- Nine To Noon -
- Friday 7 February 2014 -
- Kathryn Ryan & Brian Easton -
Income inequality in New Zealand is set to become a central election issue, but is it really getting worse?
Brian Easton offers a solution how to address income inequality. Listen and find out what he suggests.
Click to listen: Brian Easton, Economist ( 13′ 37″ )
Acknowledgement: Radio NZ
(Hat tip: Murray Simmonds)
= fs =
In case there are still one or two New Zealanders remaining who haven’t yet cottoned on to one very simple truism about National in office, let me spell it out; they are rank hypocites of the highest order.
And in case you, the reader, happen to be a true-blue National supporter, let me explain why.
In the last four years, National has been beavering away,
- slashing budgets
- sacking nearly 3,000 state sector workers
- closing schools
- attempting to close special-needs services such as Nelson’s Salisbury school
- cutting state services such as DoC, Housing NZ, Police, etc
- freezing wages for state sector workers (whilst politician’s salaries continue to rise)
- cutting back on funding to various community services (eg; Rape Crisis ands Women’s Refuge)
- and all manner of other cuts to state services – mostly done quietly and with minimum public/media attention.
In return, the Nats successfuly bribed us with our own money, giving us tax-cuts in 2009 and 2010. (Tax cuts which, later, were revealed not to be as affordable as what Dear Leader Key and Little Leader English made out – see: Key: $30b deficit won’t stop Nats tax cuts, see: Government’s 2010 tax cuts costing $2 billion and counting)
One such denial of funding for public services is an on-going dispute between PHARMAC and the New Zealand Organisation for Rare Disorders (NZORD) which is struggling desperately to obtain funding for rare disorders such as Pompe’s Disease,
Acknowledgement: Fairfax Media – Mum not prepared to wait and die
NZORD and it’s members have been lobbying National for the last four years to gain funding for much-needed medication. They are in a dire situation – this is a matter of life or death for them.
This blogger has blogged previously about their plight,
Previous related blogposts
- Priorities? (19 Oct 2011)
- Terminal disease sufferer appeals to John Key (12 Nov 2012)
- “There’s always an issue of money but we can find money for the right projects” – John Key (20 Jan 2013)
- “One should judge a society by how it looks after the sick and vulnerable” – part tahi (4 March 2013)
- “One should judge a society by how it looks after the sick and vulnerable” – part rua (4 March 2013)
- “One should judge a society by how it looks after the sick and vulnerable” – part toru (4 March 2013)
This blogger has also written directly to the Prime Minister and to Health Minister, Tony Ryall.
One response from Minister Ryall is presented here, for the reader’s attention,
So there we have it, folks. If you’re a New Zealander dying from a rare disease, and PHARMAC won’t fund life-saving medication – don’t expect an assistance from this rotten government. Their response will be, and I quote,
“While I share your concern [snort!!!] for people with Pompe disease, as I advised you in my letter of 22 November 2012, in the current fiscal environment, unfortunately funding is not available for all treatments.”
So “in the current fiscal environment, unfortunately funding is not available for all treatments“?!
But funding is available for;
$1 Rugby – $200 million to subsidise the Rugby World Cup (see: Blowouts push public Rugby World Cup spending well over $200m)
$2 Movies – $67 million paid to Warner Bros to keep “The Hobbit” in New Zealand (see: The Hobbit: should we have paid?) and $300 million in subsidies for “The Lord of the Rings” (see: Hobbit ‘better deal than Lord of the Rings’ – Key)
$3 Consultants - After sacking almost 3,000 state sector workers (see: 555 jobs gone from public sector) – and with more to come at DoC – National seems unphased at clocking up a mind-boggling $1 billion paid to “consultants”. (see: Govt depts clock up $1bn in consultant fees)
And on top of that, we are now faced with the prospect of a trans-national corporate – Rio Tinto – with their hands firmly around Meridian Energy’s neck, attempting to extract a greater subsidy from the SOE powerco. The story began in August last year,
Acknowledgement: NZ Herald – Rio Tinto seeks power deal revision
We know why. Despite implausible assertions to the contrary by National Ministers, Genesis Energy, and Rio Tinto executives – the partial sale of SOE powercos (Meridian, Genesis, and Mighty River Power) have made them vulnerable to the demands of Big Businesses.
Rio Tinto knows that the share price of each SOE will be predicated on marketplace demand for shares.
They know that if there is less demand for electricity, then the price of power may (note: may) drop; those SOE’s profits will drop; and the price of shares will drop.
That leaves shareholders out of pocket and National with egg on it’s face. And a whole bunch of Very Pissed Off Voters/Shareholders.
Think: Warner Bros. Think: corporate blackmail to shift ‘The Hobbit’ overseas. Think: National not wanting to risk the wrath of Peter Jackson and a thoroughly manipulated Public Opinion. Think: National looking at the 2011 election. Think: panic amongst National ministers and back-room Party strategists.
This is precisely what is happening with Rio Tinto, Meridian, and National.
In the space of six and a half hours yesterday (28 March 2013), events came to a dramatic head. The following happened in one day:
Via a Press Release from Merdian Energy;
“Thursday, 28 March 2013, 9:15 am
Press Release: Meridian Energy
New Zealand Aluminium Smelter’s electricity contract
For immediate release: Thursday, 28 March 2013
Meridian was approached by Pacific Aluminium, a business unit of global mining giant Rio Tinto Ltd, the majority shareholder of New Zealand Aluminium Smelters Ltd (NZAS), in July 2012, to discuss potential changes to its existing electricity contract.
Since talks began, various options have been discussed and Meridian has offered a number of changes and concessions to the existing contract.
Chief Executive of Meridian Energy, Mark Binns, says that Meridian has advised Pacific Aluminium of its ‘bottom line’ position.
“Despite significant effort by both parties there remains a major gap between us on a number of issues, such that we believe that it is unlikely a new agreement can be reached with Pacific Aluminium,” says Mr Binns.
In the event no agreement can be reached, Meridian will seek to engage with Rio Tinto and Sumitomo Chemical Company Ltd, the shareholders of NZAS, who will ultimately decide on the future of the smelter.
Meridian signed a new contract with NZAS in 2007, after three years of negotiations. This current contract commenced on 1 January 2013 and remains unaltered and binding on the parties.” - Source
To which Rio Tinto replied,
In a NZ Herald story,
CEO of Pacific Aluminium (the New Zealand subsidiary of Rio Tinto), Sandeep Biswas responded with,
“We believe a commercial agreement that is in the best interests of NZAS, Meridian, the New Zealand Government, and the people of Southland can be reached. We look forward to continuing productive negotiations with a view to achieving a positive outcome for all parties.” – Source
De-coding: “This ain’t over till the Fat Chick sings, and she’s nowhere to be seen. You guys better start hearing what we’re saying or this is going to turn to sh*t real fast; we’ll close our operations at Bluff; 3,200 people employed by us directly or indirectly will be told ‘Don’t Come Monday’; your Southland economy will collapse like a Cyprus bank, and National can kiss goodbye to it’s re-election in 2014. Ya got that, sunshine?”
That got the attention of National’s ministers Real Quick,
The Government has opened discussions with Tiwai Point aluminium smelter’s ultimate owners Rio Tinto in a bid to broker a deal after talks between the smelter and Meridian Energy reportedly broke down.
“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.
“In the meantime, we understand Meridian’s existing contract with Pacific Aluminium remains in place at least until 1 January 2016 with significant financial and other obligations beyond that.” – Source
Barely two hours had passed since Meridian had lobbed a live grenade into National’s state asset sale programme, and it’s fair to say that the Ninth Floor of the Beehive was in a state of panic. It was ‘battle stations’. Red Alert. National ministers were, shall we say, slightly flustered,
By noon, the markets were reacting. Though share-market analysts were attempting to down-play the so-called ‘Phoney War’ between Meridian and Rio Tinto, Devon Funds Management analyst, Phillip Anderson, remarked that,
“…the announcement had hit Contact’s share price – the company was down 3 per cent in early trading but is now down only 1.2 per cent.” - Source
If Contact’s (a fully privatised ex-SOE) share price had dropped 3% on the strength of these media stories, it is little wonder that share-market analysts were down-playing the brinkmanship being played out by Meridian and Rio Tinto. If the share-market was spooked enough, Contact’s share price would plummet, as would that of Mighty River Power – estimated to be in the $2.36 and $2.75 price-range. (see: Mighty River share tips $2.36 to $2.75).
In which case, National would be floating shares worth only a fraction of what ministers were seeking. In effect, if Rio Tinto closed down operations, Key could kiss goodbye to the partial sale of energy SOEs. They would be worthless to investors.
By 3.43pm, and six and a half hours since Meridian’s press release, National had negotiated some kind secret deal with Rio Tinto. We don’t know the terms of the deal because though it is our money, National ministers don’t think we have a right to the information,
The Government is negotiating a new taxpayer-funded subsidy with Tiwai Point aluminium smelter’s owners and has all but acknowledged its assets sales programme is being used by them to get a better deal on power prices.
State Owned Enterprises Minster Tony Ryall this morning said the Government has opened discussions with the smelter’s ultimate owners global mining giant Rio Tinto in a bid to broker a deal over a variation to the existing electricity contract.
“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.”
Mr Ryall indicated the Government had offered Rio Tinto “a modest amount of money to try and help bridge that gap in the short to medium term but there’s still a very big gap in the long term… We’re not interested in subsidising this business in the long term”. – Source
“…they’re pretty tough negotiators and I’m sure they look at what else is happening in the economy when they make their various decisions…
…”they certainly haven’t got the Government over a barrel.”
Three questions stand out from Ryall’s statement,
- If State subsidies for electricity supply to Rio Tinto’s smelter are “short to medium term” – then what will happen when (if?) those subsidies are lifted? Will shareholders “take a bath” as share prices collapse in value?
- Does Ryall think we are fools when he states that Rio Tinto did not have the government “over a barrel” ?! Is that how National views the public – as morons?
- How much is the “a modest amount of money” that Ryall is referring to?
Perhaps the most asinine comment from Ryall was this, as reported by TVNZ,
“The electricity market is capable of dealing with all the issues relating to the smelter,” said Ryall.
Acknowledgement: TVNZ News – Talks break down over Tiwai smelter contract
Really?! In what way is “the electricity market … capable of dealing with all the issues relating to the smelter” when the government has to step in with what could be millions of dollars worth of subsidies? Is that how “the market” works?!
This blogger has two further questions to put to Minister Ryall. Both of which have been emailed to him,
Date: Thu, 29 March 2013, 6.43pm
From: Frank Macskasy <email@example.com>
Subject: Re: Your correspondence to Hon Tony Ryall
To: Tony Ryall <Tony.Ryall@parliament.govt.nz>
Kia ora, Mr Ryall,
I am in receipt of your emailed letter to me, dated 5 December 2012, regarding the non-funding of certain medications for sufferers of Pompe Disease. Firstly, thank you for taking the time to respond to this issue in a thorough and timely way. Several of your other ministerial colleagues seem to lack that simple etiquette.
I note that, as Minister of SOEs, you have been in direct negotiations with Rio Rinto, and have offered the company subsidised electricity for the “short to medium term”.
This will no doubt cost the taxpayer several millions (hundreds of millions?) of dollars.
If National is able to provide such largesse to a multi-national corporation, please advise me as to the following;
1. Why is the same subsidy for cheaper electricity not offered to ALL New Zealanders? Or even those on low-fixed incomes? Why provide a multi-million dollar subsidy just to a billion-dollar corporation when New Zealanders could do with a similar cut in their power bills?
2. In your letter to me, dated 5 December 2012, you point out that,“While I share your concern for people with Pompe disease, as I advised you in my letter of 22 November 2012, in the current fiscal environment, unfortunately funding is not available for all treatments.”
If National has millions of dollars available to subsidise multi-national corporations, them obviously your statement on 5 December 2012 that “in the current fiscal environment, unfortunately funding is not available for all treatments” – is simply not credible.
