Appropriation (2015/16 Supplementary Estimates) Bill, Imprest Supply (First for 2016/17) Bill

I move, That the Appropriation (2015/16 Supplementary Estimates) Bill and the Imprest Supply (First for 2016/17) Bill be now read a second time. Just to explain the technical role of this bill, the Appropriation (2015/16 Supplementary Estimates) Bill relates to the financial year that ends on 30 June 2016—that is, this week. It seeks parliamentary authority for variations to appropriations authorised by the Estimates bill and for new appropriations that were not in the Appropriation (2015/16 Estimates) Act 2015. I want to thank the Finance and Expenditure Committee and the Intelligence and Security Committee for considering the report back so promptly.

The Imprest Supply bill relates to the new financial year starting 1 July 2016. This is a bill that enables spending authority for Government expenditure during the first 2 months of the financial year before the Estimates bill is passed—that is, the bill that was introduced on Budget day and is the vehicle for the Budget. I know that appropriations may not be the most politically discussed topic, but working with the appropriations system and improving how we work with it is at the heart of the Government’s view on fiscal control. These bills, which alter the appropriations, are the constitutional underpinning for Government spending.

Through the Public Finance Act of the late 1980s and its variations in the early 1990s New Zealand developed what was at the time one of the more progressive and well-defined public finance systems in the developed world. At that stage, it helped to clarify the way that money flowed through the system, but we are now in the process of evolving that system further. There are a couple of things that appropriations do pretty well. One is that they legally limit the amount of money that a Government department can spend on any particular activity described by the appropriation. Secondly, it enables the Parliament to track an individual dollar all the way through the system to where it was actually spent. This has served us pretty well as a means of fundamental accountability. It has underpinned a high-quality Public Service and at various times it has enabled Governments to exert fairly good fiscal control, just through the processes of government and exercising those processes thoroughly.

However, it does not tell us much about whether those dollars are effective—it is not a management system. In the past, unfortunately, it has to some extent been regarded as the way of managing public expenditure. Well, it is a useful tool for Parliament to look for accountability for a dollar, but it does not tell us much at all about what actually happens when a service is delivered to a New Zealand citizen. So what the Government is trying to do is to bring a much more focused way of showing that the dollars appropriated by Parliament actually achieve results.

That is not how things have always been done. Too often, Parliament and Governments have indicated that they are getting results simply by spending a lot more money through these appropriations—simply by enlarging the appropriations. Well, we have learnt, having had big surges of spending, particularly from about 1997 through to 2008—a huge surge in Government spending—that there was no appreciable impact on the problems that spending was addressing. Not because I say so; it is because the Salvation Army in 2008—[Interruption] Oh, now they are getting excited. The Salvation Army in 2008 essentially said that despite spending all this money, in what must have been a bit of a nirvana for those who believed in Government spending, it could not see any improvement in social statistics.

So the Government has set about a very thorough programme of focusing on getting results. When the Parliament votes on these bits of legislation it is going to be achieving something more than it used to—that is, it is voting for appropriations that mean it can increasingly, but certainly not yet comprehensively, track whether a dollar makes a difference where it is meant to make a difference. For instance, if we are spending $100,000 per prisoner in prisons, are we having any impact on recidivism? Well, we are, because we are measuring it. We are measuring it and taking action while we have people in prison, to reduce the likelihood that they will have to come back.

There is not much point in appropriating more money for education if you are not making a difference to the New Zealanders who most need the benefits of public education. And we are. These appropriations are going to be underpinning what has been a successful effort to lift National Certificate of Educational Achievement (NCEA) pass rates. Why does that matter? Not because of the statistic but because it puts young New Zealanders on the doorstep of further training and further skills. What is fascinating is that the increase in performance around NCEA level 2 is disproportionately in the Māori and Pacific population, where thousands more of these young New Zealanders are getting to that threshold, and we are doing a better job of supporting them to do it. They have always had the potential but the system is now backing them up. The appropriation on its own does not tell us that, but the Government’s results framework and its social investment framework do tell us that.

