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Posts Tagged ‘2009 tax cut’

Newsflash: apparently our public hospital system is in crisis?!

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A NZ Herald front page headline on 22 February screamed out to anyone who  cared to read – or perhaps even just happened to glance at the paper;

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Written by veteran Herald political reporter, Audrey Young – the on-line version’s headline was considerably more restrained;

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Regardless of headlines, the content confirmed years of media reports and countless blogposts  on The Daily Blog, The Standard, and elsewhere, that New Zealand’s public healthcare system was critically under-funded; over-stretched; and staff were burning out from over-work. The story confirmed nine years of National’s gross under-funding and mis-management of the health system as successive ministers demanded that DHB managers and health-workers “do more with less”;

The Government said total health spending would be a record $16.77 billion in 2017/18 – an increase of $879 million, with an overall increase of $3.9b over the next four years.

However, the record claim does not take inflation into account, and sidesteps the fact that almost half the spending will go toward mandated wage increases as part of the pay equity settlement.

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Meanwhile, mental health workers and union representatives said the funding was only a fraction of what was needed to adequately respond to demand.

Social worker Andy Colwell said he expected to see the gap between demand and funding get even worse as a result of Budget 2017.

“As a mental health worker, seeing families struggling with life-threatening situations not being seen as urgent is incredibly frustrating, and knowing it will get worse is incredibly distressing,” Colwell said.

Healthcare workers made their cries of frustration heard clearly and unequivocally;

A survey of almost 6000 paramedics, nurses, mental health workers and support staff earlier in 2017 found 90 per cent felt the healthcare system was understaffed and under-resourced.

Some said they feared burnout could be jeopardising patient safety, and 72 per cent said their workload was not reasonable.

Gordon Campbell wrote on 3 April;

Week by week, the sheer scale of the neglect to crucial social infrastructure by the Key/English government becomes apparent – and with it the size (and expense) of the problems they’ve left behind, for the Ardern government to somehow address. The mouldering walls and the decaying electricity and sewage systems at Middlemore Hospital serve as a perfect symbol of the dilapidation that’s been fostered by pressure to meet the political goals of budgetary constraint. All of it done so that John Key and Bill English could brag about being capable managers, who kept expenditure under control – as if balancing the books was an end in itself.

Meanwhile at Middlemore, the necessary investments in maintenance were being deferred – as they have has been in DHBs all around the country, in order to prop up the illusion of competence by a government always far more interested in delivering another round of tax cuts, if it possibly could. It didn’t want to hear bad news. Its managers in public health heard that, and obeyed orders.

Since National changed leaders, the same illusion has been perpetuated by Simon Bridges, who cited National’s claim to be “good economic managers” in his first statements as leader.

Over the last two years, Radio NZ  featured a series of hard-hitting, critical stories examining growing waiting lists and worsening under-funding at the various DHBs around the country. The reports were damning;

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This year,  DHB Boards mustered the courage to disclose the full extent of under-funding.  Our dilapidated hospital buildings were literally rotting from within;

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On top of stretched services; lengthening waiting lists; and stressed medical staff, the full extent of  the public health nightmare became apparent, as revelation after revelation was made public;

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Noticeably, it was this country’s non-commercial broadcaster, Radio New Zealand, that led the steady expose on the crisis in our public health system. Other media outlets picked up on the issue, belatedly, albeit based on Radio NZ’s sound investigative reporting;

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A subsequent Fairfax editorial was damning of the previous National government;

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The un-named editorial writer sheeted home responsibility for this mess firmly where it belonged;

The new Government has inherited these problems from a National Government that prided itself on running a tight financial ship. Even as recently as this week, when worsening news about Middlemore appeared in the media, new National leader Simon Bridges stuck to a script about prudent financial management and passed the buck back to Prime Minister Jacinda Ardern and Health Minister David Clark. 

But the responsibility for this and other problems of underfunding and general neglect in the health system really need to be sheeted home to former Health Minister Jonathan Coleman, who has already signalled his departure from politics for the private health system. Many National MPs are said to quietly blame Coleman for their 2017 election result as both health and mental health became political quagmires. 

The editorial echoed Gordon Campbell’s earlier blogpost, and those of  other bloggers over the last nine years. This blogger has consistently pointed out that the 2009 and 2010 tax cuts implemented by National created a fiscal hole; forced increased borrowing; and corresponding under-funding/cuts to public services;

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As this blogger reported in January last year (2017);

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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In response, National’s current, caretaker Leader, Simon Bridges attempted to mitigate his Party’s shocking record of incompetance by repeating the oft-parrotted, mythical mantra of National’s “good economic management“;

“But remember we didn’t have all the choices that this government’s blessed with from a very strong legacy from good economic management.

We had to get through a [global financial crisis,] we had to get through earthquakes.

Now we are in actually a relatively blessed period with strong surpluses, it’s for this government to look at how they do this”

Bridges seemed utterly oblivious as to why “we are in actually a relatively blessed period with strong surpluses“. Those so-called “surpluses” were at the expense of  rotting hospital buildings and under-funded services and medical staff.  He seemed wholly blind to the social costs incurred in National’s single-minded mania to create “surpluses”.

Bridges’ attempt to deflect to the GFC  ignores the critical fact that National stubbornly proceeded with it’s reckless promises of tax cuts that – as predicted – eventually proved to be unaffordable.

Even right-wing commentator, Matthew Hooton panned Bridges’ comments on Radio NZ’s Nine To Noon political panel, saying;

“That was his worst Morning Report interview so far…”

Hooten  also dismissed former Health Minister Coleman’s claims not to have been informed of Middlemore Hospital’s dire building crisis as “hopeless”.

Hooton suggested that rather than National’s 2017 election year bribe for more tax cuts, that the focus should have been on writing off DHB debts and more social spending. He believed that offering tax cuts was the reason National was no longer in government;

“That was the wrong call.”

He has a point – a point that many commentators on the Left have been banging on for nearly a decade.

It should be abundantly clear to all by now that National’s strategy of tax-cuts was simply to win votes at election time. It was a successful tactic during the 2008 election;

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.

[…]

National is yet to explain how it will pay for the promised larger cuts.

And they tried it on again last year;

Prime Minister Bill English is talking tax cuts – saying “something will be covered” in the upcoming Budget and any changes would take effect from April 1 next year.

“There will certainly be something covered in [May’s] Budget. Look, there’s not going to be some big sugar shock with tax cuts. We have a range of tools, we want to be able to help and support low and middle income families,” Mr English told Newstalk ZB.

Had it not been for NZ First coalescing with Labour and thew Greens, National’s planned tax cuts might well have proceeded. And the rotting buildings at Middlemore would have continued to decay; waiting lists throughout the country continued to lengthen; and increasing numbers of front-line staff burning out.

However, there is an aspect far worse than the opportunistic use of tax-cuts as electoral bribes by a National Party hell-bent on re-election at any cost.

That is that District Health boards have not made these problems public earlier.

Waiting for incoming Labour-led governments to finally ring alarm bells by announcing;

“We have been facing this for years and every year make savings or defer capital or struggle to get permission to get capital through the [Ministry of Health] capital investment committee.

– appears to be an act of cowardice.

