It is a time-honoured ploy for a new government to paint its predecessor as fiscally incompetent and irresponsible. This is often done to allow a new government some leeway in implementing its promises, on the grounds that first cleaning up the mess it has inherited was a more important priority. There have been times when it has been used as a reason for abandoning new and not particularly well thought out policies altogether. And, occasionally, there is even a measure of truth in a new government’s claims.

Over the last week the new Minister of Finance has repeatedly attacked her predecessor for various unfunded fiscal liabilities the new government has discovered on taking office. Other Ministers have been hinting at similar issues within their own portfolios. However, the previous government has denied all the allegations, saying that all the so-called unfunded risks were accounted for in this year’s Budget. The previous Minister of Finance has gone so far as to say the real problem is that the new Minister does not know how to read the Budget documents properly.

This political argument will likely continue for some while yet, potentially even after the release of next week’s Half Year Economic and Fiscal Update (HYEFU), and the government’s mini-Budget to follow.

In the meantime, there have been two important pieces of broader economic information this week which have added some fuel to the already smouldering fire.

The first was an extremely negative report from the Auditor-General on the former government’s huge post-pandemic $15 billion national infrastructure programme to kick start the economy. He found that government had been warned frequently of the risks to value for money associated with many of the specific infrastructure projects. These warnings included advice from the National Infrastructure Commission that “large scale infrastructure projects are not effective mechanisms for economic stimulus due to the time needed for planning, design and procurement.” Treasury had advised it had “low confidence” the projects could be implemented quickly. The Auditor-General said that a lack of both due process for the authorisation of spending, and providing information to Parliament and the public, meant it was difficult to see whether the government was getting value for money from the projects.

But Ministers in the former government had chosen to ignore the advice and the warnings, and to proceed regardless, leaving the Auditor-General to express his concern “that significant spending of public money continues to occur without appropriate processes for ensuring value for money and transparent decision-making.”

A similar picture of fiscal laxity emerges regarding Kiwirail’s proposals to upgrade Cook Strait ferry services. In 2018 the previous government had approved a $1 billion programme for new ferries to replace the current ageing fleet, as well as associated port terminal upgrades. It had subsequently been advised that the cost of the project was likely to be nearer to $3 billion and had agreed in principle to meet at least part of this cost blow-out. Kiwirail sought additional funding of nearly $1.5 billion from the new government to meet the increased costs. Almost 80% of them were to do with building new terminals in Wellington and Picton, rather than the new ships themselves. Unsurprisingly, the new government has declined to meet the additional funding request. For its part, Kiwirail has said it will now wind down the ferry replacement project and review its Cook Strait operations.

While both the national infrastructure programme projects and the upgrading of the Cook Strait ferries are complex matters, relying on commercial and engineering judgements beyond the capability of any government, their management requires a level of overall government financial supervision and accountability that was apparently lacking in both instances.

As it tries to rectify the problems it has inherited in these cases, the new government will obviously take every opportunity it can heap blame and pour scorn on the credibility of its predecessor. That is the nature of politics. But at the same time, it will also need to take steps to avoid repetitions in the future. The Auditor-General’s report recommended that there should be “regular public reporting on the progress of all significant investments that have had or that require Cabinet-level consideration”.

Such a move would be a useful step forward, but to be truly effective, it will need to be supported by an early-warning system that alerts Parliament, not just the Cabinet, to emerging risks, so they can be scrutinised and potentially mitigated. Otherwise, there is no guarantee similar situations will not occur in the future. 

That brings Dunne’s Weekly to a close for 2023. It will return in the New Year. But, in the meantime, best wishes to all readers for the Christmas period, and for a happy and successful New Year.

 

New National MP James Meagher broke the long-standing convention that Maiden Speeches should be non-controversial. His speech not only raised a few eyebrows but also would have struck some raw nerves. 