In fact, what we found is that focusing on results helps everyone to understand that the solutions to some of our most intractable social problems are not just about money. More money is often needed—some money—but more often what is needed is a much better knowledge of who our customer is. Who are the people we are trying to help? This is not just in general, but it is about which particular people and where. If we are appropriating for another social welfare programme or for social workers or Whānau Ora, which people and where is this actually happening? That is a good question to have to answer. Can we connect with them? As we are finding with some of these issues around homelessness, sometimes we just cannot connect with people who really need help. For instance, families who are scared that their children will be taken from them do not approach Government agencies. Families who may, for various reasons, have benefit debt do not approach public agencies. It does not mean that they do not need help; it just means that our system is too intimidating to be able to deliver it.

A third question is whether or not, when the money is spent, we actually made any difference, because too often we can spend a lot of money with good intentions for the people it is aimed at, but we cannot tell if we have changed a life. That is something that is not expressed in the Appropriation Bill but which matters a lot to the Governments that are focused on spending the money. Are we changing lives? This is particularly so for those people where bad outcomes are so predictable. Our data analysis and use of big data means that we can now have a pretty good idea of the probability that a person with certain characteristics is going to end up on welfare or in prison, and this enables us to take more action.

When we pass these bills it is a technical exercise for Parliament—an important constitutional one—but it is less and less the case that the appropriations bills and the Estimates bills and the Imprest Supply bills capture the Government’s fiscal control. Of course, the Government has built up a bit of a record of being able to achieve better results without spending a lot more money. If I could just give you an indication of that, from 1998 to 2006 Governments were spending $2 billion to $3 billion extra every year. This Government is spending about $1.5 billion extra, but getting better results. We look forward to the support of the House for these bills.

It is certainly true that if you go looking in the Budget, in the supplementary estimates, and in the Imprest Supply bill, you are not going to find anything that gives a vision or a picture of what the Government is going to do. So the Minister of Finance is definitely right on that score.

Before I come to some of the specific issues in the supplementary estimates, it is interesting that the Minister of Finance chose to use this speech to talk at some length about the Government’s so-called social investment approach.

💬 Chris Bishop: This is new. You’re engaged upon it. Good on you.

Have you engaged on it, Mr Bishop? In fact, more engagement on it would be better. At its heart, at its core, some of the rhetoric of the social investment approach—who could disagree with the idea that we need early intervention and we need to get into problems before they start. We need to invest in people and the lives that they live to make sure that they can achieve their potential and do not end up in a situation where they are not achieving what they want, where they are not contributing to society or to the economy in the way that they are capable of, and where society misses out and they miss out as well. We all agree on that.

Mr English says that that is what we want to do, and we are going to do that by using big data and we are going to use that by looking at our programmes and measuring them properly and we will be able to see what the results are. I do not think he should start talking about recidivism too quickly as his example of that, because that is not going too well.

But let us pick off one where the Government actually has set a target and it thinks it has achieved it. That is the pass rate for National Certificate of Educational Achievement (NCEA) level 2. The target is 85 percent—85 percent of school-leavers having a pass rate for NCEA level 2. The Government is going to be able to point at the statistics and say it is nearly there, or it is there. But there is a fundamental problem with this, which is the fundamental problem with this approach that the Minister is putting forward. Getting NCEA level 2 is like going to the supermarket and you have got to fill up your trolley, and when it is full you will have NCEA level 2. You can go around the supermarket and you can fill up your trolley completely with toothbrushes, so it is totally full. You have filled your trolley; you have got NCEA level 2. But when you get home you cannot bake a cake. That is the problem with the Government’s public sector targets. It is all very well to say everyone is going to get NCEA level 2, but if that is just reaching that target and not worrying about the quality of it, not worrying about what people are actually learning, just making it—just making it to the target—then that is not good Public Service spending.