Auckland District Health Board states that it’s  “strategic priorities” are;

  • People, patients and whānau at the centre.
  • Values and equity underpin everything we do.
  • Guarantee quality and safety.
  • Get the best outcomes from our resources.
  • Hold people, systems and structures to account.

Fine words. But have they been followed through?

When District Health Boards fail to make clear to central government that funding for public healthcare is inadequate; that there is a crisis in offering services in a timely fashion; that buildings and equipment cannot be kept to a high standard; that staff are over-worked and leaving in droves – then they have abrogated their duties to their communities; their employees; and to those vulnerable people who desperately seek medical assistance.

Waiting for a change in government is not a viable option.

Appropriate funding for DHB services must be the the number one duty of every Board member and Chairperson, irrespective of which hue the government-of-the-day is.

Acquiescence in the face of a Minister expecting (and demanding) a surplus from DHBs is not a viable option.

We, the public, expect our DHB Boards to look after our interests – not those of  Ministers with their eye on re-election.

If DHB Boards cannot find the inner courage to speak out on our behalf, to demand appropriate funding, then they should resign. Step aside and let others do the job. After all that is said and done, people’s lives are at stake.

Silence should never be a viable option.

 

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Acknowledgement

I acknowledge and thank the hard-work of Radio New Zealand staff who have brought to our attention the current abysmal state of our public health system. This is indeed the role – the raison d’être of the  existence of public broadcasting. Your dedication to bring us the truth may have saved lives.

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References

NZ Herald:  Huge demand for services in Auckland stretches health system to the limit say bosses

Fairfax media:  Counties Manukau district health board in financial crisis

Fairfax media:  Frustration, disappointment over health funding in Budget 2017

Fairfax media:  Nine in 10 healthcare workers feel understaffed and under-resourced

Radio NZ:  Eye patient delays a nationwide problem – specialists

Radio NZ:  Eye check-up delays: ‘Within that time, I went blind’

Radio NZ:  Damning report on delayed eye appointments released

Radio NZ:  Eye patients forced to sit on floor at overcrowded clinic

Radio NZ:  Health Minister defends number of ICU beds

Radio NZ:  Man waits five months for urgent cancer surgery

Radio NZ:  ‘People will die waiting for the attention they need’

Radio NZ:  Southern DHB in a ‘slow motion train crash’

Radio NZ:  Dunedin Hospital surgeons operate only twice a month, surgeon says

Radio NZ:  Minister refuses to apologise for ‘toxic’ DHB comment

Radio NZ:  Southern DHB to implement all recommendations in scathing review

Radio NZ:  ‘I had a death sentence hanging over my head’

Radio NZ:   Prostate cancer patients face wildly varying wait times

Radio NZ:  Southern DHB commits to clearing patient backlog

Radio NZ:  Health Minister responds to ‘unacceptable’ delays at Dunedin Hospital

Radio NZ:  ‘Megaclinics’ planned for Dunedin urology patients

Radio NZ:  Akl DHB defends work culture, ‘rubs salt in wound’

Radio NZ:  DHBs warn funding crisis may worsen

Radio NZ:  Doctors push to reduce wait time for mental health patients

NZ Herald:  Rot, mould and sewage at Middlemore: Health minister ‘disappointed’ he wasn’t told

RNZ:  Hospital rot was ‘fully disclosed’ to board, ministry – former boss

RNZ:  Hospital rot – Sewage leaks linked to 2014 outbreak

RNZ: Middlemore maintainance a ‘bloody nightmare’ – ex-manager

TVNZ:  ‘We have rot, we have mould, we have sewage’ – Health Minister asks Middlemore Hospital for explanation over faulty buildings

RNZ:  Middlemore building woes worse than first thought

Fairfax:  Health system underfunding worse than PM expected, as more problems uncovered at Middlemore Hospital

Fairfax media:  Middlemore is a bleak symbol of health failure

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: 174,000 kiwis left of surgery waiting lists with Cantabrians and Aucklanders faring the worst

Radio NZ:  New govt ‘blessed’ with National’s surpluses – Simon Bridges (alt.link)

Radio NZ:  Political commentators Matthew Hooton and Stephen Mills (alt. link)

NZ Herald:  Nats to borrow for other spending – but not tax cuts

Otago Daily Times:  Tax cuts would take effect from April 2018 – PM

Auckland DHB: Who We Are

Radio NZ: DHB vacancies likely even higher than 400

Additional

NZ Medical Journal:  Funding New Zealand’s public healthcare system – time for an honest appraisal and public debate

World Health Organisation:  New Zealand cuts health spending to control costs

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

Fairfax media:  Government to urgently establish new health advisory group

Other Blogs

The Jackal:  National has failed our health system

Werewolf:  Gordon Campbell on Middlemore Hospital as a symptom of neglect

Previous related blogposts

12 June – Issues of Interest – User pays healthcare?

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

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

The cupboard is bare, says Dear Leader

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This blogpost was first published on The Daily Blog on 8 April 2018.

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St. Steven and the Holy Grail of Fiscal Responsibility

30 November 2017 3 comments

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National’s Steven Joyce is up to his old tricks, pontificating and lecturing the new Coalition government on “fiscal correctness”

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Which called for this timely reminder to the former Minister of Finance…

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from: Frank Macskasy <fmacskasy@gmail.com>
to: NZ Herald <letters@herald.co.nz>
date: 22 November 2017
subject: Letter to the editor

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The editor
NZ Herald

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Former Finance Minister, Steven Joyce, rails against the Coalition government’s plans to introduce a regional fuel tax for Auckland, claiming;

“Because if they controlled their costs properly they’d be able to have the sort of money, the $150 million a year that a regional fuel tax would generate, they’d have that in surplus if they just ran the council properly.

… ‘hey get your costs under control’.” (Radio NZ: “Auckland Council could avoid fuel tax – National Party”)

This is the same minister whose previous government racked up $70 billion in debt during their nine years term – exacerbated by two unaffordable tax cuts in 2009 and 2010, and increasing debt by $2 billion each year. (Scoop media:  “Govt’s 2010 tax cuts costing $2 billion and counting”) In effect, National borrowed money – up to $450 million per week in 2009 – from offshore to put into the pockets of mostly top income earners.

Which made a mockery of John Key’s claim in August 2008 that National’s planned tax-cuts would be “hermetically sealed” from the rest of National massive borrowing plans. (NZ Herald: “Nats to borrow for other spending – but not tax cuts”)

Let’s hope the Auckland Council doesn’t follow National’s appalling record of “controlling their costs properly”. It would bankrupt the city.

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-Frank Macskasy

[address and phone number supplied]

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Each time the Nats open their mouths to carp about the Coalition’s reforms, it is a delight to remind them of their own pitiful track record over the last nine years. And for Steven Joyce, I offer his very own:

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Postscript

It appears that Mr Joyce has taken offence at something I’ve said. The poor fragile flower has blocked me from his Twitter account;

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It is highly reassuring to know that  I have been noticed by those in high office. And amusing to realise just how incredibly thin-skinned they are.

My work continues.

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References

Radio NZ:  Auckland Council could avoid fuel tax – National Party

Scoop media:  Govt’s 2010 tax cuts costing $2 billion and counting

ODT:  Government now borrowing $450 million a week – claim

NZ Herald:  Nats to borrow for other spending – but not tax cuts

Twitter:  @stevenljoyce

Other blogs

Werewolf: The Myth of Steven Joyce

Previous related blogposts

Joyce, TPPA, and wine exports

Key & Joyce – competing with Paula Bennett for Hypocrites of the Year?

