The government’s humiliating but inevitable rout over its dopey plan to increase class sizes risks unravelling its already precarious fiscal strategy.
This one backdown adds $50 million to education costs in 2014-15, which makes a further mockery of the $197 million surplus it forecasts for that year.
More importantly, the government has shown that it is weak.
It will yield in the face of political pressure ruthlessly applied, even when it’s most important promise – its pre-election surplus – is at stake.
Those who have waited for three and a half years for the government to move on policy matters that would spur economic growth have learned the hard way that quiet diplomacy doesn’t work. The government responds only to shows of force.
Last month’s Budget consisted of hundreds of small cuts because the government is pathetically unwilling to address large-scale issues such as superannuation, out-of-control healthcare costs and Labour’s 2005 election bribes, including Working for Families, remaining KiwiSaver subsidies and interest-free student loans.
National’s refusal to touch those areas means that Bill English’s fourth Budget is more accurately described as Helen Clark and Sir Michael Cullen’s 13th, which perhaps explains why the government knighted him last weekend.
Instead of reversing Ms Clark and Sir Michael’s outrageous fiscal profligacy, National has preferred to invest its political capital in cuts with trivial impacts on the bottom line.
The teacher cuts, for example, represented just 0.5% of Mr English’s $8.4 billion deficit this year. In the context of a rational fiscal strategy that a serious government would pursue, they were utterly pointless.
The idea they were necessary to fund teacher quality programmes was absurd.
Were tertiary education minister and government strategist Steven Joyce prepared even just to inflation-adjust student loans, it would pay for teacher quality programmes and performance pay initiatives ten times the scale of those which would have been funded from the teacher cuts.
While such cuts are fiscally irrelevant, they matter to those facing them. Everyone who faces cuts from the Budget now knows what to do – take to the streets, make threats, and the government will cave.
The whole shambles was utterly preventable had John Key and Mr English been prepared to put together a Budget that took New Zealand’s long-term, Greek-level fiscal risks seriously.
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