Government to ask Parliament to approve big new spending 'buffer'

Tuesday, 7 September 2021

Finance Minister Grant Robertson sets out the economic support available to businesses as New Zealand goes into lockdown.

Finance Minister Grant Robertson will ask Parliament on Wednesday for permission to spend more money in the wake of the Delta outbreak and the resumption of wage subsidies.

The Government will table an Imprest Supply Bill, giving it approval to spend additional money not outlined in the May Budget.

Robertson declined during a parliamentary debate on Tuesday to reveal the size of new financial buffer it would be seeking but admitted it would be “significantly larger that any of us would have expected” before the resurgence of Covid.

The buffer, if spent, is set to increase government debt.

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Finance Minister Grant Robertson expects the bill for business support during the first fortnight of lockdowns to come to about $1.7 billion.

Robertson said the Government had “north of $8 billion” in the kitty to meet the direct costs of the Covid outbreak, ahead of the current lockdowns.

That included “just under $5b” that remained in its vastly depleted Covid Response and Recovery Fund “coming out of the Budget” and about $3b that had already been allocated from the fund to various departments but which they did not expect to spend.

The Government expected to have to fork out $1.7b to pay claims for wage subsidies and Resurgence Support Payments that businesses were entitled to during the first fortnight of the Delta restrictions, Robertson said.

The bulk of that would be an expected $1.2b for wage subsidies, he said.

National Party finance spokesman Michael Woodhouse says normal disciplines won’t apply to the larger spending envelope.

If the $8b ran out, the Government could also draw on any remaining contingency funding that it obtained from Parliament in an earlier Imprest Supply Act that Parliament passed in June.

That act – which was essentially designed to tide the Government over until Parliament approves its annual spending plan – capped the amount of money the Government could spend between June and September at $35b and included $5.3b for contingencies.

But the possibility of a long spell at higher alert levels in Auckland, pressure from businesses for additional support, and the risk of a wider resurgence of the virus, appears to have left the Government seeing the need for further fiscal headroom beyond that.

As well as forcing government spending higher, the lockdowns are reducing economic activity with a corresponding loss of tax revenues.

“Clearly there are ongoing costs associated with Covid … and that includes matters such as vaccinations, managed isolation and quarantine and so on and so there is an ongoing need for expenditure in the response to Covid,” Robertson said.

National Party finance spokesman Michael Woodhouse said that the spending authorised by the Impress Supply Bill would be “another big slush fund”.

It was not subject to normal parliamentary scrutiny because it had not gone through the normal Budget process, he said.

Woodhouse said his concerns were heightened by the way the Government had spent money from its Covid Response and Recovery Fund, which was originally allocated $62b last year.

“They have used it for things that by the longest bow I can’t see how they relate to Covid,” he said.

The included flood relief and putting cameras on fishing boats, he said.

“They are taking the chance to lock in some spending some of which is structural and will go on for years and years when we just don’t have the transparency we need.”

Robertson told Parliament’s Finance and Expenditure Select Committee on August 24 that it had the ability to fund wage subsidies “for some considerable time without going back to Parliament for more money”.

He made those comment four days after telling 1300 businesses on a webinar on August 20 that he was confident that there would not be need for “a very long extended lockdown like we had the first time around” – referring to the original level 3 and 4 lockdowns in 2020 for the comparison.

Robertson played down the impacts of the hit from the Delta outbreak when addressing the select committee last month.

“We need to take a step back here and remember that the economy has gone extremely well, fiscal headroom is better, and we're in a strong position to be able to respond to the outbreak,” he said.