April 17, 2012 9:00am by David Farrar

Government Expenditure

The left have been trying to push a meme that this Government has not been spending enough money. That if only we did not have the tax cuts, we would be able to have extra spending. Putting aside the fact that National’s tax packages have had less of a fiscal impact than Labour’s proposed tax cuts, I thought it would be useful to look at actual spending by term. Has National really been slashing spending? If only. First let us look at total expenditure.

The dark blue line is total government expenditure for each term of Government (from 1 July after each election). So total government expenditure increased 21% under National, from Labour’s last term. If you compare to the last term of National’s 4th Government it is a whopping 131% higher. It is also 92% higher than Labour’s first term.

Now next let us look at it in terms of real or inflation adjusted expenditure, which the red line. Ideally inflation should be 1% or so, so the impact is minimal, but that has not always been the case. Real expenditure is 11% higher than from the previous term, and 69% up from the 4th National Government. It is 50% higher than in Labour’s first term.

Now total expenditure includes SOEs and the like. A more common measure is the core crown expenditure, which excludes this. In nominal terms this increased 19% from Labour’s last term, 83% from Labour’s first term and 105% from the last National Government. This is the green line

To take account of inflation we also have the purple line of core real expenditure. Well this term National’s core real expenditure was 9.6% higher than the last term of Labour. It is 43% higher than Labour’s first term and 51% higher than the 4th National Government.

Finally we have also had population growth. I don’t accept that all government expenses should increase per capita, but to take account of this we have the light blue line which goes on the second axis. It shows National is spending in real terms per capita 6.2% more than the last term of Labour. It is 28% more than Labour’s first term, and 32% more than the last National Government.

It is interesting to look at the real increase per capita for the last four Governments. The 1st term of Labour saw this increase a modest 2.5%. The second term of Labour saw it increase 6.2% – the exact same increase as under National. The outlier is Labour’s third term is when it increased 13.8% as Labour was so embarrassed by the size of its surpluses it invented all sorts of new spending schemes.

So Labour trying to portray National as mean and stingy, and cutting spending to fund tax cuts is just bonkers. If anyone should be complaining, it is fiscal conservatives who think government spending shouldn’t increase in real per capita terms (something the Government has now agreed to in principle, thanks to ACT).

People may be interested in the real increases from Labour’s last term to National’s first term. They are: