Scoop Election 08: edited by Gordon Campbell

Treasury and the Don Brash revival

July 22nd, 2009

zombie don brash

People are just so suspicious. When you have Treasury touting the virtues of contracting out public services and Don Brash – clearly, our best and brightest lateral thinker – being entrusted with the job of lifting our productivity game, then some cynics are getting a nasty feeling that this is all a dream we’ve had before, and that it ended badly. Why, some cynics even feel these moves are more about right wing political correctness than any workable plan to get us out of recession. For shame! Finance Minister Bill English is very, very disappointed in us.

Well, colour me skeptical. Brash wants to know why New Zealand wages are lagging behind those in Australia. How likely is it – do you think – that he will consider even part of this gap goes back to the industrial legislation passed in the 90s, the express purpose of which was to drive down wages, for the short term benefit of New Zealand employers? Isn’t it kind of ridiculous that the same Nationa Party that deliberately set out to cut wages in the 90s, is now throwing taxpayer money on a commission to find out why our wages are now so much lower than in Australia? Keep in mind that Brash is getting this cushy sinecure in the same week that the rest of are being told to batten down the hatches and tighten our belts.

Is Brash likely to sheet home our low productivity levels to the past failure by the likes of Telecom and the various owners of NZ Rail to do much more than asset strip their New Zealand operations? Has the readiness of business to piss away its profits in dividends and repatriated profits ( rather than make capital investments) got anything to do with our low productivity rates? What Brash and his mates in National and Labour did was create an economy where the few could extract monopoly or near monopoly rents from a captive population of consumers. Is that process likely to be critically examined by our new productivity police?

Moving right along….is business likely to be blamed for its failure to make capital investment in the new technology basic to any genuine and sustainable lift in our productivity levels? Is Brash likely to berate the private sector for its failure to invest in r&d, and for its ongoing parasitical reliance on the government to carry out r& d in this country – as underlined by the scrapping of the Fast Forward Fund. Is Brash likely to condemn the investment flows out of New Zealand, and the contribution this makes to our current account deficit?

I think we know the answer to all of these questions. Treasury and Brash are blinkered ideologues, and always have been. Yes, substantive problems are facing this country, The books are in terrible shape, and the tax revenues to fund public services are in steep decline. That only makes it all the more unfortunate that the government is coming up with the same tired Treasury prescriptions and the same tired old faces to spearhead its response. Would that we had a swine flu vaccine that was as immune to real world outcomes as Don Brash, and the captains at Treasury.

In other words, if English wants these moves to be taken seriously and discussed on their merits, he could start by convening a genuine multi-party, multi-ideology response to the economic crisis. Lets get the Brian Eastons and Susan St Johns and Kel Sandersons in there around the table as well. National’s ongoing failure to support an inquiry into the banks – in the same week that it is letting loose the dogs on the public service – shows just how narrow the current agenda really is. It is the same old ideological campaign against Big Government, with the recession being used as the latest convenient excuse. Memo : it wasn’t Big Government that caused this recession. It was the unregulated private sector.

Treasury you might have thought, could have had some views on how – during a recession – a menu of job cuts and contracting out is likely to impact on the regional and national economy. Is it a good idea or a bad idea to argue for deflationary policies when we are trying to keep the economy from seizing up? Just asking. Just looking for some coherent, co-ordinated plan for economic recovery. What we got instead from John Key in his speech a week ago was public relations fluff – work harder, keep on doing what we’re doing only smarter somehow, and oh yes, rely on primary industry and tourism to get us out of this hole. Yeah, that’ll get us back up the OECD ladder. The OECD is just full of examples of thriving modern economies reliant on agriculture and tourism.

If, as appears to be the case, the government hasn’t a clue about how to proceed, then I suppose its little wonder they are falling back on their old mantras – privatize, contract out, and attack the public service bureaucracy. As many have noted,. Treasury is hardly taking its share of the burden. It is getting nearly a ten per cent boost to its budget this year, at a time when other departments – including those that are at the frontlines of service delivery – are facing cuts of five to ten per cent.

Minor, but relevant issue : as Labour MP Grant Robertson pointed out, if there really is a problem with public service performance and delivery, why isn’t the call to arms coming from the State Services Commissioner, rather than from the head of Treasury? What gives Treasury the right to think that it is part of the solution, rather than part of the problem? Answer : it may have something to do with ideological correctness, and a desire to impress its political masters.

Treasury after all, is not exactly the best placed body – in a practice what you preach sense – to be chiding others on how to lift their game. As many commentators have noted, the process should begin with Treasury being required to contract out its forecasting work. For years and years, Treasury has been notably more inaccurate than the competition – it miscalculated the likely tax revenue for instance, for six years in succession. Treasury boss John Whitehead must know this. He has been in his current post since 2003, and thus bears ultimate responsibility for his department’s forecasting track record. No sign of a mea culpa in his speech, though.

Treasury should also be willing to open up its policy advice to competition. (On a range of economic issues that affect exporters, the government would be doing much better to contract with Berl for policy advice. Why not ask the exporters who they think is on the right track about interest rates and the exchange rate – Berl or Treasury?) In coming days, there will be a lot of discussion as to whether the alleged cap on the public service still remains – and if so, whether that pertains to the core public service or to state service entities etc etc.

While important, these really are details. The overall process is being driven by ideology – one that is a proven failure, to boot – and not by any rational long term plan. More and more the public service is looking like a Guantanamo detainee. Beaten, ritually humiliated, forced to confess to the sins imagined by its captors and kept in limbo about when this process will end, and what purpose and plan its masters really have in mind, if any. Basically, we’re all in Gitmo, now.

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