With such scant attention to economic transformation, there’s no way this Budget will ever deliver on the promise Grant Robertson made in the title ‘Securing Our Recovery’, writes Rod Oram
COMMENT: Labour has learnt a lot about redistributing wealth in the three-and-a-half years since it resumed control of government. But very little about how to help create it. That’s the blunt verdict on Finance Minister Grant Robertson’s fourth Budget.
Robertson set the scene in the second paragraph of his Budget speech. This year was the 30th anniversary of National’s damagingly neoliberal ‘Mother of All Budgets’, he said. And at last, Labour was finally making amends.
Well, yes, increases in payments to disadvantaged people is good policy which they deserve and will benefit from. And, yes, the Government is getting better at articulating why this matters in its third Wellbeing Budget based on Treasury’s Living Standards Framework.
But successive governments have been edging back towards decency and morality for the past 20 years, albeit National governments grudgingly and Labour ones timidly. Yet, we still have a long way to go before our society is more equitable.
We can’t achieve that, though, unless we know how to create more wealth for all. To do so, we have to build a much more sophisticated economy. That’s fundamentally the role of business to work out and achieve. But government has many crucial roles to play to help businesses figure out what to do then help them to do it.
This Budget paid only lip service to the challenge. It offered a few dollars more for some old programmes and a few new ones. But nothing transformational, or even aspirational. Labour tinkered, as it and National have done with every budget for decades.
Yet, what we have to do is crystal clear. Within the next 25 years we have to change pretty much everything we do to achieve near-zero greenhouse gas emissions. Then some carbon sequestration, mainly by trees, can get us a net zero economy. And if every country in the world pulls off this gigantic but doable feat, humanity has a chance of forestalling the worst of the climate crisis.
Rightly, Robertson pointed out the Government is waiting for the Climate Change Commission’s final recommendations to it on how we can meet our climate imperatives and commitments. But he did announce a useful mechanism. From next year’s Budget onwards, the Government will recycle into emission reductions programmes the revenues it generates from auctioning off carbon credits in the Emissions Trading Scheme.
But the Government has given us very little confidence to date it will be able to turn the Commission’s extensive and ambitious recommendations into workable policies. The many issues involved are complex and often inter-dependent; and the Government is already massively pre-occupied with reforms of the RMA, freshwater, municipal water, housing, transport and a host of other areas.
Logically, applying a strong climate focus to all it did would help the Government achieve all of these essential outcomes and more. But it rejected that opportunity in its Covid recovery spending, as Newsroom reported recently, quoting correspondence from Climate Change Minister James Shaw to Robertson.
Robertson’s Budget showed how lame government policy-making is in these vital areas. For example, the Budget allocated a further $300m of capital to New Zealand Green Investment Finance. The Government created this agency two years ago to invest in low-carbon companies and to encourage the private sector to invest alongside it.
But so far NZGI has only invested $34.6m of its first $100m of capital in a handful of companies. Each of them has merits but the modest investments are hardly game-changing. Arguably, in some cases the recipients might have attracted commercial investors instead of relying on taxpayers.
Robertson’s next Budget claim to economic transformation involved Industry Transformation Plans. These are across “seven areas of our economy where we believe we can get a global competitive advantage or where an industry sector needs to undergo transformation to significantly increase its level of productivity. These are in advanced manufacturing, agritech, food and beverage, digital, construction, tourism, forestry and wood-processing. These plans see engagement with all stakeholders in the sectors so that the outcomes are well-informed, aspirational and achievable.”
These, though, have been underway since February 2019 but not a lot has happened so far, judging by the latest information on the MBIE portal for the plans. The latest Cabinet paper on the work was last July, as was the last update of the portal.
Moreover, these transformation plans are meant to be created by working groups involving businesses, unions and government. But relations between them are deeply strained because of the Government’s plans to institute Fair Pay Agreements in many sectors. They have triggered an angry backlash from the likes of Business New Zealand and the Employers and Manufacturers Association.
Undeterred, Robertson announced in the Budget another tripartite work programme – Social Unemployment Insurance. Akin to ACC, it would “provide those who lose their jobs with around 80 percent of their income, with minimum and maximum caps”, he said.
But outside an increase in infrastructure spending to a total of $57.3 billion over the next four years, there was very little of direct benefit to business sophistication or capability in the Budget. Among the few items was an extra $279.5 million for Reform of Vocational Education, a tortuous and troubled process underway since last term.
The only new item specifically for small businesses was $44m for digital skills training, which the Government reckons will help 60,000 SMEs. Yet, there are some 530,000 SMEs, representing 97 percent of all firms, 28 percent of employment and more than a quarter of GDP, MBIE says.
The Budget offered $200m for the ‘Tourism Communities: Support, Recovery and Re-set Plan’. It will support communities “most reliant on international tourism, as well as for the tourism sector nationwide, to enable the reset of tourism in response to Covid-19 to be more sustainable and resilient”. Once again, the Government tossed a pittance at an urgent problem, which is also a terrific opportunity for transformational change.
Then there’s agriculture. It generates almost half our greenhouse gas emissions, so it has got a lot of work to do to reduce those as part of its task to keep up with rapidly and deeply changing farming, food, and consumer trends overseas.
Robertson offered some money to help this multi-billion dollar sector rise to these challenges: $37m towards national integrated farm planning systems for farmers and growers; $24m towards agricultural greenhouse gas mitigation research and development; and $900,000 to collect vital statistics on agricultural production, such as greenhouse gas emissions.
“This new Budget investment will supercharge and streamline efforts. Getting the right result will actually add value to our exports. High-value consumers abroad want to know they’re buying food and fibre that are quality, ethical and sustainable,” Agriculture Minister Damien O’Connor heroically claimed.
With such scant attention to economic transformation, there is no way that this Budget will ever deliver on the promise Robertson made for it in the title he gave it: Wellbeing Budget 2021 – Securing Our Recovery.
