English Bill: Supplementary Estimates — Imprest Supply Debate 
English Bill: Supplementary Estimates — Imprest Supply Debate 
[Volume:655;Page:4511] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the Appropriation (2008/09 Supplementary Estimates) Bill and the Imprest Supply (First for 2009/10) Bill be now read a second time 
. The presentation of these bills to Parliament is an opportunity to reflect on the drastic change in the fiscal outlook that has occurred in the last 8 months in New Zealand. Back in 2008 the Government was forecasting fiscal surpluses with some cash deficits over the next 4 years. In Budget 2009 because of the impact of both the New Zealand domestic recession—in train since the beginning of 2008—and the later impact of the global recession that fiscal outlook has changed dramatically. The Budget outlined plans that show that the Government now faces 10 years of deficits and more than a doubling of public debt. That is after making substantial decisions in respect of tax deductions contributions to the New Zealand Superannuation Fund and other decisions including having a smaller operational allowance for new spending for Budgets over the next 10 years. 
It is important to remember that surpluses give us positive choices; deficits tend to give us more difficult choices. The Government has started out on a process that reflects the reality that fiscal constraint is now a permanent part of the Government’s plans. That is not a matter of ideological conviction or the democratic choices that the public make about Governments; it is the way the world has changed and it is a product of past misdirected policy under the previous Government. 
A bit of analysis of Government spending shows that the Government’s books are now significantly out of balance. Over recent years entitlements and Government spending have grown rapidly particularly under the Labour Government since the 2005 election. The effect of this is that when we calculate what is called the primary balance—that is Government revenue and expenditure excluding finance costs—we see that it is now significantly larger than anything that the New Zealand Government has seen in the last 25 or 30 years. Certainly the primary deficit is significantly larger than it was in the late 1980s which was the last time close attention was paid to New Zealand’s fiscal situation and a lot of Government policies were focused on remedying that outlook. 
The Government made a critical decision in respect of the Budget which is reflected in these bills and that was to continue with the election undertakings that it had made. This has the effect that through this next financial year the Government will continue to grow public spending at a fairly significant rate. We are doing that because we believe that it is important to support the economy through the most difficult part of this recession which we are in now. This will be a very tough 12 months; we have already seen rising unemployment and dropping tax revenues. At the same time we have set out a plan to get on top of rising debt over time. 
It is important to remember just how we got here and whom people should look to when they realise that they have to deal with some difficult issues. The last Government left this economy in much worse shape than its members believed and certainly in much worse shape than the public were led to believe. It is pretty straightforward: the economy was in recession through 2008 and that recession was caused by domestic excesses. Those excesses consisted of rapid growth in Government spending a lot of misdirected spending by the Government an asset bubble in the housing market a record current account deficit and appallingly low productivity growth through that time. Those factors left this economy in a weak state to handle the onset of the global recession. 
To turn to the Government books I say that this Government has had to deal with the global recession in the context of Government books that were already headed into deficit despite 10 of the best years of economic conditions that this country could have enjoyed. It meant that in Government we found ourselves starting not from the start line but from way behind. There was a dysfunctional immigration service a dysfunctional corrections service and a health and education sector that had been pumped up with large increases in funding and negative productivity growth. 
We have had to deal with particularly bad decisions around investment and a shortfall in accident compensation funding of $300 million a year—or $1 billion over the forecast period covered by the Budget—just because of neglect and bad management. KiwiRail was a black hole if ever there was one. The previous Government decided it was worth $700 million plus a set of concessions to the previous owners and it seemed to be intent on setting it up as a Government department. We have had to contribute something like $145 million to keep it running. We will have to put some basic investment into it next year but over the next few years that looks to be nothing like enough. So we have to clean up that particular mess. 
Along with that a whole set of regulatory changes were made that treated businesses as golden gooses that would keep laying eggs but that needed to be punished in case they were too successful. We have had to initiate sweeping regulatory reforms in order to create the kind of business environment where people will invest so that we can have employment because it is not until businesses invest that we can get the unemployment rate down. There will not be one new job until a business decides to invest and to employ someone. 
When people are concerned about the choices the Government is making they should lay the blame for that concern at the feet of Labour. We are cleaning up a mess left by an economically illiterate and fiscally reckless Government. Cleaning up that mess was always going to involve some difficult choices but the fact that the global recession has come on top of that will really test our capacity. 
I am impressed with the way that much of the Civil Service has decided to shift its framework now that the outlook has changed—not just the change in Government but the change in the economy. However some parts of the Civil Service do need to adjust a bit more to the realities. 
This Government has strongly supported the police. We are pouring millions of dollars into the police force in order to help the police to do their job. We are pouring money into Tasers so that police can be safer and into DNA testing in order to give them more capacity to resolve crimes. However I am not sure that the police are in step with the public in looking for a 4 percent pay increase. The police get a 2 percent pay increase regardless. That increase by any standard in respect of the rest of the community is quite generous especially compared with people who are losing their jobs and taking pay cuts. The Police Association is claiming 2 percent above that. This part of the public sector probably has the most secure jobs in New Zealand. The New Zealand Police has the strongest political backing of any Government department with the Government pouring so much money into the police and I think the association would do well to check whether it is reflecting the views of its membership and the communities that those members are serving. 
This legislation is part of a programme that the Government has embarked on to get the books back in order but more important it is the first step in a 3 to 5-year programme to deliver smarter and better public services to the public for the same or less funding. It is going to be a challenge but it is one we are up to. Just a few years ago Government departments were spending considerably less than they are now—in some departments it was 30 percent or 40 percent less—and at that time they were meeting many of the needs of the public. Those needs are going to grow in the recession; we are determined to meet them.