What we know in terms of NCEA level 2, just to take that as the example, is that, yes, they are getting that level of pass rates, but then the Tertiary Education Commission has a report that says that school-leavers, many of them, are functionally illiterate and innumerate. That is the result of focusing so much on this target, rather than on the quality of what is being achieved.

Then, the other problem with the social investment approach is that it is all very well to track the results to see whether what is happening is working or not, but what is the answer? What is the answer? Has this got anything to do with what policies will actually work? No. The Government is not interested in listening to the community about what those policies are. It thinks it knows best, it thinks it knows who the support from the Government should go to, and it simply sets itself up as the arbiter of what is good and what is not, and what works and what does not. It is words, it is rhetoric, and it is artificial targets. It is not real policy development. Unfortunately for the Minister of Finance, although there might be some great principles behind it, the actual social investment approach itself is all smoke and mirrors. It is a mirage, not unlike the Government’s Budget.

But returning to the question of the supplementary estimates that we are debating today, as the Minister of Finance indicated, this is a regular part of the Budget process and one that all Governments go through as they tidy up the accounts from the financial year as it is about to end. So what sort of a scorecard can we give the Government as it ends its financial year needing to make one or two extra payments? One of the things we can look at is what this year’s Budget told us is “what matters for achieving higher material living standards”, and that is per capita GDP.

💬 Dr David Clark: Oh, you’re stealing my speech.

Well, no; we will just be working in unison here. Come up with something new, Dr Clark.

What we know from the latest figures is that gross national income per person was zero. In the term that we are talking about, the supplementary estimates for today, gross national income per person was zero—flat—and GDP per capita was just inches above that, to 0.05 percent. So we have seen the economy grow, and Mr English talked about that in his speech. We have seen the economy grow. GDP has grown, up around 2.5 to 3 percent—fantastic stuff. Good work. Guess what? There are a whole lot more people in New Zealand. There are a whole lot more people in New Zealand, and although it might look like the economy is growing, per person it is not.

That is why, when we are out talking to New Zealanders and they hear these numbers about growth in the economy, they think: “Why am I not experiencing that? Why is my community not experiencing that?”. We go to the electorate of my colleague Meka Whaitiri, up in Gisborne. You go up there, and they say: “There’s no jobs here.” There is 10 percent unemployment up in Gisborne. The employment confidence survey came out the other day. The Gisborne and Hawke’s Bay region had come down, and with due respect to both of my colleagues from that area, it is actually driven out of the Gisborne area. So people in that community are not saying: “Fantastic. We’ve got growth.” They are the people who know. They are experiencing the flat per person growth.

We are not going anywhere. Realistically for the Government, as it looks ahead in the next 2 financial years, this continues. It continues because the population grows but nothing is actually happening in terms of the Government’s policy agenda to match that, in terms of what we are doing in the country. So what we see, and this was highlighted by the Westpac economists when they were reviewing this year’s Budget, is that none of the growth forecasts out into the future come as a result of a policy change or an action of the Government. They are just projections. They are just projections about the fact that more people are going to show up. They are not actually about establishing a sustainable economy—one that grows decent jobs, one that provides reasons for New Zealanders both to stay here and to come back from overseas. On that scorecard the Government is struggling.

The two other parts of the scorecard for this financial year that these Estimates come from, where the Government is struggling, are around unemployment. Grand promises were made at the election in 2014 of unemployment coming down towards 4 percent. Actually, it is not. It is up, over 5 percent, and is forecast to go up a little bit more. There are 144,000 real people without work. These are people who want to work—people who could be contributing to New Zealand in that meaningful way, who are not. So the Government has failed on that part of the scorecard for the 2015-16 year. The Government also made big promises about the lift in wages—the amount that wages would go up. Well, wages have not grown in that way, as 46 percent of New Zealanders did not experience a wage increase in the year that we are covering under these Estimates.

The share of wealth that working people have has declined over the year. It has declined over a succession of years. It means that people are working harder but they are not seeing the return on that, and today did that not hit home, with Statistics New Zealand releasing the latest wealth data, which says that the top 10 percent of New Zealand earners have 60 percent of the wealth? It is getting worse. It was about 55 percent, or slightly under that, when National took office, and now it has gone up to 60 percent. The bottom 40 percent hold 3 percent of the wealth.

