Dom Post on Budget

The Dom Post has some advice for Dr Cullen:

The grim reality facing Dr Cullen, however, is that unless today’s Budget contains a circuit-breaker he and his ministerial colleagues can start packing up their ministerial offices …

Prime Minister Helen Clark says the Fairfax poll, showing Labour 27 points behind National, is “totally out of line”. She is wrong. It is a reputable, scientific poll that continues a trend showing voters have become increasingly disenchanted with a Government that preaches to them about what they can eat and how they should discipline their children, but does not trust them to spend their own money.

So very very true. Families are told the Government does not trust them to feed their kids okay, does not trust them to be good parents and does not trust them to spend their own money.

Three years ago Dr Cullen reluctantly agreed to index tax thresholds to the rate of inflation to stop bracket creep shifting more and more middle-income earners into the top tax bracket, but he cancelled what became derisively known as the “chewing gum” tax cuts when the public showed insufficient gratitude.

Today he will again announce cuts, almost certainly larger than those previously promised, but with National leader John Key having cleverly raised the bar by suggesting a National government would cut taxes by more than $50 a week, the smaller cuts that have been signalled will not meet public expectations.

I commented to a journalist yesterday that John’s casual reference to $50 a week was either calculated genius or thinking aloud, but which ever one it was it has been devastating for Labour in terms of expectations.

Dr Cullen can be expected to point out that larger cuts would increase inflation, pushing up interest rates. But that is not an insurmountable problem. Across the Tasman the new Labor government of Kevin Rudd has honoured its pledge to reduce personal income taxes by A$47 billion over the next four years by curbing the future growth of government spending.

Absolutely. And tax cuts have less of an impact on inflation then extra government spending.

That is an avenue that has long been open to the Clark Government. Since taking office in 1999 government spending has doubled from $36 billion to $72 billion and, according to Mr Key, the number of bureaucrats has increased 37 per cent from just over 26,000 to 36,000.

Some of the increases are due to inflation and some to increases in the population, but Dr Cullen and his colleagues have not applied the same discipline to their spending as businesses and families are forced to do every day to survive.

There was some discipline early on but in the last few years the spending increases has been uncontrolled and more and more on low quality projects. In some Departments bureaucrats have even been told they are to bid for more than they actually want, and then to think up things to spend it on. Seriously.

It is past time for the government to take a more rigorous approach to its own spending. Doing so would increase the money available for tax cuts and reduce their inflationary impact. If Dr Cullen does not do so today, voters can take comfort from the knowledge that National will after the election.

And it adds up pretty quickly. $230 million has been spent on the Electricity Commission. Off memory $150 million on TEC. Close to a billion dollars wasted on low quality tertiary courses. Ministries are now bulging with communication officers, the SSC has been expanding out of sight etc etc.