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OPINION: Govt fiscal strategy to unravel after humiliating education u-turn

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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Comments and questions

Perhaps Matthew Hooton may like to write an article about where a National government was going to find journalists mature and responsible enough; to present to the electoral public, the need to reverse the profligacy of the Clark/Cullen era.
The media presentation of the class sizes debate, and the previous articles re partial assets sales, suggests that his article would be very short.

Agree entirely with MH's Opinion. This governemnet from day one was brankrupt of any ideas or moral authority to lead the country. Its leader, a salesman/trader, without any political heritage (unless 'my mother was a solo parent, and look how well I have done' counts as having done the yards) or 'nouse'. Key has also lied on occassions and assumed, correctly, that the compliant press would not highlight his failings. A beautiful country now steadily being destroyed by its own leaders.

Spot on, as always.

This government is gutless and its a crying shame.

Two problems with this post -

1) There is no additional fiscal impact from retaining ratios as they currently are - the supposed quality enhancements are simultaneously cancelled.

2) You are assuming that there is a coherent fiscal stategy to unravel. As you later point out there isn't, just random & poorly thought out cuts that don't deliver much, and often harm future growth prospects.

For nearly 30 years I have been a National party supporter and voter. But this backdown and other recent u-turns are making me seriously starting to wonder about whether Key et al have the necessary backbone to lead this country or whether the civil servants are playing a Yes Minister game here making Key et al look vulnerable.

Fiscal prudence and progress in righting the horrendous mistakes and wrongs of Cullen and Clark is starting to look like hot air talk with no action. Everytime the heat goes on Key smiles and buckles. They are starting to appear not as the iron strength government we need, but increasingly run the risk of being the "tin foil" government.

Would Key and English please get some backbone - make changes, take out a couple of billion of civil servant waste and salaries, and cut the deficit and get on with leading the country rather than worrying about the next election !

NBR need to poll with their readers on Matthew Hooton... All the ones I know have had a complete guts-full of his pathetic so-called "reporting". He should get a job with Labour/Greens/Mana that’s in the open - rather than being paid by faithful NBR clients to serve up this sort of drivel Why doesn't NBR do a poll with their readers on Matthew Hooton? All the ones I know have had a complete guts-full of his pathetic so-called "reporting". He should get a job with Labour/Greens that’s in the open - rather than being paid by faithful NBR clients to serve up this sort of drivel for the left block in stealth.

The truth hurts and Hooton whether we like it or not is telling the truth.

Hard decisions need to be made by this Government and instead of people like you always referring back to what Clark and Cullen did wrong we need to focus on the hard decisions to put it all right.

Many National voters are now disillusioned with the current gutless National government. The National party and its supporters still believing the BS and weak leadership have their heads in the sand - they are all patting themselves on the back in some inbred circular way that takes the reality out of the situation.

What NZ inc needs and what they voted in the Key government for was strong decisive leadership - which means sonmetimes you have to stick to your decision and over time prove that the decision was right - whilst in the meantime you might have to wear a load of the proverbial cowpat while time proves you right.

The current Government is providing more reasons than what the Clark government did for many Kiwis to emigrate to Australia and further afield.

Totally agree .I hear him on that Radio Dead programme with a couple of ex Maori Politicians and a union guy who was visited by I R D on certain tax matters.He seems to have been injected with some sort of vile,which is part of that Radio Station. I have been buying the NBR for many years,seems if i want to read such dribble ,which Hooton Peddles,i might as well buy the believe it or not anti National weekend billy liar newspapers.

Thanks Matthew - unfortunately your analysis of our so-called 'Government' is spot on yet again. Key, Joyce and English have become the three stooges of NZ politics - sadly at our expense. An overwhelming disappointment doesn't even begin to describe how they have let their core supporters down. And for what?? Their populist and bankrupt strategy won't be rewarded in the ballet box and we will then be saddled with another decade or so of a wealth destroying labour party regime. And as for knighting Michael Cullen for services to NZ...Could our PM insult us any more??

I hope all you people criticising the Govt. for making weak decisions voted against the retention of MMP , because that is the problem. As long as we have that system we will always have Governments in power with small majorities ( from a voting point of view) and therefore we will always have cautious decision making, no matter who is power.
NB. I am not suggesting a return to FPP.

Good one National. It's nice to see you listen and respond. Playing rigid ideological games may play well with rigid ideologues, but the majority of the population was pretty clear on what we wanted.

Over the last five years, on a per capita basis, New Zealand has had more people leave NZ for other countries. This is the result of the morally corrupt and self serving crony politices of Key and the National Party. Was coming to power worth it? The push for asset sales strated with a lie by the finance minster and the PM who both claimed at the last election that the first tranche would bring in "over 600million". Yet after the election, the finance minister admitted that no work had been been done and it was a guess! The clamour for asset sales is from those who will benefit, the lawyers and merchant bankers who will take $150 million in fees to sell $500M worth of assets (Treasury estimates) - sadly, greedy white men gorging on the fruits of this nation. Maybe we ought to also stop these breeding?? most

Cr*p! They were leaving in droves under the corrupt Clark/Cullen government and its "let's put everyone on welfare" policies. The tragedy is that Key, English and Joyce have lacked the guts to do anything to reverse the unsustainable, vote buying bribes of the Clark/Cullen government, which will ultimately bankrupt NZ.

Lindsay I normally don't agree with you but on this occassion I do.

As a staunch National supporter I support your balls in calling it exacttly how it is - you like many National supporters are getting disillussioned with this weak flip flop National Government. Key and his team promised so much and we all thought they had the balls to make the hard decisions

Unfortunately not

Agree with your take on the Clark govt. and the electotal bribes and pork barrel politicking.

But Key's one is showing itself to be no different -- doing anything and everything to hold on to power.

Hekia has proved herself to be totally inept. Be worried that she's stacked close members of her whanau in the education ministry

A cleverly engineered and dynamically delivered diversion with no long term fall out, in fact a gain from 'admitting we were wrong and that we are listening to the people' notice no one is saying Hekia should go, she came out looking really strong actually and John Banks has been able to dissolve into the background... we're also talking about who can and can't have children thanks to well timed statements from Paula Bennett (granted an issue that should be being debated and I think she's quite cool) giving precious Peter the opportunity to have a self righteous chest beat without any consequences... all good media dominating stuff to keep some rather awkward potentially more messy issues off the front pages like the power asset flog off legislation racing towards completion which will see our power system sold back to only those who can afford it, our forebears who built the system to benefit a nation by creating cheap energy betrayed, a wealth transfer of significant proportions and most concerning locking in a system that can only deliver ever rising prices. Like class sizes a massive majority of people are against selling but unlike class sizes doesn't seem to illicit the same response from the National lead Government, or maybe not... who knows?

Lindsay so it's all Clarke's fault still... get a life!

Common sense has prevailed -- rather than cutting the fat off future generations ie children, how about cutting it of the older generation that caused this mess.

Agreed. The youth can vote with their feet if these issues are not resolved.
Super and aged care is by far the biggest cost to the welfare budget.

Funny how most National supporters are hardened capitalists until someone tries to remove the superannuation welfare teat.

Fact check time. 1999 - government spending - 32% of GDP. 2008 - government spending - 32% of GDP. Current government spending - 35% of GDP.

Budget surplus every year between 1999 and 2008, Government debt at the 2008 election? Zero,

Austerity policies: a failure everywhere every single time. Reading Matthew Hooten and agreeing with him? A dwindling delusional minority.

We need a party to the right of National to support Nats to do the hard tasks