Now BERL is likely aware that the Budget Economic and Fiscal Update leaves out that unallocated spending. It's right there in the darned table. Here:
BERL then goes and deflates that by expected inflation; the Greens then claim that there's a real cut in spending.
Now take a look at the line reading "Forecast for future new spending". That's the line where Treasury makes its best wink-wink-nudge-nudge guess as to future operating spending announcements, some of which it's possibly already had to cost for future government policy announcements, and some of which will be based on expectations of future inflation adjustments.
When BERL runs its inflation adjusted accounting on Core Crown Expenditures, it finds a 9.9% nominal and 2.8% real spending increase over the next three years. That total Core Crown Expenditures category includes the future spending increases. Those future spending increases have not been allocated across spending categories. If it were allocated proportionately across all categories, the weighted average of the different categories' increases would wind up being 2.8% real. But BERL doesn't assume that. It just takes each line from the BEFU and inflation adjusts it while ignoring the forecast future new spending.
Nolan is right. And it's worse than that. Nolan points to the 2013 Note 8 adjustments to BEFU. The 2014 table above has the forecast increases right there in the same table where BERL would most likely have pulled its data. It would be really hard to miss it. And if you didn't miss it, it would be really hard not to know that it would be really misleading to run a deflation adjustment without incorporating future expected spending increases where some of those increases would be to offset future inflation!
The forecast new capital spending and unallocated contingencies are in the 2014 Note 8 adjustments; there's another $2.5 billion in forecast new capital spending by 2018. None of that's included in BERL's accounting.
Nolan's evaluation, noting that he's an Infometrics economist who hadn't worked on the report:
One thing I will point out, after reading the Infometrics report for the first time, is that they don’t say the things in the Green’s summary – but if you do a costing for a party, that is the way they will sell it. The BERL tables on the other hand do imply what the Greens take from them – and that is very disappointing as they are misleading.So the Greens put the best spin they could on the Infometrics numbers, as would any other party. But they could have been misled by the BERL tables. And that turned into some very erroneous headlines for the Greens, and some embarrassment when the Minister of Finance used a yellow highlighter to point them to what BERL failed to notice:
@RusselNorman @stevenljoyce Here it is. P119 BEFU "Forecast for future new spending" - the line BERL missed. pic.twitter.com/V2pnaYwXdqI love that our Minister of Finance will come in and correct these kinds of things, or at least somebody in his office on his behalf (who knows whether he runs his own Twitter account).
— Bill English (@honbillenglish) August 19, 2014
It looks like Russell Norman honestly believed that there was no provision for future spending. I wonder whether he's satisfied with the advice he received.