It is obvious that your government can find money when it wants to. This applies to Rugby World Cup funding, consultants, movie-making subsidies, etc.
As such, I hope you are able to find the necessary funding for medication for people suffering rare disorders.
You are, after all, Minister for Health as well as Minister for State Owned Enterprises.
PS: Please note that this issue will be canvassed further on the blogsite, The Daily Blog.
Minister of Health. Minister for SOEs. Minister for corporate welfare.
Which ‘hat’ will Tony Ryall be wearing today?
And will he find the necessary funding to save the lives of sick New Zealanders?
This blogpost was first published on The Daily Blog on 31 March 2013.
NZ Herald: Rio Tinto seeks power deal revision (10 Aug 2012)
Scoop.co.nz: New Zealand Aluminium Smelter’s electricity contract Press Release (9.15am, 28 March 2013)
NZ Herald: Govt steps in to sort out stalled Tiwai power deal (11.15am, 28 March 2013)
NZ Herald: Tiwai stoush may affect Mighty River price (12.00pm, 28 March 2013)
NZ Herald: Mighty River share tips $2.36 to $2.75 (20 March 2013)
Related to previous blogposts
Pharmac: The politics of playing god (16 June 2011)
$500,000 a year to keep toddler alive (5 Feb 2013)
Rare disease sufferers want pricey treatments (1 March 2013)
Rare disease takes awful toll on boy (1 March 2013)
Bill English – do you remember Colin Morrison? (4 Feb 2013)
NZ Herald – Fran O’Sullivan – Govt intervention doesn’t cut mustard (30 March 2013)
= fs =
By now, it has become fairly well known that National’s tax cuts in 2009 and 2010 were unaffordable and impacted disastrously on government revenue (and subsequent spending) in following years.
In 2008, National tempted voters with promises of “self funding” tax-cuts. (Though “self funding” was never very clearly explained.)
National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.
This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services.
Source: Economy – Tax Policy 2008
The pledge of “no requirement to cut public services ” was also one that was made (and subsequently broken in dramatic fashion).
In May 2008, Key was making bold statements of “meaningful“ tax cuts, “north of $50“,
John Key… said National would be looking at economic figures and what other promises Dr Cullen made in the budget on Thursday… But he was “very confident” National could deliver an ongoing programme of tax cuts, like that promised in 2005”.
Despite the growing black clouds of a global downturn, Key was still optimistic. When questioned by Sue Eden of the NZ Herald whether National’s tax cuts programme of 2005 were still credible given uncertain economic circumstances, Dear Leader replied,
“Well, I think it is.”
National will fast track a second round of tax cuts and is likely to increase borrowing to pay for some of its spending promises, the party’s leader John Key says.
But Mr Key said the borrowing would be for new infrastructure projects rather than National’s quicker and larger tax cuts which would be “hermetically sealed” from the debt programme.
The admission on borrowing comes as National faces growing calls to explain how it will pay for its promises, which include the larger faster tax cuts, a $1.5 billion broadband plan and a new prison in its first term.
It has also promised to keep many of Labour’s big spending policies including Working for Families and interest free student loans.
Mr Key today said there would be “modest changes” to KiwiSaver.
How does one ” “hermetically seal” tax cuts from the debt programme ” ?!
The ‘crunch’ came on 6 October 2008, when Treasury released a document known as the “PREFU” (Pre-Election Economic and Fiscal Update). This Treasury report analyses and discloses the fiscal and economic state of the nation, with short and medium-term outlooks, based on international and local trends.
The 2008 PREFU started with this dire warning,
The economic and fiscal outlook has deteriorated since the Budget Update
In the five months since the Budget Update was finalised, we have witnessed a number of significant domestic and international developments: in particular, the deepening of the international financial crisis, the slowing housing market, and growing pressure on households and businesses. These developments are key factors in our updated view of the economy and the government’s finances set out in this Pre-election Update.
We are now expecting weaker economic growth over the next few years, resulting in slower growth in tax revenue and higher government expenditure. Combined with increases in the costs of some existing policies, these factors lead to sustained operating balance deficits and higher debt-to-GDP ratios.
The economic outlook is weaker …
Imbalances have built up during nearly a decade of sustained growth, including inflation pressures, an overvalued housing market, high household debt and a large current account deficit, with implications for interest rates and the exchange rate. With the economy slowing, these imbalances are starting to unwind – as are imbalances in the global economy – but there is a long way to go.
The opening statement went on to state with unequivocal frankness,
The international financial crisis has deepened and is having an adverse impact on global economic growth. New Zealand is expected to feel the effects of the financial crisis principally through the tighter availability and increased costs of credit, but also through a fall in business and consumer confidence, falling asset values and lower demand and prices for our exports.
The weaker economic growth that we are forecasting is reflected in reductions in our tax revenue forecasts. Compared with the Budget Update, we expect tax revenue to be on average around $900 million lower for each of the next three years.
- The weak outlook for the household sector will have a direct impact through GST, which is forecast to grow by around 4% per annum over the next five years, compared with 7.5% over the six years to 2007.
- With firms’ margins under pressure and profitability low, underlying corporate income tax is forecast to decline by 3% in the 2009 June year, and growth is expected to be negligible in 2010 as accumulated tax losses offset profits.
- A relatively robust forecast for wages over the next few years helps to keep underlying growth in PAYE up at around 5% per annum.
The largest single change in government spending in the Pre-election Update is an increase in the expected costs of benefits. Compared with the Budget Update, benefit expenses are around $500 million per annum higher, reflecting both an increase in numbers of beneficiaries as a result of the slowing economy, and the impact of higher inflation on the costs of indexing benefits.
As a result of the various factors set out above, the government’s debt outlook deteriorates. This leads to higher debt servicing costs, which are forecast to be around $500 million per annum higher
Treasury continued – in considerable detail – to outline the gloomy prospects for New Zealand’s fiscal and economic short-term and medium-term outlooks (see: Fiscal Outlook),
In Risks and Scenarios, Treasury wrote,
Since the Budget Update, global developments have been more in line with the alternative scenario than the Budget forecast and global financial and economic conditions have worsened significantly. On the domestic front, finance companies have continued to face reduced debenture funding and more finance companies went into receivership or moratorium in the past three months. The speed and magnitude of the slowing in domestic demand has been more abrupt and greater than forecast in the Budget Update.
Reflecting these recent international and domestic developments, we have made significant downward revisions to our growth forecasts in this Update. However, the financial turmoil has intensified since the finalisation of our economic forecasts. As a result, we have seen the downside risks to our growth forecasts increase markedly, particularly in the years to March 2010 and 2011.
Unlike his “lack of knowledge” over the GCSB monitoring of Kim Dotcom, or the Police report on John Banks, John Key cannot feign ignorance over the 2008 PREFU report,
“John Key has defended his party’s planned program of tax cuts, after Treasury numbers released today showed the economic outlook has deteriorated badly since the May budget. The numbers have seen Treasury reducing its revenue forecasts and increasing its predictions of costs such as benefits. Cash deficits – the bottom line after all infrastructure funding and payments to the New Zealand Superannuation Fund are made – is predicted to blow out from around $3 billion a year to around $6 billion a year.”
Especially when Bill English admitted his knowledge of the PREFU,
“The figures outlined in the Prefu are a bit worse than we expected, and we are currently digesting them. However, National is not content to run a decade of deficits.”
In an example of black-humoured irony, English went on to say,
“New Zealand can no longer afford Michael Cullen and Labour’s big-spending low-growth policies.”
But evidently New Zealand could afford National’s “ big-tax-cutting low-growth policies“?
On 6 October 2008, Key reacted to the PREFU (proving he had full knowledge of it’s contents, and made this astounding comment when questioned about National’s planned tax cuts, at 0:40,
“REPORTER: What is your growth programme, does it include tax cuts?.”
“JOHN KEY: It certainly does include tax cuts. We have a programme of tax cuts.”
Key’s comments following 0:40 seem equally bizarre, and at 2:28 admits that “… we can’t deliver anything other than, ‘yknow, a legacy of deficits for New Zealand…” – and still continues to warble on about cutting taxes, including trying to justify “debt for future growth“.
The consequences were a $2 billion hole in government tax revenue (see: Outlook slashes tax-take by $8b; Govt’s 2010 tax cuts ‘costing $2 billion and counting’); budget deficits (see: Budget deficit $1.3b worse); increased borrowings (see: Govt borrowing $380m a week); cuts to the State sector in terms of services and jobs (see: Early childhood education subsidies cut; 10 August: Unhealthy Health Cuts, 2500 jobs cut, but only $20m saved); and surreptitious increases in government charges and taxation elsewhere (see: Petrol price rises to balance books; Student loan repayments hiked, allowances restricted; Prescription charges on the rise); and asset sales (see: Govt says asset sales will cut debt).
The point of this blogpost is simple.
It’s not to look back, at the past…
… it is to look forward to the future.
When National makes Big Promises, be wary of the nature of said promises, and the underlying , invisible “hooks” contained within them.
Quite simply when the Nats offer you a “tax cut”, the first question that should pop into your head is not, “Oh goody, I wonder how much I’ll get!”
The first thought should instead be, “Uh oh, I wonder how much that’s going to cost me!”.
Because as sure as evolution made little green apples and the sun will rise tomorrow, the Nats care very little about your pay packet.
They care only about “rewarding hard work” [translation: more income for the rich] and “making the veconomy more competitive” [translation: implementing their neo-liberal agenda for their ideological crusade to turn this country into a Market-driven economy, away from an egalitarian society].
In the process, if they have to turn our country into a slow-rolling, economic train-wreck, then so be it.
They can always blame someone else,
Key even blames Labour for the global recession !? (see @ 0:48)
In the meantime, did National recklessly damage the New Zealand economy with unaffordable tax cuts, despite Key & Co being given ample warning by Treasury – simply to get elected in 2008?
Draw your own conclusions.
The evidence speaks for itself.
The Atlantic: Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds (16 Sept 2012)
National Party: Economy – Tax Policy 2008
NZ Herald: National’s 2005 tax cut plans still credible – Key (20 May 2008)
NZ Herald: Nats to borrow for other spending – but not tax cuts (2 Aug 2008)
The Treasury: Pre-election Economic and Fiscal Update 2008 (6 Oct 2008)
NZ Herald: $30b deficit won’t stop Nats tax cuts (6 Oct 2008)
BBC News: Bank shares fall despite bail-out (13 Oct 2008)
Bay of Plenty Times: John Key: We cannot afford KiwiSaver (11 May 2011)
= fs =
A contributor to The Standard blog, ‘Jenny’, made a very simple – but insightful post, detailing National’s track record in the last three and a half years,
“ This is a government determined to gift everything they could possibly wish to the rich and powerful, and on behalf of this greedy sector force onto the rest of New Zealanders.
More junk food
A fire sale of public assets
Less civil liberty
More toadying to foreign powers
More toadying to foreign corporates
More spying snooping and videoing of New Zealand citizens
More tax cuts
More job cuts
More benefit cuts
Have they actually done anything worthwhile or positive? “
Jenny posits the question, “Have they actually done anything worthwhile or positive? “
Try as one might, despite inane rhetoric and vague promises, no National Party MP, functionary, or groupie could possibly point to any success achieved by John Key and his colleagues.
Not . One.
National’s “Master Plan” for economic growth and job creation seems to revolve around four events – none of which have been particularly successful,
- The rebuild of Christchurch. Despite being an opportunity to upskill 160,000 unemployed and a major boost to the economy – nothing much is happening. Instead, National is content to allow tradespeople from overseas to come into the country and carry out the work. With few apprenticeships, we are woefully unprepared for the looming demand for tradespeople – a damning lack of planning by National and it’s naive reliance on the “free market” to provide skilled workers.
- The Rugby World Cup – far from being a major boost, seems to have contributed very little to our economy. In the last three months of 2011, GDP grew just 0.3% – half that predicted by economists. It seems that Dr Sam Richardson’s prediction, that $700 million was a hopelessly unrealistic expectation proved to be unerringly correct. Who is ultimately responsible for National throwing $200-plus million of our tax dollars at this exercise in outrageous extravagance? Murray McCully? Steven Joyce? John Key?
