TL;DR: New Finance Minister Nicola Willis has set herself a very high bar for retaining confidence in her rhetoric by accusing Labour of “economic vandalism” in handing over a set of books ridden with ‘hidden’ “fiscal cliffs” worth billions, but without detail.
Her first and last opportunity to ‘show us the money’ will be on December 20 (the last Wednesday before Christmas) when she releases her first ‘mini’ Budget with Treasury’s Half Yearly Economic and Fiscal Update (HYEFU).
Former Finance Minister Grant Robertson is ready to pounce on any signs Willis over-hyped her claims without backing, and to contest her suggestion the Public Finance Act will need to be rewritten.
The short answer to whether Labour misled the nation is that we’ll find out properly on December 20, and so far there is no smoking gun.
Elsewhere in the news:
New Workplace Relations Minister Brooke van Velden is already ignoring Treasury advice to Cabinet on how the repeal of the Fair Work Act would hurt women, Māori, Pasifika and young people, papers leaked to Newshub’s Amelia Wade last night showed;
Labour’s new Revenue spokesperson, Deborah Russell, told Newshub’s Jamie Ensor yesterday it might be time for Labour to look seriously at a Capital Gains Tax (again) because a wealth tax would be too complicated to explain; and,
New Transport Minister Simeon Brown’s first order to his ministry was to start using English names first in communications. 1News
Paying subscribers can see and hear more detail and analysis in the podcast above and below the paywall threshold here.
A day of reckoning is coming for Willis or Robertson
Finance Minister Nicola Willis has ramped up the political stakes for her December 20 mini-Budget and ‘big reveal’ of the books she inherited from Grant Robertson by accusing Labour of leaving ‘massive fiscal cliffs’ worth billions she wasn’t aware of.
Willis made the unsubstantiated claims in more detail at yesterday’s post-Cabinet news conference. (See her full comments from 2:07 onwards)
Here’s her key accusations in text form (bolding mine):
“I'm concerned by the scale of the financial challenges left to us by the outgoing government. I am still receiving advice on both the number of those challenges: their size and the options available to the incoming government.
“The challenges fall into two broad categories. The first are risks that were referred to in the pre-election update, but the true scale and urgency of which was not made clear for a range of reasons, including commercial sensitivity, some of these risks are now upon us and they are much larger than had been suggested.
“Second, I have been surprised by the sheer number of government policy programs for which funding is due to expire as the government chose to fund those programs on a short-term basis only. In some cases this practice is extremely disingenuous. This is because it makes the books look better in future years, even though it is highly unlikely ministers genuinely intended to stop funding those programs.
“It is remarkable to me for example that the outgoing government left a massive fiscal cliff for Pharmac funding. Did they really intend to withdraw funding for listed medicines and if not, why didn't they account for that in their pre-election update? I have asked Treasury to advise me of how many times this approach has been used and therefore how much funding we will need to find to continue essential programs left short changed by the outgoing government.
“The preliminary advice is that this sum is likely to approach many billions of dollars over the forecast period. I will have more to say about how we will approach these risks and how and what decisions we will make about them I will also have more to say about what amendments may be required to the Public Finance Act.
“This is in order to ensure that future governments are more upfront about the these choices.” Nicola Willis in Monday’s post-cabinet news conference above.” Willis in the post-Cabinet news conference.
Challenged on whether she was accusing Robertson of breaking the law, she said:
“Right now I'm accusing it of upholding the letter of the law, but not necessarily its spirit, because I think what they did was they found clever workarounds to make the books look better than they really are.
“It is absolutely permissible for a government to only short-term fund a program. That is allowed, but where you know that you will have to go back to fund it in future budgets, then actually you should just be funding it for the long-term. Pharmac is example. School lunches are another.
“I knew about those before the election. What's surprised me is how many more of those there are and I think it would have been helpful…pre-election to have collected in one place a list of all of the programs the government had chosen to short-term fund, with an explanation of why because in many cases when I'm asking that question of why haven't they funded that into the future, there is no good answer.
“I've been saying for quite some time that these were people who were reckless with the taxpayer dollar. They committed economic vandalism. They've left the country in a very bad financial and economic sttate and what I'm saying today is that also extends to the way they left the books.” Nicola Willis
‘She should have read the Budget properly’
Robertson described Willis comments last night as a “desperate diversion from somebody who can't make their tax package add up. He said the list asked for by Willis was not needed.
"It already exists, it's called the Budget. We put it out every year. And all of those things are in here," he said, holding up a copy. "How can we be hiding something that's literally in this document?"
"I inherited a number of time-limited pieces of funding and what you do at each Budget is you go back and you look and say 'Well are we going to extend that? Are we going to baseline it? Are we going to look at another way of doing it? This is literally the job that Nicola Willis has signed up for and she seems to think it's some kind of scandal."