Steven Joyce – Hypocrite of the Week

Letter to the Editor – Steven Joyce, Hypocrite of the Year

Steven Joyce rails against low mortgage interest rates; claims higher interest rates “beneficial”

Dollars and sense – Joyce’s hypocrisy

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This blogpost was first published on The Daily Blog on 25 November 2017.

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Dollars and sense – Joyce’s hypocrisy

7 November 2017 4 comments

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You’d think that after the humiliation of being dumped from government, that National’s ex-Ministers would keep a relatively low profile in the next few months.

You’d think that National’s former ministers and backbenchers would be familiarising themselves with their newly-appointed roles as impotent  Opposition MPs.

You’d think that National’s members of parliament would be nursing massive, Jupiter-sized hang-overs after drowning their collective sorrows at being turfed out of office by the ungrateful peasantry.

Not so.

Former Economic “Development” Minister in the Former National Government, Steven Joyce, has been busying himself  critiquing the recently-elected, newly-sworn-in, Labour-Green-NZF coalition.

Even before the dust settled on the recent election; the subsequent swearing-in ceremony at the Governor-General’s residence on 26 October, and only three days since the new government ministers have barely moved into their new offices, Joyce has been making mischief like a spoiled brat.

On 30 October, Joyce demanded;

“Mr Robertson has done two long-form interviews over this weekend and yet New Zealanders are still none the wiser about the cost of the coalition’s programme and the impact on their back pockets.”

He added,

“They also have a right to know whether the new Government’s spending plans in actual dollars will match the cast-iron commitments Labour repeatedly made before the election.”

Now bear in mind that this is the same National (ex-)government that, in 2008, campaigned on tax-cuts despite the Global Financial crisis already impacting on New Zealand’s economy that year.

On 6 October 2008, Key was only too happy to dangle the tax-cuts carrot in front of a gullible electorate, to win power;

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.

The rest is history. National won the 2008 election. Tax-cuts were enacted in April 2009 and October 2010.

All that despite a massive budget blow-out deficit of $15.4 billion by March 2009;

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The tax cuts were (and still are!) costing us around $2 billion per year, according to figures obtained by the Green Party from the Parliamentary Library.

New information prepared for the Green Party by the Parliamentary Library show that the estimated lost tax revenues from National’s 2010 tax cut package are between $1.6-$2.2 billion. The lost revenue calculation includes company and personal income tax revenues offset by increases in GST.

“The National Government said that their signature 2010 income tax cut package would be ‘fiscally neutral’ — paid for increased revenues from raising GST. That hasn’t happened. The net cost for tax cuts has been about $2 billion,” Green Party Co-leader Dr Russel Norman said today.

“Borrowing $2 billion in 18 months to fund upper-income tax cuts is fiscally irresponsible.

“National’s poor economic decisions have led to record levels of government debt and borrowing.

“They have also broken a promise to the electorate when they said their tax cut package was going to be fiscally neutral.”

Whilst it can be justifiably argued that New Zealand’s debt increased because of the 2008 Global Financial Crisis and two Christchurch earthquakes – both of which were out of National’s control – the loss of revenue through two unaffordable tax cuts in ’09 and ’10 were of it’s own making.

Against this backdrop of gross fiscal irresponsibility, Steven Joyce has  pontificated that “New Zealanders are still none the wiser about the cost of the coalition’s programme and the impact on their back pockets“.

It could also be argued that “most New Zealanders are still none the wiser about the cost of National’s tax-cuts and the impact on their social services“.

Steven Joyce lecturing the incoming coalition government on fiscal integrity and transparency would be like Robert Mugabe advising the U.N. on human rights.

Or like Steven Joyce telling the “truth” about a non-existent $11.7 billion “hole”.

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Postscript – A letter to the Editor

from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: 31 October 2017
subject:Letter to the editor

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The editor
Dominion Post

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Opposition MP, Steven Joyce, has been busying himself attacking the recently elected Labour-Green-NZ First Coalition government.

Despite barely moving into their new offices on 27 October, three days later Joyce was complaining;

“…New Zealanders are still none the wiser about the cost of the coalition’s programme and the impact on their back pockets. They also have a right to know whether the new Government’s spending plans in actual dollars will match the cast-iron commitments Labour repeatedly made before the election.”

Mr Joyce should settle down and take a deep breath. The coalition government has only been sworn in since 26 October.

The new government’s policies will be better costed than National’s unaffordable tax-cuts of 2009 and 2010. Those tax-cuts cost this country $2 billion p.a. according to the Parliamentary Library.

John Key happily over-looked NZ’s growing budget deficit, as reported on 6 October 2008;

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 … is predicted to blow out from around $3 billion a year to around $6 billion a year.

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-Frank Macskasy

 

 

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References

Fairfax media: Jacinda Ardern’s new government sworn in

Radio NZ:  550 staff move office at Parliament this weekend

NZCity:  Ardern won’t budget on coalition costs

Mediaworks:  Spending plans ‘totally affordable’ – Jacinda Ardern

NZ Herald:  Recession confirmed – GDP falls

NZ Herald: Key – $30b deficit won’t stop Nats tax cuts?

Interest.co.nz:  Budget deficit worse than forecast – debt blows out by NZ$15.4 bln

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

Fairfax media:  Which side of the fiscal hole debate are experts standing on?

Additional

Frankly Speaking: Time-line

NZ Herald:  National and Labour’s nine years in charge – what the data shows

NZ Treasury: Debt

Previous related blogposts

“Less Debt and Lower Interest Rates” – Really?

Solid Energy and LandCorp – debt and doom, courtesy of a “fiscally responsible” National Govt

Observations on the 2017 Election campaign thus far… (wha)

Observations on the 2017 Election campaign thus far… (whitu)

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This blogpost was first published on The Daily Blog on 1 November 2017.

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Election ’17 Countdown: Joyce – let the lolly scramble begin!

25 February 2017 1 comment

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(Or, “Under-funded health, education, and other social services? Let them eat tax-cut cake!”)

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2017 Election – Opening Gambits and Giveaways

You can tell it’s election year; the lolly-scramble (aka, hint of tax cuts) has begun;

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Historical Context

Cutting taxes (and social services on-the-sly) is one of National’s mainstays when it comes to election promises. Bribes work best when a government has nothing left to offer.

Who can forget the infamous  2008 election campaign, where – despite the Global Financial Crisis firmly taking hold of the New Zealand economy – then-National Party leader, John Key promised tax cuts.

In January 2008;

“We will cut taxes, not just in election year, but in a regular programme of ongoing tax cuts.

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And we will do all of this while improving the public services that Kiwis have a right to expect. ”

In March 2008, then Finance Minister, Michael Cullen warned against borrowing for tax cuts;

“ Those who would actively choose to drive New Zealand into further debt to pay for tax cuts lack real ambition for our economy…

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Even before these challenges hit home John Key wants to increase our debt to at least 25 per cent of GDP. But he does not pretend he wants to borrow more to pay for more services and he does not really believe he needs to borrow more to pay for roads. He only wants to outspend Labour on tax cuts.

