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Posts Tagged ‘2009 tax cut’

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

2 December 2016 6 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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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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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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Other social services have also been wound back – as previously reported by this blogger;

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Cuts to the Health budget have resulted in wholly predictable – and preventable – negative outcomes;

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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.

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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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(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.

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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…

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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.

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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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–  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.

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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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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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The Mendacities of Mr Key #3: tax cuts

2 March 2014 9 comments

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john key lying

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3. Tax cuts

Background

19 May 2008

In the bitterly contested lead-up to the 2008 general election, National promised three tax cuts, to be spread over three years.

These were prompted by the nine consecutive Budget surpluses that Labour’s Finance Minister, Michael Cullen, had posted between 2000 and 2008. The public perceived that the government had too much of our money and demanded tax cuts.

Cullen resisted, as his main priority was continuing to pay down billions in debt that Labour had inherited in late 1990s.

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Key  and  National Party strategists heard the insistent  calls for tax cuts, and duly obliged – even though by November 2008, the global financial crisis had plunged the world into a recession, with only Australia and China escaping the worst effects.

In May 2008, Key promised voters tax cuts ‘‘North of $50‘‘.

April 2009

On 1 April 2009, National delivered the first of two rounds of tax cuts (a third round had been scrapped, as by then the recession had blown a hole in the government’s revenue).

This is what the 2009 tax cuts delivered.

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tax-cuts-april-2009

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Anyone earning under $40,000 received nothing. Not even close to “north of $50”.

October 2010

The following year, the second round of tax cuts was implemented,

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Tax rates October 2010

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Susie Nordqvist wrote in the Herald on 20 May 2010,

* Average income household – $24.71c per week better off

* Average wage worker – $15.91c per week better off

* Couple receiving New Zealand superannuation – $10.77c per week better off

* Professional property investor with 25 properties – $288.18c per week worse off

* Couple saving for their first home – $40.38c per week better off

* Domestic purposes beneficiary – $2.45c per week better off

* Minimum wage worker – $6.36c per week better off

* Student – $2.66c per week better off

* Business owner structuring income to claim for Working for Families – $153.03c per week worse off.

As the reader can easily determine, very few in the above group were receiving “north of $50”. When the rise in GST was taken into account, the actual real cut in  taxes for average workers’ and families was reduced even further.

The only tax bracket that received a tax cut “north of $50” were those earning around $80,000 or more. Such as government ministers. And John Key.

When you factor in the rise in GST from 12.5%  to 15% – even fewer got the much promised “north of $50”, except the wealthiest.

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Key defends tax cuts for wealthy

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Conclusions:

  1. Key had no choice but to cancel the third round of tax cuts (scheduled for 2011), and to reduce the amount on offer. The GFC and recession were biting into our economy so badly, that National was borrowing $450 million a week by the end of 2009. Adding the 2010 tax cuts into the mix eventually left this country with a $60 billion fiscal hole.
  2. Key knew that the tax cuts were unaffordable during the 2008 election campaign. The world was deeply mired in the global financial crisis and recessionary effects were beginning to hit economies around the world. To pursue the promised tax cuts was the height of irresponsibility.
  3. Key bought the election with unaffordable promises.
  4. Our debt will have to be re-paid. (Foreign creditors insist.)

Beware of politicians bearing promises and gifts. We will be the ones paying for it.

Charge: broken promise/deflection/half-truth/hypocrisy/outright lie/mis-information?

Verdict:  Outright Lie, Broken Promise

 

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References

NZ Herald: Cullen – Tax cuts but strict conditions

Trading Economics:  New Zealand Government Debt To GDP

Dominion Post: Nats set for $50 tax cut trump

Otago Daily Times: Key says donate tax cuts to charity

NZ Herald: Budget 2010: What the tax cuts mean for you

NZ herald: Key defends tax cuts for wealthy

Parliament:  Tax System Changes—Impact on Operating Balance

Otago Daily Times: Government now borrowing $450 million a week – claim

Radio NZ:  English confirms national debt set to rise

Previous related blogposts

Labour: the Economic Record 2000 – 2008

The Mendacities of Mr Key #2: Secret Sources

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Vote these traitors out

Above image acknowledgment: Francis Owen

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When the Rich Whinge about paying tax

17 February 2014 3 comments

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I can't afford this and pay my tax

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It seems that after seven tax cuts since 1986, the rich still aren’t satisfied;

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taxation rich poor

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The matriarch of the Horton family – the 41st richest family in New Zealand according to the 2012 NBR Rich List and worth an estimated $220 million – Dame Rosie Horton, is complaining that “increasing the rate on the wealthy to provide services for lower income New Zealanders would just discourage hard work” and claims that “the country is already overtaxed and demanding an even greater take from the wealthy would only put people off working hard“.

