ACT leader David Seymour has alleged Labour would need to dip into contingency funding – aka the government's emergency money pot - just to keep the lights on in hospitals as he says the party has not accounted for inflation or population growth.
But a closer look at ACT's analysis shows it has failed to account for the drop off in COVID spending – which doesn't need to increase for population growth, as the need for pandemic funding all but disappears from next year.
ACT did an analysis of the Pre-Election Economic and Fiscal update released on Tuesday and alleged Labour left itself $882 million short in the 2023/24 financial year – climbing to $1.8 billion the following year.
"Using Consumer Price Index forecasts, the Government needs to dip in for $882 million in contingencies just to keep the health system going in 2023/24, while in order to maintain health and law and order in 2014/25 they'll be pinching $1.8 billion from contingencies," Seymour said.
Seymour said the contingency funds should be left alone.
"Contingencies are by definition meant to be left for unpredictable circumstances. By using them just to maintain existing services, Labour is leaving New Zealand in a shocking position if and when the next Government faces some sort of crisis.
"[Labour's finance spokesman Grant] Robertson knows he's on his way out, so he has left a grenade for the next Finance Minister and is setting the country up for disaster. Kiwis deserve better than this."
But Robertson said that analysis shows "a lack of understanding of how government accounts work and includes basic and fundamental errors".
"It adjusts health spending for inflation and population growth from the 2022/23 year without accounting for the fact that this year includes $2.5 billion of spending on COVID-19 health response, which is clearly not part of ongoing health spending plans.
"The analysis also generates an independent estimate of the remaining operating allowance through subtracting the Government's baseline savings measures from the operating allowance.
"This is completely the wrong way round. It seems to suggest that something that the Government announced as a savings measure from department baselines has been interpreted by ACT as something that needs to be paid for through future operating allowance."
Robertson said PREFU provides for "a cost pressure allocation for health and multi year funding for the Justice cluster".
"In addition, there is still unallocated expenditure in the operating and capital allowances."
After Newshub put Robertson's response to ACT, the party didn't dispute it had it wrong.
"The Government says this is the result of withdrawing COVID funds, but can anyone say the health sector wasn't already under pressure even with that funding in the past year?" said a spokesperson.
"And if the Government really expects people to believe they've been spending $2.5 billion on COVID-related expenses buying vaccines or funding MIQ in the past financial year then that is a scandal in itself. It's more likely COVID funds were being used to prop up the under-pressure health system."
In Treasury's Budget Practice Guide it states that inflation is not automatically accounted for and therefore Governments must leave room in their operating allowances (the amount of new money they allow themself to spend every budget) to fund this.
"Because most government expenditure does not automatically adjust for inflation, it is generally expected that changes to expenses and new revenue policies are funded from the operating allowance," it states.
At the Budget, Robertson set his operating allowances at $3.5 billion for the next three years – however, he recently reduced those allowances in the face of worsening tax take.
The PREFU released on Tuesday showed a tax take shortfall contributed to a surplus being pushed out a year. Inflation was predicted to return to a 1-3 percent band by the end of the next year and domestic price pressures mean interest rates need to stay elevated for longer. However, it also showed there was no recession forecast and unemployment is relatively low.