His plan would cost an extra $700 million a year in financing costs alone, around what the government has invested in new health services for each of the last two years.

But the real worry is that Mr Key’s pro-debt policy shows he does not take long-term challenges seriously. His risky deal for tax cuts today would leave the bill to our children and grandchildren tomorrow.”

Undeterred, Key pursued his irresponsible promises and in August 2008 announced to a gullible public;

National will fast track a second round of tax cuts and is likely to increase borrowing to pay for some of its spending promises.

Key made the incredible assertion that tax-cuts would not impact on government debt;

So that will be extremely clear cut and rather hermetically sealed.

Key’s claim of “hermetically sealing” tax cuts from the rest of government fiscal activity was never fully explained, and nor did the MSM ever challenge that unbelievable promise.

In October 2008, Key repeated his fantasy of affordable tax cuts;

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’ .

The rest is history. National was elected to power on 8 November and tax cuts implemented in 2009 and 2010. Government borrowing and  debt rocketed;

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A third round scheduled for 2011 was cancelled as the budget blow-out  caused – in-part – by  unaffordable tax-cuts began to hit home even on a profligate National-led administration.

By May 2011, National was borrowing $380 million per week to fund it’s debt. Bill English and John Key seemed startled by the government’s deteriorating financial position;

Finance Minister Bill English said the Government’s financial position had deteriorated “significantly” since late 2008.

“The pre-election update in 2008 forecast that the deficit for this year would be $2.4 billion,” he said.

“It’s much more likely to be around $15b or $16b.”

That level of deficit, as NZPA has previously reported, will be the highest in New Zealand’s history and Mr English confirmed that today.

Prime Minister John Key confirmed the average weekly borrowing figure, which he said was unaffordable.

Michael Cullen’s warnings over unaffordable tax cuts seem to have been long-forgotten as collective amnesia over-took the National Party leadership.

Worse still, it was the rising army of unemployed who were to pay the fiscal bill for National’s profligacy;

More than three quarters of all beneficiaries will be forced to seek work or face cuts to their payments under sweeping recommendations from the Government’s Welfare Working Group… Working group chairwoman, economist Paula Rebstock, said the present high levels of welfare dependency meant major changes were needed. “ There are currently few incentives and little active support for many people reliant on welfare to move into paid work. Long term benefit dependency can be avoided if investments are well targeted and timely…”  Social Development Minister Paula Bennett said the report was an opportunity to change the welfare system and would feed into Government work in the area.

Key indulged in National’s favourite activity when things went horribly wrong after his administration’s apalling policty-decisions. He blamed those at the bottom of the economic heap;

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. “But it is also true that anyone on a benefit actually has a lifestyle choice. If one budgets properly, one can pay one’s bills. “And that is true because the bulk of New Zealanders on a benefit do actually pay for food, their rent and other things. Now some make poor choices and they don’t have money left.”

By 2016/17, National’s net debt had reached $66.3 billion. (Damn those beneficiaries’ “poor choices”.)

The Joy of Joyce’s Tax Bribe

On 8 February this year, Joyce announced aspects of this year’s coming Budget. Joyce  dangled the tax-cut carrot  in  front of voters;

It is also very important to remain mindful that the money the Government spends comes from hard working Kiwi families. We remain committed to reducing the tax burden on lower and middle income earners when we have the room to do so.

On the same day, Joyce voiced concerns about New Zealand’s massive mountain of private debt;

I have discussed DTIs with the Reserve Bank Governor, who remains concerned about the levels of debt in some households in the context of recent increases in house prices.

Joyce has good reason to be nervous. As of this year, New Zealand’s household debt has reached stellar proportions;

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Any further tax-cuts will not only be based on cuts to social services (health, education, housing, NGOs, etc), but may further fuel the housing bubble.  This would raise the prospect of a monstrous  three-headed creature of National’s making where;

  • it would likely have to have to borrow to fund the tax-cuts,
  • fuel an increase in private debt as tax-cuts are spent on a property-buying binge,
  • as well as driving first-home buyers out of the market as housing-prices take off again.

Joyce voiced this concern on 8 February;

The use of macro-prudential tools can be complex and affect different borrowers in different ways. I am particularly interested in what the impacts could be on first home buyers.”

So further tax cuts may have negative impacts that a fourth National administration would have to deal with if it wins the 23 Sept election.

On top of which, New Zealanders would be faced with further cuts to social services and increasing user-pays in health and education. From our on-going housing crisis;

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… to more user-pays in education;

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…in healthcare;

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… and the gutting of NGO services through budget-cuts;

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When Kiwis take up National’s tax-cut bribes, they end up paying more, elsewhere.

But even slashing the budgets for the state sector and NGOs is insufficient to meet the multi-billion dollar price-tag for tax-cuts.  National is desperately having to scramble to find money where-ever it can. So-called student loan “defaulters” are firmly in National’s eyesights;

Almost 57,000 student loan borrowers found in Australia

The agreement came into force in October and the details of around 10,000 New Zealanders were found in the first data match. The process has since been refined and a total of 56,897 people have now been located.

“These borrowers have a combined loan balance of $1.2 billion and $430 million of that is in default. Inland Revenue will now start chasing up these borrowers and taking action to get their student loan repayments back on track,” says Mr Joyce says.

Mr Woodhouse says “The data shows that more than half of these borrowers left New Zealand over five years ago, with nearly a quarter having been away for more than 10 years. A third of them have not returned to New Zealand in the past four years. One third of the group has had no contact with Inland Revenue, and 43% have not made a payment since they left New Zealand.

“It’s time these people did the right thing and met the obligations they signed up to when they took out their student loan,” Mr Woodhouse says.

Who else will National target to squeeze money out of?

What social services will National slash to fund tax-cuts?

What further user-pays will be implemented?

One further question; if National does not pay down our sovereign debt – how will the country cope with another global financial crisis and shock to our economy? As Joyce himself pointed out;

 

“ We need to keep paying down debt as a percentage of GDP. We’ve set a target of reducing net debt to around 20 per cent of GDP by 2020. That’s to make sure that we can manage any shocks that may come along in the future.”

 

When National took office from Labour, the previous Clark-Cullen government has prudently resisted National’s tantrum-like demands for tax cuts and instead paid down our sovereign debt. As former Dear Leader Key himself was forced to admit;

In 2005, as Leader of the Opposition;

“ Firstly let me start by saying that New Zealand does not face the balance sheet crisis of 1984, or even of the early 1990s. Far from having dangerously high debt levels, gross debt to GDP is around a modest 25 percent and net debt may well be zero by 2008. In other words, there is no longer any balance sheet reason to justify an aggressive privatisation programme of the kind associated with the 1980s Labour Government.

In 2012*, as Prime Minister Key  justified the partial sale of state-owned assets;

The level of public debt in New Zealand was $8 billion when National came into office in 2008.  It’s now $53 billion, and it’s forecast to rise to $72 billion in 2016.  Without selling minority shares in five companies, it would rise to $78 billion.  Our total investment liabilities, which cover both public and private liabilities, are $150 billion – one of the worst in the world because of the high levels of private debt in New Zealand.”

(* No link available. Page removed from National Party website)

With our current debt of $66.3 billion, we no longer have a safety-buffer. That is the current dire state of our government books.

