School lunches are free and the government’s books are balanced – but don’t look too hard at the $40bn rise in its net debt

Our Beehive Bulletin

We spotted the politically alluring word “free” among the latest Beehive announcements.  The headline said “Hundreds more schools join free lunches programme”.

This was one of two statements from Chris Hpikins since Point of Order last updated its record of of ministerial press statements. The other (in his capacity as COVID-19 Response Minister) said more than half of New Zealand’s estimated 12,000 border workforce have received their first vaccinations, as a third batch of vaccines arrive in the country.

As of midnight Tuesday, a total of 9,431 people had received their first doses. More than 70 percent of those, which equates to 6,688 people, have been delivered in the Auckland region.

Commerce and Consumer Affairs Minister David Clark had good news, too. The Government’s Consumer Travel Reimbursement Scheme has helped return over $352 million of refunds and credits to New Zealanders who had overseas travel cancelled due to COVID-19.

But let’s tuck into those school lunches and Hipkins’ repudiation of the old saw about there being no such thing as a free lunch.

We are sure he is wrong and that taxpayers will be called on to pick up the tab, a figure not mentioned in his braying press statement as Minister of Education.

Maybe they don’t have to pick up the tab immediately, we concede, because perhaps the money has come from the government significantly increased borrowing.

That brings us to the next headline among the day’s press statements – Govt’s balanced economic approach reflected in Crown accounts.

Balance is the key word here.  The press statement records the Finance Minister’s delight that the government’s books are in better shape than expected.

The Crown accounts for the seven months to the end of January 2021 were better than forecast in the Half Year Economic and Fiscal Update (HYEFU).

The operating balance before gains and losses (OBEGAL) deficit at $4.4 billion was $2.9 billion better than forecast in the HYEFU. Tax revenue was $53.6 billion, $1.8 billion above the HYEFU forecast.

“This result reflects the continued strength of current economic conditions. The improved revenue will be considered for the upcoming 2021 Budget Economic and Fiscal Update,” Grant Robertson said.

Core Crown expenses were $60.9 billion, $0.5 billion below forecast.

Net core Crown debt was 31.3% of GDP, $3.1 billion less than forecast.

“Our careful management of the Government accounts has meant we are in a good position to respond financially to alert level rises such as those we are currently experiencing.

“We are taking a balanced approach to managing the economy and keeping New Zealanders safe from COVID-19 and we will continue that approach.”

For what it’s worth, the net debt which Robertson expressed as a percentage of GDP, is modest in comparison with other countries.  Even so, it has climbed to $100,364 million, up from $59,732m in the seven months to January 31 last year.

To balance the books, in short, the government has increased its net debt by $40,632 million.

And that’s how (among many things the government must do or has chosen to do to curry favour with voters) an additional 88,000 students in 322 schools and kura across the country have started the school year with a regular lunch on the menu, thanks to the Government’s Ka Ora, Ka Ako Healthy School Lunches programme.

As Hipkins explained, they join 42,000 students already receiving weekday lunches under the scheme, which launched last year to help tackle child poverty, improve youth wellbeing and learning and boost local economies.

Since the programme started in February 2020, it has served up over three million lunches, and reached double its target number of students in the first year.

By the end of 2021, 964 schools and kura, and over 215,000 (25 percent) of Year 1-13 students across New Zealand will be receiving free lunches.

Oh, and let’s not forget the rhetoric that is drummed up persistently from the Beehive to justify its spending and borrowing

The expansion is part of the Government’s COVID-19 response.

“Growing the programme now further supports families to meet their living costs, and provides an economic boost throughout the whole community, employing local people and spending in local economies,” Chris Hipkins said.

“School lunches impact the whole supply chain, from local growers, to delivery drivers, to the local businesses and community organisations that are preparing lunches and supplying schools.

“Over 942 jobs have already been generated by the programme and it is estimated that around 2,000 jobs will be created by the end of 2021.

“The programme has been a huge success and we’re excited to roll it out further,” Chris Hipkins said.

Latest from the Beehive

4 MARCH 2021

Over $300m returned to COVID-hit travellers

Hundreds more schools join free lunches programme

Govt’s balanced economic approach reflected in Crown accounts

3 MARCH 2021

Over half of border workforce receive first vaccinations

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