- The Sky City/Convention Centre deal. Our illustrious Dear Leader promised 1,800 jobs from this planned project, in return for re-writing gambling legislation and permitting Sky City to increase pokie machine and gaming tables by up to 500. Potential social fall-out surrounding increased problem gambling was casually dismissed by both John Key and Sky City’s CEO Nigel Morrison. Unfortunately, as with most of John Key’s figures and promises, the expectation of 1,800 jobs was as fictitious as much of what he says.
- Asset sales. With weak growth; a stagnant economy; high unemployment; and New Zealanders continuing to escape to Australia, National’s one (and only) trump card appears to be the partial-privatisation of five state owned corporations. As has been pointed out, ad infinitum, floating shares in these SOEs will not contribute to economic growth; nor create new jobs (in fact, it is likely to result in redunancies, if past privatisations are any guide); nor create real wealth. It simply shuffles bits of paper (shares) around from investor-to-investor-to-investor. And if investors need to borrow to buy these shares, we are using overseas funds for speculative purposes. Which sounds suspiciously like our love-affair with speculative housing-”investments”.
As Business NZ has stated, our economic growth has been ‘unspectacular’. And that’s coming from one of National’s own business allies. (Just as Business NZ seemed somewhat unimpressed as National’s lack of planning and direction last year, just prior to the election.)
Otherwise, National’s Grand Plan can be summed up as a reliance on a “two pronged” approach to growing the economy; a hands-off “free market” approach, and tax cuts. Not only have neither worked terribly well, but these measures have been counter-productive.
Tax-cuts gave massive increases in income to the richest 10% of New Zealanders – whilst the GST increase has made life harder for the poorest and lowest-paid in this country.
Right wing cheer-leaders who bleat on about their rich masters “working hard and deserving increased wealth” may be aspirationists who one day hope to become one of the Master Class – but I hope they’re not holding their breath. That day will be a long time coming.
Tax cuts have also resulted in a government budget blow-out. Borrowing $380 million a week, whilst claiming that National is “not borrowing for tax cuts is credible only to National; their salivating sycophants; and low-information voters (for whom “The GC” is the height of documentary-making).
Tax cuts have also not delivered the promised boost to the economy by increasing spending and consumption. This is not surprising, as the tax cuts were given to the wrong sector of society.
High income, wealthy, asset-rich families tend to use their tax-cuts to reduce debt or spend on investments (shares, kiwisaver, etc) that do not directly help small businesses.
Low income, poor, families spend everything. These are the the people who will buy more food to put on their tables; clothes; shoes; medication; and other consumables. These are the people that small businesses rely on on for their custom. And the retail supermarket sector is suffering a massive drop accordingly.
Middle income families continue to stuggle not to fall behind. Any tax increase they may have gained has been swallowed up by increased gst, government charges, increased user-pays, etc.
I think most people have since ‘twigged’ that National has indeed borrowed for tax cuts. And we’re having to pay back those massive borrowings by cutting services; slashing the state sector; and selling our state assets.
2. Asset Sales
National’s asset sales programme has been an unmitigated disaster from Day One.
Since National first announced their decision to partially privatise Meridian, Genesis, Mighty River Power, Solid Energy, and Air New Zealand, this issue has been opposed by the public.
National has used it’s so-called “mandate” from last year’s election to proceed with their policy, and passed enabling legislation only last Tuesday (26 June).
Any notion of a “mandate” is shaky and open to interpretation.
Whilst the National-ACT-Peter Dunne Coalition has 61 seats, and Labour, NZ First, Greens, Mana, and Maori Party have 60 seats – the number of Party votes cast tells a different story.
|National , ACT, United Future Party Votes||Labour, Greens, NZ First, Maori Party, Mana, and Conservative Party votes|
National – 1,058,636
Labour – 614,937
ACT – 23,889
Greens – 247,372
United Future – 13,443
NZ First – 147,544
Maori Party – 31,982
Mana – 24,168
Conservative Party* – 59,237
TOTAL – 1,095,968
Total – 1,125,240
The irony of the Conservative Party gaining more Party Votes than ACT and United Future combined – yet winning no seats in Parliament – will not escape most fair-minded people. Adding the Conservative’s 59,237 party votes to the anti-asset sale bloc, yields a majority of voters opposed to National’s programme.
It is only the current rules of MMP (now under review) that allows this quirk to take place.
Add to that, opinion poll after opinion poll showing 60% to 80% of respondents opposed to asset sales, and National’s mantra that “We have a Mandate” becomes patently untenable.
A recent NZ Herald poll, where respondents were asked to leave a comment, as well as a “Yay” or “Nay” vote yielded results that were thoroughly predictable,
The National Party understands this only too well. Hence their desperate, ad hoc schemes to bribe the public with all manner of ‘sweeteners’,
- giving first option to buy shares to “mum and dad” investors
- a bribe of “loyalty” shares
- promise of “affordable” shares for investors
There is a considerable degree of arrogance in National’s pursuing of their asset sales, despite considerable public anger.
” They don’t fully understand what we’re doing. My experience is when I take audiences through it, like I did just before, no-one actually put up their hand and asked a question. “
On 3 May, as a 5,000 person march wound it’s way through Wellington, John Key grinned to reporters and cheekily said,
” How many people did they have? Where was it? Nope wasn’t aware of it. So look, a few thousand people walking down the streets of Wellington isn’t going to change my mind. “
” No, um, and with the greatest respect to your financial literacy, you’ve proven that you don’t actually have any. “
Key said pretty much the same about Greens co-leader, Russel Norman,
” With the greatest respect to [Green Party co-leader Russel Norman], I’m sure he’s a great bloke, he doesn’t know much about economics. “
It is fairly obvious that Key has very little time for anyone who opposes his views. In fact, he gets downright belligerent and derisive.
Who does he remind me of? Someone else who used to belittle and deride anyone who dared disagree with him – especially in economic matters. Who else was famous for his arrogance? Another Prime Minister,
Despite public opposition and several valid commercial reasons made clear that these sales will be financially disadvantageous to our economy, National carries on, oblivious to all but it’s own ideological fanaticism.
This is a Party totally out of touch with the rest of the country.
In 2008, the GFC (Global Financial Crisis) hit the world with a social and economic recession not seen since the 1920s/30s. Coporations like Lehmann Bros collapsed. General Motors filed for bankruptcy protection. Others had to be bailed out with billions of taxpayers’ dollars. Millions lost their jobs and homes, and unemployment skyrocketed. Europe is tottering on the brink of a domino-like collapse of their currency.
When criticism is levelled at National’s inability to address our stagnating economy, John Key and Bill English point to the GFC, stating it’s not their fault,
“We did inherit a pretty bad situation with the global financial crisis.” – Source
“This is a global debt crisis and you certainly wouldn’t want to add more debt at that time unnecessarily.” – Source
“The economic downturn that may occur on a pronounced basis in Europe is factored into our books.” – Source
But when it comes to those who are the casualties of the economic downturn; the unemployed, National suddenly sings a different tune when it comes to Cause-and-Effect,
“The Government is considering requiring beneficiaries to immunise their children.” – Source
“Social Development Minister Paula Bennett yesterday said contraception would eventually be fully funded for female beneficiaries and their 16 to 19-year-old daughters. ” – Source
“Prime Minister John Key says beneficiaries who resort to food banks do so out of their own “poor choices” rather than because they cannot afford food.” – Source
“Under the Government’s new youth welfare policy, announced by Prime Minister John Key at the weekend, 16- and 17-year-old beneficiaries would receive a payment card for food and clothes from approved stores.” – Source
And perhaps – worst of all – was this piece of vileness from Finance Minister, Bill English,
[click on image to go to TV3 website]
English’s smirking disdain, for all those New Zealanders who have lost their jobs due to the global financial crisis, was plain to see. Shame on him; his revolting attitude; and shame on every person in his electorate who voted for this arrogant little man.
The National Creed
1. The Global Financial Crisis – a handy excuse for poor economic policies and mismanagement.
2. The Unemployed – a handy scapegoat for National’s inability to grow the economy and create new jobs.
3. If in doubt, never take responsibilty; refer to #1 and #2.
- Hakes Marine; 15 redundancies
- Telecom; 400 redundancies
- Brightwater Engineering; 40 redundancies
- Pernod Ricard New Zealand; 13 redundancies
- Depart of Corrections; 130 redundancies
- Summit Wool Spinners; 80 redundancies
- Ministry of Foreign Affairs and Trade; 80 redundancies
- Norman Ellison Carpets; 70 redundancies
- IRD; 51 redundancies
- Flotech; 70 redundancies
- NZ Police; 125 redundancies
- CRI Plant and Food; 25 redundancies
- Te Papa; 16 redundancies (?)
- PrimePort Timaru; 50 redundancies (?)
- Kiwirail; 220 redundancies
- Fisher & Paykel; 29 redundancies
- Goulds Fine Foods; 60 redundancies
- Canterbury University; 150 redundancies (over three years)
Will drug testing be used to “sort this lot out smartly”, Mr English?
And more bizarre is Paula Bennet’s admission that National “has ruled out universal drug testing of all beneficiaries, with drug and alcohol addicts being exempted from sanctions for refusing or failing a drug test when applying for a job“.
Which means that if addicts and alcoholics are not tested – that leaves only those workers who’ve been unfortunate enough to lose their jobs through New Zealand’s ongoing stagnating economy.
Adding insult to injury doesn’t begin to cover the humiliation which National intends to thrust upon workers who’ve lost their jobs.
And all because National has no job creation policies.
4. Sky City/Convention Centre
This is perhaps one of John Key’s shonkiest deals. It is no wonder that the Auditor General is investigating the Sky City “arrangement” – so I have little faith that the investigation will yield much that is incriminating of Dear Leader.
As Key stated with utter confidence, on TV3′s ‘The Nation‘ on 17 June,
” KEY: The involvement I had, as Minister of Tourism was to go and talk to a number of critical players, and as part of a general conversation say to them, “Hey, look, New Zealand’s interested in building a convention centre. Did that with Sky City. I did that with people out at ASB Centre The Edge. I did that with Ngati Whatua. That’s not unusual. I mean, and to argue that that would be unusual would be to say, well, look I have discussions with people in Whangarei about building a museum there. And I have discussions with people in Auckland about building a cycleway.
So now what we’re talking about about is, ok, was there undue influence or was the process correctly handled, that’s what the auditor general will say.
So let me tell you this, for a start off, ok, in terms of the expression of interest process, my office had absolutely no involvement, no correspondence, [ interuption by Rachel Smalley] no phone calls, absolutely nothing. So when the auditor general comes in there will be no correspondence, no phone calls, no discussions, zero. “ - Source (@ 6.37)
That statement does not instill confidence in me. Dear Leader has just stated, on record, that no evidence exists of his meeting(s) with Sky City management. Key admitted meeting with Sky City’s Board in late 2009,
“I attended a dinner with the Sky City board 4 November 2009 where we discussed a possible national convention centre and they raised issues relating to the Gambling Act 2003“. – Source
But what was said or agreed on, we don’t know. As Key has stated, “when the auditor general comes in there will be no correspondence, no phone calls, no discussions, zero”.
This is not a very good example of transparency. It is certainly not the “transparency in government” that Key has promised this country on several occassions.
In fact, it’s dodgy as hell.
In the same blogpost ( Doing ‘the business’ with John Key – Here’s How ) dated 23 April, this blogger outlined John Key’s somewhat dubious tactics for pushing through dubious policies,
“ Promise Big Numbers. It doesn’t matter if the numbers never eventuate because they were fictitious to start with. By the time the media and public realise the true facts, the issue will be all but forgotten. A week may be a long time in politics – but a year positively guarantees collective amnesia for 99% of the public.
