The Post: Austerity kills, but it’s not the actual threat facing us

Read the original article in the Post

Austerity kills. That’s the clear verdict from the latest research into British public spending cuts, which shows that the Conservatives’ savage post-GFC retrenchment led to at least 190,000 excess deaths.

Cuts to childcare centres and services sent more kids to hospital. That’s if they could even get there: in areas where health budgets were chopped, fewer ambulances turned up on time. Welfare cutbacks, deepening poor people’s misery, sparked drug overdoses and other deaths of despair.

The bleakest irony is that these clawbacks didn’t even aid the economy: living standards under the Conservatives stagnated for a staggering 14 years. Fewer jobs, shorter lives: austerity really is a lose-lose.

No wonder, then, that our own Labour Party wants to pin the “austerity” badge to Nicola Willis’ lapel, having started working the term into its political attacks. But will it stick?

Although austerity has no clear definition, one can take as a guide the British cuts, in which virtually all state agencies had their budgets slashed by around one-fifth. So far, the Finance Minister’s 6.5% cuts are not in the same league.

Willis has, admittedly, foreshadowed a further “programme of targeted savings”, a spending cap for most departments, and potentially more job losses. Meeting her target to curb government borrowing could also require sharp reductions.

But ministerial comments about not being “a slave” to the target rather suggest it will be relaxed. And while the redundancies in particular can cause great pain, none of this amounts to slash and burn.

State spending, after all, rose rapidly under Jacinda Ardern, from $76 billion in 2017 to $128b in 2023, most of it going on Covid, health and higher benefits. Adjusted for the rapid inflation of the post-pandemic era, this represented a $28b increase in annual spending.

Willis’s much-hyped 2024 Budget cuts removed just $2.5b, or one-tenth of that sum.

The public-sector redundancies are more sweeping, however. Staffing levels rose by around 16,000 under Labour; roughly 3000 have already lost their jobs, and that figure could ultimately reach 7000.

There is no doubt that Willis and colleagues want to shrink the state. The key measure here is government size relative to GDP, which tracks whether spending rises in line with increased costs and a growing volume of economic activity needing regulation. This captures, in short, the breadth of the public services the state offers us.

On that measure, core government spending will fall from this year’s 33.6% of GDP to 31.5% in 2029. That implies National will spend around $8b a year less than Labour would have done.

This, in turn, will require agencies to either become vastly more efficient or – more likely – deliver a lower level of service. But it’s worth recalling that in the dying days of the last National administration, state spending was just 27.3% of GDP. This Government may be tacking hard right on cultural issues, but in economic terms it plans to spend $16bn a year more than Bill English would have done.

Left-wingers may have been spooked by the Prime Minister’s stated desire to learn the “lessons” of Ruth Richardson and Bill Birch’s 1990s cutbacks. State spending then was cut from around 40% of GDP to 30%, while benefit levels were slashed by one-quarter.

One shudders to think how many deaths this austerity-on-steroids caused. But nothing like that is currently envisaged: the “lessons” soundbite is less a prediction than it is a rhetorical device, an invocation of figures still mystifyingly revered on the right. National’s plans are, at most, austerity-lite.

Hence the muted nature of the public’s response, outside Wellington anyway. Most Kiwis haven’t experienced sweeping cuts to services.

Not yet, that is. Willis’s gamble is that she can curb the government’s “back office” while protecting the frontline. And there are, of course, horror stories of bureaucratic waste. One former Ardern lieutenant told me about an internal comms staffer at a state agency who, during a job interview, admitted their key aim was – wait for it – to send one really good staff email each week.

By the same token, the public service possesses analysts who are – I’m told by their foreign counterparts – world experts in their field. The ideologically driven haste of the government’s cuts means many of the latter are being lost.

National this week touted its scientific credentials, but has slashed hundreds of public-sector science roles. And its cull of bureaucrats may – for instance – simply force frontline police officers to fill out the paperwork formerly handled by head office.

All this, in turn, could spell real trouble for the quality of public services in a year or two’s time, on top of the debacle that is the health sector.

The current political debates about “austerity” – and, relatedly, public-sector job cuts – are, in the final analysis, just shadow-boxing. What actually shows up on the frontline, and consequently in people’s day-to-day lives, is what matters politically.