Responsible management, or borrow and hope?

Bill English put out an interesting media release yesterday; check this out:

Labour continues to make expensive spending promises it could not afford without borrowing hundreds of millions of dollars more from overseas lenders, Finance Minister Bill English says.

“In the past week, it has proposed doubling paid parental leave entitlements, which would cost taxpayers another $150 million a year.

“And today, Labour’s leader confirms he backs research and development tax credits, which would cost at least $300 million a year. He claims this could be paid for from a new capital gains tax, but that’s not possible as Labour already concedes this would raise little extra revenue in its first few years.

“This from a leader who says he will be thrifty with taxpayers’ money, but in reality wants to spend more, borrow more and tax more.

“Together, these two Labour promises alone would amount to almost $2 billion of more debt over a four-year forecast period. Labour has clearly learned nothing from its past extravagance. Less than five months since the election, it is already going back to its bad old habits.

“New Zealanders and businesses are being careful with their own money, prioritising their spending and getting on top of debt. They expect nothing less of the Government. We need only look to many other countries to see the dire consequences of governments spending and borrowing too much.

“This Government does not want that for New Zealand. That’s why we’re focused on getting back to surplus by 2014/15, which will provide us with more choices such as repaying debt, delivering better results from public services and building a more competitive economy based on higher savings and less debt.

“It’s time Labour was honest with New Zealanders about precisely how it will pay for its spending promises,” Mr English says.

 English is dead right. We are already borrowing too much, although that amount is slowly being pared back. The John Key-led government has set a target of a return to surplus by 2014, but that is going to take hard decisions, not extravagent promises of things that wopuld be nice to have, but are clearly unaffordable.

Our father was of Scottish heritage, and was an accountant by profession. To describe him as fiscally conservative would be something of an understatement. He never had a credit card, and never used hire purchase; if he wanted something, he saved for it, then paid cash. A good part of that has rubbed off on us, although we DO have a credit card!

Labour trotted out all sorts of promises during last year's election campaign; no asset sales, no GST on fruit and vegetables, a capital gains tax, a $5000 tax-free income threshhold, and the extension of in-work tax credits to people who weren't in work, plus other extravagences. All would have been nice to have in an ideal world, but all could only have been paid for by further borrowing, or by tax increases. 

The public passed judgment on Labour's borrow-and-tax regime. The Labour Party received barely more than a quarter of the popular vote. Some of those rejected policies have been consigned to the dustbin, but others remain. So it's time for Labour to be honest about where the money would come from, especially given that the capital gains tax would be tax-negative for at least its first four years, based on Labour's own numbers.

One of the key moments of last year's campaign came when John Key asked Phil Goff to "Show me the money!" The same question now needs to be asked of David Shearer and leader-in-waiting Grant Robertson.