It is astonishing that Joyce has the nick-name of “Mr Fixit”, as he makes irresponsible hints of tax cuts to come.

Little wonder that Joyce’s unearned reputation as “Mr Fix It” was deconstructed by journalist and political analyst, Gordon Campbell;

The myth of competence that’s been woven around Steven Joyce – the Key government’s “Minister of Everything” and “Mr Fixit” – has been disseminated from high-rises to hamlets, across the country. For five years or more, news outlets have willingly (and non-ironically) promoted the legend of Mr Fixit…

[…]

Of late however, the legend has lost some of its lustre. More than anything, it has been his handling of the SkyCity convention deal that has confirmed a lingering Beltway suspicion that Joyce’s reputation for business nous has been something of a selfie, with his competence appearing to be inversely proportional to his sense of self-esteem. Matthew Hooton’s recent critique of Joyce in NBR – which was inspired by how the SkyCity convention deal had cruelly exposed Joyce’s lack of business acumen – got a good deal of traction for that reason. On similar grounds, Joyce’s penchant for (a) micro-managing and (b) the prioritising of issues in terms of their headline potential has resulted in his ministerial office becoming somewhat notorious around Parliament for (c) its congested inefficiency and for (d) a not-unrelated extent of staff burnout.

[…]

Not only is Joyce’s ministerial office renowned as an administrative bottleneck – where issues tend to be ranked in terms of their p.r. potential for the Minister – none of this seems to be in service of any wider goal or vision. As Mr Fixit, Joyce tends to be engaged in the equivalents of blown fuses and leaking taps – rather in the re-design of the political architecture. Joyce has simply never been – and has never pretended to be – a big picture kind of politician. He has been never someone with an abiding interest in – or the intellectual stamina for – systemic change.

The re-election of National this year – by any means necessary, whether beneficial to New Zealand or not, no matter what the social or financial costs – appears to be ‘Mr Fixit’s’  latest ‘DIY’ project.

And like most DIY budgets, wait for the blow out.

Just like 2009.

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References

Interest.co.nz: Finance Minister says Government remains ‘committed to reducing the tax burden

Scoop media: Tax cuts still in the mix for Joyce’s first budget

Sharechat: Tax cuts still in the mix for Finance Minister Steven Joyce’s first budget

Radio NZ: Budget date set, tax cuts likely

NBR: Government hints at tax cuts in Budget 2017

Fairfax media: Joyce signals low and middle earners’ top rates target for tax cuts

NZ Herald:  The Economy Hub – About those tax cuts… Steven Joyce, the big interview

NZ Herald: John Key – State of the Nation speech

Scoop media: Government will not borrow for tax cuts

NZ Herald: Nats to borrow for other spending – but not tax cuts

Guide2: National Party – Tax Policy

NZ Treasury: Financial Statements of the Government of New Zealand for the Year Ended 30 June 2010 – Debt

NBR: Tax cuts scrapped in budget

Interest.co.nz: Budget deficit worse than forecast; debt blows out by NZ$15.4 bln

NZ Herald: Govt borrowing $380m a week

Fairfax media: Extensive welfare shake-up needed – report

NZ Herald: Food parcel families made poor choices, says Key

NZ Treasury: Budget Economic and Fiscal Update 2016

Beehive: 2017 Budget to be presented on 25 May

Beehive: Finance Minister requests cost-benefit analysis on DTIs

NZ Herald: New Zealand residential property hits $1 trillion mark

Beehive: Almost 57,000 student loan borrowers found in Australia

Scoop media: John Key Speech – State Sector Under National

Werewolf: The Myth of Steven Joyce

Other Blogs

The Hand Mirror: A crack in the wall

Previous related blogposts

Tax cuts & school children

Letter to the editor: Setting it straight on user-pays in tertiary education

Letter to the Editor: tax cuts bribes? Are we smarter than that?

The Mendacities of Mr Key #3: tax cuts

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

The Mendacities of Mr English – Social Services under National’s tender mercies

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This blogpost was first published on The Daily Blog on 20 February 2017.

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

2 December 2016 4 comments

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In troubled times, we are community

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On 14 October, eight hours after two massive 7.8 earthquakes simultaneously rocked the entire country, our Dear Leader John Key made an impassioned (for him, it was impassioned) appeal to the people of Aotearoa on Radio NZ’s ‘Morning Report‘;

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john-key-web-rob2_10

The one thing I’d we’d just say to New Zealanders at the moment is stay close to your family and friends. Make sure you listen to the radio and listen to the best information that you’re getting. And if you do have certainly older neighbours or family, if you could go in and check up on them that would be most appreciated. Because there will be people feeling genuinely alone.“

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It was  an appeal to a sense of community that is rarely made by right-wing governments or their leaders. It was a tacit acknowledgement that No Man or Woman is an Island that that only by acting collectively can human beings survive  and improve their own circumstances and for their children.

Unfortunately, a week later, Key’s sense-of-community-spirit  was returned to it’s hermetically-sealed casket and re-buried alongside cryo-capsules containing New Zealand’s Once-Egalitarian-Spirit and International-Independent-Leadership-On-Moral Issues.

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National dangles the “carrot”

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On 21 November, Key announced that tax cuts were once again “on the table” and Little Leader/Finance Minister, Bill English confirmed it.

With a statement that was more convoluted than usual, Key said;

“We’ve identified from our own perspective if there was more money where would be the kinds of areas we want to go, not what is the make up … for instance, of a tax or family package, what is the make up of other expenditure we want?

Tax is one vehicle for doing that, it’s not always the most effective vehicle for doing that for particularly low income families.”

Tax could be effective higher up the income scale, but lower down it was not that effective because base rates were low or it was very expensive.

Over the fullness of time we’ll have to see whether we’ve got much capacity to move.

Making sure they can keep a little more of what they earn or get a little bit more back through a variety of mechanisms is always something we can consider. It could be a mix, yes.

In the end it’s about equity for New Zealanders and about .. having a rise in their standard of living, and there’s a number of ways you could deliver that.”

Key has once again dangled a billion-dollar carrot in front of New Zealanders as the country heads towards next year’s election.

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National’s previous election “carrots”

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During the 2008 General Election,  as the Global Financial Crisis was impacting on our own economy, Key was promising tax cuts. In May 2008, he said;

“But 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,” he said.

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.”

At the time, then Labour’s Finance Minister, Michael Cullen  described National’s tax-cut-bribe as ‘reckless‘.

By October 2008, as NZ Inc’s economic circumstances deteriorated, Treasury issued dire warnings that should have mitigated against any notions of affordable tax-cuts;

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.

Key’s government won the 2008 election and proceeded with tax-cuts in 2009 and 2010.

Predictably, government debt – which had been paid down by the Clark-Cullen government – ballooned as the recession hit New Zealand’s economy and tax revenue fell;

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National government debt - tax cuts

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Key himself estimated tax cuts to be worth between $3  or $4 billion.

In 2008, New Zealand’s core government debt stood at nil (net)

Current government debt now stands at $62.272 billion (net).

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fs16-12

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Nature intervenes in National’s “cunning plan” for a Fourth Term

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According to Dear Leader Key, estimates for the re-build of earthquake damage in and around Kaikoura; State Highway One, and the rest of the South Island  is likely to be at least “a couple of billion dollars“.

