Rutherford has the best analysis

Hamish Rutherford reports:

Does Labour have an $11.7 billion hole in its fiscal plan?

No. Practically everyone outside of the National Party agrees on that.

So is Steven Joyce completely wrong?

Possibly not. Joyce’s argument since Monday has been an “either/or” one. Either Labour has a massive black hole, or it is proposing “zero Budgets” in its second and third year in government.

Although the media naturally focused on Joyce’s claim of a huge hole based around an error – the National Party’s press release made the claim in its headline – from the start he said that it was possible that Labour had not made the mistake.

Note the part I bolded about how Joyce said from the start that there may not be a mistake or hole.

However he said the alternative was Labour had left itself with such little room for new Government spending that it was in a “completely untenable” position.

Yep they have pre-allocated almost all the contingency spending meaning they have almost none left over.

How much room does Labour have to play with?

While it has already made a series of announcements, including major initiatives in health, education and extra police to name a few, there is little of the everyday increases.

Labour’s fiscal plan gives it roughly $900 million each year in its first three years, beyond what it has already announced.

But describing it as $900m a year is somewhat misleading, because operating allowances, by and large, only go up.

If Labour was to spend the $900m in the first year (which its fiscal plan implies it will), it would have nothing left for years two and three. Hence Joyce’s claims of “zero Budgets”.

And consider Labour have opposed every aspect of fiscal restraint National has done.

Labour could have presented its operating allowance a different way. If it spent less than $900m in year one, it would have a little more left in years two and three.

Using a very basic analysis, Labour could give itself $450m increases in operating allowances, each year.

National points out that in the past two years, its operating allowance increases outside of education and health expenditure have been more than twice this much.

This is why the Taxpayers Union has praised Labour’s fiscal plan. If you believe their fiscal plan they will run a tighter fiscal ship than National. Whether that is credible is up to voters – do you believe their rhetoric of the last nine years and their voting record against every piece of spending restraint there has been – or do you believe what they are now saying?