"Nicola Willis seemed to suggest that particular example she gave today (cybersecurity funding) was, quote: 'Buried in the estimates'. It's on page 89 of a 154-page document. It is not buried.
"If she couldn't make it to page 89 of the Budget I'm really, really concerned at what kind of finance minister she'll make." Robertson via RNZ
He said funding could be time-limited for a variety of reasons.
"When it comes to the school lunch programme, that was a Covid initiative initially, it's been carried on as the cost of living crisis has continued and it's shown its worth - both parties decided in their fiscal plans to extend that out.
"We wanted to align Pharmac with the overall health funding, so we did the two years of health funding and now we're moving into a three-year health funding phase - again, both parties acknowledged that and made the decision that we would spend some of the new operating allowance into the future to fund that.
"There was time limited funding for that education cybersecurity initiative, that's because we were making sure that at each stage of that project, we knew it was working and because we were looking for a more efficient way of delivering those services across government." Grant Robertson.
So he said and she said, but who’s right?
In my view, Nicola Willis has thrown a lot of hyperbole thrown around about “massive fiscal cliffs” and “billions of dollars” and has raised the stakes sky high. There will be an intense focus on December the 20th to see whether that hyperbole is backed up by true surprises.
Grant Robertson will be ready and willing to point to the lines in the Budget where things were disclosed and that this is going to be a point of contention early on in the Government.
In the past, these accusations of ‘we opened the hood and we had no idea what was in there’, were backed up by some often big shocks. But they were really before the 1989 Public Finance Act and the 2004 Fiscal Responsibility Act.
I would be incredibly surprised if Treasury decided under pressure from Grant Robertson to not disclose things. The short answer is we’ll find out properly on December 20 and so far there is no smoking gun.
There are some contingent liabilities that should be in there
However, this debate does raise some good questions about what the scale of contingent liabilities are, in particular, and whether or not they should be booked.
I've argued that, for example, the up to $23 billion worth of carbon credits that will need to be bought to meet our Paris targets should be included in the contingent liabilities. Others could argue many other coming costs are not in there that perhaps should be. That would help any future government, let alone voters.
So there’s a big fight brewing here on fiscal disclosure, which we can't really judge the accuracy of, or who's going over the top, until December the 20th.
Quote of the day
The head of COP 28 says the quiet part out loud
The head of COP 28, Adnoc (UAE’s state oil and gas giant) CEO Sultan Al Jabar, was challenged in a panel discussion yesterday by former Irish President and former UN Special Envoy on Climate Change Mary Robinson about why Adnoc and others weren’t phasing out fossil fuels more aggressively, as The Guardian’s Damian Carrington and Ben Stockton reported.
Robinson said: “We’re in an absolute crisis that is hurting women and children more than anyone … and it’s because we have not yet committed to phasing out fossil fuel. That is the one decision that Cop28 can take and in many ways, because you’re head of Adnoc, you could actually take it with more credibility.”
Al Jaber said: “I accepted to come to this meeting to have a sober and mature conversation. I’m not in any way signing up to any discussion that is alarmist. There is no science out there, or no scenario out there, that says that the phase-out of fossil fuel is what’s going to achieve 1.5C.”
Robinson challenged him further, saying: “I read that your company is investing in a lot more fossil fuel in the future.” Al Jaber responded: “You’re reading your own media, which is biased and wrong. I am telling you I am the man in charge.”
Al Jaber then said: “Please help me, show me the roadmap for a phase-out of fossil fuel that will allow for sustainable socioeconomic development, unless you want to take the world back into caves.”
“I don’t think [you] will be able to help solve the climate problem by pointing fingers or contributing to the polarisation and the divide that is already happening in the world. Show me the solutions. Stop the pointing of fingers. Stop it,” Al Jaber said.
Comment of the day
The problem with blaming victims
“Lucy O'Hagan's comment about how we just know how to get stuff is so pertinent and familiar. It extends beyond Health to so many other areas where government funding or support is available but so many people don't know how to go about it. Tax benefits (particularly WFF), Educational Grants/Scholarships etc, MSD support.
“So often you hear Politicians saying, "yeah but we support all these people already". The reality is that so many people in need, lack the knowledge on how to go about getting this funding or, too often, are scared to deal with government departments because of previous poor experience/outcomes or suspicion of how the government might treat them in the future.” Grant in yesterday’s Top 10
Chart of the day
Actually, the black market in tobacco is getting smaller, not bigger
Video of the day
One of the myriad effects of climate change
Cartoon of the day
‘This Government could damage your health’
Timeline-cleansing nature pic of the day
Ka kite ano
Bernard
Nicola Willis' 'show me the money' moment