I am proud that when Labour was last in Government we stopped inequality growing, and we started to reduce it through programmes like Working for Families, interest-free student loans, 20 hours’ free early childhood education—good things that were the building blocks—

💬 Hon Bill English: Didn’t help with inequality.

You kept every one of them. You kept every single one of them. This is the Minister of Finance who likes to criticise the last Labour Government. He did not ditch a single one of those promises. He has ridden off the back of Michael Cullen’s success as a Minister of Finance, and now the chickens are coming home to roost. Now there is no Christchurch rebuild to rely on, Bill. It is all about population growth, and none of it is about a Government that actually has a plan for a sustainable economy.

Inequality is growing under this Government. Fairness is going out the window. The Kiwi concept of a fair go—that wherever you were born you could get ahead and you could succeed—has gone under this Government. Inequality grows because this Government is on the side of the very, very few at the top; not most New Zealanders, who are working hard. The supplementary estimates here do nothing to change the view on this side of the House of what the priorities of this Government should be. There is not a single reference in them to additional initiatives for housing, and not a single reference in them for how they are really going to lift productivity. All it is is a record of the Government’s failure to work things out in Christchurch and the massive gaps in our health expenditure. That is actually what the Estimates are about.

This is another representation of a failed Government that works only for the very few at the top, and not for most New Zealanders.

I am glad that last speaker woke up once the bell went, and he actually got to his speech. But Grant Robertson did make one comment, and that is that the Government has ridden off the back of Michael Cullen. Well, we all know what Michael Cullen left this country: 10 years of deficits ahead, high interest rates, a country that was going into recession before the rest of the world. That is what Michael Cullen left New Zealand. That is what the Labour Government and New Zealand First left New Zealand.

That is not what this Budget represents, because in this Appropriation Bill and Imprest Supply bill we see what this Budget actually delivers for New Zealanders. And that is GDP growth of 2.9 percent, projected to be 2.8 percent over the next 5 years; exports up $2 billion in the last year; and a trade surplus of $358 million in the last month. I remember the days when the Opposition would come in here and ask about trade surpluses and deficits, but they do not any more because New Zealand is in surplus. Over 200,000 more people are in work than 3 years ago, and another 170,000 jobs by 2020. The unemployment rate has dropped to 4.6 percent, and the average wage is increasing to $63,000 a person—that’s up $16,000 since the National Party came into office.

💬 Dr David Clark: Who wrote this rubbish?

This is the truth of what has happened in New Zealand, Mr Clark, and I wish you would listen. The net operating allowance of only $1.6 billion, compared with Labour’s of $4.3 billion—the Labour Government that Grant Robertson was so keen to extol the virtues of and that spent New Zealand into recession before the rest of the world. Operating surpluses are expected for the next few years, going to $2.5 billion in 2018-19 and then $6.7 billion in 2019-20. Net debts peaked at 25.6 percent of GDP and then fell to 19.3 percent of GDP.

What does that show the New Zealand public? It shows the New Zealand public prudent economic management—good economic management—in this Budget which delivers results for New Zealanders. It delivers the ability for us to fund those social services in the many areas that New Zealanders want. Contrast that with what is happening in the rest of the world at the moment: Britain deciding to be isolationist. Britain could be the Hong Kong of Europe if it took the approach of looking wider towards Asia, Africa, the Pacific, and America, but instead it is taking a very isolationist approach. America may well follow that isolationist approach later in the year. We know that in Canada there is a left-wing Government that is spending money like it is going out of fashion, and will destroy its economy.

