A dearth of election-year sweeties

20:05, May 22 2013

Remember the Budget? No? Well, a week is a long time, especially for such a pared-back spending programme.

It has sparked a wave of speculation that Finance Minister Bill English is saving up his dosh for a big splash next year. So will the election- year Budget in 2014 be stuffed full of sweeties, a veritable lolly scramble of promises to lure voters into giving National a third term?

Not on the numbers in last week's Budget. The new spending set aside for 2014 was just $1 billion, only $100 million more than this year's allowance - and were it not for the previous two "zero Budgets" that would have been considered hopelessly miserly.

Having made a virtue for so long of fiscal prudence - and with a daunting target of cutting net debt to 20 per cent of gross domestic product by 2020 - the Government is unlikely to throw open the doors to Treasury's vault and let the taxpayers cavort around Scrooge-like, in gold coins.

But that is not the whole picture.

The Budget itself notes that there is "a wide band of uncertainty around medium to long-term projections and the Government does not intend to be a slave to the 20 per cent debt target in every Budget".


A rough translation is that it will allow itself a few "overs" on the downward track - and what better time than in election year?

There is also some hope that the (for once) conservative growth forecasts by Treasury, combined with a more optimistic growth outlook by many forecasters, will see revenues bounce back more strongly than the current forecasts expect. That could lead to significantly more cash in the bucket either in the December update or next year's Budget.

Whatever the outcome, it is unlikely to have a major fight from Labour over spending. Labour finance spokesman David Parker has repeatedly stressed he, too, would have delivered a surplus in 2014/15 and his stress has been on macro and micro-economic changes, not pump- priming.

National is punting that Labour, for credibility's sake, will be forced to adopt a fiscal track in line with its own. So to some extent Prime Minister John Key and Mr English will be able to set the boundaries for the campaign fight.

Whether it is $1b or more, the Government's first spending priority should be some extra cash for public services and some specific measures to back up the poverty fighting rhetoric in this year's Budget and its response to the child poverty report, due out in a few days. Paid parental leave may even get a boost to head off Labour and the Greens.

That suggests the planned ACC levy cuts will be the only significant "tax cuts" in National's immediate sights.

Last week's Budget, though, left open the possibility of some slow-burning promises using the proceeds of the asset sales. They are in the books at about $1b a year from now on but that is a notional assumption rather than a set programme.

There remain some doubts around that, in any case.

The Mighty River Power float was hardly a roaring success, despite the Government's cheery take on it.

The number of retail shareholders, at 113,000, was well down on initial hopes and the share price is barely keeping its nostrils above the $2.50 float price.

Ministers are looking on the bright side - they can hardly now be blamed for selling the shares at a knockdown price to their "mates" - but they would surely have been happier with a decent enduring premium on the listing price to encourage future investors, especially in Meridian.

A key political test will come in October when MRP reveals as part of its profit announcement just how many Kiwi shareholders are left and how many have bailed.

Fast forward to the election and it is unlikely National will campaign on a further round of asset sales.

Insiders say the party is split between the "phew, we got away with it, let's do it again" camp and the "phew, we got away with it when we were popular and assured of re-election so let's not push our luck" crew.

The political mathematics are too fraught for National to take another big risk on this unpopular policy, and in any case there is very little worthwhile left in the cupboard.

Rats and mice assets such as Learning Media and Kordia could be given the flick, but who would buy them? And would the loss of political capital be worth the candle?

Once Air New Zealand and the generators have gone, the remaining significant, vaguely saleable, assets are the Landcorp farms and Transpower.

The former is a possibility, the latter not so much. Selling equity in a monopoly is probably a no-no, although there is always the option of a quasi- equity bond or some other derivative to free up cash without relinquishing voting rights.

For now, the Government seems more focused on extracting value and efficiency from its state housing portfolio than casting around for new ways to lose an election.

The Dominion Post