Notwithstanding all the usual pre-Budget media hype it is worth remembering that Budgets seldom defeat governments. Game-changing Budgets – like Sir Roger Douglas’s 1984 Labour Budget or Ruth Richardson’s 1991 National “Mother of All Budgets” – which profoundly shook up the existing social and economic order, did not lead to their governments’ defeat at the next election.

Indeed, the only post-war Budget which could be held to be at least partially responsible for a government losing the following election was Labour’s 1958 “Black” Budget. But even then, there were extenuating circumstances – Labour had been elected by the barest of majorities in 1957, so was always going to struggle to win a second term in 1960. This was even before the 33% personal income tax increase and the sharp rise in taxes on alcohol and tobacco – the “working man’s pleasures” of the time – that the “Black” Budget introduced.

The 1958 Budget was a shock because it was unexpected, rather than because of its contents. In those days, there was very little media commentary or discussion in the lead-up to the Budget. There was certainly not the round of pre-Budget softening-up speeches and presentations we are used to today, or the post-Budget roadshows that Prime Ministers and Ministers of Finance now carry out. So, the Budget was really a bolt from the blue.

Back then, Budgets were seen simply as the government’s annual economic statement. Today, Budgets have a wider role – they are not only the government’s annual economic statement, but they also shape much of the ensuing political agenda.

Nicola Willis’s first Budget focuses strongly on achieving National’s pre-election commitments on tax relief for what she calls the “squeezed middle of New Zealand”, as well as meeting other commitments in health, education, and infrastructure. While the Budget was accompanied by widespread protests, it is unlikely to determine the result of the next election, if history is any guide.

The Budget draws more starkly the ideological line between National-led governments of the centre-right, and Labour-led governments of the centre-left. It makes a strong point of providing $3.7 billion a year of tax relief to New Zealand households through cutting back or eliminating some 240 specific policies of the previous government at an annual cost of $5.86 billion. It sends a clear, quasi-moral message that this government believes households should decide their own futures, rather than rely on a range of government programmes, however well they are targeted.

At the same time, the government is boosting health spending by $8.2 billion, education by $2.9 billion, law and order by almost $3 billion, and disability services by just over $1 billion through a combination of new funding and “reprioritisations”. The government is also committing to spending $68 billion over the next five years on infrastructure, including road and rail upgrades (although there is no mention of new Cook Strait ferries). In the longer term, the government is pledging to hold the net increase in new spending to $2.4 billion a year – a nearly 33% reduction on annual new spending levels that happened under Labour – which means there will be an ongoing focus on programme cuts and reprioritisations. 

While National and its coalition partners will be seen to have delivered substantially on their pre-election commitments and will be able to draw some satisfaction from that, bigger questions remain. From a macroeconomic perspective, the Budget is unlikely to cause too many ripples. A one-year delay in the projected return to a Budget surplus and a debt level to GDP ratio remaining at around 44% are still good by international standards and are therefore unlikely to be problematic.

The wider question relates to the domestic political reaction. This year’s Budget marks the end of what Sir Bill English used to call the “nice to haves” that people became increasingly used to during Labour’s time in office. For example, last year Labour scored heavily with the abolition of prescription charges. But how will people react to prescriptions charges being reinstated for everyone but superannuitants and community service card holders in this year’s Budget? Will they buy the argument that this is more than compensated for by the forthcoming tax relief of up to $78 a fortnight?

And what about the delay to funding additional cancer drugs that National promised at election time? National says that Labour’s underfunding by $1 billion last year of certain drugs which now need to be funded, has caused that. But patients desperate for new cancer drugs are unlikely to buy that argument.

Over the next few weeks, New Zealanders’ reaction to the 2024 Budget will become clearer. During that time, starting tomorrow, the Prime Minister, the Minister of Finance and other senior Ministers will be on the road selling their message to a variety of audiences across the country. That again shows how things have changed since 1958 – then, there were no post-Budget roadshows, nor attempts to politically sell tough economic decisions.

