Home > The Body Politic > Cutting taxes toward more user-pays – the Great Kiwi Con

Cutting taxes toward more user-pays – the Great Kiwi Con

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Introduction

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The following is the amount spent by Labour, on Vote Education in the 2008 Budget;

Total 2008 Vote Education: $10,775,482,000 (in 2008 dollars)

Total students in 2009: 751,330* 

spend per student: $14,341.88

The following is the amount spent by National, on Vote Education in the 2016 Budget;

Total 2016 Vote Education: $11,044,598,000 (in 2016 dollars)

Total students in 2016: 776,948**

spend per student in 2016 dollars: $14,215.36

Total 2016 Vote Education: $9,608,800,000 (re-calculated in 2008 dollars)

spend per student in 2008 dollars: $12,367.37

Calculated in real terms (2008 dollars), National’s spending on Vote Education was $1,166,682,000 less last year than Labour budgetted in 2008.

In dollar terms, in 2016, National spent less per student ($14,215.36) than Labour did in 2008 ($14,341.88). Converting National’s $14,215.36 from 2016 dollars to 2008 dollars, and the sum spent  per student is even less: 12,367.37.

In real terms, National has cut the total*** education budget by $1,974.51 per student.

*  Not including 9,529 international fee-paying students

**  Not including 11,012 international fee-paying students

*** Total spent on Vote Education, not just schools and tertiary education.

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Tax-cuts and Service-cuts

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Writing in the Daily Blog recently, political commentator Chris Trotter had this to say on the matter of taxation and social services;

Speaking on behalf of the NewLabour Party, I felt obliged to spell out the realities of tertiary education funding. I told them that they could have free education or low taxes – but they could not have both. If the wealthy refused to pay higher taxes, then students would have to pay higher fees. If the middle class (i.e. their family) was serious about keeping young people (i.e. themselves) out of debt, then they would have to vote for a party that was willing to restore a genuinely progressive taxation system.”

Since 1986, there have been no less than seven tax-cuts;

1 October 1986 – Labour

1 October 1988 – Labour

1 July 1996 – National

1 July 1998 – National

1 October 2008 – Labour

1 April 2009 – National

1 October 2010 – National

 

The 2010 tax-cuts alone were estimated to cost the State  $2 billion in lost revenue.

Taxes were raised in 2000 by the incoming Labour government, to inject  much needed funding for a cash-strapped health sector. The previous National government, led by Bolger and later Shipley, had gutted the public health service. Hospital waiting lists grew. People waited for months, if not years, for life-saving operations. Some died – still waiting.

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During that time, National cut taxes twice (see above). Funding for public healthcare suffered and predictably, private health insurance capitalised on peoples’ fears;

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A decade late, National’s ongoing cuts, or under-funding, of state services such as the Health budget have resulted in wholly predictable – and preventable – negative outcomes;

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patients-have-severe-loss-of-vision-in-long-wait-for-treatment

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A critic of National’s under-funding of the health system, Phil Bagshaw, pointed out the covert agenda behind the cuts;

New Zealand’s health budget has been declining for almost a decade and could signal health reforms akin to the sweeping changes of the 1990s, new research claims.

[…]

The accumulated “very conservative” shortfall over the five years to 2014-15 was estimated at $800 million, but could be double that, Canterbury Charity Hospital founder and editorial co-author Phil Bagshaw said.

Bagshaw believed the Government was moving away from publicly-funded healthcare, and beginning to favour a model that meant everyone had to pay for their own.

“It’s very dangerous. If this continues we will slide into an American-style healthcare system.”

Funding cuts to the Health sector have been matched with increases to charges;

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cuts to NGOs offering support services;

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… and  leaving district health boards in dire financial straits;

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The critical correlation between  tax cuts and consequential reduction of state services was nowhere better highlighted then by US satirist and commentator,  Seth Meyer. He was unyielding with his  scathing, mocking, examination of  the travesty of the Kansas Example of “minimalist government”;

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Here in New Zealand, National’s funding cuts have not been restricted to the Health sector and NGOs. Government agencies from  the Police , Radio NZ, to the Department of Conservation have had their funding slashed (or frozen –  a cut after inflation is factored in).

The exception has been the Prime Minister’s department which, since 2008, has enjoyed a massive  increase of $24,476,000 since 2008 and  a near-doubling of John Key’s department and Cabinet expenditure since Michael Cullen’s last budget, seven years previously.