From December, 2010,
Cycleway jobs fall short
“6:00 AM Wednesday Dec 8, 2010
The national cycleway has so far generated just 215 jobs – well short of Prime Minister John Key’s expectation of 4000.
In May, Mr Key said he expected the $50 million project, which involves building 18 cycleways throughout the country, to generate 4000 jobs.” – Source
Who can remember the initial cycleway project and the promise of 4,000 new jobs?
From March, this year,
Key defends casino pokie machine deal
.“08:23 Mon Mar 5 2012 – AAP
Opposition parties are accusing the government of selling legislation through an agreement that will see Auckland’s Sky City build a $350 million convention centre in return for more pokie machines…
… But Mr Key says it’s a good deal for New Zealand.
“It produces 1000 jobs to build a convention centre, about 900 jobs to run it… ” – Source
In a year’s time, who will recall the promise of 900 new Convention centre jobs?
Who will care that only a hundred-plus eventuate?
Well, it didn’t take one year. It took only a matter of months. On 5 March, John Key asserted,
”It produces 1000 jobs to build a convention centre, about 900 jobs to run it, and overall the number of pokie machines will be falling although at a slightly lower rate.”
But then, on 5 June, the NZ Herald reported,
” Job numbers touted by Prime Minister John Key for a proposed international convention centre at SkyCity are much higher than official estimates.
Mr Key has said a deal allowing SkyCity more gambling facilities in exchange for funding the convention centre would provide 900 construction jobs and work for 800 people at the centre.
But the figures are much higher than those in a feasibility study done for the Government by hospitality and travel specialist analyst Horwath Ltd.
Horwath director Stephen Hamilton said he was concerned over reports the convention centre would employ 800 staff – a fulltime-equivalent total of 500.
He said the feasibility study put the number of people who would be hired at between 318 and 479. “
Sprung! Another of Dear Leader’s “little white lies” uncovered.
Next ‘cast iron guarantee’ from Dear Leader, who said on his website,
” SkyCity has agreed to pay the full construction costs of the centre – estimated at $350 million. The company has asked the Government to consider some alterations to gambling regulations and legislation.”
Yeah, I’ll bet that Sky City has “asked the Government to consider some alterations to gambling regulations and legislation“…
In business, it’s called a ‘contra-deal‘.
But it’s seems that even this deal is not as “free” for tax-payers as Key has made out. In fact, it has been uncovered that taxpayers are definitely ‘stumping up’ some of their hard-earned cash,
” Budget documents reveal that if the plan goes ahead, taxpayers will contribute up to $2.1 million to ensure its design and facilities meet Government expectations... The Prime Minister, however, is defending the budget allocation of millions of dollars towards a potential Sky City convention centre.
John Key says he has always said his preferred position is that no taxpayer money would be spent – and that if it does go ahead, it will have economic spinoffs. “
So… Key has (once again) mis-led the public, and his stock-standard explanation is that “if it does go ahead, it will have economic spinoffs .”
John Key claims that “a new convention centre would bring 144,000 additional nights of Auckland stays for business tourists, who generally spent twice as much as other tourists“.
But as Bob McCoskrie, National Director of Family First NZ, said somewhat more convincingly,
” Tourists come to see the country and the culture – not the casinos. If tourists were really focused on gambling, they would be going to Las Vegas – not the Sky City casino venue in Auckland. “
What’s the bet that the forecast for “economic spinoffs” will be as accurate as National’s predictions for spin-offs from the Rugby World Cup or national cycleway?!
How many times have we heard Prime Minister John Key make all sorts of promises that this or that will deliver jobs and economic growth – only to see the promise fail. Which is then usually followed by an excuse relating to the global economic slowdown?
It’s getting rather predictable and tedious.
What Dear Leader has tried to gloss over and dismiss is the inevitable consequence of increasing pokie machines: more problem gambling. Both John Key and Sky City CEO, Nigel Morrison, have tried to trivialise this growing social problem,
” The incidence of harm cited from Lotto is greater than that from pokie machines in casinos. Getting those facts across is difficult. We’re not just on about growing our gaming machines. We would like to grow our table games product and expand our operations to meet the growth of Auckland. “
Gambling addiction in many way is as pernicious – if not worse – than alcohol and drug additions. A compulsive gambler can damage not only his/her own life – but those around them. Houses have been lost; businesses crippled or closed down; families torn apart, as problem gamblers suck others down into a whirlpool of uncontrollable gambling.
From a Ministry of Health report,
” Overall, the prevalence of problem gambling in New Zealand adults was 0.4% (about 13,100 adults). Additionally, the prevalence of moderate-risk gambling was 1.3% (representing a further 40,900 people). In total, 1 in 58 adults (1.7%, or 54,000 adults) were experiencing either problem or moderate-risk gambling.
Other key findings of this study include:
- Maori and Pacific people experience more gambling-related harm than other people
- people living in more socioeconomically deprived areas are more affected by gambling-related harm.
- this study may help to inform the provision of problem gambling intervention services and public health activity, as the study showed that:
- problem gamblers can be found in both urban and rural areas
- Maori and Pacific people appear to be under-represented in intervention services
- people experiencing gambling problems are more likely than other people to be current smokers, have hazardous drinking patterns, have worse self-rated health, and have a high or very high probability of a mood or anxiety disorder. “
Interestingly, the above report, using 2006/07 data, and posted online in 2009, is the most recent Ministry of Health report available. Nothing more recent – and perhaps more damning of current gambling policies – is apparent on the Ministry of Health website.
Why is that?
On a more personal level, this blogger is aware of an elderly couple who were both addicted to pokie machines. Badly in debt, they were forced to down-size their family home and buy a smaller, more modest, property. One of the couple died soon after, leaving the other who continued her gambling habit.
Not only has this elderly woman lost her surplus cash from the house-sale, but has gambled using equity in her current home. She often ‘borrows’ money from her grown up children.
Her modest house is deteriorating through lack of maintenance.
Not only has this woman lost all equity in her home, she is now more reliant on both the State and her family.
Meanwhile, this article on Sky City’s most recent posted profits should be cause for concern,
“ Sky City Entertainment, one of the biggest gambling operators in the country, has seen a significant rise in profits over the course of the last year. The company attributes this growth to the earnings generated by the Sky City Casino in Auckland.
Over the course of 2011, profits for Sky City rose by over $10 million to $78 for the year. The company believes that the changes made to Sky City Auckland are to thank for this impressive profit increase over the course of the past year.
$50 million was spent on renovating the gambling facilities available the casino, but the company still managed to offset the costs with improved profits. In addition to building a new VIP lounge, Sky City also renovated other areas of the casino to make them more attractive to players.
Slots [pokies] brought in the amount of increased revenue, seeing a rise by 17%. Non-gaming elements also helped to boost profits. Auckland’s recently-revamped hotels and restaurants garnered a great deal of attention from patrons.
It seems that the adage “you have to spend money to make money” is true for Sky City. “
If the convention centre is National’s only scheme to grow the economy and to create 170,000 new jobs – we are in deep trouble.
Nothing best illustrates National’s narrow vision of the role of government than the demise of TVNZ7. Nothing.
Whether the previous Broadcasting Minister, Jonathan Coleman, or the current Minister, Craig Foss – their attitude has been the same; market forces shall prevail – and public-interest programming shall be the responsibity of NZ On Air, who shall contract such programmes to current commercial broadcasters.
Except that this is a cop-out.
The beauty of TVNZ7 is that public broadcasting was, in the main, focused on a single broadcasting platform. The public knew where to go to watch certain types of programming.
Just as the public now go to supermarkets to buy their meat, fish, veg & fruit, and bread – instead of going to a butchers; a fish shop; a fruit & veg produce store; and a bakery. Imagine the uproar if John Key told us we must go to five different food retailers to buy five different sorts of foodstuffs?! Dear Leader would have a size 9 boot imprinted on his backside.
TVNZ7 fulfilled the same public demand; niche programming on a niche broadcaster.
Just as, currently we have racing on the TAB channel; Chinese programming on CTV; parliament on Parliament TV, etc.
Ironic that politicians have no problem broadcasting their “debates” (inverted commas used deliberately), deeming their squabbles and shrill screams a must have - but not public, non-commercial TV.
Or, that we can have non-stop horse racing on a free-to-air TV channel.
But we are not entitled to have access to non-commercial public TV.
Whatever concept National has of public television, it is clear that Broadcasting Minister, Craig Foss’s vision is different to the rest of New Zealand,
“… the government was ‘committed’ to supporting local content through NZ on Air, instead of directly funding single broadcasters. “
Having public TV through NZ On Air is akin to selling vegetarian/vegan food products in butcher shops. You have to go looking for it. It’s not easy to find. And it’s buried amongst ‘crap’ you’d rather not have to put up with.
And what makes NZ On Air funding of ‘Media7/Media3‘ “public television” – when it will have advertisements peppered throughout?
Take out the advertising of underarm deodorants; cat/dog food; toilet ducks; panty shields; the latest 4WD monstrosity from Korea; promos for the latest US crime/cop shows; reality TV shows; home improvement shows; US sitcoms; and voyeuristic, soft-core porn like “The GC”, and a 30 minute current affairs programme from TVNZ7 becomes a 20 minute show on TV3.
There goes our chance to focus on critical social issues, as commercial advertisers compete for our attention.
What next? Advertising in Tolstoy’s “War and Peace”? Shakepeare’s “Macbeth”? Anne Frank’s Diary?
We are being ripped off in more ways than one. We deserve better than this.
But not, it seems, according to National; there is more than an element of vindictiveness in their decision to can TVNZ7. As if it was their opportunity to “stick it to us” after their embarrassing backdowns on mining in conservation schedule four estates; their attempt to cut teacher numbers and increase classroom sizes; and ongoing resistance to state asset sales.
The closure of TVNZ7 is a clue what National thinks of us. And it ain’t very pleasant.
See: Pundit – TVNZ kills ad-free channels to grow profits
Current cutbacks to state and social services is a re-run of the 1990s. National’s cuts now, mirror those of last century.
Bolger, Richardson, Shipley, and Bill English ran amok – slashing health, education, police, military, and anything else they could lay their cold, clammy, neo-liberal hands on.
At one stage, in the late 1990s, the health system was so badly run down that patients requiring critical surgery were not receiving it – and were dying on waiting lists.
This year, as part of National’s on-going agenda to cut government services; reduce the size of the State; and to pass on savings as tax cuts to the rich, National has cut staffing levels; departmental budgets; and services.
The New Zealand middle class tolerates this – until it affects them, personally.
Enter: 24 June – Minister Parata and her plans to slash teacher numbers and increase class sizes. That was a step too far, and a teacher-parent-principal-Boards alliance fought back. Hard.
Bill English – a bloodied veteran of the Bolger-cum-Shipley administration of the late 1990s - recognised the signs that a revolt of the middle classes was in the offing. National’s merciless cuts to social and government services in the ’90s had resulted in an electoral thrashing in the November 1999 elections.
Upshot: 7 July – Government u-turn on cost-cutting policy.
This is now the second major policy u-turn by National. Their previous bloodied-nose, in July 2010, when Gerry Brownlee was forced to announce a back-down on National’s proposals to mine schedule 4 conservation land, was a stunning exercise in people-power.
In my previous blogpost (Why Hekia Parata should not be sacked), I argued that Educational Minister, Hekia Parata should not be forced to step down from her ministerial role. As I pointed out, “sacking Parata for policies that every other Minister has been implementing seems pointless. Especially when National’s essential policy of cutting expenditure and services would remain unchanged”.
However, recent revelations from OIA-released document have revealed,
” The papers for the education budget reveal class size funding ratio changes went even further than what was announced.
Education Minister Hekia Parata originally urged changes that would seen 1300 fewer teachers hired over the next four years than would have happened under the existing funding formula.
That plan to curb growth in teacher numbers would have seen a “a minimal net reduction” in staffing of about 260 after four years.
The Government eventually decided on a less aggressive plan to cap teacher numbers, with almost the same number proposed to be employed in 2016 as now.
