Treasury states what we all knew

The Herald reports:

A new Treasury paper has criticised the last Government for overspending during the pandemic, leaving the country with a high level of public debt that makes it vulnerable to future shocks.

The paper calculated the total cost of the pandemic at about $66 billion. It put the total fiscal contribution to the pandemic – measured by additional spending and foregone tax revenue – as about 20.4% of Gross Domestic Product (GDP), making the response “one of the largest among advanced economies“.

There will, almost beyond doubt, be another global finance shock in the next decade. If we have not reduced our debt significantly by then, we will be in a far worse position to respond to it. You pay down debt when times are good, so you can borrow when times are bad.

Willis pointed in particular to Treasury’s criticism of the last Government for spending the Covid-19 fund on things that were only tangentially related to the Covid response, such as the school lunch programme.

Stuff like the wage subsidy was a sensible intervention. But Labour turned it into a giant slush fund for all sorts of programmes. This meant that they left behind a spending track tens of billions higher than previously.