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Tax cuts, slashed services, and increasing user-pays

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By contrast,  parents are finding more and more that the notion of a free state education is quietly and gradually slipping away. User-pays has crept into the schools and universities – with harsh penalties for those who fail to pay.

In May 2013, National’s Tertiary Education Minister, Steven Joyce, announced;

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True to his word, in January 2016, the first person was arrested for allegedly “defaulting on his student loan”. By November the same year, a third person had been arrested. Joyce was unrepentant;

“There probably will be more, we don’t know of course how many are in Australia but that’s a very good start, and I think it’s probably a reasonable proportion of those who are in Australia.”

Joyce, of course, has nothing to fear from being arrested for defaulting on a student loan. His tertiary education was near-free, paid for by the tax-payer.

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joyce

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National had no choice, of course. The entire premise of user-pays was predicated on citizens paying services that until the late ’80s/early ’90s, had been either free or near-free. With student debt now at an astronomical $14.84 billion, National cannot afford to let ‘debtors’ get off scott-free. That would send the entire unjust system crashing to the ground.   According to Inland Revenue;

… nearly 80,000 of the 111,000 New Zealanders living overseas were behind on their student loan repayments.

IRD collections manager Stuart Duff said about 22 percent of borrowers living overseas were in Australia.

He said the $840m owed to New Zealand was a substantial amount of debt.

Figures show that student debt has been increasing every year since it’s inception in 1992. At this rate, student debt will achieve Greece-like proportions;

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Graphic: acknowledgement - NZ Herald

Graphic acknowledgement:  NZ Herald

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Unsurprisingly, loan ‘defaulters’ have surpassed $1 billion, including $16 million  written off through bankruptcy. Some never pay off their “debt” with $19 million  lost after death of the borrower.

But it is not only tertiary education that has attracted a user-pay factor. School funding has also been frozen, with operational grants the most recent to suffer National’s budgetary cuts;

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Education, Inc.

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Schools are so starved of funds that they are having to rely on outside sources of income  to make up shortfalls;

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Reliance on foreign students to make up shortfalls in government spending is essentially turning our schools into commercial ventures; touting for “business” and ensuring “clients” achieve good results so as to ensure repeat custom.

When did we vote for a policy which effectively commercialised our education system?

Schools are also funded more and more by parents – to the tune of hundreds of millions of dollars. Fund-raising and ever-increasing school fees are required, lest our schools become financially too cash-strapped to function.

In 2014, school “donations” (actually fees by another name) and necessary fundraising reached  $357 million and is estimated to reach a staggering $1 billion by this year;

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It is estimated that a child born this year will cost his/her parents $38,362 for thirteen years of  a “free” state education. In 2007, that cost was 33,274. Our supposedly “free” state education is being gradually whittled away, and replaced with surreptitious user-pays. According to Radio NZ;

Some school principals say many schools are considering a hike in parent donations next year and cutting teacher aide hours, as they respond to a freeze on core school funding.

More than 300 school principals responded to a survey by teacher unions.

About 40 percent of school principals said they were considering cutting back on the hours of teacher aides and other support staff next year.

Thirteen percent said they were looking to increase parent donations.

The president of the teacher union NZEI, Louise Green, said the survey showed it was students who miss out when school funding was frozen.

The neo-liberal princiciple of user-pays is being covertly implemented throughout the public sector and nowhere is this more apparent than in education. Parents and guardians are expected to pay more for education and this is “off-set” by cuts to taxes. This is core to the concept of user-pays.

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User-pays is hard to pay

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The problem is that this is not an overt policy by National. The public have not been given a clear choice in the matter and instead increasing user-pays has crept in, barely noticed by the voting public. Even when challenged, a National Minister will use mis-information to attempt to use Trump-like “alternative facts” to hide what is happening;

But Education Minister Hekia Parata said parents contributed just $1.80 for every $100 spent by the taxpayer on education.

The Government was set to invest $10.8 billion in early childhood, primary and secondary education, more than the combined budget for police, defence, roads and foreign affairs.

New Zealanders have been lulled into a false sense of security that, even after seven tax cuts, we still have “free” education.  But as Chris Trotter pointed out with cool logic;

I told them that they could have free education or low taxes – but they could not have both.

The question is, what kind of society do New Zealanders want: a free education system or  tax cuts and more user-pays?