That plan to save $174m over four years was agreed and written in to the Budget but Parata was forced in to an embarrassing backdown earlier this month, which cancelled the plan and returned to the status quo.
However Parata’s original plan was to cut $217m. “
It appears that Ms Parata’s inclination was for even deeper cuts to Education services than, (a) the public was initially aware of and (b) that her National ministerial colleagues could stomach.
This explains, in part, why Key torpedoed Parata’s plans to cut education services; he was thoroughly exasperated with an an incompetant Minister who badly overestimated her abilities and could not “sell” even a watered down version of her plans. He must have been spitting tacks that, had Parata’s initial plans to cut $217 million (instead of $174 million) gone ahead, she would have found herself in a much deeper hole, and the fallout to National would have been much worse.
This blogger has come to the conclusion that Hekia Parata is way over her head, and should step down as Education Minister forthwith.
At any rate, she will be gone at the next cabinet re-shuffle.
Tea-lady might be a good, safe role for her?
7. ETS – Another of Key’s broken promises
John Key is adamant that National will not consider slowly raising the retirement age from 65 to 67, because it is a committment he has promised to keep,
“I’ve made it quite clear it would be my intention to resign from parliament if I broke that promise to New Zealanders.”
This blogger finds it hard to understand Key’s reticence to “breaking” an election promise. After all, he’s broken promises not to raise GST; to retrieve the bodies of the Pike River miners; to address growing youth unemployment; stem the flow of migration to Australia; grow the economy; and now, to implement an ETS.
In May 2008, Key stated,
” Key outlined a series of principles an ETS should have, including…
… It should be closely aligned with Australia’s ETS.
… It should not discriminate against small and medium businesses in allocating emissions credits and purposes. “
At the time, Key also stated,
” This not about National walking away from an ETS, we support that. . . we just simply want to get it right and we now have the time to get it right. “
That was four years ago.
Since then Australia has implemented it’s own carbon tax that will lead in to a full ETS by 2015,
” The A$23-a-tonne price on carbon emissions started yesterday [1 July 2012] , directly affecting 294 electricity generators and other companies.
The federal Government is aiming to cut carbon emissions by 5 per cent by 2020, with the carbon tax shifting to an emissions trading scheme in 2015. “
By contrast, National has been delaying implementing New Zealand’s own version of an ETS, and has now “postponed” it until 2015.
And yet, four years ago, Key stated that New Zealand’s emissions trading scheme should “ be closely aligned with Australia’s ETS “.
Our Aussie cuzzies have already started their carbon tax/ETS.
With National postponing the ETS for farmers, industrial and commercial polluters, until 2015 – that means that Dear Leader’s “postponement” will have lasted seven years – over two Parliamentary terms. How long does Key need to ‘get it right’ ?
Perhaps the turn of the 22nd century?
Let’s cut through the BS here. John Key is not “postponing” the ETS – he is postponing it indefinitely. National has no intention of ever implementing it. So much for Key’s statement,
“Ours is not a political agenda here, we want a good ETS that works.”
That deserves to be immortalised,
The sooner the Nats admit this deception, the better for the entire country. Until then, the only sector paying the ETS is… us, the public.
Which leads on to…
8. Tax Cuts & Government charges
In 2009 and 2010, National cut taxes. The rationale, as National explained in their 2008 document,
” In the short term, National’s tax package will give households confidence and some cash in their back pockets to keep the economy going and to pay down debt.
In the longer term, our tax package encourages people to invest in their own skills and make best use of their abilities, because they get to keep more of any higher wages they earn. It encourages them to look for and to take up better and higher-paying jobs that make more use of their skills. “
However, what National giveth with one hand; National taketh with the other.
Any benefits from the ’09 and ’10 taxcuts have been more than swallowed up (for low and middle income earners) by increases in a myriad of government and SOE charges.
The most recent have been Family Courts fees, which have risen astronomically.
From July 1 2012, services which used to be free to couples in dispute, now incur considerable court fees,
- Child custody disputes: $220
- Property disputes: $700
- Hearing of any application for each half-day, or part half-day: $906
Of all National’s user-pays regimes, charging couples who are separating; highly stressed; and where violence may be involved, is mind-boggling. We thought it was miserly when National decided to tax children in the last budget – but these user-pays Family Court fees hit people who are vulnerable in the extreme,
” But Family Law Specialists director Catriona Doyle says most families try to avoid handing custody and property decisions to a judge and only use the Family Court as a last resort in irresolvable conflicts.
The few people who waste the court’s time by filing repeatedly or unnecessarily won’t be put off by the fees because they’ll either be wealthy enough to afford it or earning little enough to have the fees waived, she says.
“It’s going to hit the middle class and lower income families where $220 is a lot of money.”
Women especially will be hit hard, as they are often financially disadvantaged when a relationship breaks up, Ms Doyle says.
Rather than trying to keep children out of court, the ministry should be aiming to resolve conflicts before children are affected by them, she says.
“Leaving children in a conflict situation where the parents are at war is neglect and abuse. The kids who live in that situation are damaged.”
A judge should be the person to decide if a case is genuine or flippant, especially when children are involved, she says.
“It’s not something that should be addressed by Parliament or a court registrar”. “
Minister of Courts, Chester Borrows, stated plainly,
” What we are trying to do here is have a disincentive for people to be able to bring these matters before the court. “
(Note: As a matter of interest, Chester Borrows is the very same Minister who stated he would be buying shares in SOEs, when they were partially-privatised. See: Conflicts of Interest? )
National complains that court costs have risen from $84 million in 2004/2005 to $142m in 2010/2011 – hence Family Court fees must be imposed.
This is faulty logic, and is penalising people who are attempting to sort out damaging relationship breakdowns. Using Family Courts is preferable to taking the law into one’s own hands. Disincentiving people from using the law – which Parliament put in place to protect us all – is like disincentivising people from calling the Police if you’ve been burgled.
Instead, if we are being “encouraged to resolve issues ourselves”, find the burglar; beat the crap out of him; and retrieve our stolen property ourselves. That is what Borrows is advocating.
Further using Borrows’ “logic”, National should implement high user-pays charges in public hospitals, as “ a disincentive for people ” to use hospitals.
It sounds ridiculous? It is ridiculous.
It is also dangerous. Borrows and his idiotic fellow ministers are playing with peoples’ lives. Putting expensive, punitive barriers up at a time when families most need society’s help defies logic, common sense, and most of all, compassion.
But then – when did anyone ever accuse the National Party of being compassionate?
And will the Dear Leader, John Key, take responsibility if something goes horribly wrong, and an emotionally-stressed family explodes into violence because they had no way out through the Family Court? Like hell he will.
This is a death waiting to happen.
On your miserable head be it, Mr Borrows.
9. More on those tax cuts
As an aside, National’s 2008 Tax document makes this derisable claim,
“ This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services. “
Jeez. No wonder people don’t trust politicians.
10. Alcohol law reforms
The latest offerings of irrationality from John Key’s Universe; evidently Dear Leader does not believe that minimum pricing for alcohol would work. He suggests (with a straight face, no doubt) that minimum pricing for booze would not work because it could drive people to drink lower quality liquor instead of reducing consumption,
“What typically happens is people move down the quality curve and still get access to alcohol.”
Mr Key, how do I mock thee? Let me count the ways… (with apologies to Elizabeth Browning)
How do I mock thee? Let me count the ways.
I ridicule thee to the depth and breadth and height
My soul can reach, when laughing at you hard
For the ends of Banality and Idiotic Government.
I mock thee to the level of every day’s
Most quiet need, by sun and ecobulb-light.
I deride thee freely, as men strive for human rights.
I caricature thee purely, as they turn from praise.
I jeer at thee with the passion put to use
In my old griefs, and with my voter’s faith.
I scorn thee with a scorn I seemed to lose
With my lost saints. I sneer at thee with the breath,
Smiles, tears, of all my life; and, if The People choose,
I shall but take the piss better after you are voted out.
Why so contemptuous, you ask?
Because raising the price of tobacco has been the number one tool of both Labour and National governments.
As recently as 12 June, John Key stated on a Fairfax online interview,
” The Government is unashamedly trying to deter people from smoking through price, particularly young people who are very sensitive to rising tobacco prices. I know this is difficult for those that have smoked for quite some time, but for your long term health I can only encourage you to try and give up. “
So high-pricing for tobacco is useful for ” the Government is unashamedly trying to deter people from smoking ” – but not for alcohol?
Raising prices to deter smoking works. But raising prices to deter binge-drinking doesn’t?
It boggles the mind how Dear Leader can hold two conflicting viewpoints, simultaneously, without suffering a brain explosion.
Or is it simply that the liquor industry is a generous donor of funds for National’s election campaigns?
In the meantime, life goes on,
See previous blogpost: A kronically inept government
11. Government Cost cutting = Economic suicide
On 12 May, this blogger posted a piece on National’s slashing of our MAF biosecurity.
In part, I posted this dire warning,
Now, we have the prospect of having entire suburbs in Auckland being contained in some kind of loose “quarantine”, after a Queensland fruit fly was caught in a pest surveillance trap,
Considering that the Queensland fruit fly costs the Australian economy approximately $160 million a year, this is a very real threat to New Zealand’s own $5 billion annual horticultural industry.
Five billion dollars, per year, every year. All under threat because this government wanted to save a few million bucks by employing fewer biosecurity staff.
As if the discovery of a painted apple moth in 1999; the varroa mite infestation of our honey hives in 2000; and other isolated instances of pests found in this country did not serve as a warning to us – National proceeded to cut back on biosecurity staffing.
This blogger wonders sometimes (actually, all the time) what goes through the minds of our esteemed Honourable Ministers of Her Majesty’s Government. These are supposedly well-educated men and women, with support from thousands of University-educated advisors – and yet they still manage to accomplish the most incredibly moronic decisions conceivable.
National has put at risk this country’s $5 billion industry – simply to save a few million dollars.
They have risked horticulturalist’s businesses; workers their jobs; and all the down-stream economic activity – to save a small percentage of billions.
This blogger has three pieces of advice for all concerned,
- John Key must accept the resignation of David Carter, Minister for Bio-security immediatly.
- National must reinstate biosecurity services to pre-2009 levels.
- Horticulturalists (and others who own farms and other agricultural businesses) should carefully consider whether National is working on their behalf – or for the sake of implementing false economies. What is the point of an orchardist voting for National – if National is going to screw his/her business by cutting back on essential government services such as biosecurity?!?!
Hopefully, this fruit fly is a lone bug; perhaps a stowaway in someone’s bag or in a container offloaded at Ports of Auckland.
If so, once again we’ve been lucky.
But how long will our luck hold out?
See previous blogpost: Bugs and balls-ups!
It seems our luck ran out some years ago,
” The kiwifruit growers’ association is considering legal action over the outbreak of the vine disease PSA and says it can’t rule out seeking compensation.
An independent review released on Wednesday into how the bacterium came into New Zealand has found there were shortcomings with biosecurity systems, but it does not say that caused the entry.
The disease was first confirmed near Te Puke in 2010 and has infected 40% of the country’s kiwifruit orchards. It is expected to cost the industry $410 million dollars in the next five years.
Ministry for Primary Industries director general Wayne McNee asid the review did not determine how PSA came into the country but does show where improvements can be made.
NZ Kiwifruit Growers president Neil Trebilco says he can’t rule out that compensation will be sought by growers. “
” A damning report into the outbreak of kiwifruit virus PSA is another in a series of warnings over the biosecurity system that the Government has failed to act on, Labour’s biosecurity spokesman Damien O’Connor says.
The independent report was commissioned by the Ministry for Primary Industries (MPI) following the devastation caused by the virus in the Bay of Plenty orchards with an estimated cost of $400 million.
The report, released yesterday, found “shortcomings” in New Zealand’s biosecurity system although it could not say how the incursion had occurred.
It said MPI could improve protections and must work more closely with industry groups.
The report also suggested resources be moved from low-risk industries to high-risk ones such as the kiwifruit sector.
O’Connor said there needed to be a complete overhaul of the biosecurity system.