A Budget that largely does what its author promised it would, without surprises, is going to be hard to attack politically. Labour’s best chance will be to focus on what the Budget does not do, the lost opportunities as it sees them. The rub is, though, that while people might tell pollsters and the like they favour prefer more government spending over tax reductions, few will baulk at additional cash in their household budgets after 31 July. That is the awkward truth National is relying on, as it did in the election campaign last year, and which Labour has so far failed to successfully debunk.

This year’s Budget is reminiscent of the old Selwyn Toogood radio show, popular in 1958, “It’s in the Bag”, and his legendary catchphrase, “what will it be customers, the money or the bag?” This year, Nicola Willis has gone for the comfort of the money over the uncertainty of the bag. She and her government colleagues will be hoping voters will now do likewise.

As the city of Tauranga prepares to elect a new Mayor and Council after three and a half years being run by government-appointed Commissioners, the case for replacing the Wellington City Council with Commissioners strengthens.

The Wellington City Council has been dysfunctional for years, long before the current Mayor took office. However, the situation has worsened significantly during her tenure to the extent it is now almost impossible to see the current crop of Councillors being able to resolve the massive issues confronting the capital city.

The shocking state of Wellington’s water supply, with about 40% of the city’s water being wasted through leaking pipes, has led to derisory headlines around the country. Savage restrictions imposed on residents to conserve water over the summer period have only just been lifted this week, but the Council-controlled company, Wellington Water, which supposedly runs the system, is giving no guarantees things will be any better next summer. And the Council seems powerless to do anything about it.

Central Wellington is a maze of traffic cones as many inner-city streets are realigned to remove parking to allow for cycleways and bus lanes. This completely overlooks the reality that Wellington’s topography means most of the city’s streets are already narrower than elsewhere. Making them narrower still is neither practical, nor safe for either cyclists or motorists. But that inconvenient reality seems to matter little to the Council with its avowedly anti-car and pro-cycling and public transport approach.

Even that is coming to grief. Large double decker buses rumble frequently empty through suburban streets. Commuter bus-stops are being removed in other parts of the city. The city’s much-maligned bus system, last reviewed in 2014, is simply not working and needs to be overhauled. Gridlock continues to choke access to the eastern suburbs and the airport because the Council cannot agree how to resolve it. Central government’s plan for a second road tunnel through Mount Victoria aroused little Council enthusiasm.

When the pandemic struck, and the public servants went home to work, many seemingly yet to return, Wellington’s already struggling CBD became a ghost town, leading to the closure of long-standing, well-regarded city businesses. The subsequent economic downturn, and more latterly the loss of around 4,500 public service jobs because of government funding cuts, are making the situation worse. Wellington faces severe long-term retrenchment in jobs and population.

But the Council clings to the increasingly absurd notion that the city’s population will increase by around 80,000 people over the next thirty years, with absolutely no indication of where the jobs will be for this additional population to fill. The Council’s new housing intensification strategy, based on non-consented approval of up to six storey high Stalinist style apartment blocks, in the inner city and alongside designated commuter routes to house this mythical population increase simply compounds the sense of unreality. Even more bizarrely, the Minister of Housing, who had previously appealed as a person of sound judgment and commonsense, has approved this nonsense.  

The appalling way the Wellington City Council does things was highlighted this week at a Council meeting discussing the city’s long-term plan. A local community leader – allocated a mere five minutes to make his submission on an issue of concern to his community – had the temerity to complain that the Mayor had been working on her phone the entire time he was making his submission. In response, the Councillor chairing the meeting, rebuked him for criticising the Mayor, terminated his presentation, and adjourned the meeting until he left.

Not even the worst of student politicians, which the current ruling clique on the Council seem so reminiscent of, would behave in such an overbearing and childish way. Their pointless and petty behaviour, coupled with an arrogant and smug sense of their own authority, inspires no confidence at all in their ability to prudently manage a Council operating budget of nearly $820 million a year, and an annual capital budget of $566 million. And the Mayor’s seeming indifference to what is happening, simply adds insult to injury.

Increasingly, it seems wishful thinking to believe that the current Council and its leadership will ever be capable of waking up to reality and abandoning their personal hobbyhorses in the interests of making Wellington a functional capital city once more. Worse for the long term, the current shambles means there is no incentive for capable people to put their names forward for election to the Council in the future, so the downward spiral looks set to continue at ratepayers’ expense.