Because we can’t have both.

At the moment, politicians are making this choice for us.

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Postscript

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From a Dominion Post article on 24 January;

Student loans are getting bigger and graduates are taking longer to pay back the money they owe.

Figures from last year’s Student Loan Scheme Annual Report show the median loan balance in this country grew from $10,833 in 2008 to $14,904 in 2016.

The median repayment time for someone with a bachelor’s degree also lifted from just over six years, to eight and a half.

Since a peak in 2005, the numbers of people taking up tertiary education have declined.

[…]

Labour education spokesman Chris Hipkins said there was a variety of factors that lead to higher student loans and longer repayment times. Tuition fees continued to rise, as did living costs.

“The long term impact for people is quite significant, basically they have a large debt for longer,” Hipkins said.

“If they’re weighed down with student loan debt it will be difficult to get on the property ladder, it’s already a burden, and this is making it even harder for the next generation.”

Universities New Zealand executive director Chris Whelan said that when it came to universities fees increasing, one need only look at published annual accounts of the country’s eight universities to see they were not “raking in” a lot of money.

Currently two-thirds of the cost of tuition was covered by subsidies, and one-third was covered by the student.

LOANS ON THE RISE

Median loan balances

2010 – $11,399

2012 – $12,849

2014 – $13,882

2016 – $14,904

Median repayment times for a bachelors/graduate certificates or diplomas

2010 – 6.9 years

2012 – 7.8 years

2014 – 8.5 years

 

 

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References

Reserve Bank NZ: Inflation calculator

Treasury: Vote Education 2008

Treasury: Vote Education 2016

Educationcounts: School RollsStudent Rolls by School 2005-2009

Educationcounts: School RollsStudent Rolls by School 2010-2016

The Daily Blog:  Don’t Riot For A Better Society: Vote For One!

Infonews: Government’s 2010 tax cuts costing $2 billion and counting

The Press: Four forced off waiting list die

Otago Daily Times:  Heartwatch Insurance Cover

Radio NZ: Patients have ‘severe loss of vision’ in long wait for treatment

Fairfax media: Researchers claim NZ health budget declining, publicly-funded surgery on way out

Radio NZ: Patients suffering because of surgery waits – surgeon

Fairfax media:  Prescription price rise hits vulnerable

TVNZ News: Kiwi charities and NGOs face closure with impending funding cuts

NBR: Leaked document shows 10 District Health Boards face budget cuts – King

Fairfax media: Police shut 30 stations in effort to combat budget cuts

Youtube: Kansas Tax Cuts –  A Closer Look

Scoop media: Budget cuts continue National’s miserly underfunding of DOC

Fairfax media: Student loan defaulters to face border arrest

NBR: Arrested student loan defaulter claims to be Cook Island PM’s relative

Fairfax media: Third arrest of student loan defaulter made following government crackdown

Radio NZ: Govt tightens education purse strings

NZ Herald: ‘At risk’ school funding revealed – with 1300 to lose out under new model

Fairfax media: Student loan borrowers seeking bankruptcy as millions in debts wiped due to insolvency

NZ Herald:   Schools using foreigners’ fees to staff classrooms

NZ Herald: Parents fundraise $357m for ‘free’ schooling

NZ Herald: Parents paid $161m for children’s ‘free education

NZ Herald:   School costs: $40,000 for ‘free’ state education

Motherjones: Trickle-Down Economics Has Ruined the Kansas Economy

The New Yorker: Covert Operations

CBS News: Kansas loses patience with Gov. Brownback’s tax cuts

Kansas City Star: Gov. Sam Brownback cuts higher education as Kansas tax receipts fall $53 million short

Bloomberg: Kansas Tried Tax Cuts. Its Neighbor Didn’t. Guess Which Worked

Fairfax media: Tourism industry claims DOC will be severely handicapped by funding cuts

Previous related blogposts

The slow starvation of Radio NZ – the final nail in the coffin of the Fourth Estate?

12 June – Issues of Interest – User pays healthcare?

The Mendacities of Mr Key # 16: No one deserves a free tertiary education (except my mates and me)

The Mendacities of Mr Key # 19: Tax Cuts Galore! Money Scramble!

The seductiveness of Trumpism

Steven Joyce – Hypocrite of the Week

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This blogpost was first published on The Daily Blog on 26 January 2017.

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