February 26, 2009 9:31am by David Farrar

Herald on Spending

Now, as Mr English admitted this week: “We have ended up with the worst of all worlds.” We have Labour’s level of public expenditure and we are about to get National’s level of taxation.

Something has to give. If National will not postpone tax cuts due in April, it must trim some of the programmes it has inherited. The most costly of them, interest-free student loans, free childcare, KiwiSaver subsidies and the upper reaches of the Working for Families grants, should be means-tested more tightly to avoid taxing people to provide benefits they could pay for themselves. None of these would be politically painless and one or two are policies John Key has promised not to touch.

But National needs to cut core public spending to match its tax cuts even as it considers borrowing a much larger amount to fund counter-recessionary spending.

This is just plain misleading. Is the editorial writer not aware that National already cut public spending to match its tax cuts? National primarily cut the KiwiSaver subsidies, to fund the tax cuts. This must be known to the editorial writer (Labour harped on about it non stop during the election), so why is it ignored?

And National’s policy, with the wisdom of hindsight, was 100% correct. Because the billions that were to go into KiwiSaver subsidies would have been locked up for decades. Instead they are adding to the fiscal stimulus so badly needed now.

To clarify what it is doing, its Budget needs to present the public with two accounts: one for the temporary relief it is borrowing, including the cost of capital for infrastructure, the other to bring core public spending into line with the permanent changes to income tax rates and thresholds.

National’s tax cuts have been paid for by reduced spending. That has already been done. The problem is not the level of tax rates, but the level of income earned, and hence the amount of tax collected.

Now I fully agree, we should restrain spending now – but only in ways that do not break election promises. And frankly I am getting sick of Herald articles and editorials continuously calling on National to break its election promises. Because I’m bloody sure there have been a lot of editorials in the past condemning parties that did break their election promises. There is a degree of moral hypocrisy at play here.

I agree interest free student loans is stupidity. However National made a promise not to start charging interest again, during this term of office anyway. I want National to keep all its promises, not just the ones I agree with.