Smith Lockwood: Debate on Budget Policy Statement 
Smith Lockwood: Debate on Budget Policy Statement 
[Volume:637;Page:7760] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In speaking to this Budget Policy Statement debate I would like to draw members’ attention to a particularly pertinent table on page 47 of the fiscal outlook. That table figure 2.8 forecasts the Government’s new operating initiatives. It is so important because when we talk about increases in Government spending we so often forget that it actually piles one on top of the other. What I mean by that is that over this next Budget period the fiscal outlook and the Budget Policy Statement identify that the Government will increase its operating spending by $1.9 billion plus 3 months’ worth of the company tax concessions—probably about $100000. So the figure is about $2 billion but the table of course identifies the figure of $1.9 billion. 
Then the Budget Policy Statement identifies $3 billion of extra new spending in next year’s Budget. Often people then look at those figures and say that the Government is increasing spending over the next 2 years by $5 billion—$2 billion this year and $3 billion next year. But as figure 2.8 shows that is not the way it works. The Government is increasing operating spending in this Budget by $1.9 billion plus the company tax concessions but this figure shows that in the next Budget compared with the current one the increase will be $4.9 billion. So the total increase in spending compared with the current level of operating expenditure over just the next 2 years by this Labour Government is an increase of almost $7 billion. That is not my figure; that is the figure to be found in figure 2.8 “Forecast New Operating Initiatives” on page 47 of the fiscal outlook. That is why the Governor of the Reserve Bank in his latest Monetary Policy Statement speaks of the Government’s fiscal policy being expansionary. He states: “This expansion can be seen in the national account measures of government spending but also involves substantial boosts to transfer payments to households. The effect of such a shift to an expansionary fiscal policy is significant at a time when the available pool of resources remains stretched.” 
The outcome of what the Governor of the Reserve Bank has said there is that New Zealanders face higher interest rates over the next few months because of this Government’s increased spending. The table on page 47 shows exactly what the Governor of the Reserve Bank is on about. If members look at the next 3 years—because normally in Budget cycles the Government looks 3 years ahead—members will see that the total increase in spending over the next 3 years compared with now is $2 billion plus $5 billion is $7 billion plus $7 billion is $14 billion. Over the next 3 years there will be $14 billion more Government spending than there is right now. It is little wonder that the Reserve Bank is saying: “Hang on this will just blow interest rates out of the water.” I want the next Labour speaker to tell this Parliament why the Government thinks it should be spending over the next 3 years $14 billion more and forcing ordinary mums and dads in New Zealand with their families to face higher interest rates on their mortgages. 
It seems that the Labour Government’s policy is one that expects mums and dads to tighten their belts and pay higher interest rates on their mortgages so that Michael Cullen can loosen his belt and spend a whole lot more just to try to get Labour re-elected. It might have worked once. At the last election there was a massive promise of extra spending including interest-free loans for students masses of increases in Working for Families—hundreds and hundreds of millions of dollars of extra spending leading up to the next election. None of that is included in these fiscal projections. That is what my colleague the Hon Bill English said. These increases in spending that Treasury identifies actually come before the bidding war by this Labour Government when it starts to try to get itself elected for yet a further term—God forbid! 
New Zealand mums and dads ought to think very carefully about how much higher interest rates they want to pay on their mortgages to support this huge-spending Labour Government. If the spending were on something worthwhile maybe some of it could be justified. The bit that is being spent on roading for example is justified although our roading is hugely expensive by international standards. Let me share with the House where so much of this extra spending has gone. Every year in recent years we know that this Government has put $750 million more into health. That means that over a 2-year period the total increase is about $2.5 billion in spending on health—a bit under that. But we see no more operations no more delivery of services. What this Government is doing is spending money on bureaucracy not on services. 
If members look at the actual number of employees employed in the central government agencies they will see that over the years this Government has been in office since 1999 the increase in public sector employees is 95 percent—almost twice as big a Government bureaucracy. Is it delivering any more service? 
One area where I was Minister for quite a long time was education. I was Minister of Education for almost 6 years. I was not only in charge of the school sector but early childhood as well as tertiary—these days that is too hard a job for any one Labour Cabinet Minister; it has about three of them involved. When I ran the tertiary sector when we were involved in a massive expansion of the tertiary sector we went from darn near the bottom of the OECD in terms of tertiary participation in the early 1990s up towards the top. I ran the tertiary sector with 15 officials in the ministry. About 15 officials with me ran the entire tertiary sector. Do members know how many officials Labour needs to run the tertiary sector? Over 300 are needed to do what a National Minister did with 15 and I know Brian Donnelly knows this is absolutely right; I see him nodding his head. 
Hon Member 
: And they’re doing it a lot worse! 
Dr the Hon LOCKWOOD SMITH 
: And they are doing it a lot worse. When I was Minister I had none of the scandals around the wananga. We set up the wananga and they went really well when I was the Minister. There are now 300 officials to do what National did with 15. It is little wonder that we do not see any improvements in productivity. There is a 100 percent increase in bureaucrats but no increase in service. That is why productivity has gone down under this Labour Government. 
These bureaucrats of course have to be housed. The floor space this Labour Government has taken on to house those bureaucrats it has employed is the equivalent of 15 rugby fields. Since Labour came to office it now leases 15 rugby fields’ more office space to employ that massive tribe of public servants that delivers no more service to New Zealand taxpayers. That is why the information presented to the Finance and Expenditure Committee showed that productivity so crucial to New Zealand’s future has halved while this Labour Government has been in office compared with multifactor productivity during the 1990s. This Labour Government has succeeded in halving the productivity of this country’s economy and it is no surprise why. It has poured so much money into massive bureaucracy right across the sector delivering no more service and we now suffer the consequences as our productivity winds down our prospects look more bleak and our interest rates are going to climb. 
Doug Woolerton from New Zealand First says that this is Export Year. Let me tell him that with the exchange rate being jacked up by his Government’s high interest rate policy and big spending our exporters are suffering because the exchange rate yesterday hit a 16-month high or more against the US dollar. I say to Doug Woolerton that if he wants to support exporters he should stop supporting this big-spending high interest rate Government that is jacking up interest rates and crippling our exporters. It is little wonder New Zealanders think it is time for a change of Government.