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 The repair bill from Monday's earthquake near Hanmer Springs is estimated to be billions of dollars. Photo: RNZ / Rebekah Parsons-King

The repair bill from Monday’s earthquake near Hanmer Springs is estimated to be billions of dollars. Photo: RNZ / Rebekah Parsons-King

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Finance Minister Bill English has hinted the cost may be much more;

“The combination of significant infrastructure damage in Wellington, obvious damage in Kaikoura – all roading and rail issues – this is going to add up to something fairly significant. We also know that those estimates change over time.”

No wonder Labour leader Andrew Little was less than impressed at tax cuts being mooted. Echoing Michael Cullen from eight years ago, he condemned the irresponsible nature of Key’s proposal;

“Well this is crazy stuff, I mean in addition to a government having $63 billion worth of debt it is yet to start repaying, and you’ve got a billion dollars extra each year just in the cost of superannuation.

Now we have another major civic disaster that is going to cost in terms of repairs. I do not see how John Key can say tax cuts are justified in the present circumstances.”

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National spends-up large on new prison beds

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On top of which, English announced last month that National was planning to spend over $2.5 billion on new prison beds. He questioned whether tax cuts were affordable with such looming expenditure;

Finance Minister Bill English has warned an announcement today of plans for an extra 1,800 prison beds will reduce the room for the Government to consider tax cuts before next year’s election.

English told reporters in Parliament the extra beds would cost NZ$1 billion to build and an extra NZ$1.5 billion to run over the next five or six years.

“It will have an impact because it is a very large spend and, two or three years years ago, we probably thought this could be avoidable,” English said when asked if the extra spending would make it harder for the Government to unveil tax cuts and other spending before the next election.

“It’s all part of this rachetting up of tougher sentences, tighter remand conditions, less bail and taking less risk with people who commit serious offenses,” he added.

Asked if that meant there would be less room for tax cuts, he said: “I wouldn’t want to judge that because it is a bit early, but certainly spending this kind of money on prison capacity is going to reduce other options.”

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The inevitable cost of tax-cuts

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As billions more is wasted on prisons, money spent on health, education, housing, and other social services is being frozen; cut back, or not keeping pace with inflation.

This has resulted in appalling cuts to services such as recently experienced by  96-year-old Horowhenua woman, Trixie Cottingham;

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dhb-threatens-to-cut-off-96-year-olds-home-help-in-levin

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Other social services have also been wound back – as previously reported by this blogger;

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relationships-aortearoa-funding-cuts-anne-tolley-budget-2015

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Cuts to 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.”

As the public healthcare system faces reduction in funding – more and New Zealanders will be forced into taking up  health insurance. In effect, National is covertly shifting the cost of healthcare from public to private,  funding the public/private ‘switch’ through personal tax-cuts.

Tax dollars have previously been allocated to social services such as Education or Health. By implementing tax cuts, those “Health Dollars” become “Discretionary Dollars”; Public Services for Citizens becomes Private Choice for Consumers.

And we all know how “well” that model has worked out in the United States;

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how-the-u-s-health-care-system-fails-its-sickest-patients

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(Yet another) Broken promise by Key

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But equally important is that, in promising to spend the government surplus on tax-cuts, Dear Leader Key has broken yet another of his promises to the people of New Zealand.

In July 2009, National suspended all contribution to the NZ Superannuation Fund. At the time  Bill English explained;

“The Government is committed to maintaining National Superannuation entitlements at 66 per cent of the average wage, to be paid from age 65.

[…]

The suspension of automatic contributions will remain until there are budget surpluses sufficient to fund contributions. Under current projections, the Government is not expected to have sufficient surpluses for the next 11 years.

[…]

Once surpluses sufficient to cover automatic contributions return, the Government intends to contribute the amount required by the Fund formula.”

In 2010, English said;

“We’re managing government spending carefully, the economy is improving a bit faster than we expected, and that means it’s six years instead of 10 years until we start making contributions to the fund. If the economy picks up a bit faster again, we’ll get to that point sooner.”

In 2011, John Key said;

“Once we’re back to running healthy surpluses, we’ll be able to auto-enrol workers who are not members of KiwiSaver, pay down debt and resume contributions to the Super Fund.”

In 2012, English said;

“The Government’s target is to return to surplus by 2014-15 so that we will then have choices about repaying debt, resuming contributions to the New Zealand Superannuation Fund, or targeting more investment in priority public services.”

In 2013, English said;

“It remains our intention that contributions will resume once net debt has reduced to 20 percent of GDP, which is forecast for 2020.”

In 2014, English told Patrick Gower;

“… In this Budget we will have a paper-thin surplus , I mean we’ll just have a surplus but that’s the beginning of a series of surpluses and that means we have choices. And there’s a lot of choices. We’ve got the New Zealand Super Fund to resume contributions, an auto-enrolment for KiwiSaver, paying off debt more quickly, something for households to help them along. Those are choices that New Zealand fortunately will have if we have a growing economy and we stick to being pretty careful about our spending.”

In 2015, Key and English issued a joint  statement saying;

“Through Budget 2015, the National-led Government will…

[…]

Reduce government debt to less than 20 per cent of GDP by 2020/21 when we can resume contributions to the NZ Super Fund.”

In October this year, English said;

“There has not been any broken commitment regarding the Superannuation Fund. We have said for some time that when the Government returns to a sufficient budget surplus and can contribute genuine savings rather than borrowing, National will resume contributions to the New Zealand Superannuation Fund. The straightforward issue is that even when the Government shows surpluses under the operating balance before gains and losses measure, it does not always have cash surpluses until those accounting surpluses get reasonably big.

[…]

I remember that Sunday in 2009 in vivid detail, in fact, and constantly go back to it. The Government has outlined its position many, many times since 2009, and when there are sufficient surpluses and when we have debt down to the levels we think are prudent, which is 20 percent of GDP by 2020, then we will resume contributions, which we would like to do.”

In every year since National ceased contributing to the NZ Super (“Cullen”) Fund, both Key and English have reiterated their committment to resume payments when government books returned to surplus.

By hinting at tax cuts instead, Key and English have broken their promises, made over a seven year period.

Even their “qualifyer” of resuming contributions “when we have debt down to the levels we think are prudent, which is 20 percent of GDP by 2020” becomes untenable with their hints of an election-year tax-cut bribe.

By cutting taxes instead of paying down debt, resuming contributions to the NZ Super Fund is pushed further out into the dim, distant future.

The very suggestion of tax cuts is another potential broken promise.  What’s one more to add to his growing list of promises not kept?

After all, there is an election to be fought next year.

Since National has not thought twice at under-funding the Health Budget, it certainly does not seem troubled at using tax-cuts as an election bribe, and undermining this country’s future superannuation savings-fund for selfish political gain.

Muldoon did it in 1973 – and got away with it.

Carrot, anyone?