It is going to become more and more difficult for the Minister of Local Government to stand by and watch this train wreck steadily worsen. Ratepayers already face a 16.4% increase in rates this year, with no clear indication of any improvements in service delivery. Sooner or later the government will have to step in and appoint high-powered Commissioners to sort out the sad mess the capital city has become. For Wellington’s beleaguered residents, that day cannot come quickly enough.  

It is no coincidence that two Labour should-have-been MPs are making the most noise about public sector cuts. As assistant general secretary of the Public Service Association, Fleur Fitzsimons has been at the forefront of revealing where the next round of state sector job cuts is occurring, and in his role with the E Tu union Michael Wood has fronted the campaign for redress for TVNZ staff laid off in the recent programme cancellations.

 

Fitzsimons will be remembered as the Labour candidate who unexpectedly lost the hitherto safe seat of Rongotai to the Greens' Julie-Anne Genter at the last election. At the same election, after a series of self-inflicted mishaps that led earlier to his Ministerial resignation, Wood was tossed out of the Labour stronghold of Mount Roskill by National's Dr Carlos Cheung. This was only the second time since 1957 that Labour had failed to win the Mount Roskill electorate.

 

Both Fitzsimons (a former Wellington City Councillor) and Wood seem keen to resume their thwarted political careers. Their good fortune is to now be in positions where they can promote their political profiles and attack the National/ACT/New Zealand First coalition government at the same time. Both are doing so with shameless vigour. In addition, Wood has also become a member of Labour's powerful Policy Council, so is already in a strong backroom position to influence Labour's future policy direction, alongside another Parliamentary wannabe, Council of Trade Unions' economist Craig Renney, who reportedly fancies himself as the next Labour Minister of Finance.

 

However, Labour, like most parties, does not have a good record when it comes to political forgiveness, so despite their current very public penance Fitzsimons and Wood may struggle to secure immediate redemption before the next candidate selection round. Political parties have long memories when it comes to electoral failures, especially if that failure contributed to the defeat of a government. This may be especially so in Wood’s case where it has been reported that Labour’s internal polls recorded a critical 4% drop in its support after his repeated failures to disclose various personal shareholdings were revealed.

 

But even if they are to be selected again, neither Fitzsimons nor Wood face a certain route to Parliament. Fitzsimons’ defeat at the hands of Genter was part of the Green wave which washed over Wellington at the last election and shows no signs of abating, Genter’s recent public behaviour embarrassments notwithstanding. While Wood’s conduct failings as a Minister played a large part in his electoral demise, a significant underlying factor in his loss of the Mount Roskill seat was that just under 50% of that electorate now identify as Asian, hence their attraction to Cheung. As that trend intensifies, Wood will increasingly appear the pale, stale, odd-male-out in that electorate.

 

But behind this, a bigger picture is playing out. After the last election, there were few who expected Hipkins to stick around as Labour leader for very long. The conventional wisdom was that he, like most former Labour and National Prime Ministers, would find the return to Opposition tedious and soul-destroying and would quickly move on to greener pastures elsewhere. That may still prove the case for Hipkins, but so far, he has shown no signs of doing so, and indeed looks to be increasingly relishing his role as Opposition leader. In any case, no credible potential challenger to his leadership has yet emerged, nor seems likely to, given the talent in Labour’s current ranks. The likelihood that Hipkins will lead Labour into the next election is therefore increasing.

 

Hipkins is innately prudent, cautious and pragmatic, very much in the Helen Clark mould. His immediately circumspect reaction to the government’s revival of charter schools is an example. While some of his colleagues fulminated against the plan, Hipkins pointed out that the nature of the contracts to be concluded with the new charter schools would ultimately determine whether a future Labour government would be able to abolish them, as they might wish.

 

But Fitzsimons, Wood, and Renney are distinctly more left-wing and doctrinaire, so may find Hipkins lukewarm about their becoming part of his line-up for the next election. (This may be especially so in Wood’s case, given Hipkins’ interaction when Prime Minister with him over the shares disclosure issue.) For his part, Hipkins seems anxious to portray Labour as credible, compassionate, progressive, inclusive and fiscally responsible – not a bunch of wide-eyed ideological enthusiasts ready to cut loose on New Zealand society.

