The Post: Extra spending doesn’t always mean wasteful spending

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Losing a debate is often a chastening experience, and so it was for me on Monday night. Alongside the writer Danyl McLauchlan, I was arguing, at a Free Speech Union event, that the tax system is unfair and the wealthy should pay more.

We made, I think, solid arguments: homeowners generally avoid tax on the capital gains they make selling properties, and the wealthiest families pay just 9.4% of their income in tax, compared to 10.5% for supermarket cashiers and 22% for the typical Kiwi.

In response, our opponents – the Taxpayers’ Union’s Jordan Williams and the New Zealand Initiative’s Eric Crampton – casually conceded that, yes, the system was unfair. But if wealth taxes were to be justified, that money would have to be well spent – and just look at all the government waste.

For the admittedly conservative crowd, this argument carried the day. And so it goes in the country at large.

Every shiny new Labour pledge is met by scepticism about its ability to spend well. National leader Christopher Luxon’s favourite stat is that government expenses are $1b a week higher than in 2017. And indeed state spending has risen from $76.3b to $128.2b, an increase of 68% or $51.9b.

But if one adjusts those figures for inflation and population growth, spending has risen a more modest 26%, or around $4000 a head.

Broadly speaking, New Zealand governments spend about 30% of GDP, or national income, each year. Spending has gone from a below-normal 27.8% in 2017 to 32.5% this year, and is projected to fall back to 31.5% by 2027. It has risen, but not to a staggering degree.

Very little of it, moreover, has gone on pet projects. Two-thirds of the increase has come in the core areas of health, education and social security.

And we are the better for this spending. State pensions may have added billions of dollars to the tab – but they keep our elder poverty rates among the world’s lowest.

Higher benefits have helped cut the proportion of children in families where food frequently runs out, down from 20% in 2019 to 13% now. The Healthy Homes Initiative, which provides curtains, heating and insulation for poorer families, reduces hospital admissions by one-fifth.

Labour has also had to repair holes left behind by National. Some $500m of the health budget was spent wiping the old DHBs’ deficits; billions of dollars more were needed for pay equity and wage increases. And Covid, of course, has hampered everything.

Still: instances of waste abound. Merging every polytechnic into one mega-entity was a bizarre decision, as was the call to rip up the health service amidst a pandemic and start again.

Lacking strategic vision, Labour has spent $51m on an abandoned Auckland harbour bridge project, and incalculable consultancy fees on projects going nowhere. Lavish $40,000 farewells for state CEOs stick in the public mind.

Instead of denying this waste existed, Labour should have gone on the front foot long ago, acknowledging the problems and publishing a plan to tackle them. It didn’t. Now, not only is the perception of waste understandably widespread, there is no counter-narrative.

That battle has been lost for this election: any reform pledges now would look hollow. But in future, either in or out of power, Labour will need to answer a question it has almost always ducked: how do we make government work better?

Cutting consultancy spending would be a good start. But since consultants have mushroomed in a hollowed-out public sector, Labour will have to grapple with tough questions about how to attract and retain talented officials.

More importantly, though, the progressive solution to waste would be to put public-service workers and users in charge of tackling it.

In a little-known union-led trial a decade ago at Tauranga Hospital, frontline staff were asked to identify and fix inefficiencies. So they changed the way patients were contacted, allowed them to choose their appointment times, and didn’t book them in until the appointment was confirmed.

The time taken to schedule acute appointments fell from 5 hours to 1.5 hours. Imagine how much money these changes – and others equally simple – could save if extended to every hospital.

Another suggestion: beneficiaries could be asked to redesign every Work and Income form, process and office, so that welfare recipients could get the information they need, navigate the system with greater ease and, where possible, leave it more rapidly. Public service users could be surveyed on ‘process’ issues – whether, for instance, they were treated with respect – and that data used in agencies’ performance evaluations.

Ministers could expand joined-up, family-centric programmes like Whānau Ora and set public-sector targets that frontline staff find meaningful. And they could, finally, set aside funds to evaluate every new programme over a certain size. Absent initiatives like this, Labour’s pleas to be entrusted with more taxpayer money will be met with silence.