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What’s Going to Be in The Budget

The Government’s Budget for 2016 is on 26 May. What’s likely to be in it, and what should be?

The ‘Operating Allowance’ for new operational spending will again be just $1 billion. Usually $300-400 million is allowed for Health, though more is clearly necessary. The Government will want to make some big announcements about the review of Child, Youth and Family. That doesn’t leave much for the rest. It has squeezed spending since the 2014 Budget to have $2.5 billion available to announce tax cuts next year (election year). It would be irresponsible to cut revenue despite growing funding needs which have been suppressed over the last eight years.

Forecasts in December showed net capital spending will rise only $0.5 billion. Much more is needed for deteriorating hospital and school buildings, affordable houses, the rail network, and investment in Kiwibank to compete with the big Australian banks.

The Government will feel compelled to react to the increasing public concern about plummeting housing affordability. John Key showed his Government is worried by floating the idea of a land tax. The tax is unlikely to work but it shows the Government is running out of ideas that don’t threaten its property investor backers, require substantial government funding, or conflict with tax and investment treaties governments have signed.

Health will almost certainly be underfunded again despite evidence of deteriorating services in mental health, underfunding of medicines and of health centres serving low income communities, hidden surgery waiting lists, and low pay for carers in residential care.

We will be told there is ‘social investment’ in health, social welfare and probably education. While in theory this means an evidence-based approach to funding, and spending now to save in the future, in practice the evidence is often shaky, and, particularly in social welfare, savings may ignore human and social costs. The Government is using this approach to narrow provision of social services to a few people ‘most at risk’ rather than strengthening our social security system for all New Zealanders. Addressing poverty (especially child poverty) and income inequality would go a long way to resolving the problems of children at risk. The Government has shown it is not willing to face up to these ingrained failings.

Like last year this is likely to be a money-shuffling Budget. By taking from one area and announcing “new” spending in another, the Government covers its track record of underfunding. We only find out what are real cuts to services rather than ‘efficiencies’ much later. But like during the 1990s, chronic underfunding eventually catches up in real failures in public services.

Download the full bulletin: CTU Economi Bulletin 178 – April 2016