The National Government has been trumpeting a claimed return to fiscal surplus in 2014-2015 as the prime example of its economic management.
A close look at the numbers however shows that the surplus, already reliant on hiking petrol taxes and overcharging for ACC levies, is based on some seriously questionable accounting.
The truth is that National’s surplus is not ‘wafer thin,’ and comes from massaging the numbers. Had they been completely upfront with New Zealanders, they would have either admitted that they would not reach surplus or had to hike up petrol taxes even more.
But that would mean admitting failure. Instead, the Government has resorted to contortionist accounting tricks that would make a pencil pusher blush.
Not realistic
It’s a “bogus surplus” and here is why.
More than $1 billion is being collected from ACC levies and an extra $900 million is being taken from people’s pockets through petrol taxes.
Forecast revenue flows show a one-off net $600 million surge above trend in 2014-2015, driven by an unexplained jump in corporate tax and employee compensation, and there is a magic $400 million tax loss offset that occurs in that year only.
National has forgotten to cost their tax credits to small business or include them in the estimates. What kind of economic management is this when you create a cost but do not know how much it will add to your budget?
That is like committing to paying your children pocket money without knowing how much you will end up handing over.
There is a strange and abnormal use of contingencies in Education ($196 million). That means National’s surplus relies on major spending lines that are not properly appropriated. The question this raises in my mind is, “Is this featherbedding for next year’s surplus?”
The granddaddy
You think that is bad? At least these figure fudges are subtle and difficult to find. Wait until you see the grand-daddy of them all.
At the previous forecasts, the Government said that it would spend $1.2 billion in 2014-2015. This time, $200 million spending has suddenly shifted out of that year (the year they need surplus) and shunted into the other years or disappeared.
This way, they will have only to spend $1 billion in 2014-2015.
That makes it a lot easier for them to reach surplus.
If that $200 million of total new spending had not shifted out of 2014-2015 at the last minute all the contortions that I have discussed would not have got them over the line.
Imprudent management
It is almost like they are taking the New Zealand public for fools.
Refusing to lower excessive ACC levies, kicking out forecast expenditure, an artificial spike in predicted revenue flows, a huge use of unfunded contingencies and unbudgeted spending shows that National’s surplus relies on flaky accounting, not prudent management.
By contrast, Labour ran nine consecutive fiscal surpluses in nine years of Government. Labour has a proud record of prudent fiscal management.
But even if the National-Act Government had reached fiscal surplus, their record on broader economic management has been woeful.
The current account deficit continues to widen; international debt continues to rise; unemployment is too high; wage growth is too low; the gap between rich and poor continues to widen. They lack vision, strategy and a heart for everyday Kiwis.
National is fiddling with the figures to balance their books. They are doing it at the expense of your books. Their fiscal surplus is bogus and they know it.
David Cunliffe is an elected Member of Parliament from New Lynn. He is Labour Party’s Spokesperson for Revenue and Associate Spokesperson for Finance.
