The Budget Fallout continues
THE BUDGET FALL-OUT CONTINUES
The Budget Fallout continues. It is clear that Labour will argue that they have spent the surplus, and that everyone else's proposals are not workable. As I indicated last week, this is based on the false premise that all capital spending has come out of current revenue, and that all government expenditure is wise and thoughtful.
Dr. Cullen also implies that all his spending plans over the next three years are perfectly responsible. That is simply not true.
National has already shown the level of government waste, the most notable being the $250 million spent last year on the Wananga, and the increase of thousands of civil servants based in Wellington. These are not the teachers and nurses that always get mentioned by Labour. They are the cardigan-wearing bureaucrats inhabiting the civil service warrens in Wellington; in the Ministry of Health, the TEC, and numerous other central government offices, both small and large.
What is even more remarkable is that Labour budget proposes an increase in government spending from $45.3 billion to $54.8 billion in 2008, a massive increase of $9.5 billion in just three years. That is an increase of 6.5% per annum. It is way above the rate of inflation or projected economic growth. In short, the central government will take an ever-increasing slice of the total economy.
Core government expenditure will rise to 32.3% of GDP from 29.6% last year. You also have to add the cost of local government, now 4% of GDP, to get a true sense of the size of government. Just like central government, the local authorities have also been increasing their share of the economy - look at the way rate increases exceed inflation!
The short point is this; who can seriously believe that all of Labour's increased government expenditure will result in better schools or better health care - just look at the scandals over the Wanaga, the NCEA and the scholarship results. The Labour government has not even been able to increase the number of operations performed in our hospitals.
So the election will offer a real choice in Budget options.
Vote National and you get:
a) A decent tax cut for all New Zealanders
b) Better roads
c) A prudent approach to government expenditure.
There is simply no need to squeeze out any possibility of a tax cut by thoughtlessly increasing government expenditure to levels way beyond the rate of inflation, or economic growth.
The Labour alternative is quite straightforward also - a vote for Labour is a vote for wasteful government expenditure.
It does not seem such a difficult choice. The overall amount in play is probably about the same, that's why National's plan won't affect interest rates.
Under Labour, their only option is to spend extravagantly - that's the Labour way. Under National, overall government expenditure will not take an ever-increasing slice of the economy. Instead, you get to keep much more of your hard earned income as a decent tax cut.
Dr Wayne Mapp
Visit my website for more information at: www.wayne-mapp.co.nz