Yesterday, we had New Zealand’s annual government Budget presented in Parliament.  I’m not going to comment much on the Budget - politics is not an area I stray into often.  I’ll just say that I have a sense of wasting a good crisis. My politics is classic liberalism - economic and social liberalism based on universal individual rights and responsibilities, not the American or British versions which have morphed into woolly-woofter centrist camps. So I’d have gone a lot harder on cutting the state’s activities while setting things up for the long term economic and social well-being of the country, firms and individuals.  But that isn’t my focus today.  I want to look at entitlements.

It’s a curious term  - entitlements - especially when used by a centre-right government.  It was used frequently yesterday, particularly by Prime Minister John Key in phrases like “No beneficiary will have their entitlements cut” or words to that effect.  You wouldn’t say that the supermarket is “entitled” to your money every week, nor the petrol station, nor the hotel owner if and when you take that annual holiday in Fiji, nor even the charities to which you donate.  You make choices on whether or not to spend your money, on what and with whom. But somehow, when a government spends your money for you, the recipients see it as an entitlement.

Every government spending programme - every single one - was initiated at some point by a government deciding that spending this money on that programme was a better idea than spending it on something else, or putting it in the bank, or reducing taxes. Before that decision to spend, there was no “entitlement”. The new recipients are usually intensely grateful - for about a year.  Then they start to see the continued uninterrupted and unquestioned supply of that government money as an entitlement, an inalienable right which must be maintained and grown in line with any expansion of the use for which the money was originally supplied.  Once a government starts spending on a programme, it’s extremely hard to stop, especially when citizens and institutions (public or private) receive those funds directly.  Even if the original need has gone or morphed into some unintended or even dysfunctional application.

As a new non-executive member of a big-spending government agency’s board, I’d frequently ask “Why is the taxpayer’s money being spent on this?”   I learnt quickly that, contrary to popular perception, we actually had very little power over what we spent, why and with whom.  That was principally decided by the ruling politicians, whose decisions (either logical or appeasing some political constituency) were effectively concreted in place until overturned, if ever, by another set of ruling politicians who had decided the issue was important enough.  We could move money at the margin, but the bulk of spending was effectively predetermined under rules set down by Cabinet, and very much seen as an entitlement by the often large and influential organisations that received it.  Getting anything significant changed takes years of argument, followed by more years to implement those changes. [Update: see a more positive perspective from me here.]

Let me be clear.  Although I’d probably do things very differently, most institutions and the intent for which the money is spent are  worthy and legitimate. I also recognise that changes to funding mechanisms are disruptive.  But this notion of entitlement is a real problem for us as citizens and taxpayers. It creates an ever-growing burden over generations, it ossifies society’s institutions and mechanisms, and it is a major barrier to improvement and innovation.

PS Having said all that, the Tertiary Education Commission, of which I’m a board member, contributed a very significant portion of the government’s expenditure savings. Although we also cut our operating costs - largely in line with the plan we put in place 3 years ago - the bulk of savings will come from pruning some of my pet hates, such as hobby courses funded as Adult and Community Education, industry compliance training, and various other silly funds of dubious merit. Result!