This year's National-ACT supply and confidence deal goes futher than the previous one, prompting a lot of indignant questions about ideology, economic management and choice... and a few examples of hypocrisy

Is that the whiff of ideology in the wind? The National-ACT supply and confidence deal will lead John Key's second term government off the first term's more pragmatic road and down some very rocky by-ways indeed.

The plan to trial Charter Schools and pass spending cap legislation ties the government to action and moves this government two steps to the right. I'm intrigued that these are the battlegrounds John key has chosen to fight on.

ACT and National signed their supply and confidence deal yesterday, and in doing so fired the first shots of the 2014 election campaign. I say that so baldly because the agreement shows much more intent than the 2008 equivalent. The deal with Rodney Hide was full of taskforces, working groups and promises of supporting legislation to its first reading; National had wiggle-room. ACT seems to have learnt from that -- or National has proved more willing -- as yesterday's document is more prescriptive.

On the two most significant policies, National promises to trial Charter Schools and "legislate within the next two years" a spending cap on future governments. Now, trials can be found wanting and abandoned; two years is a long time in politics. But the promises go further than I would have expected from this Prime Minister. (I'm not including the welfare reform in this post because National broadly and openly endorsed most of the Welfare Working Group's recommendations and would have pushed ahead regardless of ACT).

My suspicion is that John Key will be interested in Charter Schools and more private sector play in education, but will be less than keen on a spending cap bill. Key will, at this stage, be happy to campaign on welfare and education reform, but does a government that significantly increased government debt as a percentage of GDP during the recession of its first term really want to argue that future governments should not have the right to borrow and stimulate the economy? Can it credibly make such a case? Would cutting taxes thereby increasing government borrowing, for example, be a policy condemned by a bill designed to "constrain... government spending"?

And does any government have any right to tell future governments how much they can spend? I would argue, strongly, no. It seems deeply unconstitutional and unwise for a current government to effectively try to set budgets for future governments.

Can a proper conservative such as Bill English really support this radical policy? This is a Finance Minister who back in 2008 spoke loud and long about New Zealand having one of the biggest stimulus packages in the developed world. I'm sure he'd rather have not spent or borrowed as much as he did these past three years, but he kept an open mind and reacted to events.

So just what level of hypocrisy would be required for him to turn around and vote for a legal spending limit that would bind the hands of future finance ministers?

Can John Key back such a law, having spent the past three years proudly and repeatedly claiming that National has "continued to protect the most vulnerable"?

Here's the kind of line he uses in a lot of speeches, to stress National's socially caring and non-radical face and fend off Labour from his centre-left:

“We have continued to protect the most vulnerable New Zealanders through extensive programmes such as Working for Families, New Zealand Superannuation and welfare benefits, as well as investing significantly more in health and education.

Yet yesterday's agreement says:

"National and ACT agree that New Zealand's current fiscal problems were caused by irresponsible increases in government spending between 2005 and 2008..."

Spending such as Working for Families, perhaps? Or increases in health and education? Point being, Key can't credibly claim on one hand it was good for him to continue the huge extra-spending of programmes such as Working for Families, but on the other say such programmes are so bad they must be legislated against.

Under this law, it would seem to me that we could never again have the sort of bold programme implemented by the 1935 Labour government. Ideologically, those on the right may cheer that. But how utterly undemocratic to think they have the right to tell voters they won't have that choice again.

And this from parties who argue they stand for choice!

Who knows what the future may bring. A second global recession or worse? A major health epidemic? War? Or the collapse of Air New Zealand, for example. Presumably the previous government wouldn't have been able to bail it out if the $885 million rescue package pushed it over budget.

I just don't see how any government has the right to set boundaries around the future, given the "unknown unknowns" that may arise.

To test the integrity of such a policy, let me ask two more questions: How would this Cabinet like to be told by the 1984 Cabinet what it can and can't spend? And what would right-wing parties think of a law passed by a left-wing government legislating a limit on cuts to government spending?

If you don't think either of those scenarios are a good idea, then I don't know who you can applaud this idea other than as an ideological victory of small government over big.

But enough on that. To separate the two subjects and so this post become too enormous, I'll start another post to have a think about those Charter Schools.