The National Government cut biosecurity funding in 2009 and had accepted the growing risk caused by faults in the system, he said. “
Anyone with two inter-connecting neurons would’ve figured out very quickly that if a government cuts biosecurity then we put ourselves at dire risk of pests entering our country. Like the varroa mite. Or PSA bacterium.
With approximately 550,000 shipping containers and 4.5 million people entering New Zealand each year, it stands to reason that we are at extreme risk of unwanted organisms being brought into the country.
National was warned as far back as 2009, when 60 Biosecurity jobs were “dis-established”. It therefore defies understanding as to why National believed that cuts could be made to frontline MAF Biosecurity without serious consequences.
Spelling out those consequences,
- Millions – even hundreds of millions of dollars of valuable export dollars lost,
- Jobs lost,
- Businesses ruined,
- And not one single government minister taking responsibility.
The only question now remaining to be asked: how many farmers and horticulturalists will vote for National at the next election?
Remember: you get the government you deserve.
This time, it is farmers and horticulturalists who have been warned.
12. The Terminally Ill
During the 2008 general election, Prime Minister John Key adopted the Herceptin campaign.
Pharmac was funding herceptin treatment for women suffering from breast cancer only up to a nine week period. Breast cancer patients wanted treatment extended to twelve months. Pharmac refused, stating there was no evidence that an extended treatment period would prove beneficial,
Pharmac CEO, Matthew Brougham, said,
“A fresh review of the science and other information has failed to convince us that 12-month treatments offer any additional benefits over the concurrent nine week treatment.”
Enter, John Key. As the 2008 election campaign swung into full force, Key leapt upon the issue,
“National recognises that many Kiwis have limited access to modern medicines. We will improve that access.
“We will boost overall funding for medicines and speed up the registration of new medicines, with final approval remaining in New Zealand.
“These initiatives will be funded within the indicative health spending allocations in the Prefu [Pre-election Fiscal and economic Update].
“They are also further examples of our determination to shift spending into frontline services for patients, rather than backroom costs.”
The election promise was one of many that Key made (along with tax cuts and the perennial “getting tough on crime), and on 10 December 2008, the Prime Minister-elect announced,
“I am proud to lead a government that has honoured such a commitment to the women of New Zealand.
“The commitment was part of National’s first 100-days action plan. I am pleased that the Herceptin funding policy effectively applies from the swearing in of the Government on 19 November.”
Unfortunately, John Key’s belief that ” National recognises that many Kiwis have limited access to modern medicines. We will improve that access. We will boost overall funding for medicines and speed up the registration of new medicines, with final approval remaining in New Zealand “ - seems only to apply during election campaigns.
At other times, Key does not seem to want to know.
Allyson Lock is one of five New Zealanders who suffers from Pompe Disease. It is a terminal condition.
There is medication available (called Myozyme ), but it currently receives no funding from Pharmac agency Pharmac. It is an expensive drug, but without that medication, Allyson and her fellow sufferers will not survive.
Allyson and her group have appealed to John Key for funding for their medication – without success. In fact, Key wants nothing to do with Allyson and other Pompe sufferers.
At a recent “on-line chat” with John Key, hosted by Fairfax Media, several people including this blogger attempted to put a question to the Prime Minister; why was National not prepared to fund medicine for Pompe as they had for breast cancer sufferers?
See previous blogpost: Fairfax; An hour with Dear Leader
After all, Pharmac had expressed the same reservations regarding the efficacy of Myozyme as they did with long-term herceptin treatment. Yet, that did not stop Key from ensuring breast cancer sufferers had full access to a year-long course of herceptin.
John Key and Health Minister Tony Ryall have wiped their hands of Allyson.
It is not election year.
So there are no political points to be scored in saving the lives of five fellow New Zealanders.
I look forward to John Key proving me wrong; a link to this blogpost will be sent to media as will as the Prime Minister’s office. The rest is in his hands.
To Prime Minister, John Key;
Fund treatment for Allyson and others, Mr Key. They deserve no less than breast cancer sufferers. You can either oversee funding for their treatment – or attend their funerals.
Your call, Mr Prime Minister.
See previous blogpost: Priorities?
Thanks to ‘S’ for proof-reading.
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From four years ago…
Note this bit,
” Questioned on whether National’s tax cuts programme of 2005 was credible today given the different economic circumstances, Mr Key said: “Well, I think it is”. “
By the end of 2008, the global financial crisis was in full force,
- March: 76 banks in the USA in financial trouble and at risk of failure – a 52% increase from the previous year – source
- July: Freddie Mac, Fannie Mae, Countrywide Financial, Bear Stearns, and other US corporations in financial trouble – source
- September: Lehmann Bros files for bankruptcy – source
- September: AIG files for bankruptcy – source
- September: Russian stock exchange closes after 20% drop – source
- September: New Zealand officially in recession – source
- September: NZ Super Fund drops $880.75 million – source
- October: Bush signs US$700 billion Wall Street bail out – source
- October: Icelandic banks declared insolvent – source
- October: UK government intervenes to bail out banks Royal Bank of Scotland Group plc, Lloyds TSB and HBOS Plc – source
Despite major banks, financial institutions, and other corporations collapsing or requiring massive bail-outs by tax-payers; despite New Zealand lready being in recession – John Key went into the 2008 November elections promising,
” John Key has defended his party’s planned program of tax cuts, after Treasury numbers released today showed the economic outlook has deteriorated badly since the May budget. The numbers have seen Treasury reducing its revenue forecasts and increasing its predictions of costs such as benefits. Cash deficits – the bottom line after all infrastructure funding and payments to the New Zealand Superannuation Fund are made – is predicted to blow out from around $3 billion a year to around $6 billion a year. ” – Source
By 1 April of this year, Bernard Hickey wrote in the ‘Herald’,
” It is clear now that the Government has effectively cut the income tax rate and paid for it by borrowing money overseas, in large part from China. It is an act of economic treason and generational selfishness when a government has decided an already-wealthy part of the population deserves higher incomes paid for by loading foreign debt on future generations of taxpayers. “ – Source
” The charts reveal the results of the cut in the income tax rate from 39 to 33 cents, which was in theory partly paid for by an increase in the GST rate from 12.5 to 15 per cent. They also reveal a massive reversal in a decade-long trend of improvement in New Zealand’s public debt position.
Our tax-to-GDP ratio has crashed from almost 34 per cent in late 2008 to 29 per cent last year, which means yet more borrowing on the horizon.
At the same time, the tax from individual incomes has fallen from around 32 per cent to around 24 per cent.
This is a direct result of the cut in the top personal tax rate and consumers’ shift to spending less and saving more. This means the higher GST rate is not collecting the revenue expected.
Meanwhile, interest-free student loans and Working For Families are deepening budget deficits. That is being paid for with increased Government borrowing to the tune of 15 per cent of GDP.
A collapse in the corporate tax take is only partly responsible and is largely due to the recession rather than any change in policy. It is now rebounding but the tax-to-GDP ratio is worsening.
This is unsustainable without an immediate and extended surge in economic growth, which few expect.
Voters will have to repay this debt in decades to come. Why are they not revolting at this national act of selfishness? “
Because people are generally fiscally illiterate?
Because National supporters are intrinsically self-centered?
Because those who voted National allowed themselves to be persuaded by a smooth-talking, plausible-sounding moneyman-come-politician?
And for National – they were so desperate to replace Labour as government that they were willing to promise anything – no matter how irresponsible and unaffordable – to win the election. It is this same willingness to make outrageous promises that are little better than bribes that got New Zealand into economic trouble during the Muldoon years.
To demonstrate how “credible National’s 2005 tax cut plans” really were, Bernard Hickey shared his “chart porn” with ‘Herald‘ readers,
“The charts reveal the results of the cut in the income tax rate from 39 to 33 cents, which was in theory partly paid for by an increase in the GST rate from 12.5 to 15 per cent. They also reveal a massive reversal in a decade-long trend of improvement in New Zealand’s public debt position. “
And some New Zealanders still delude themselves that National are sensible, prudent fiscal managers of our economy?
Not only have we borrowed billions from China, America, etc to fund our tax cuts – but National is also having to cut social services. Like, teacher-numbers. Which will result in larger class-sizes.
Was it all worth it?
(National supporters need not answer that question. It is purely rhetorical.)
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Previous Blog post
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In the last couple of years, this blogger has been pounding away, wearing out one keyboard after another; shooing cats of piles of documents; drinking enough coffee to deny me sleep for the rest of the decade…
To make a point.
By early 2008, recession was looming following a banking crisis that started in the US,
John Key’s history in international finance would have alerted him immediatly of the looming crisis. It was irresponsible of him to campaign on tax cuts when he must have known they were unachievable, as New Zealand’s economy began to slump.
To point out the blindingly obvious: New Zealanders in 2008 voted tax cuts for themselves that we could ill-afford as a nation. We were warned, even as far back as 2008,
No one who voted for National in 2008 can genuinely claim ignorance – we were warned. News of the building crisis and recession filled the media. New Zealanders’ greed for money simply outstripped their common sense,
We should have taken note when John Key “assured” us,
“Our tax policy is therefore one of responsible reform… We have ensured that our package is appropriate for the current economic and fiscal conditions… This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services… National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.’ “ – National Party: Tax Policy
Despite all the media reports; despite all the warnings; despite all the criticisms that National’s programme of tax cuts was unaffordable, on 8 November 2008, 1,053,398 New Zealanders voted for National.
As a result of cutting taxes in April 2009 and October 2010, government revenue dropped. The supposedly “fiscally neutral “tax-switch” wasn’t so much a “switch” as a parlour-trick. It wasn’t our money that John Key was giving back to us – it was money borrowed from overseas.
The first tax cuts kicked in on 1 April 2009. That was followed by this media report,
The second round of tax cuts took effect on 1 October 2010. Predictably, that was followed by this media report, eight months later,
Yesterday, the NZ Herald published this piece penned by Bernard Hickey. It wasn’t just highly critical of the National – it accused the John Key’s government of;
- being fiscally irresponsible
- enacting policies designed to please its wealthy backers
- borrowing money overseas, to fund taxcuts
- economic treason
- and generational selfishness
Bernard Hickey did not mince his words,
Hickey went on to state,
“The charts reveal the results of the cut in the income tax rate from 39 to 33 cents, which was in theory partly paid for by an increase in the GST rate from 12.5 to 15 per cent. They also reveal a massive reversal in a decade-long trend of improvement in New Zealand’s public debt position.
Our tax-to-GDP ratio has crashed from almost 34 per cent in late 2008 to 29 per cent last year, which means yet more borrowing on the horizon.
At the same time, the tax from individual incomes has fallen from around 32 per cent to around 24 per cent.
This is a direct result of the cut in the top personal tax rate and consumers’ shift to spending less and saving more. This means the higher GST rate is not collecting the revenue expected.
Meanwhile, interest-free student loans and Working For Families are deepening budget deficits. That is being paid for with increased Government borrowing to the tune of 15 per cent of GDP.
A collapse in the corporate tax take is only partly responsible and is largely due to the recession rather than any change in policy. It is now rebounding but the tax-to-GDP ratio is worsening.
This is unsustainable without an immediate and extended surge in economic growth, which few expect.
Voters will have to repay this debt in decades to come. Why are they not revolting at this national act of selfishness?” – Ibid
To illustrate his point, Hickey charted New Zealand’s economic progress (or lack, thereof),
Hickey condemns the borrowing-funded tax cuts by calling it for what it is: inter-generational theft. It is a massive debt that will have to be repaid by loading that debt onto future generations of taxpayers.
Like hell !!
Many of the next generation won’t have a bar of paying of their parents’ debt. They’ve already decided to take the only logical step,
Bernard Hickey, and many other political, economic, and social commentators have highlighted the bad decisions that voters continually make. Unsurprisingly, we all like tax cuts – who wouldn’t want more money to spend on nice, new, shiny things.
