Mother of all Budgets
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The Mother of all Budgets was the nickname given to the 1991 New Zealand budget. It was the first budget delivered by the new National Party Minister of Finance
Ruth Richardson Ruth Margaret Richardson (born 13 December 1950) is a New Zealand retired politician of the National Party who served as Minister of Finance from 1990 to 1993. Her 1991 budget, which she dubbed the "Mother of all Budgets", formed the catalyst ...
and formed the catalyst of her economic reforms known in the media as "
Ruthanasia Ruthanasia, a portmanteau of "Ruth" and "euthanasia", is the pejorative name (typically used by opponents) given to the period of free-market policies conducted during the first term of the fourth National government in New Zealand, from 1990 t ...
".


Background

Richardson was a member of a wing of the National Party that emphasised small government and personal liberty. She worked closely with Minister of Social Welfare
Jenny Shipley Dame Jennifer Mary Shipley (née Robson; born 4 February 1952) is a New Zealand former politician who served as the 36th prime minister of New Zealand from 1997 to 1999. She was the first female prime minister of New Zealand, and the first woma ...
on the 1991 budget, which Richardson proclaimed the 'mother of all budgets'. The budget cut spending on many of the
welfare state A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equita ...
institutions established in the 1930s by the First Labour Government. The unemployment benefit was cut by $14.00 a week, sickness benefit by $27.04, families benefit by $25.00 to $27.00 and universal payments for family benefits were completely abolished. Richardson also introduced many
user pays User pays, or beneficiary pays, is a pricing approach based on the idea that the most efficient allocation of resources occurs when consumers pay the full cost of the goods that they consume. In public finance it stands in opposition to another pr ...
requirements in hospitals and schools, services previously free to the populace and paid for by the government. Public services such as state housing were devolved essentially into companies under government contract in all but name. Despite promoting acceptable measures such as personal saving and fiscal prudence, the largest opposition came from the fact that cuts were focused largely on low income families which were greater in dollar terms than savings from the top 20% of families. The budget was not popular with many in the conservative wing of the National Party either, and led to major disagreements over policy. Former Prime Minister Sir Robert Muldoon resigned from his Tamaki constituency in protest of Richardson's policies.


Outcomes

Such was the unpopularity of Richardson's policies among voters that it nearly cost National the next election. At the 1993 election National's comfortable 18 seat majority from 1990 was reduced to a bare majority of only 1. This backlash against the government at the polls, combined with rapidly rising levels of unemployment, was due to the disapproval by the public of Richardson's budget decisions. The effect of her policies has had a profound effect on New Zealand, during her time in the finance portfolio she implemented a radical shakeup of the healthcare system in New Zealand and resulted severe financial strains on hospitals. A 2015 review of the changes in income in New Zealand between 1990 and 1993 concluded that welfare reliant households income fell from 72% of the average national income to 58% in just three years. Anger towards the budget played a significant role in the process of
electoral reform in New Zealand Electoral reform in New Zealand has, in recent years, become a political issue as major changes have been made to both parliamentary and local government electoral systems. National elections in New Zealand were first held in 1853 using the basic ...
. Revolted by the spectacle of three elections in a row where the winning parties broke their promises and implemented unpopular market reforms, the electorate voted to change the electoral system from first-past-the-post to
mixed member proportional Mixed-member proportional representation (MMP or MMPR) is a mixed electoral system in which votes cast are considered in local elections and also to determine overall party vote tallies, which are used to allocate additional members to produce ...
(MMP) in 1993. MMP prevented any party from commanding an absolute majority, thus removing their power to implement radical changes in government policy. In the general elections of
1993 File:1993 Events Collage.png, From left, clockwise: The Oslo I Accord is signed in an attempt to resolve the Israeli–Palestinian conflict; The Russian White House is shelled during the 1993 Russian constitutional crisis; Czechoslovakia is peacefu ...
and 1996, several new parties benefited from the electorate's frustration, particularly the
Alliance An alliance is a relationship among people, groups, or states that have joined together for mutual benefit or to achieve some common purpose, whether or not explicit agreement has been worked out among them. Members of an alliance are called ...
and New Zealand First. Benefit payments remained at low levels for the following three decades, across successive governments, until a large boost in the 2021 budget by the Sixth Labour Government. The finance minister
Grant Robertson Grant Murray Robertson (born 30 October 1971) is a New Zealand politician and member of the Labour Party who has served as the 19th deputy prime minister of New Zealand since 2020 and the minister of Finance since 2017. He has served as Member ...
referenced the mother of all budgets in his budget speech stating that the benefit increases were to "right the wrongs" of Richardson's 1991 budget and would "address the most inequitable of the changes made 30 years ago". Richardson responded, defending her budgets legacy saying "Grant Robertson's budget is overtly driven by politics and the desire to pay off Labour supporters" as opposed to hers which was "...driven by a desire to lift economic growth and to make employment attractive."


References

{{Economy of New Zealand 1991 in New Zealand New Zealand budgets New Zealand National Party 1991 in politics 1991 in economics
New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
Political terminology in New Zealand