Comments (14)

by Andrew Geddis on December 06, 2011
Andrew Geddis

Couple of points ...

(1) The issue of government debt (as opposed to overall government spending) isn't touched by this proposal - there already is a provision in the Public Finance Act meant to deal with this (see here). Of course, one may ask whether National has been acting consistently with this provision in the last 3 years (what is a "prudent level" of overall government debt?) ... but the fact it has been possible to borrow the infamous $250 million a week with it in place just goes to show how much wiggle room there is in these sorts of measures.

(2) Hence, the proposal is purely symbolic. It can be repealed/amended by any future Labour/Green Government (and why shouldn't it be, given its ideological foundations?), and has no binding legal force in any case (if a Government ignored it and proposed a budget that increases public spending in breach of its "limit", then no consequences would follow in law).

by Tim Watkin on December 06, 2011
Tim Watkin

Thanks for spelling that out Andrew, I could have been clearer on that. I'm just so appalled by the idea of this.

I take your point 1, but in reality to try to say borrowing and spending are different creatures is just nuts. They're two limbs on the same body. And to actually argue your point, I'm not sure you can say government debt isn't touched by this proposal. If the law says you can't spend money, there's not much point borrowing it, is there? By default a spending cap then caps borrowing.

Of course the agreement says nothing about where the cap's set (presumably including WFF), but it's the principle of the thing!

As for point 2, you know how controversial it can be to change laws and the political cost of that. Another Labour or whatever government might repeal it, but will get hammered as 'tax and spend fools' in the process. And how do we know the law won't include "consequences" for an offending government?

by Andrew Geddis on December 06, 2011
Andrew Geddis

Tim,

"If the law says you can't spend money, there's not much point borrowing it, is there? By default a spending cap then caps borrowing."

I think that's what ACT/National would like to claim - that this simply reinforces the existing Public Finance Act measure regarding the "Principles of responsible fiscal management". But it's a purely political move ... I mean, why is the present level of Government spending the absolute perfect amount, such that to spend any more than this (population and inflation adjusted, of course) is so wrong that it cannot be allowed? Is it just our great good luck that we live in the moment of history when Government spending reached its optimal level from which it must never increase?

So, it's just Act/National trying to set in concrete their belief about the "right" size of Government, least the New Zealand public be stupid enough to vote in a Labour/Green coalition in 2014. By turning its policy preferences into "the law", it gives them a stick with which to beat that future Government over the head.

As for "how do we know the law won't include "consequences" for an offending government?" We know that because present constitutional orthodoxy says that a current Parliament cannot bind future ones (at least, can't do so by means of ordinary enactments). So a future Parliament is entirely free to ignore any measure passed by this next one simply by enacting a budget proposed to it that breaches the spending limit "imposed" on Government. And if the ACT/National Government try to overturn this orthodoxy in some way ... well, a future parliament can just ignore that too!

by Richard on December 06, 2011
Richard

I'm intrigued that these are the battlegrounds John key has chosen to fight on.

Is it unnecessarily paranoid to suggest that these are merely the battlegrounds we are meant to be distracted by?

by DeepRed on December 06, 2011
DeepRed

Lessons from the Colorado State TABOR: Be careful what you wish for, you might actually get it.

by Andrew R on December 06, 2011
Andrew R

There is a spending cap bill at select committee which could be rolled over to the new Parliament and passed quite quickly.  Submissions on it have closed.

No one has ever claimed (have they?) that National and ASCT have well thought out and intelligent poliices.

by Andrew Geddis on December 06, 2011
Andrew Geddis

"There is a spending cap bill at select committee which could be rolled over to the new Parliament and passed quite quickly."

True - but the existing bill isn't what is being proposed in the agreement. That bill would (somehow) require a referendum vote before government expenditure could increase above its prescribed limits (as is the case with Colorado's TABOR). The proposal in the National-ACT agreement is only to amend the Public Finance Act ""principles of responsible fiscal management" ... which merely are "nice to have" statements of good practice that Parliament may choose to ignore if it wishes.

by Ben Wilson on December 07, 2011
Ben Wilson

@Richard

>Is it unnecessarily paranoid to suggest that these are merely the battlegrounds we are meant to be distracted by?