Voting for wealth is not enough to make us wealthy. Especially if, at the same time, we expect all the nice things that a modern social democracy has to offer; free education; free healthcare; good roads and public transport; a pension at retirement; and lots of other state services funded by – taxation.
Well and truly, we have shot ourselves in the foot. We voted for more wealth, through taxcuts, and comprehensive social services – and we’ve ended up with neither.
And we have no one to blame but ourselves. We did this; 1,053,398 New Zealanders voted for it.
Here’s an idea: every single person who voted for National in 2008 and 2011 should be sent an invoice for their share of our country’s debt. Wouldn’t that be a lovely prospect?
Meanwhile, the final word goes to National’s Finance Minister, Bill English,
* * *
A few previous blogposts on tax cuts
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Five days ago, Finance Minister Bill English released a statement on the part-privatisation of several State Owned Enterprises. It is worthwhile re-printing his statement in full, and responding to it, point-by-point,
Running up $5-$7b more debt not the answer
by Hon Bill English, Finance
23 February 2012
Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders, Finance Minister Bill English says.
Speaking to an Auckland Chamber of Commerce and Massey University business lunch today, he said the challenge was how the Government pays for forecast growth in taxpayers’ assets over the next few years.
“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”
The rationale for offering New Zealanders minority stakes in four energy companies and Air New Zealand is quite simple, Mr English says.
“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.
“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.
“We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing.
“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.
“Most nights on television, we see the consequences of countries in Europe and elsewhere borrowing too much. We don’t want that for New Zealand.”
Secondly, under the mixed ownership programme New Zealanders will get an opportunity to invest in big Kiwi companies so they can diversify their growing savings away from property and finance companies.
“Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”
Thirdly, mixed ownership will be good for the companies themselves, Mr English says.
“Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won’t have to depend entirely on a cash-strapped government for new capital to grow.
“We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders.”
In his speech, Mr English reiterated the Government’s economic programme this term would focus on rebuilding and strengthening the economy.
It’s main priorities are:
- Responsibly managing the Government’s finances.
- Building a more productive and competitive economy.
- Delivering better public services within tight financial constraints.
- Rebuilding Christchurch.
“So there will be no big surprises from this Government,” Mr English says. “We have laid out our economic plan and Budget 2012 will focus on implementing that plan.”
Firstly, let’s call a spade, a spade here. Whilst National ministers use the euphemistic term, “mixed ownership model”, the issue here is partial-privatisation of state owned enterprises. National’s spin-doctors may have advised all ministers and John Key to always use the phrase “mixed ownership model” – but the public are not fooled.
To begin, I take great exception to English’s opening statement,
“Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders…”
Opponants of National’s part-privatisation do not “need to explain” anything. It is up to National to explain why it feels the need to part-privatise tax-payer owned corporations that are efficient and give a good return to the State.
Demanding that the “opponents of the Government’s mixed ownership programme need to explain” their opposition is the height of arrogance. Governments in western-style democracies are accountable to the public – not the other way around.
English then goes on to say,
“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”
“…we are not reducing our assets” ?!?!
Selling 49% of Genesis, Meridian, Solid Energy, Might River Power, Air New Zealand (from 75% to 51%) down to a 51% holding is “not reducing our assets” ?!?!
“To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them…”
English laments that “our challenge is how we pay for their growth, while getting on top of our debt”.
This involves two distinct issues;
Paying for the growth of state assets.
Genesis, Meridian, Solid Energy, Might River Power, and Air New Zealand are all profitable enterprises in their own right. In the 2010 financial year, these assets made a combined profit of $581 million dollars. None of these five SOEs are loss-makers.
They can each pay for whatever growth programme they require, using their profits.
Where National interfered in SOE operations, the results were highly distorted,
“Genesis paid out no dividend and had a zero yield on its operating profit of $293 million.
It had a 30.5% shareholder return on total assets.
Meridian had a dividend yield of 10.4%, achieved by paying out 428.8% of its profit. The increase came from the $300 million special dividend it received during the sale of Tekapo A and Tekapo B stations to Genesis, which was forced by the Government to borrow to pay for the purchase.” – Source
The reason that there is a “challenge [in] how we pay for their growth“ is simple: National demands high dividends from these SOEs (often by forcing them to borrow) leaving little for the companies to reinvest in their own growth.
Under-funding is a problem only because National has created the problem.
Getting on top of debt.
Linking New Zealand’s $18-plus billion dollar debt to funding the growth of SOEs is deliberate sophistry (ie; a deliberate deception).
The reason we have out-of-control debt is because,
- the global banking crisis and recession hit New Zealand’s export-driven economy as it did nearly every other country (which is also why we have high unemployment – which makes National’s current beneficiary-bashing all that much more repugnant);
- the two earthquakes which damaged or destroyed much of Christchurch;
- and two tax-cuts in 2009 and 2010 which we could ill-afford; benefitted the top income earners/wealthy; and left a gaping $1.4 billion “hole” in the government’s revenue.
As a society and as an economy, we had no control over the first two crises to hit us.
But we sure had control over our taxation policy, and doling out generous tax cuts to millionaires and wealthy businesspeople was a luxury we could not afford. (Many maintain that National was “rewarding” certain affluent socio-economic groups for electoral support at the ballot box.)
Next. English states,
“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.”
National appears confused (as with most of its ad hoc policies) as to the proceeds it may gain from the partial sales. Only a year ago, Key stated authoritatively,
“If we could do that with those five entities … if we can make some savings in terms of what were looking at in the budget and maybe a little on the upside you’re talking about somewhere in the order of $7 to $10 billion less borrowing that the Government could undertake.” – John Key, 26 January 2011
Then again, as recently as eleven days ago, English let slip that,
“I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes. That’s an honest answer.” – Bill English, 17 February 2012
The best description of Key and English on asset part-sales: clueless.
It is also worrying that National is selling state assets to pay for “other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets“.
Every householder will tell you that if you have to sell of your furniture; whiteware; tv, family car, to pay to maintain your home – then you are in deep financial trouble.
What National is doing is “selling the household furniture to pay for painting the house”. Selling off assets to pay for maintenance is not sustainable – eventually you run out of stuff to sell. It is a really dumb idea.
But more than that, it indicates that National is not “earning” enough, by way of taxation revenue to pay for it’s house-keeping. If we have to borrow or sell assets to do simple things like paint schools or properly resource hospitals – then it is a fairly clear indication that taxation revenue is insufficient for day-to-day operations of public services.
It also indicates that we are paying for the 2009 and 2010 tax cuts by selling state assets.
This is not “fiscal prudence” – this is foolish profligacy.
Bill English again demands, in his speech,
“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.”
No, Mr English. Perhaps you should “honestly explain to New Zealanders” why you believe it makes greater commerciall sense to part-sell profitable assets that are returning a higher yield on investment, than what the government pays to borrow?
“The Government is estimating a $6 billion reduction in net debt after the sale of the state-owned enterprises – but concedes the savings on finance costs will be less than what it would have booked from dividends and retained earnings if it kept them.
Treasury forecasts released today in the Government’s budget policy statement outline the forecast fiscal impact of selling up to 49 per cent in each of the four State-owned power companies – Mighty River Power, Meridian, Genesis Energy and Solid Energy – and by reducing the Crown’s current shareholding in Air New Zealand.
They assume a price of $6 billion – the midpoint in previous estimates of a $5 billion to $7 billion sale price – and a corresponding drop in finance costs of about $266 million by 2016.
But the trade-off is the loss of an estimated $200 million in dividends by 2016 and the loss of $360 million in forecast foregone profits in the same year.
Documents supplied today state that the overall fiscal impact of selling a partial stake in the SOEs is a reduction in net debt, but the Government’s operating balance will also be smaller, because foregone profits would reduce the surplus.” – Source
Yet, only a year ago, Bill English was forced to concede that state owned power companies were indeed, highly profitable. In fact, he was complaining bitterly about State-owned generators “earning excessive returns”,
“Generally the SOE model has been quite successful in that respect. But if you look at those returns being generated particularly out of the electricity market, the Government has taken the view that that market is not as competitive as it should be.” – Source
The State will be losing money on the deal; earning less dividends from the SOEs than the cost of borrowing. The sums simply don’t add up.
There also seems to be some confusion (no longer a surprise) as to what National intends to do with sale proceeds.
On the one hand Bill English sez he wants to reduce debt,
“We are firmly focused on keeping the Government’s overall debt as low as possible and that is the most important consideration over the next few years.” – 16 February 2012
And a week later, English is spending it,
“First, the Government gets to free up $5 billion to $7 billion… to invest in other public assets like modern schools and hospitals…” – 23 February 2012
I guess Mr English is hoping that no one is paying attention?
Further in his speech, English makes this rather candid admission,
“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.”
And there we have it, folks: the clearest statement yet from our Minister of Finance that the partial-sale of our state assets has little to do with giving “mum and dad” investors a share in our power companies; or making them more efficient; or paying down any of our $18+ billion debt; or putting a new coat of paint on your local school – the government is desperate to raise cash because it “is spending and borrowing more than it can afford “.
The tax cuts of 2009 and 2010 were never “fiscally neutral” as National kept insisting.
The “tax switch” left a $1.4 billion “hole” in the government’s revenue and this is how they are attempting to “plug that hole”.
We have been conned.
The tax cuts will be funded by the sale of state assets that we, as citizens of this country, already own. And because the bulk of tax cuts benefitted the highest income earners/wealthy – who are also in a better position to acquire shares in Genesis, Meridian, Solid Energy, Might River Power, and Air New Zealand – the transfer of wealth from low and middle income earners will be two-fold.
The legacy of John Key’s government will be to make the rich richer, and for the rest of us, we can look forward to,
- more expensive power
- losing half ownership of our taxpayer-created state assets
- and the top 10% to increase their wealth even more
But, to be generous, I will leave the last word to the Hon. Bill English,
“Those who would actively choose to drive New Zealand into further debt to pay for tax cuts lack real ambition for our economy.” – Finance Minister Michael Cullen, 7 March 2008
“…in 2005 we promised tax cuts which ranged from about $10 to $92 a week, roughly $45 a week for someone on $50,000 a year. I described it as a credible programme of personal tax cuts and I’m committed to a credible programme of personal tax cuts. I believe that an ongoing programme of personal tax cuts that delivers the sort of magnitude that we’ve had in the past is potentially possible.” – John Key, Leader of the Opposition, 20 May 2008
“National will fast track a second round of tax cuts and is likely to increase borrowing to pay for some of its spending promises.” - John Key, Leader of the Opposition, 2 August 2008
“Our tax policy is therefore one of responsible reform… We have ensured that our package is appropriate for the current economic and fiscal conditions… This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services… National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.” – John Key, Leader of the Opposition, 20 October 2008
“Taxpayers do not want further tax cuts if they mean more government borrowing, a new survey shows. The survey comes as social welfare campaigners say tax cuts failed to help those most in need. The New Zealand Business Council for Sustainable Development survey found that while most people wanted tax cuts planned for 2010 and 2011, they did not want them if it meant further borrowing… The survey found most people would spend the tax cuts on living expenses, while others looked to credit-card debt and mortgage payments. “ – New Zealand Business Council for Sustainable Development, 11 April 2009
In 2008, National campaigned on promises of tax cuts knowing full well this country could not afford them. By November 2008, as New Zealand went to the polls, the international global banking crisis was in full swing, and recession was beginning to hit nearly every single nation on Earth (Australia and China were the lucky exceptions).
By March 2008, the US Federal Deposit Insurance Corp had identified 76 American banks as “in trouble”.
A week later, and Lehmann Bros – one of the largest financial institutions in the US filed for bankruptcy. On the same day, the Russian stock market was forced to close, as shares plunged by up to 20% in a day.
On 26 September 2008, it was officially declared that New Zealand was in full recession.
