Is this the fiscal hole?
By Richard Harman (author)
Prime Minister Jacinda Ardern may have revealed a glimpse of Steven Joyce’s infamous “Fiscal Hole” yesterday when she expanded on the decision to backtrack on the promise to make doctors’ visits cheaper.
Both the Prime Minister and Health Minister David Clark have spent the last two days clearly trying to dampen down expectations in the health sector.
They are doing this as the health sector appears to be about to confront a “perfect” fiscal storm of rising DHB deficits and a still unresolved nurses' wage claim.
Labour’s Manifesto promised increased funding to GPs who lowered their fees by $10 to apply from July 1.
But now both Ardern and Clark are saying that and other health moves will have to be phased in over three years.
“Improving the access to primary health care is and remains a focus for us,” she told her weekly press conference yesterday.
“What we have talked about generally for this budget is the need to have to phase over a three year period some of the things that we wish to achieve because we can’t do everything in health care in one go.”
Though Joyce’s claims that Labour faced an $11.7 billion fiscal hole over three years have been widely debunked, one of his points, that Labour’s budgeting left little wiggle room appears to be the case.
In health, the Government has been caught by a rapidly deteriorating financial situation in the District Health Boards and the still-to-be-settled nurses' wage claim.
Ministry of Health figures for DHB accounts for the current financial year up to the end of February show that all but three will be in deficit for the full year and that the total deficit will be $189 million against a forecast of $143 million.
Just over $120 million of that total will be accounted for by four DHBs --- Waikato, Southern, Capital and Coast and the biggest of them all, Canterbury which is expected to run up a $58 million deficit for the year.
Those figures, however, do not account for the nurses' pay claim which at least some DHB’s have estimated in their forecasts at only two per cent; the figure now rejected by the Nurses' Union.
Speaking on TVOne’s “Q+A” at the weekend, Clark said the pay claim was “huge.”
“Let’s not pretend it’s not,” he said.
“It’s a serious issue, but it does need to be tackled.
“The offer that was rejected by the nurses was more than the average offer under the last Government.
“There’s no doubt their expectations are up.
“But now we’ve got a process in place, and we’ve got to approach that in good faith.”
Clark in November last year had to give his approval for the DHBs to exceed their budgets just to meet the original settlement proposal which was rejected by the nurses.
Like Ardern, Clark new health expenditure would now have to be phased in over three years.
“We won’t be able to afford everything straight away.
“Nobody pretends we can.
“We won’t be able to afford everything in our first Budget.
“We’ve got to do it step by step.
“And there is a backlog of underfunding.
“We’re going to take steps to address that. “
Meanwhile, there is good news for the Government in Treasury's accounts which show that the surplus was running at about $500 million for the year to the end of February.
Labour has promised to continue big surpluses and there are recurring questions as to whether this is wise policy given all its pending commitments.
Ardern rejects that argument.
“Making sure that we have services that are strong in health and education is something that we remain committed to delivering in this Budget,” Ardern told her media conference.
“At the same time, I know New Zealanders want to feel assured that we have balanced the books; that we are ready in case we need any contingency for a significant event in New Zealand; that we have buffeted the vulnerabilities that a country like ours has.”
That last statement could have been made any time over the past nine years by Bill English or Steven Joyce.
But they managed to avoid dealing with the DHB deficits ---unfortunately for Ardern, that time has now come.