the lowest value so we can then discuss which ones remain and which ones do not.

Anyone who has ever worked in the real world will have been through such an exercise themselves. Even non profits regularly do this – identify the lower priority programmes so a decision can be made on whether to do them or not.

If No Right Turn’s hysteria is correct, then every Government Department will have 10% less funding in the budget in May. I would be willing to bet that not a single Department will have 10% less funding.  English has said that generally the cuts have been around 1% to 2%.

NRT also tries to keep repeating the lie that one has to cut this spending to pay for the tax cuts:

And all so National’s rich friends can get their tax cuts.

And again this is not true. National’s tax cuts were fiscally neutral due to the reduction in KiwiSaver subsidies.

Finally we have the best comedy line of the week:

contrary to the right’s propaganda, there is precious little fat in the public service to trim

Hilarious. NRT should try talking to some peopel who actually work in the public service. They are full of stories about waste and fat.

The Dom Post has covered the story about funding a third staff member for MPs with very large electorates.

Their story is a significant improvement on the beatup on TV3 last night. They correctly identify that this was part of the confidence and supply deal made last year. What they failed to do though is to mention that it was implementing a recommendation made by an independent reviewer of parliamentary resources. That is a key ingredient in this story.

They also confirmed that Tamaki Makaurau did not get any extra resource as it is relatively small. I am glad of that, because that was part of my criticism of the agreement last November, that it should not go to all seven Maori seats.

The Dom Post does make one clear factual error:

Under the coalition deal with the Maori Party, National agreed to fund extra staff members for the large Maori electorates, but the Cabinet extended the funding to include others in the same boat, such as Mr English and Mr Auchinvole, whose Clutha-Southland and West Coast electorates were equally vast.

Nope. The coalition deal always specified that extra resources should go to both the Maori electorates and electorates over 20,000 sq kms. Cabinet did not extend the funding beyond that deal. And that coverage is exactly what the Goulter Review recommended. Cabinet actually restricted the funding by excluding Tamaki Makaurau.

Having corrected the facts, it is worth now considering the merits of the decision. It is certainly open to criticism about whether or not it is a priority with belt tightening elsewhere due to the recession. But I would suggest some caution about just seeing this as a perk for MPs.

When you are an electorate MP, your electorate staff spend a huge amount of time working on constituent issues who are having problems with Immigration, WINZ, ACC, and other agencies. People might be amazed at how much time a good MP and their staff spend on constituent assistance.

Now people do like to actually go into an MPs office and meet with the MP or their staff. In urban areas this is easy as you can get to the office within minutes.

In rural areas it can take over an hour to get to the closest office – sometimes well beyond that. And almost every rural MP already has two offices (as they get funded for two staff) so constituents have less distance to to travel.  More offices actually means more travel for the MPs as they have to make appearances at all of them, but less for constituents needing assistance.

Now six of the Maori seats are huge. Te Tai Tonga is the entire South Island and Wellington. So a third staffer means you can have an office in Christchurch, Dunedin and Wellington. Even then constituents can end up having to drive hours to get to their MPs office.

The West Coast-Tasman electorate can take 13 hours to drive from one end to another.

Now as I said, one can criticise this as badly timed with the recession. However it is worth considering that in a recession more constituents end up needing to enlist the help of an MP when trying to get assistance from various govt agencies.