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Sir Roger Douglas: Budget of Broken Promises

Budget of Broken Promises

Sir Roger Douglas speech to Budget 2009; Parliament
ACT New Zealand
Thursday, 28 May 2009

This is the budget of deficits. A deficit of spending, a deficit of the current account, a deficit of courage, but most importantly, a deficit of imagination.

Why do I say a deficit of imagination? Because Prime Minister John Key and Finance Minister Bill English, like all people who lack the guts to do what's right, have taken the soft option. They have decided to borrow and hope.

The best thing I can say about this Budget is that it’s as good as any of the nine that Labour’s Michael Cullen delivered. Then again, that’s hardly the standard any decent Finance Minister should hold themselves to.

After all, during Cullen's term, total Government spending increased in real terms by over $5,500 for every person in New Zealand. That’s how much could have been left in your pocket every year had he not ramped up Government spending.

For a family of four that’s $400 a week.

And what did you get for Cullen's spending?

Some of it was wasted on the bureaucratic health, education, and welfare empires.

Some of it was taken off you and then used to turn most New Zealand families into welfare beneficiaries under the Working for Families programme.
Mr English has continued in this vein, increasing health spending by over a billion dollars – an increase of around 6 percent.

And what happened to Bill English’s line by line review, which was meant to cut Government waste?

Well, he managed to find $301 million. Let’s put that in context. $301 million is just 0.4 percent of total Government spending. Was that seriously all he was able to find after Cullen increased Government spending by $18 billion?

National missed an opportunity to cut Government waste by scrapping some Government departments completely. The Families Commission, the Ministry of Economic Development, and the Charities Commission are obvious candidates for immediate abolition.

But what has Labour's response been to modest cutbacks? Outrage.
To Labour, every area of Government is underfunded.
Having spent up large for nine years, it believes it can always find new projects to waste money on. I worry that Labour might be right.
When Labour say it would not cut spending, what it’s really saying is it wants higher taxes.

Over nine years Labour tried to tax the nation to prosperity. The only effect was to slash productivity growth, helping us slip further behind the other nations on the OECD ladder.

Our productivity growth under Labour was a third of what it was after the reforms implemented by the fourth Labour Government.
The difference to the average New Zealander is that they receive 25 percent lower wages today than they would have if productivity growth had been maintained.

After nine years of tax abuse are National much better?
Let’s look at their deficits. The annual deficit, in real terms, is a third what we were running back in 1984. Back then, the Government managed to create a surplus within three years.

But that’s too hard for Bill English. Although the deficit is a third what it was then, it’s taking us 11 years to get back to surplus.
The reality is that National did not have to go down the debt path. National had choices.

One choice was to do what National has always done - that is to take all Labour’s policies as a given, tinker at the edges, and hope to manage the system better. It could be the conservative Party it has always been.

The other choice was to look to the future. The Party that looks to the future always sets the real political agenda.
When Labour looks to the future, it sees a larger state, higher taxes, and more control for meddling politicians in Wellington – so that's what we've ended up with.

When National looks to the future it sees itself administering Labour's programmes more efficiently. It is bereft of vision. National suffer from a deficit of courage, and a imagination.

If it wanted a vision, National could have looked towards a future of low taxes, personal responsibility, personal freedom, and prosperity.
Instead, it has chosen high taxes, Government ownership and delivery of social services, and more power for politicians and bureaucrats.

National has continued the trend since 1993 for Governments to take the soft option deciding once again to borrow and hope.
National promised that it wouldn’t touch health, education, and welfare. But those areas make up 66 percent of the Government’s budget.
Saying that it will not even look at ways to open these areas to competition and other reforms is to give up on fiscal prudence and to sentence New Zealand to low productivity growth.

Making cuts to Government spending does not mean denying anyone access to health education and welfare. All it does is change the way we go about offering help to those who need it.

One way to help is to shovel money into the bureaucracy, and hope like hell that it eventually reaches people in the form of decent education, quality healthcare, and welfare that helps rather than harms the poor.

But as we have seen through Labour’s health spending, not all of it goes towards those who need it. There was a 15 percent decline in doctor productivity, and 11 percent decline in nurse productivity. In fact, the only increase in hospital productivity was for orderlies and cleaning staff, and they were outsourced to the private sector!

The other way is to give the money back to those who earned it, and encourage them to purchase their own education, their own health coverage, and their own insurance against risks like job loss, accidents, and sickness.

The most obvious difference between these two systems is who has the power.
In the status quo, the bureaucrat is all powerful. It decides where your child gets educated, it decides whether your medical treatment will go ahead, it decides what level of income assistance you require.

The recipients of handouts – be they parents, patients, or welfare recipients – are treated as children to be managed by a bureaucrat who knows very little about them, and cares even less.
Is it surprising that within this environment, more money does not deliver better outcomes?

The only way yet discovered of improving outcomes while keeping costs down is to restore control to the individual.

Unfortunately for us all, National suffer from the tyranny of the status quo. The only thing they know is to spend and if spending means borrowing, then they will continue to borrow and hope.


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