A failure of measurement: inside the Budget lock-up

Monday, 30 May 2016, 1:01 pm
Article: Max Rashbrooke

The funniest moment in last week’s lock-up – a closed-off room where journalists get early access to Budget documents under embargo – came when one of the government’s press secretaries explained to the assembled hacks that there had been a minor security scare and it was essential that everyone stay away from the windows. The journalists promptly flocked to said windows in order to see what was going on. (Nothing much, as it turned out.)

The other flocking behaviour of the day was on show shortly after the embargo lifted at 2pm and news organisations started filing reports claiming that health, and to a lesser extent housing and education, were the ‘big winners’ out of the Budget. This was off the back of $2.2bn for health over four years, nearly $900m for school buildings and $200m for social housing.

The problem with this reporting is that, although on one level accurate, it failed to take into account the fact that in most cases the apparent increases were in fact cuts. How so? Because of the twin effects of inflation and population.

Since inflation eats away at budgets by making everything more expensive, you have to reduce (effectively) each year’s promised spending by the expected inflation rate that year, to get a more accurate figure. Then, you have to deal with the fact that in many areas the spending will have to spread around more people, as the population grows rapidly, so you need to divide the funding amount by the number of people targeted.

The effects of these adjustments is often dramatic. In health, what looked like an increase in funding of $550m a year was actually a cut of $300m, according to calculations by the CTU and the Association of Salaried Medical Specialists. Inflation in the health sector is especially strong because the cost of treatments and equipment are skyrocketing, and we have an ageing population with increasingly high health needs. So $550m a year was $300m short of what the sector needed just to stay still, to have effectively the same funding as last year, let alone expand services.

What does this mean for reporting? I think we need to get some standards in place for reporting on Budget 2017, so that more is written next year about what funding means per person and after inflation. This would allow us to compare, say, per-patient funding in health in 2008 vs 2017 – which would be much more meaningful and useful than just the total amounts of spending, especially the non-inflation-adjusted ones.

This would be a good habit to get into when it comes to keeping governments – not just this one but all future ones – honest in terms of their spending. Because it’s not to their advantage, I don’t think governments themselves will ever do it, so the initiative will have to come from reporters and civil society.

A second thing I’d like to see is a clearer summary of cuts, as a counterweight to the reports of new spending. The Treasury, to their credit, is trying to make the Budget easier to understand, and this year produced a nice Summary of Initiatives that pulled together details of all the new spending projects.

That was great, but there was no equivalent summary of the cuts – astonishingly enough – and so reporters were left hunting through dozens of massive documents, trying to work out where the government had saved hundreds of millions of dollars. And because the new spending was easier to find and well highlighted, it tended to generate nice lists of positive initiatives in the news reports.

Some reports on the cuts have come out, but I don’t think – though I’m happy to be corrected – that any news outlet put together a comprehensive list of them. This matters, because we need to be able to clearly see what programmes are being stopped, and form a view on whether they had ceased to be useful or were cut purely to fund other plans – the old robbing Peter to pay Paul trick that most governments indulge in at some point or other.

Again, I don’t expect governments to come up with this list themselves, so it’ll be left to others to do. It seems like an obvious crowd-sourcing project, since anyone can hunt through documents, especially to check on pet projects or areas they know well. And I think it would do a lot to improve the debate about what’s being spent and where.

© Scoop Media

Max Rashbrooke

Journalist

Max Rashbrooke is a journalist and author working in Wellington, New Zealand, where he writes about politics, finance and social issues.

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