I'd say yes. Maybe they'd like that to happen, but I don't see it actually happening. In practice, each battle has emotional appeal to a sub section of the populace, so multiplying the number of battlegrounds doesn't give you any freebie battles. It just gives you more to deal with.

by Richard on December 07, 2011
Richard

@ Ben

Yeah, I largely agree.

Although I suppose there is an attrition aspect too.

Does lots of crap, poorly thought-out legislation consolidate the opposition, or merely increase voter apathy and fatigue?

by Richard Aston on December 07, 2011
Richard Aston

@ Richard and Ben, you raise good points

In the shear complexity of MMP politics I wonder if  complexity fatigue is a reality.. And hey I don't think we have even started yet, I reckon a lot more complexity is coming our way.  Voter apathy is on the increase and the simple solution of a brave white knight, sword waving high, while attractive to some is increasingly becoming a fantasy.. Good god voters may have to actually think before they vote. Now there is a challenge .

 

 

by Frank Macskasy on December 08, 2011
Frank Macskasy

"And does any government have any right to tell future governments how much they can spend? I would argue, strongly, no. It seems deeply unconstitutional and unwise for a current government to effectively try to set budgets for future governments."

I concur, Tim. And I heard you make precisely the same point on RNZ the other day. It is arrogance in the extreme - but then, what else should we expect from the right wing?

"Another Labour or whatever government might repeal it, but will get hammered as 'tax and spend fools' in the process. And how do we know the law won't include "consequences" for an offending government?"

Any future incoming government has a duty to repeal that legislation. I suspect that by the time the electorate has had a gutsful of National and vote a Labour-led coalition back, that the incoming government will have a fairly cosy "honeymoon" period with voters. That will be the opportunity to get rid of this odious law.

"Is it unnecessarily paranoid to suggest that these are merely the battlegrounds we are meant to be distracted by?" - Richard

No, not paranoia at all, Richard. I think we're in for a fairly turgid period of right wing "reforms". This National government (not really a coalition at all) will be markedly different from the 2008-11 administration.

Be prepared for Rogernomics, Part Deux.

Richard Aston - I've called this a National Government, not a National-led Coalition. Banks and Dunne are quasi-National MPs so in effect, we have a majority single-party government in power. National was successful in rorting the system in Epsom and Ohariu  and the lack of intelligent tactical voting by Green and Labour voters in those two electorates guaranteed a National government.

National didn't fail in crossing the 50% threshold. They succeeded.

 

 

by Steve F on December 09, 2011
Steve F

Tim

As I was reading through this I thought  " didn't I read somewhere in the last few weeks that Parliament cannot bind future Parliaments? As it turns out Andrew has clarified the position and I didn't just dream it.

But I am puzzled as to why the main stream media don't pick up on this. It would interesting to to surmise on a possible scenario should a cap be put in place and a future government simply ignored it. Who would enforce the law? Who would be most likely to file a statement of claim with the courts? And should it progress through the court hierarchy what would be their interpretation of the constitutional validity of such an Act?

 

Although parliament has sovereign law making powers who decides in the first place that parliament has that sovereignty? I would imagine that if you go back far enough in time it was the courts that conferred the sovereign law making ability upon parliament. I think it was Lord Cooke of Thonrdon who argued the position that the powers of parliament were originally and probably currently defined by the courts so does it follow that if the courts make the rule about Parliaments powers then perhaps they can control it or modify it.


by Tim Watkin on December 09, 2011
Tim Watkin

Steve, there's no tradition in NZ of activist courts taking on the will of parliament. (Of course writing that is a red rag to Andrew or Graeme or Dean, but most courts consider parliament the highest court in the land in Westminster democracies).

It was interesting to note that Hotton in the NBR today said the daily media had completely missed the significance of this bill and agreed with me (in terms of its political significance, at least!). He said the new rule would, like the A-G and the Bill of Rights Act, require the Finance Minister to explain to parliament if he or she had to break the cap (which he admits is effectively a sinking lid, not a cap). That puts significant political pressure on a government.

What do you make of that Andrew? Still of the mind it's easily ignored or repealed, or are you re-thinking?

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