Ministers merrily dispense more millions while Crown accounts show big above-budget lifts in Covid costs

Monitoring the Ministers

While Finance Minister Grant Robertson was noting an above-forecast increase in government spending in the first few months of the year, his colleagues were delighting in announcing even more spending.

The biggie was the announcement of a support package intended to help revive economic, social and cultural activities in  Auckland over summer and provide relief for people in hardship .

The sum involved – as often happens in Beehive statements – was buried in verbiage:  the $37.5 million package was put together jointly with Auckland Council and Auckland Unlimited.

The Minister for the Digital Economy and Communications, David Clark, and Minister for Economic and Regional Development, Stuart Nash, popped up to announce world-class mobile and broadband services had been switched on for the 663 residents of the Chatham Islands.

The network has been enabled by the Rural Connectivity Group (RCG), Government’s Rural Broadband programme and an $11.5 million investment from the Government including $8.6m from the Provincial Growth Fund.

Foreign Affairs Minister Nanaia Mahuta – is she still in MIQ? – announced New Zealand is contributing a further $9 million to the COVAX Advanced Market Commitment (AMC) to ensure developing countries have access to COVID-19 vaccines.

COVAX  is the only global initiative working with manufacturers and governments to ensure COVID-19 vaccines are available worldwide to both high-income and lower-income countries. It is co-led by CEPI, Gavi and WHO – working in partnership with developed and developing country vaccine manufacturers, UNICEF, the World Bank, and others.

The latest funding brings New Zealand’s total COVAX AMC contribution to $26 million.

Our Minister for Women, Jan Tinetti, was spending too – or rather, announcing the 160 successful applicants who had applied for lolly in the COVID-19 Community Fund to support organisations helping women and girls affected by the pandemic.

At the end of the statement we learn the $2 million fund was allocated to the Ministry for Women as part of the COVID-19 Response and Recovery Fund established as part of Budget 2020.

That allows us to bring the Minister of Finance into the picture.

He advised us the Government’s financial accounts continue to reflect an economy that has performed better than expected, despite the latest Delta COVID-19 outbreak.

But although taxation revenue was higher than forecast, so too (by a bigger amount) was  government spending and the Budget deficit.

The Crown accounts for the four months to the end of October factors in the improved starting position for the new financial year. Core Crown tax revenue was $2.5 billion above the Budget 2021 forecast, coming in at $31.8 billion. This was largely driven by better-than-expected corporate profits and more people in work.

The operating balance before gains and losses (OBEGAL) was a deficit of $7.8 billion, $1.8 billion higher than forecast, as restrictions to contain the pandemic triggered the payment of government financial support.

As a result, core Crown expenses at $41.9 billion were $4.9 billion above forecast due to the payment of wage subsidies and COVID-19 resurgence support payments to protect jobs and livelihoods.

This better-than-expected result showed the resilience of the economy as it operates under Alert Level restrictions, Grant Robertson said (not for the first time rejoicing in describing the economy as resilient).

 “We have been taking a balanced approach as we protect New Zealand from the global COVID-19 pandemic. This approach has been reflected in these results.

“As the country transitions to the new COVID-19 Protection Framework and the fewer restrictions that go with it, the prospects are strong for the economy to support the recovery and deal with long standing challenges such as climate change, housing and child wellbeing,” Grant Robertson said.

Great.  But without studying the latest financial statements too closely, Point of Order noted some items which cry out for more explanation.

Social security and welfare accounted for $16.1 billion of core Crown expenses.  This accounts for 39 per cent of those expenses, a significant 26 per cent more than forecast.

That’s almost twice as much as health spending of $8.6 billion, which accounts for 21 per cent of the total.  But the health spending was a mere 0.7 per cent above forecast, notwithstanding the demands of the Covid-19 response.

In the comparable four months last year social security and welfare spending amounted to $13.3 billion.

Fair to say, the $2.6 billion spent on economic and industrial services in the first four months to October 31 was a whopping 89 per cent above forecast. That’s a much bigger variance from forecasts than social security and welfare spending, but economic and industrial services account for a much smaller 6 per cent of total Crown spending.

We looked to the Treasury’s press statement for more details than Robertson provided.

But we learned only this:

Core Crown expenses were $41.9 billion, $4.9 billion or (13.3%) above forecast, mainly owing to the reappearance of COVID-19 which triggered a number of fiscal support measures. As a result, wage subsidies and COVID-19 resurgence support payments were $3.6 billion and $1.3 billion respectively higher than forecast.

The Nats, under new leadership, might try to winkle more information out of the Minister.

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