Budget '10 and Budget '11

I've been thinking about the government's political strategy in the lead up to next year's election (as you do).

It's clear that this year's Budget was all about not scaring the horses - with two horses in particular the focus of the affair. Horse 1 was the general centrist voter: the message to them was, "we're not slashing". Horse 2 was the ratings agencies: the message to them was, "we're going to get on top of that debt curve".

What about the out-years? Well, there are cuts in public services in the outyears and they will start to hurt. But I don't believe they will come to pass. Instead, I think that the next couple of Budgets will see the government coming up with "new money" to avoid cuts. 

They could do that in numerous ways. They might seek to sell state assets to the NZ Super Fund. They might rely on the Treasury's forecasts being too pessimistic. They might decide that with the glut of debt on the market internationally, a slight downgrading in NZ's path back to surplus can be sustained. 

They might do all sorts of things, but what they won't do is allow electorally damaging cuts to actually happen - at least, not prior to the '11 election. For it is clear now, after six months, that the prime focus of Mr Key's National Government is Mr Key's National Government. The agenda is re-election. The aim is power. The desire is to win. There is not much else there. Everything else comes behind that driving ambition for National. 

After years of solid investment that have undone the damage of the last nine-year-slicing-at-the-state National government, people recognise and appreciate the level of public services they have. They only elected National when it made the case that it would not damage them like it did last time. It therefore faces serious political risks if it does something else. Which is why they will, in my view, flex the budget and drop this year's cuts as it becomes politic to do so.

Bearing in mind that focus, and notwithstanding the hypocrisy of this next point, the positioning National seeks to impose on Labour is already clear. "Whack it on the bill" is the motif. National will try to portray anything Labour proposes as "adding to an unsustainable debt that our kids will have to pay back," regardless of whether their own policies have already been doing that or not. 

That's something for Labour to watch out for - we cannot be seen or in fact be, fiscally imprudent come the next election. I believe that every promise we make will have to be funded, with cuts to something else or new revenue. Otherwise we'd be handing National a gift horse we don't need to give.

More importantly of course is that the '11 campaign will and should be about the future - and National's theft of it from the next generation through their short-sighted and reactionary economic, environmental and social policy. But to focus on that debate we need to leave no hostages to fortune.

Comments

[George D]

National will try and straightjacket Labour with a tax regime in which policies are unaffordable without tax increases - always a difficult sell.

Good luck!

[Hugh]

I believe that every promise we make will have to be funded, with cuts to something else or new revenue.

Does this really need saying? I'd say it was policy formulation 101 - for any political party anywhere, let alone for one that's just been in government for nine years.

[Jordan Carter]

Hugh - it's something that bears repeating, especially given that the other side of things will do its very best to paint us as doing the opposite.

The other point has to be that the debate can't just be about that, as it's not fertile ground upon which we should be fighting the next election.