What does that leave? That leaves New Zealand and Australia, at the bottom of the world, which actually have the best Western economies, and New Zealand has the best Western economy of any country in the world. Mark my words, New Zealand will be the place where all Europeans and all Americans and all Asians and all people of this world who want to have a good future will actually want to come and prosper, because it is a country that will run itself in a prudent and successful way. We have shown we can do that, and we have shown how important it is to do that. We do not need to be a failed State like Europe, where there is too much bureaucracy, where there are initiatives supporting uncompetitive industries, and where there is a large welfare State and high debts in those countries. We need a country that is open and free and that trades with the rest of the world. That is what this Budget delivers for New Zealanders, and what this Budget delivers for all people in the world to see what can be done with this country and what is important.

We will hear from Opposition speakers that there should be no immigration, that we should cut this country down, and that we should take an isolationist approach. That is the policy of the Labour Party. It is against immigration. We know the Green Party is against immigration—how silent its members are in this House. They will not admit to their policy when it is said in front of them. They are so silent about it, are they not? We know New Zealand First has always been against immigration. It does not see New Zealand as an open place for business.

This Budget is a Budget, through its Imprest Supply bill and the Appropriation Bill, that shows that we are open for business. We have set the fundamentals there for New Zealand to prosper and succeed. And New Zealand, as a country that has that opportunity, will be a haven for all those like-minded people who believe in the future of themselves and their people. New Zealand has that stable Government that can take up those opportunities, and we look forward to that happening in the near future as we continue to build on the successes of this last Budget.

We also saw in this Budget, in the speech from Bill English, how there has been an attempt and an approach to actually look at social investment and to look at how that spending has been spent, to make sure that we see the strong results of that expenditure. No more can we see that than in areas such as education. With the large investment in innovation in this Budget, it really sets up a strong basis for education for our people. It sets up a system where people understand that there is a strong investment in things like the science, technology, engineering, and mathematics subjects in our universities, so our students see where their job opportunities are. They know that that investment is there, so they can follow that investment through.

It sets up the extended health-care provision as well, in the Budget, with over $2 billion in extra health-care expenditure for New Zealanders, to deliver those services. It also works in the education field around how to look at funding for schools, so that we actually fund those students who are most in need, rather than just the broad increases that there have been in the past. The use of that kind of data and understanding of information so that we deliver the best services for New Zealanders is what our people want. It is the best use of our resources as a Government, and it shows an economic base that is solid and strong and that can deliver those opportunities. When you look through and see that economic base, we are flourishing in this modern world.

New Zealand has gone through the economic hardships of the recession. We have rebuilt Christchurch, to a large extent, and at the same time have managed to do so in a way that is prudent for our Budget and that has put us into a place where we now can have surpluses going forward. That gives New Zealanders opportunities and choices—choices that would be taken away by the Opposition, which wants to spend and spend and spend, and take away those surpluses—

💬 JAMES SHAW: Is that communism then? You haven’t said communism yet.

—to deliver New Zealand no opportunities for the future.

We have the Green Party over there, its spokesperson wanting to talk about the word “communism”. Well, we know that he is a member of that party, and so we acknowledge his past in that area. But the Green Party, for example, would be the last party you would want to have in control of the Budget of New Zealand. We know from the agreement with the Labour Party that those two parties are looking at formalising such an arrangement. But we always know that the Labour Party leads the Green Party that far and then dumps it just at the election day, and then goes with New Zealand First. So beware, in the Green Party. I hope that that agreement has something tangible for you, because it is unlikely to ever come to fruition after an election result because Labour’s history is not such.

These are interesting times in the world. They are not the times to be isolationist. They are not the times to set walls around our country. They are the times where we should look forward, and we should take advantage of our opportunities. New Zealand is uniquely placed. We are the country that has strong economic management. We have solid bases, through education and health care, for our citizens. We have a free and democratic system. We have an opportunity for all people to achieve their full potential. No other country in this world creates that environment at this time. With the uncertainty in Europe, with the uncertainty in America, and with the growth of Asia we are uniquely placed to become the place where everybody will want to be in the future. New Zealand should take that advantage. We can ill afford to have an Opposition party in this Parliament and in any Government going forward that would stop New Zealand being able to take advantage of those opportunities. Thank you.

Debate interrupted.