 

The crunch point for Labour, Hipkins, and the current wannabes will be the outcome of Labour’s internal policy review. A pragmatic result, building on the perceived gains of the last Labour-led government, will be a positive boost for Hipkins and his leadership, which in turn should be reflected in the type of candidates selected for the next election. However, a significant shift to the left in areas like economic management, taxation and industrial relations, while potentially beneficial for the likes of Fitzsimons, Wood and Renney, could create real problems for Hipkins’ ongoing leadership, which, given the talent within Labour’s current Parliamentary ranks, are unlikely to be resolved by the time of the next election.

 

So, the public positions now being taken by Fitzsimons and Wood are not just about their carrying out professionally and properly the responsibilities assigned to them by their current employers. Nor are they just about helping promote their personal political agendas, although that is certainly a factor. Rather, they are part of the deeper contest for the future heart and soul of the Labour Party.

I am always wary when I hear that the Controller and Auditor-General has commented on or made recommendations to the government about an issue of public policy that does not relate strictly to public expenditure.

According to the legislation, the role of the Controller and Auditor-General is to make sure that public sector organisations are spending public resources well and making good decisions.  That is as it should be and consistent with what might be expected of good audit practice.

But the Controller aspect of the role is more problematic. Under the relevant legislation, the Controller "can direct a Minister to report to the House of Representatives if the Controller has reason to believe that expenditure has been incurred that is unlawful or not within the scope, amount, or period of any appropriation or other authority” and “can stop payments from a Crown or departmental bank account, to prevent money being paid out if the Controller believes the payments may be applied for a purpose that is not lawful or is not within the scope, amount, or period of any appropriation or other authority.”

Again, that is reasonable and is an important accountability constraint on Ministers who may think they can do as they like with the funds appropriated to them by Parliament.

But, over the years, successive Controllers and Auditors-General have interpreted the function far more broadly and consequently delved into all manner of specialist areas, delivering a view not just on whether spending complied with the appropriation, but whether the activity in question was even justified in the first place. Recent Controller and Auditor-General’s reports have dealt with topics as varied as “Meeting the Mental Health Needs of young New Zealanders”; “Monitoring importers of specified high-risk foods”; and “The fast-track approvals Bill”. This week, the Controller and Auditor-General issued his words of wisdom on the conduct of the 2023 General Election, specifically the processes for counting votes.

Now, these are all important areas of public policy deserving of critical scrutiny, but it is surely doubtful that this can be provided by an office that is essentially a fiscal bean-counter. However, that constraint has never stopped Controllers and Auditors-General over the years poking their noses into areas where they have limited or no expertise, and then reporting with a confidence and certainty that defied that. As an aside, that may explain why so few of their recommendations, outside the fiscal management ones, ever get adopted by governments.

The report on conduct of the 2023 General Election is important. The smooth, fair, and efficient operation of our election process is critical to the functioning of our democracy. That is why Parliament conducts a full public enquiry, to which anyone can make a submission and be heard, after each election to improve the process for the next one. That process has worked well over the years and does not require the intervention of the Controller and Auditor-General at this stage. His office and time would be far better employed examining the profligate blow-outs in government expenditure that occurred under the previous government, as well as some of the expenditure decisions of the present government.

In the early 1990s, as a member of the Electoral Law Select Committee, I pushed successfully for the establishment of an independent Electoral Commission to oversee all aspects of electoral law, educate voters about the political process, and manage the conduct of elections. I envisaged it would become a strong and authoritative expert body. But unfortunately, over the years it has proven too amateur, timid, and wimpish to do any of those things properly. It seems far more comfortable being a cheap policeman, ticking off politicians and parties when they do not dot every i and cross every t with the level of bureaucratic pedantry the Commission likes to wallow in.

There is no doubt the Electoral Commission mismanaged the conduct of the last election. The Chief Electoral Commissioner and the Chief Electoral Officer should be held to account by Parliament and the public for this failure. But doing so via the route of the office of the Controller and Auditor-General, that has no known expertise in either electoral law or running elections, is of questionable value. It almost certainly means those officers will escape any accountability, which probably ensures nothing will change as a result.