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References

Radio NZ: Morning Report – John Key urges New Zealanders to look out for their neighbours

Radio NZ: Morning Report – Key not ruling out tax cuts despite billion-dollar Kaikoura bill

Radio NZ: Morning Report – Government not ruling out tax cuts despite $1B Kaikoura bill

Fairfax media: John Key reveals plans for ‘tax and family’ package, but quake might affect plans

NZ Herald: National’s 2005 tax cut plans still credible – Key

Beehive: National ignores inflation warning

NZ Herald: Key – $30b deficit won’t stop Nats tax cuts

NZ Treasury:  Financial Statements of the Government of New Zealand for the Year Ended 30 June 2010 – Debt

Fairfax media: $4b in tax cuts coming

NZ Treasury: Fiscal Indicator Analysis – Debt  as at 30 June 2008

NZ Treasury:  Financial Statements of the Government of New Zealand for the Year Ended 30 June 2016

Radio NZ: Earthquake’s billion-dollar bill won’t compare with Chch

Radio NZ: PM ‘irresponsible’ to talk tax cuts after quake – Labour

Interest.co.nz: English says NZ$1 bln capital cost and NZ$1.5 bln of operating costs for extra 1,800 prison beds reduces room for tax cuts

Radio NZ: Checkpoint – DHB threatens to cut off 96-year-old’s home help in Levin

Dominion Post: Women’s Refuge cuts may lead to waiting lists

NZ Herald: Govt funding cuts reduce rape crisis support hours

NZ Doctor: Christchurch’s 198 Youth Health Centre to close its doors as management fails to implement directives from CDHB

TV1 News: ‘Devastating news for vulnerable Kiwis’ – Relationships Aotearoa struggling to stay afloat

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: 174,000 Kiwis left off surgery waiting lists, with Cantabrians and Aucklanders faring worst

Fortune: How the U.S. Health Care System Fails Its Sickest Patients

NZ Super Fund: Contributions Suspension

Beehive: New Zealand Super Fund – fact sheet

Fairfax media: English signals earlier return to Super Fund payments

Scoop media: John Key’s Speech to Business New Zealand Amora Hotel Wgtn

Parliament Today: Questions and Answers – November 7

TV3 News: $23 billion in NZ Super Fund

Throng: Patrick Gower interviews Finance Minister Bill English on The Nation

Beehive: Budget 2015

Scoop: Hansards – Questions and Answers – 18 October 2016

Fairfax media: Compulsory super ‘would be worth $278 billion’

Additional

The Standard: The great big list of John Key’s big fat lies (UPDATED)

Other Blogs

The Standard: The eternal tax-cut mirage

Previous related blogposts

“It’s one of those things we’d love to do if we had the cash”

Tax cuts & school children

The Mendacities of Mr Key #3: tax cuts

The consequences of tax-cuts – worker exploitation?

Plunket and the slow strangulation of community organisations

The cupboard is bare, says Dear Leader

An earthquake separates John Key and ‘The Iron Lady’, Margaret Thatcher

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This blogpost was first published on The Daily Blog on 27 Novembr 2016.

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The cupboard is bare, says Dear Leader

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a-country-of-opportunity

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The latest on Budget 2015;

Prime Minister John Key is lowering expectations about measures to combat child poverty in this week’s budget.

Mr Key says there’ll be “some support” for those suffering material deprivation.

“But you’d appreciate that there’s a limited amount of resources that we’ve got in very tight financial conditions,” he told reporters on Monday.

Key has driven home the lack of “resources” (ie; money) in this year’s budget. On the Paul Henry show – that great bastion of critical thinking –

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cartoon

 

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–  Key was his usual relaxed self as he casually informed his host;

“We don’t have a lot of money. But again what I’d say to you is that we already do a lot, but there could be more we could do.”

And just to drive home the point, again casually;

“When you go to a Budget, you don’t have a lot of cash – and we haven’t, because we’ve been wanting to get the books in order.”

Of course National doesn’t “have a lot of money“.

Remember the tax cuts that Key promised during the 2008 general election? That was the  money National gave away in 2009 and 2010.

2008 was election year, and National’s aspiring leader, John Key, was pulling out all stops to win. His promises of tax cuts were the lynch-pin of National’s campaign strategy.

On  2 August 2008, National announced;

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.

On  26 September 2008, the Herald reported;

GDP shrank 0.2 per cent in the June quarter, confirming what everyone already knew – that the country is in recession. The smaller than expected June quarter decline followed a fall of 0.3 per cent in the three months to March, so the country now meets the common definition of recession: two consecutive quarters of economic contraction.

Undeterred by the country entering into recession, on  6 October 2008, Key promised;

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.

With a looming election only a month away, on 14 October 2008, National maintained it’s commitment to tax-cuts;

National will not slash spending at a time when people are looking to the government for a sense of security. In developing our economic management plan, we have concentrated on the fundamentals of the economy, and particularly on laying the foundations for a future increase in productivity.

National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.

Over the next term of government the total cost of National’s personal tax cuts is balanced by the revenue savings from:
• Changes to KiwiSaver.
• Discontinuing the R&D tax credit.
• Replacing Labour’s proposed tax cuts.

Overall, our fiscal policy does not result in any requirement for additional borrowing over the medium term.

National won the election on 8 November 2008.

By 6 March 2009, the Global Financial Crisis had crashed New Zealand’s economy;

Budget deficit worse than forecast; debt blows out by NZ$15.4 bln

The New Zealand government’s operating balance before gains and losses (OBEGAL) for the seven months ended January 31 was NZ$600 million, which was NZ$800 million below the pre-election update and NZ$300 million below December forecasts, Treasury said. Tax revenue and receipts during the period were NZ$500 million lower than the pre-election forecast. Meanwhile, Treasury also disclosed a NZ$15.4 billion rise in Gross Sovereign Issued Debt to NZ$45.4 billion (25.3% of GDP) from the pre-election forecast. This included fresh Reserve Bank bill issuance to mop up the liquidity from lending to the banks against securitised mortgages.

Despite falling tax revenue, and increased borrowing by the government,  the tax cuts went ahead regardless. First, on 1 April 2009. The second trance on 1 October 2010.

The cost of these tax cuts was in the billions.

According to Key, the 2009 tax cuts cost the government $1 billion;

“…The tax cuts we have delivered today will inject an extra $1 billion into the economy over the coming year, thereby helping to stimulate the economy during this recession. More important, over the longer term these tax cuts will reward hard work and help to encourage people to invest in their own skills, in order to earn and keep more money.”

And according to information obtained from Parliamentary Library, and released by the Greens, the 2010 tax cuts cost the country an additional $2 billion;

The Green Party has today revealed that the National Government has so far had to borrow an additional $2 billion dollars to fund their 2010 tax cut package for upper income earners.

New information prepared for the Green Party by the Parliamentary Library show that the estimated lost tax revenues from National’s 2010 tax cut package are between $1.6–$2.2 billion. The lost revenue calculation includes company and personal income tax revenues offset by increases in GST.

All up, National gave away an estimated $3 billion – per year – in tax cuts.

That is why John Key has reneged on his promise – made on 22 September 2014, on TV3’s ‘Campbell Live‘ – that his third term would be spent combating child poverty.

No money.

Not only will National abandon any serious work to alleviate growing child poverty in this Country of Plenty, but it seems that the viability of  community organisations doing invaluable work  are threatened by chronic under-funding.

These community groups are often the ones on the front-line, picking up the pieces after government programmes are cut back or cancelled entirely. Even as our Brave New Free-Market World widens the wealth-gap even further, year after year.

Since National came to office in 2008, their cuts to community organisations has been systematic and dire.

