Peter Dunne says when the Govt Budget is in surplus, the focus comes much more onto the quality and overall value of the new spending being proposed, and that requires Ministers to make some very strong judgements

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Grant Robertson by Jacky Carpenter.

By Peter Dunne*

In the wake of its greatest triumph to date, the Coalition Government is about to face its greatest challenge. And one will have been the cause of the other.

The far better than expected Budget surplus figures certainly came as a surprise, but may well be short-lived and more a product of the previous Government’s stewardship, rather than anything the current administration has done. Be that as it may, there is nonetheless little doubt that they come as huge fillip to a Government whose economic management has been under so much criticism.

While the Government will understandably seek to milk every ounce of political advantage it can from this happy situation, as it should, Ministers will be well aware of the need to manage and downplay wider expectations of what this might mean.

Even as affable and laid back a Finance Minister as the current one knows that igniting public expectations of a new spending spree would be both economically disastrous and near certainly unattainable, and consequently a monumental political blunder. Especially so, since this self-proclaimed “Government of kindness” has already increased substantially its spending, with the promise of even more to come, while ongoing decisions about how it all is to be paid for are left dangling. After all, ultimately, there is nothing kind about a Government that outspends its capability, and leaves its people struggling to cope when the inevitable retrenchment occurs.

So, Mr Robertson and his more economically literate colleagues, although by no means all members of the Coalition one suspects, will, while smiling quietly and just a little smugly, want to let down public expectations, albeit calmly and gently, as befits the “kindness” label.

Ironically, they have been helped considerably, and rather unintentionally, in their efforts to do so by the raw crudity and selfishness of their allies in the teachers’ unions, immediately and loudly laying claim to a fair chunk of the new surplus to settle their current salary claims.

Now, this is not to dispute the legitimacy of their claims and their rights to pursue them through the already established channels, but more to make the point that leaping in so quickly to put their fingers on the money, as they did, was a mighty strategic error that has three impacts.

First, it makes it much easier for the Government to now push back, as they already have done, citing the “no new lolly scramble” argument to send a wider signal of restraint. Second, it makes it actually a little more difficult for the Government to be seen to be too generous when a settlement with the teachers is eventually reached; and third, it runs a risk of alienating some of the considerable public support the teachers currently enjoy, if they are now seen to have become too pushy.

Beyond the teachers, there are of course many other groups who will be eyeing up a part of the surplus for their interests, and the Government will be well aware of this. So it will be equally determined to send them a “kind” but firm message that its purse strings are not for additional loosening. None of this will be an easy sell, especially if the surplus figures hold up longer than expected, so it will require nerves of steel from the top downwards to continue the line currently embarked upon, and that will impose its own challenges.

Former Finance Minister Sir Michael Cullen correctly and somewhat ruefully observed a number of years ago that managing Budget surpluses was a far more difficult task than managing deficits.

When the Budget is in deficit, it is much easier for the Finance Minister just to say no to everything, however meritorious, because the money is simply not there. But in surplus times, the focus comes much more onto the quality and overall value of the new spending being proposed, and that requires Ministers to make some very strong judgements. In such circumstances, the admirable virtue of “kindness” is often not enough.

A tough reality this Government is about to find out. 


*Peter Dunne is the former leader of UnitedFuture, an ex-Labour Party MP, and a former cabinet minister. This article first ran here and is used with permission.

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