Put bluntly, the office of the Controller and Auditor-General needs to refocus its activities on the specific responsibilities regarding the effective management of public expenditure that its legislation requires it to oversee. That should be its unquestioned area of expertise, which means that the Controller and Auditor-General’s enthusiasm to pontificate on so many other areas of government activity needs to be curbed as a consequence.

Ironically, under the present arrangement where the Controller and Auditor-General’s office can butt its nose in, almost at will, specific departmental and agency accountability is being eroded, not strengthened. The primary role is for government departments and agencies to own the policy and procedures for which they are responsible. A busy-body, know-all Controller and Auditor-General’s office merely gets in the way of that.

It is one of the oldest truisms that there is never a good time for MPs to get a pay rise. This week’s announcement of pay raises of around 2.8% backdated to last October could hardly have come at a worse time, with the economy on the brink of recession, massive cutbacks in public expenditure, public sector redundancies and rising unemployment.

Yet the response from MPs to the decision of the independent Remuneration Authority has been unusually muted. Even those who might have been expected to be more outspoken and prone to grandstanding on the issue of MPs’ pay have so far been restrained in their responses.

A factor in this may be that MPs salaries and allowances have been frozen by Prime Ministerial fiat since 2018. Yet according to Statistics Department figures, average household income has risen by just over 19% in that time. The increase in the average cost-of-living is estimated to have been over 13% for the last two years alone. Even though their incomes are higher than the average, MPs and their households will not have escaped the impact of these increases.

Labour leader Chris Hipkins has correctly (and courageously, given the way she is still idolised in some quarters) said the freeze on MPs salaries and allowances Dame Jacinda Ardern instituted in 2018 and renewed in 2021 was a mistake, which has led to the current level of increases proposed by the Remuneration Authority. Hipkins properly says these decisions should always be left to the Authority, and not interfered with by politicians. He is right.

Until the mid-1970s, politicians set their own salaries. Since then, the responsibility has been delegated to an independent statutory authority, now called the Remuneration Authority to determine what MPs should be paid, according to clear criteria that have been set out in legislation. This is designed to ensure that the process is transparent and free from any direct political intervention.

By and large it has worked well over the years, although there have been occasions when successive governments have felt the need to interfere with Remuneration Authority decisions because they have been seen as politically unpalatable at the time. The Ardern interventions are the latest, but no means the only, occasions where the meddling of politicians has made the situation more complex in the long term.

At present, the Authority is required to review MPs salaries and allowances at the start of a Parliamentary term and set a rate that will apply for the balance of that term. What has complicated its work this time around has been the six-year freeze since 2018, and the need for a catch-up to address that. It is arguable that this year’s proposed increases would have been smaller, had salaries and allowances been adjusted, not frozen, in 2018 and 2021.

MPs have always indulged in a measure of double-talk when it comes to increases in their salaries. Previously, there have been MPs who have attempted to make a virtue out of publicly declining to accept their pay rise. However, as Inland Revenue advised me when I was Minister of Revenue, MPs do not have the option of declining a salary increase. Because the rate is set by a statutory determination, they are taxed for that rate of income, regardless of whether they accept it or not. Faced with that prospect, most of the grandstanders over the years apparently quietly acquiesced.

Learning the lesson of his housing allowance embarrassment, Prime Minister Luxon has said he will donate his increase – around $50,000 over the next three years – to charity, because he says he does not need it.  Fair enough, but he will still be taxed on that income. However, he will be able to claim the charitable donations rebate of 33% on any donations he makes!

So far, there have been no suggestions of the government intervening to prevent or limit the Remuneration Authority’s decisions. The immediate reactions of MPs suggests that they may be more prepared to adopt a “take it on the chin” approach (a cynic might say, take the money and run) and let the process run its course. In any case, the adverse public reaction to MPs’ pay rises has always been short-lived and seldom deep-seated.

Overall, the Remuneration Authority’s decisions are not excessive and reasonable in the circumstances. They send the clear message that they can be trusted to make responsible determinations, and do not need the interference of politicians to do so.

In that respect, the Authority has set a benchmark which future Parliaments which would be wise to abide by.