In the wake of its
greatest triumph to date, the Coalition Government is about to face its
greatest challenge. And one will have been the cause of the other.
The far better than
expected Budget surplus figures certainly came as a surprise, but may well be
short-lived and more a product of the previous Government’s stewardship, rather
than anything the current administration has done. Be that as it may, there is nonetheless
little doubt that they come as huge fillip to a Government whose economic management
has been under so much criticism. While the Government will understandably seek
to milk every ounce of political advantage it can from this happy situation, as
it should, Ministers will be well aware of the need to manage and downplay wider
expectations of what this might mean.
Even as affable and
laid back a Finance Minister as the current one knows that igniting public
expectations of a new spending spree would be both economically disastrous and
near certainly unattainable, and consequently a monumental political blunder.
Especially so, since this self-proclaimed “Government of kindness” has already
increased substantially its spending, with the promise of even more to come, while
ongoing decisions about how it all is to be paid for are left dangling. After
all, ultimately, there is nothing kind about a Government that outspends its
capability, and leaves its people struggling to cope when the inevitable
retrenchment occurs. So, Mr Robertson and his more economically literate
colleagues, although by no means all members of the Coalition one suspects,
will, while smiling quietly and just a little smugly, want to let down public
expectations, albeit calmly and gently, as befits the “kindness” label.
Ironically, they
have been helped considerably, and rather unintentionally, in their efforts to
do so by the raw crudity and selfishness of their allies in the teachers’
unions, immediately and loudly laying claim to a fair chunk of the new surplus
to settle their current salary claims. Now, this is not to dispute the
legitimacy of their claims and their rights to pursue them through the already
established channels, but more to make the point that leaping in so quickly to
put their fingers on the money, as they did, was a mighty strategic error that
has three impacts. First, it makes it much easier for the Government to now push
back, as they already have done, citing the “no new lolly scramble” argument to
send a wider signal of restraint. Second, it makes it actually a little more
difficult for the Government to be seen to be too generous when a settlement
with the teachers is eventually reached; and third, it runs a risk of
alienating some of the considerable public support the teachers currently
enjoy, if they are now seen to have become too pushy.
Beyond the teachers,
there are of course many other groups who will be eyeing up a part of the
surplus for their interests, and the Government will be well aware of this. So
it will be equally determined to send them a "kind" but firm message
that its purse strings are not for additional loosening. None of this will be
an easy sell, especially if the surplus figures hold up longer than expected,
so it will require nerves of steel from the top downwards to continue the line
currently embarked upon, and that will impose its own challenges.
Former Finance
Minister Sir Michael Cullen correctly and somewhat ruefully observed a number
of years ago that managing Budget surpluses was a far more difficult task than
managing deficits. When the Budget is in deficit, it is much easier for the
Finance Minister just to say no to everything, however meritorious, because the
money is simply not there. But in surplus times, the focus comes much more onto
the quality and overall value of the new spending being proposed, and that
requires Ministers to make some very strong judgements. In such circumstances,
the admirable virtue of "kindness" is often not enough.
A tough reality this
Government is about to find out.
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