The Bluff-it Budget

Yesterday, the Treasury released a large pile of documents showing the advice public servants gave to the government in advance of this year’s Budget, causing nerdgasms among a small, tragic group of political anoraks, myself included. (Step 1 is admitting you’ve got a problem…)

What the documents show is a government that is perfectly happy to bluff on policies it wants to pursue, regardless of what the evidence says. This is really great for Type-A Ministers’ egos, but not very good for New Zealand. Quelle surprise.

Here are two classic examples from the document dump:

KiwiSaver
In the Budget, National cut the $1000 kickstart payment for new KiwiSaver accounts. Defending this announcement, John Key said axing the incentive would “not make a blind bit of difference” to the number of new people signing up for KiwiSaver, saying his conclusion was backed by IRD advice. Everyone agrees having more people sign up for KiwiSaver is a good idea; Key just believes he could take some money away without deterring anyone.

First, for a government dedicated to the cornerstone economic idea that “people respond to incentives,” this blasé attitude seems out of character. Next we learn from the Budget documents that, in fact, the IRD specifically warned Ministers that axing the $1000 would lead to lower numbers of new enrolments, especially among the very young, meaning Key flat-out lied to Parliament about the advice he got. And third, the country’s largest KiwiSaver provider is already reporting new enrolments dropping by half since the incentive was cut.

The government needed to save $500 million, so it cut an incentive that means the most to young people and people on modest incomes, knowing it would lead them to save less for their retirements. That’s what really happened. Then it lied about the likely impact of that cut, and its lies have been exposed. John Key gets to bluff for a month; modest income New Zealand gets a lower savings rate long-term.

Housing
Nick Smith’s breathless announcements about freeing up public land in Auckland for new housing always had the whiff of an 11th-hour homework assignment about them. As I mentioned in the NBR, I think the idea behind this policy is a good one, which has sadly been ruined by childish execution.

Now it turns out from the Budget documents that Smith hadn’t got anything about his policy through Cabinet in time for the pre-Budget cut-off. Not a sausage. As late as three weeks before the Budget, when the gates are usually closed, Smith and officials were arguing about how much money he needed to get the policy implemented, how much land he could actually expect to build on, and so forth. Senior Treasury officials recommended to Ministers that the government follow its standard rules and delay any funding announcement for a Crown-land building policy until Nick Smith had found the time to figure out exactly what the hell he was doing. But the government chose to bluff it instead; with the sadly predictable result the policy is mired in confusion, embarrassing oversights, and now court battles.

Yes, Type-A Minister Smith got to stand up and loudly proclaim things for a while, until the house of cards came down around him. But, much more importantly, the government’s bungling of this half-baked proposal means Auckland families will have to wait even longer for more housing supply, as National does battle with Iwi through the courts. Nick Smith is a (very) temporary winner; Auckland renters are long-term losers.

Dr Rob Salmond owns and posts at Polity, a Wellington communications and data analytics consultancy. His current clients include the Labour leadership.

This piece was first published on the Public Address blogsite.