Against this backdrop, National proceeded with it’s election promises of tax cuts. As unfolding events would show, they were irresponsible promises – and carrying them out in April 2009 and October 2010 was even more reckless,
“John Key has defended his party’s planned program of tax cuts, after Treasury numbers released today showed the economic outlook has deteriorated badly since the May budget. The numbers have seen Treasury reducing its revenue forecasts and increasing its predictions of costs such as benefits. Cash deficits – the bottom line after all infrastructure funding and payments to the New Zealand Superannuation Fund are made – is predicted to blow out from around $3 billion a year to around $6 billion a year.” – NZ Herald, 6 October 2008
Fast-forward four years, and we are now having to pay for those taxcuts – which were funded by borrowing other peoples’ savings from offshore banks,
It is obvious to all but the most blinkered National/ACT supporter that our debt is growing because we have a shortfall of revenue, caused by this government’s ill-conceived tax-cuts. That shortfall is in the order of $1.4 billion.
A business columnist for the NZ Herald wrote,
“Just how much became apparent yesterday with the $1.4 billion drop in forecast tax revenue for this financial year.
The overall upshot is the Government’s cash deficit has blown out from $13.3 billion to $15.6 billion this year taking into account the unexpected expenditure and the drop in forecast tax revenue.” – Fran O’Sullivan, 15 December 2010
CTU President, , Helen Kelly wrote,
“The unsuccessful tax switch (we called it a “tax swindle” at the time) last year was not fiscally neutral as was claimed. There is a $1.4b revenue hole. It wasn’t a fair switch. The gap in take- home pay between someone on $30,000 and someone on $150,000 a year grew by $135 a week as a result of tax cuts made by this Government.” – Helen Kelly, 23 May 2011
And ex ACT MP, Muriel Newman said,
“If we look back at the state of the books just before the last election, the impact on the country of the recession and the earthquakes become more evident. Crown revenue today is $1.4 billion lower than three years ago and Crown expenses $2.2 billion higher.“ – Muriel Newman, 14 November 2011
Interestingly, Ms Newman blames the blow-out in government debt on “the recession and the earthquakes” – but makes no reference to the ’09 and ’10 tax cuts. In fact, she pours petrol on a bon-fire by saying that “ACT would lower the top rate of income tax to 25% and the company tax to 12.5%“.
One can imagine what that would do to the government deficit! (But then again, ACT would sell every single state-owned enterprise and scrap most welfare, to fund their deep tax cuts. A society governed under ACT policies would be utterly alien to anything most New Zealanders could have dreamed of. I suspect Australia’s population would rise by four million, practically overnight.)
And, spelling it out in even simpler terms, the PSA’s analysis of the figures,
“Tax Cuts Widen the Gap Between Rich and Poor
- Government chose to make tax cuts in worst recession in 70 years
- Total tax cuts worth $5.5 billion
- Top 10% income earners got tax cuts worth $2.5 billion
- GST increased to 15% – hurts low and middle income most
- Tax cuts + GST left $1.4 billion hole in budget
Since 2008, National has introduced tax cuts that cost New Zealand around $5.5 billion a year in lost revenue. Most of the benefit has gone to the wealthiest.
National’s first set of tax cuts – the personal tax cuts and ‘Independent earner rebate’ taking effect in April 2009 – cost approximately $1 billion a year.
The second set of cuts – cutting the top income tax rate from 38% to 33%, and the company rate to 28% – will cost $4.5 billion a year, according to figures from the 2010 Budget. That gives a total of $5.5 billion.
National claimed that because it was also increasing GST, the tax changes would be “revenue neutral” – that is, the increase in GST would cancel out the income tax cuts. In fact, the losses from the income tax cut will outweigh the gains from GST by $1.4 billion. In other words, the so-called “tax switch” has blown a $1.4 billion hole in the budget.
The tax cuts have also made New Zealand a less fair place. According to Labour, the wealthiest 10% of New Zealanders will get 43% of the tax savings. And the gap in take-home pay between someone on $30,000 and someone on $150,000 a year grew by $135 a week as a result of the tax cuts.
New Zealand’s income tax rates are among the lowest in the OECD, as the Tax Working Group acknowledged.
In Australia , for example, income over $80,000 is taxed at 37%, and income over $180,000 is taxed at 45%.
Figures from the OECD itself show that, before National’s tax cuts, New Zealand’s “all in” top income tax rate – a measure that includes all taxes on income, including local and regional ones – was 38%. In contrast, the all in top income tax rate in Australia was 47%, and in most countries it was higher still.” – PSA.org.nz
This blog can confirm the PSA’s statement that “figures from the OECD itself show that, before National’s tax cuts, New Zealand’s “all in” top income tax rate – a measure that includes all taxes on income, including local and regional ones – was 38%“.
Why did they do it? Why did National make a $1.4 billion committment it knew we could ill-afford?
- Because they could.
- Because they wanted to be the government. Badly. And nothing quite wins votes like promises of tax cuts (even unaffordable ones).
- Because they probably had no idea how bad the recession would be? Rubbish. Of course they knew: John Key’s background was in international finance. He knew precisely how bad the Recession was – and how bad it was likely to get in Europe.
The question is: why did we, the voters, do it? Why did 1,053,398 New Zealanders cast their vote for National in 2008? Why did we vote for tax-cuts – something we knew was unaffordable?
Whatever the reason, we are having to pay for those tax-cuts – or rather, the $1.4 billion in revenue short-fall that we now have to borrow from overseas. In doing so, as this government continues to post budget deficits, it continues to cut back on services; raise government charges; and sack those state workers who have spent many years of their lives doing all the things we expect done for us in education, health, defence force, border control, conservation, etc.
It is inevitable that, unless New Zealand wins the international equivalent of Lotto, this government (or it’s successor, sometime in the next three years) will have to raise taxes again. Or, steal a page from Gareth Morgan’s book and implement a new, Land/Wealth tax. There is no other way to pay of our debt and pay for Christchurch’s re-build.
Something for all New Zealanders to ponder, next time National (or any other Party) promises us a tax cut, in return for our votes.
In the mean time, Bill English signed a document last year called a “PREFU” – Pre Election Economic & Fiscal Update,
This document is now worthless. It may have only one use left.
And finally, will Finance Minister Bill English accept “overall responsibility for the integrity of the disclosures within the Update“?
Does any politician ever accept responsibility for anything?
It is fast becoming apparent that this government is eyeing up Christchurch’s community-owned assets, to “help” pay for the costs of that city’s re-build.
Gerry Brownlee recently stated,
“Let me tell you, when the Government is spending $5.5billion anywhere, we expect the recipients of that to have some plan for how they will participate in what will be a very, very expensive recovery. And that plan has to be a lot better than ‘we’re just going to put up the rates and we’re going to borrow a lot more money’.” – Source
Which, strangely enough, is pretty much what National has done in the last three-and-a-bit years; raise gst; raise ACC premiums; raise EQC levies; and borrowed $380 million a week until we were (last reported) over $18 billion in debt,
So it’s ok for Central government to raise taxes/charges/levies and borrow like crazy – but not Christchurch!?
Ok, got it.
So what alternatives are Gerry Brownlee and John Key expecting of Christchurch City Council?
It appears that Key and Brownlee are indeed pressuring the Christchurch Council to privatise it’s community-owned assets to raise $1 billion for re-building. Chief amongst these, I suspect would be the Orion Power company – one of few in New Zealand still in public ownership. (Orion is 89.3% owned by the Christchurch City Council and 10.7% owned by the Selwyn District Council.) Red Bus Ltd, Lyttelton Port Company, and Christchurch airport could also be privatised if Brownlee gets his way.
“”We have asked Treasury, obviously, to give us advice about what the capacity is for Christchurch’s rating base to take on the extraordinary expense they have to face in the future,” he said.
”It is a $1billion-plus bill that they have to face and we are very interested, given that we are putting up $5.5b, as to how they might meet that cost.” ” – Source
Which is ‘code’ for “how are you guys going to cough up $1 billion for your re-build”?
It would be crazy to expect the people of Christchurch to rebuild the second largest city in this country. After enduring so much devastation; the death of 184 loved oved ones; thousands of people leaving the stricken city; losing teaching staff and other skilled workers – expecting the local people to weather such an onerous billion-dollar cost is patently unjust.
And it would be commercial insanity to privatise Council-owned assets at a time when, due to Christchurch’s current state, would constitute ca “fire sale” and not fetch the best possible prices.
As Gordon Campbell wrote on Scoop.co.nz.,
“Please. It would be idiotic to force Christchurch to sell its assets to pay for its rebuild, under present conditions. Given the current state of the city, those assets would earn only fire sale returns. Hocking off the city’s assets dirt cheap is yet another version of the destruction of its legacy – and while it may make sense to Brownlee to sell off that legacy to any of his government’s real estate speculator mates who may be waiting in the wings, it would be a betrayal of the people of Christchurch who as [Lianne] Dalziel says, have been through enough: “What they don’t need are backroom deals being done on the future of their city and their city’s assets.” – Source
As for the government’s financial problems – these are of John Key’s own making. Cutting taxes (April 2009, October 2010) during a recession, when we most needed to stimulate the economy via encouraging strong infra-structure investment was just irresponsible,
Bill English may have “expected the “tax switch” to be revenue-neutral” – but his ‘expectations’ are not part of reality. Instead, National has left a gaping hole of several billions of dollars in government revenue. No wonder we’re borrowing $380 million a week – and paying hefty interest amounts on those borrowings!
Refusing to raise taxes (except gst, which impacts mostly on the poorest) to finance the rebuild of our second largest city simply defies logic. But then, I, and others, have long since given up trying to figure out this governments plans.
Even the business community said as much,last year,
“Business NZ also released the results of its election survey of more than 1300 small to large businesses. While almost all believed it was important for the government to have a co-ordinated plan of action that raised economic performance, little more than a third thought John Key’s Government had one.
Deloitte chief executive Murray Jack said the finding was “disturbing” and the plan Mr Key had earlier in the day confidently spoken to the conference about “was obviously news to most people in this room”.” – Source
It’s fairly obvious that this government is relying on short-term “gains” (asset sales) to achieve long-term results. Applying “free market” policies to rebuild a crippled city is simply more right wing craziness.
A far better option would be the Green Party proposal for an Earthquake Levy. Such a levy would spread the cost of Christchurch’s re-build; take unnecessary financial pressure off Christchurch citizens; preserve Council-owned assets in public ownership; and retain the income stream – $100 million per annum – from these assets.
It’s a win-win-win scenario.
Does this government have the wit to investigate this, and/or other options?
Or does John Key really looking to buy into yet another fight with another community over another sensitive issue?
Your call, Mr Key.
Here, yet, is another instance of the current government’s ability to say one thing – whilst doing something completely different. (Commonly referred to as telling a lie.)
This issue, though, is perhaps the most serious of all of National’s spin-doctoring.
Taking money from already stretched school-budgets, to “redirect” into “trade training for teenagers”, seems counter-productive and the consequences will simply be more social problems down the road.
Does this seem even remotely sensible to anyone? “Robbing Peter to pay Paul”?
But that’s ok. We got our tax-cuts in 2009 and last year.
Never mind the kids. They’ll be ok. And if they don’t get a proper education, and go off the rails… well, I guess National will just go ahead with building that new prison in Wiri.
Is it worth it, my fellow New Zealanders?
This article, published in the American “National Journal”, is a must-read as to where the US has gone wrong – and by implication – has sucked New Zealand into their mistakes.
Pay close attention to the writers’ commenys on tax cuts and spending, as it applies to us, as well. This is possibly one of the most important and insightful commentaries yet to be written. It will grip you…
“The events of Sept. 11 have ultimately left us, 10 years later, with an economy and a strategic stature that no longer seem terribly awesome. America is still the sole superpower, but our invincible military is bogged down in two wasting wars, and poorly armed insurgents seem not to fear us. The rest of the world, beginning with China and Japan, now underwrites our vast indebtedness with barely concealed impatience. We are a nation downgraded by Wall Street, disrespected abroad, and defied even now by al-Qaida, whose leader was killed only recently after spending most of the decade taunting Washington. How did this happen?” – Read further…
(Acknowledgement to whoar.co.nz for bringing this excellent article to my attention.)