May 20, 2010 9:44am by David Farrar

Labour on budget

If Labour were writing today’s Budget, it would spend more than National to ensure the recovery from recession remained on track, says finance spokesman David Cunliffe.

The Government spending more does not “ensure” the recovery remains on track. It merely ensures that taxes will have to increase in the future to pay back all the debt.

Labour leader Phil Goff has already sparred with Finance Minister Bill English over the tax changes expected today, with Mr English saying last week that Labour’s policies were a recipe for more debt and higher taxes.

How mean of Bill English to say that, just because it is true.

However, Mr Cunliffe told the Herald that his party, as “very prudent managers” of the Crown’s finances, would keep a tight rein on spending at present.

This would have more credibility if Labour had not called for billions of dollars of extra spending and borrowing.

“Right now, the country’s coming out of recession and well into recovery, and with growth rates forecast between 2.5 and 3.5 per cent of GDP this year and higher next year, this would not be the time that we would want to increase the amount of fiscal stimulus in the economy.”

I actually agree with that statement. We’ve just had the biggest fall in unemployment since records began. The economy does not need a fiscal stimulus.

Having said that, Mr Cunliffe believed an argument could be made that the $1.1 billion earmarked for new spending in the Budget “is quite contractionary given that around half of that will be chewed up by the automatic cost increase of health alone”.

It isn’t contractionary – it is disciplined. If one returns to the fiscal settings Labour had, then the deficit was projected to widen and widen, and debt to indefinitely grow until we have Greece like levels of debt.

“Bill English is behaving like an old-fashioned Treasury vote analyst pinching a few pennies here and there. Well that won’t solve the problem,” said Mr Cunliffe.

Increased savings, investment and exports were the keys to improving economic performance and those would be areas of focus for a Labour government.

So in one paragraph Labour argues they will be “very prudent” managers who will keep a “tight rein” on spending and then they dismiss said tight rein as mean penny pinching.

I agree increased savings and investment is important – which is why I support increasing GST and reducing personal income taxes. Sadly Labour does not – they ran an axe the tax campaign against GST.