From Women’s Refuge;

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Women's Refuge cuts may lead to waiting lists

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Then it was the turn of  Rape Crisis;

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NZ Herald - Govt funding cuts reduce rape crisis support hours - government funding cuts

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To medical clinics serving our most vulnerable, in-need youth;

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Christchurch's 198 Youth Health Centre to close its doors as management fails to implement directives from CDHB - National cuts to community organisations

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A Radio NZ report on 19 May revealed that yet another community organisation has become the latest victim of National’s mania to starving community organisations of funding;

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Relationships Aortearoa - funding cuts - Anne Tolley - budget 2015

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Relationships Aotearoa is facing closure as Radio NZ outlined on 19 May;

Relationships Aotearoa, New Zealand’s largest provider of counselling services, says its funding has been cut by $4.8 million since 2012 and the situation is increasingly dire with no assurance of more government funding.

The organisation posted a $271,000 deficit for the year ended 30 June 2014.

[…]

Relationships Aotearoa spokesman John Hamilton said since 2012 its funding from government agency contracts had fallen by $4.8 million – a fall of about 37 percent from $13.1m to a forecast $8.2m.

“There’s been no grants or injections to the bottom line … there’s been no CPI increase for MSD services for seven years but there has been increasingly complex demands in reporting requirements.”

Mr Hamilton said the situation was increasingly dire and more than 120 staff and 60 contractors would potentially lose their jobs if went goes under.

A funding cut of $4.8 million…

A deficit last year of $271,000…

Staff cuts of  46…

When interviewed on Radio NZ’s Morning Report, Minister Anne Tolley’s outright denial of any cuts to Relationship Aotearoa’s funding – despite evidence presented to her –  left seasoned journalist and interviewer, Guyon Espiner, frustrated with her moronic semantics game-playing;

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radio nz - Min. Tolley responds to potential collapse of counselling - relationship aotearoa - underfunding

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Tolley’s exercise in word-games beggars belief and if she thinks any intelligent person listening to her comments gave  credence to her obvious avoidance-tactics, then she is delusional. There is a world of difference between Radio NZ’s critical audience – and those who stare stupified and lobotimised at ‘X Factor‘/’My Kitchen Rules‘/’The Block‘.

As Key lamented,

“We don’t have a lot of money. But again what I’d say to you is that we already do a lot, but there could be more we could do.”

“When you go to a Budget, you don’t have a lot of cash – and we haven’t, because we’ve been wanting to get the books in order.”

Though there is always cash for really important things that “matter to New Zealanders”.

Things like corporate welfare;

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PM defends $30m payout to Rio Tinto

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Or like a flag referendum – $26 – $27 million;

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John Key defends cost of flag referendums

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And even spending $6 million of taxpayer’s money to build a sheep farm for a Saudi millionaire;

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NZ Government gifts $6m to offended Saudi businessman

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Key will always find money for things that matter to his government.

Child poverty just doesn’t happen to be one of them.

 

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References

NZCity News:  PM lowering expectations on child poverty

NZCity News: Child poverty targeted in budget

TV3 News: Child poverty targeted in Budget – John Key

NZ Herald: Nats to borrow for other spending – but not tax cuts

NZ Herald: Recession confirmed – GDP falls

NZ Herald: Key –  $30b deficit won’t stop Nats tax cuts

Jo Goodhew MP for Rangitata: Newsletter #41

Interest.co.nz: Budget deficit worse than forecast; debt blows out by NZ$15.4 bln

Parliament: Hansards – Tax Cuts – Implementation

Scoop media: Govt’s 2010 tax cuts costing $2 billion and counting

Dominion Post: Women’s Refuge cuts may lead to waiting lists

NZ Herald: Govt funding cuts reduce rape crisis support hours

NZ Doctor: Christchurch’s 198 Youth Health Centre to close its doors as management fails to implement directives from CDHB

TV1 News: ‘Devastating news for vulnerable Kiwis’ – Relationships Aotearoa struggling to stay afloat

Fairfax media: Government may let Relationships Aotearoa fold

TV1 News: Relationships Aotearoa hanging on at ‘awful’ 11th hour

Radio NZ: Counselling service rejects claim it’s badly run

Radio NZ – Morning Report: Min. Tolley responds to potential collapse of counselling (alt. link) (audio)

NZ Herald: PM defends $30m payout to Rio Tinto

NZ Herald: John Key defends cost of flag referendums

TV1 News: NZ Government gifts $6m to offended Saudi businessman

Other blogs

Local Bodies: Government Kills Relationships Aotearoa

Previous related blogposts

That was Then, this is Now #6

Budget 2013: petrol taxes

“It’s fundamentally a fairness issue”- Peter Dunne

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200000-abandoned-for-national-tax-cuts-ht-william-joyce

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This blogpost was first published on The Daily Blog on 20 May 2015.

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Budget 2014 – Why we will soon owe $70 billion under this government…

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NZ Government overseas debt 1993 to 2012

Graphic courtesy of The Daily Blog

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A few reasons why our debt skyrocketed from 2008 onwards…

1. The Global Financial Crisis, which reduced corporate turnover and export receipts, thereby lowering the company tax take;

2. Two tax cuts (2009 and 2010) reduced government revenue, thereby necessitating borrowing more from offshore  to make up the difference. In essence, we borrowed from other peoples’ saving to put more money in our (mostly top incomer earners) pockets.

Using Parliament Library information, the Greens have estimated that this involved borrowing an extra couple of billion each year.

3. National could have kept Debt down by investing in job creation. Key’s cycleway project was promised to create 4,500 new jobs  – it failed spectacularly.

Instead, job creation was largely left to “the market”, which itself was having to engage in mass redundancies for businesses to survive the economic downturn.

This meant more expenditure on unemployed which went from 3.4% in 2008 to 7.3% by 2012 (currently sitting at 6% for the last two Quarters).

Ironically, part of our current economic “boom” is predicated on the Christchurch re-build – evidence that had National engaged in a mass housing construction programme in 2009, after it held it’s mostly ineffectual “Jobs Summit”, we would have;

A. Maintained higher employment,

B. Paid out less in welfare,

C. Persuaded more New Zealanders to stay home and not go to Australia to find work,

D. Addressed the current housing crisis we now have.

As usual, National’s short-sightedness; irresponsible 2008 election year tax-cut bribes; and misguided reliance on market forces resulted in New Zealand borrowing more than we really needed to.

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References

NZ Herald: Govt borrowing $380m a week

Scoop media: Govt’s 2010 tax cuts costing $2 billion and counting

NZ Parliament: Government Proposals—Cycleway and Nine-day Working Fortnight

NZ Herald: Cycleway jobs fall short

Statistics NZ: Employment and Unemployment – March 2008 Quarter

Statistics NZ: Household Labour Force Survey: September 2012 quarter

Fairfax NZ: Jobs summit ‘fails to deliver’

TVNZ News: OECD report shows housing crisis in NZ – Labour

TVNZ News: Christchurch rental crisis ‘best left to market’ – Govt

Additional

Fairfax media: Public debt climbs by $27m a day

Fairfax media: Budget 2014: The essential guide

Previous related blogposts

Can we do it? Bloody oath we can!

 

 


 

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The Cost of Living

Above image acknowledgment: Francis Owen/Lurch Left Memes

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