Meagher described himself as a "walking contradiction" – “a part-Māori boy raised in a state house by a single parent on the benefit. Now a proud National Party MP in a deeply rural farming electorate in the middle of the South Island." He went on to chide parties of the left that they "do not own Māori", "the poor", or "the workers", and that "no party and no ideology has a right to claim ownership over anything or anyone".

 

Meagher has put his finger on what appears to be an ingrained issue within parties of the left. While they genuinely seek to uplift the poor and disadvantaged out of poverty and hardship, and have a proud record of doing so, they have never been able to accept that many then go on to be successful in life, without the continued assistance of the state. For example, much of Labour's antagonism towards Sir John Key was because he was also raised in a state house by a single parent, and then went on to be an extremely successful money trader, well beyond what should have been his aspirations. 

 

It is the same with Māori. Again, Labour has a proud record of supporting and looking after Māori, but it has never been as strong on supporting Māori aspiration or participation. I recall asking Ta Pita Sharples, after the Māori Party signed its confidence and supply agreement with National in 2005, why they had done so, given their years of support for Labour going back to the days of Tahupōtiki Wiremu Rātana in the 1930s. "It was simple," Sharples said, "National asked us." He said Labour had always been happy to have Māori "in the room" but "never at the table".

 

The left seems to believe that while people should be supported to live good and rewarding lives, they should not seek to go beyond that, or get aspirations above their station. In their view, those who receive State support at difficult times in their lives should not only be forever grateful but should also not use that support to become independently successful later. People like Meagher and Key are uncomfortable reminders to the left of how people can triumph over difficult circumstances to flourish.

 

I have always believed that the basic responsibility of any government is to ensure that every citizen has an equal opportunity to succeed, regardless of their circumstances. But too often, governments have become too focused on preventing failure, ahead of promoting opportunity. And that simply leads to greater dependency. The challenge that Meagher is setting out is for the new government to trust people more to make their own decisions, but with a decent safety net in place for those who cannot or fail in the process.

 

Parties of the left are often overly protective in this regard, to the extent of stifling opportunity for many by promoting excessive conformity. Their efforts to guard against social failure, frequently lead to resentment of those who succeed. At the same time, those on the right on the spectrum often go too far towards the other extreme and appear insufficiently sensitive to those in real need.  

 

However, the new National-led coalition government has pledged to restore the social investment approach, advanced originally by Sir Bill English, to develop a much more sophisticated way of identifying those who are disadvantaged or at risk. At its heart, social investment is about applying rigorous and evidence-based social services policies to improve people’s lives, rather than continuing the broad-brush, one size fits all, approach of the last few years. Labour had abandoned social investment concepts because of their preference for universal, untargeted approaches to social assistance.

 

Social investment draws on the findings of long-term studies – like the Dunedin Health and Multidisciplinary Study that has been ongoing since the 1970s – as the basis for policy development. Its aim is to ensure that, to the greatest extent possible, the government’s investment in social services is always directed to where the need is most identified, and where such intervention has its highest chance of success.

 

A proper social investment-based approach to social services may well weaken the political left’s long held, self-claimed mortgage on compassion for the disadvantaged that Meagher has highlighted. But far more importantly, it will shift attention to a more direct approach to disadvantage and inequality in all its aspects because of its reliance on empirical data over emotion and prejudice.

 

For a government that says that need will be the overwhelming determinant of access to government services and support, social investment will be a vital tool. It is therefore significant that Finance Minister Nicola Willis is also Minister for Social Investment. All eyes will now be on her and Budget 2024 to see how the policy is to be implemented, so that those like Meagher are no longer seen as “walking contradictions”.

 

 

Dame Jacinda Ardern observed after she stood down as Prime Minister that "Government isn’t just what you do, it's how you make people feel". While an interesting insight into how she viewed the purpose of government (and, some would argue, an explanation of why her government seemed focused as much on appearance as on substance) it is also nevertheless a very pertinent reminder to Christopher Luxon as he begins his term as Prime Minister. 

