National claims Finance Minister Grant Robertson has run down the $50 billion Covid recovery fund to fund general spending, meaning he will have to borrow more it there is another outbreak.
As part of the 2020 Budget, the Government established a $50 billion Covid-19 Response and Recovery Fund (CRRF), billions of which was not allocated to particular initiatives to allow Cabinet to allocated spending as needs arose.
When Labour released its pre-election fiscal statement, it not only published an estimate of what New Zealand’s debt levels would be if the fund was spent, it provided a second debt track showing what would happen if the remaining funds in the CRRF were not needed, implying that the funds were contingent on specific Covid related initiatives.
Since then the funds have continued to be depleted, in some cases for spending with little clear link to the response to Covid-19.
By February, the Government said that the amount unspent had fallen to $10.2b which had been “set aside for any future health and economic response needed in the case of a further Covid-19 resurgence”.
However, half of the remaining money was allocated to the housing acceleration package, a suite of measures announced by ministers in March aimed at improving housing affordability.
Documents released by Treasury show that initiatives to get funding included wallaby and wilding conifer control schemes, as well as funding for the Olympics, water safety, a play about the Covid response, and a “modern approach to night classes”.
Opposition shadow treasurer Andrew Bayly said much of the spending in the fund had been wasteful and now Robertson was likely to have to borrow more in the event that there was a Covid-19 outbreak.
“In a traditional budgeting sense, everyone knows what the operational allowance is. What’s he [Robertson] has done is he’s just chosen to create this artificial fund, a conceptual fund, and every time he needs a bit of extra money, he’s just dipped into it. And, unfortunately, he’s dipped into it again and again and now there’s only $5 billion left,” Bayly said.
“What I’m worried about is, what happens going forward. If we do get Covid, we actually need this money spent on good projects that relate to Covid, but more importantly this was set aside for a health response.
“In the event that there is a lockdown, we need a truckload of money because we know how expensive it is.”
In a statement, Robertson denied that the Labour Party’s pre-election materials suggested the money in the fund would only be used if there was an outbreak.
“The Covid Response and Recovery Fund is to respond to Covid but also to support the economic recovery.”
Robertson said the Government did not expect to exhaust the fund, but confirmed that if it was and there was an outbreak, it would look to raise debt.
“It is not our expectation that this will be necessary as the vaccination programme rolls out. If the fund were to be exhausted in dealing with a significant outbreak, the Government could consider borrowing to cover those costs.”
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