Ardern's message that policy change, however well designed or intended, ultimately only succeeds if people feel it is in their best interests is an especially relevant consideration for the new National-led government as it commences its term and embarks upon its “100 Day Action Plan”.

 

The Plan contains 49 actions which National says were key elements of the election campaign that it wants to get started on. It is a mixture of repealing legislation passed by the previous government – like the Auckland regional fuel tax, the so-called “Ute” tax, and Three Waters – and new policies like banning the wearing of gang patches, allowing the sale of cold medicine containing pseudoephedrine, restoring 90-day trials for all businesses, and extending free breast screening to those aged up to 74.

 

The overall impression the government is seeking to establish is threefold. First, that it is a government of action, getting on with the job it was elected to do. Second, that it means business by moving quickly to drop policies of the previous government that it did not support. And third, that it can be relied upon to carry forward the policy programme contained in National’s coalition agreements with ACT and New Zealand First. Overall, and consistent with the Ardern maxim, it wants to establish, if it can, the narrative that it is acting quickly and decisively in the public interest to get the country “back on track” so that people will feel better and more positive.

 

In that regard, it is doubtful that the new government’s first move, good policy though it is, to restore the Reserve Bank’s monetary policy focus solely on reducing inflation will immediately seize the public’s attention. It is by no means clear that National has yet convinced the public how important it is that inflation be curbed, if living standards are to rise, and that adjusting the Reserve Bank’s mandate is more than just a technical change to the operation of monetary policy.

 

The government’s plans regarding smoke-free legislation are an even more dramatic instance. For the record, the government’s plan is to “repeal amendments to the Smokefree Environments and Regulated Products Act 1990 and (associated) regulations”, not to abandon the policy entirely, as some health professionals who ought to know better, have implied. The amendments it is referring to came into effect on 1 January 2023, with the associated regulations being promulgated in late September. Most of the provisions do not come into full effect until 2024-25, and the restriction on the sale of tobacco products to persons born before 2009 does not take effect until 1 January 2027.

 

There is therefore plenty of time for the government to develop an alternative approach, consistent with Prime Minister Luxon’s stated commitment to continue to reduce smoking rates, if it is of a mind to do so. However, by focusing its early defence of the policy on the need to secure tax revenue from tobacco sales to help the government accounts, and to protect tobacco retailers from potential burglaries, the government immediately lost the argument, at least as far as the public was concerned. To most people, it just looks like winding back forward-looking changes, and nothing more.

 

As was demonstrated dramatically by the Ardern government during the pandemic, measures to protect the public health, no matter whether they work or not, always score highly. Conversely, measures seen to risk public health are dramatic losers, as the negative public reaction, and some of the ridiculous and extreme over-reactions in some quarters to the government’s smokefree policy, have shown. It has gifted its opponents – political and socio-medical alike – the easy line that the government cares more about tax cuts than protecting the public health.

 

Whatever worthy arguments the government may have in favour of its policy – and protecting the tax base is not one of them – it is not going to win over the public unless it can develop and implement alternative policies to reduce smoking rates within the time frame of the legislation it is now set to repeal. Of all the issues governments confront, health is the most sensitive and the most personal, the one people care greatest about. It is therefore the issue where the Ardern maxim has its highest relevance.

 

Establishing a positive public mood is an important contributor to political success, but it needs to be balanced alongside achievement. The last Labour-led government lost the public’s support when it became clear there was little in the way of substantive policy gains to balance its warm and caring approach. For the new National-led coalition, the other side of the coin applies. It will lose public support if it is seen to be too focused on its policy agenda as an end, rather than taking the public along with it, as it makes changes.

 

Getting the balance right – which Labour failed to do – will determine the success or failure of the Luxon government. Its early handling of the smokefree legislation shows it has some way to go in that regard, and that a long rocky road may lie ahead.