New Zealand?! “Over-taxed”?!

After two tax cuts (2009 and 2010) which saw the wealthiest and top income earners benefit the most, Horton is still insisting that New Zealand is “over-taxed”?

Well, let’s put that to the test and compare New Zealand to Australia, via the KMPG on-line tax rates indicator;

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KPMG - individual tax rates

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Verdict: New Zealand’s highest individual tax rate (33%) is lower than Australia’s (45%) and lower than the Oceania average (37.75%).

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KPMG - corporate tax rates

Verdict: New Zealand’s corporate tax rate (28%) is lower than Australia’s (30%) – though marginally higher than the Oceania average (27%).

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KPMG - indirect tax rates

Verdict: New Zealand’s indirect tax rates, GST, is higher (15%)  than the Australian rate (10%) or the Oceania average (12.92%).

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The only tax rate higher than Australia or the Oceania average is GST. That tax is recoverable by companies (through their GST Return), and does not impact on rich families (who can also avoid it with some skillful accounting) unlike poorer or middle class families.

So let’s compare New Zealand globally. Where do we stand on taxation rankings? In 2006 the US-based Tax Foundation positioned New Zealand at number 22 out of 30,  in terms of high-to-low taxation ranking;

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Tax Foundation: Top Marginal Combined Individual Income Tax Rates in the OECD
2000 and 2006

Country

Top Combined Marginal Individual Income Tax Rate in 2000a

Rank

Top Combined Marginal Individual Income Tax Rate in 2006a

Rank

Percentage Reduction in Marginal Rate
(2000-2006)

Denmark

59.70%

3

59.74%

1

0.06%

Sweden

55.38%

4

56.60%

2

2.20%

France

53.25%

6

55.85%

3

4.88%

Belgium

63.90%

1

53.50%

4

-16.27%

Netherlands

60.00%

2

52.00%

5

-13.33%

Finland

48.67%

8

50.90%

6

4.58%

Austria

45.00%

17

50.00%

7

11.11%

Japan

50.00%

7

50.00%

7

0.00%

Australia

48.50%

9

48.50%

9

0.00%

Canada

46.41%

13

46.41%

10

0.00%

Germany

53.81%

5

45.37%

11

-15.67%

Spain

48.00%

10

45.00%

12

-6.25%

Italy

46.40%

14

44.10%

13

-4.96%

Switzerland

43.23%

21

42.06%

14

-2.71%

Portugal

35.00%

28

42.00%

15

20.00%

Ireland

44.00%

20

42.00%

16

-4.55%

Poland

40.00%

23

40.00%

17

0.00%

Greece

45.00%

18

40.00%

18

-11.11%

United Kingdom

40.00%

24

40.00%

19

0.00%

Norway

47.50%

11

40.00%

20

-15.79%

United States

46.09%

15

39.76%

21

-13.74%

New Zealand

39.00%

26

39.00%

22

0.00%

Luxembourg

47.15%

12

38.95%

23

-17.39%

Korea

44.00%

19

38.50%

24

-12.50%

Iceland

45.37%

16

36.72%

25

-19.07%

Hungary

40.00%

25

36.00%

26

-10.00%

Turkey

35.60%

27

35.60%

27

0.00%

Czech Republic

32.00%

30

32.00%

28

0.00%

Mexico

40.00%

22

29.00%

29

-27.50%

Slovak Republic

35.00%

29

19.00%

30

-45.71%

Average

45.93%

  

42.95%

  

-6.46%

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Note that the Ranking chart above is dated 2006 – three years before National’s tax cut in 2009, and a further year before the 2010 tax cut.  Our marginal tax rate is now at 33%, putting us even further down the Chart, just above the Czech Republic. That would put New Zealand at number 28 out of 30.

The following chart is a comparison of corporate tax rates;

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United States 39.10%
Japan 37.00%
France 34.40%
Belgium 34.00%
Weighted Average (by GDP) 32.50%
Portugal 31.50%
Germany 30.20%
Spain 30.00%
Mexico 30.00%
Australia 30.00%
Luxembourg 29.20%
New Zealand 28.00%
Norway 28.00%
Italy 27.50%
Canada 26.10%
Greece 26.00%
Simple Average 25.50%
Denmark 25.00%
Austria 25.00%
Netherlands 25.00%
Israel 25.00%
Finland 24.50%
Korea 24.20%
United Kingdom 23.00%
Slovak Republic 23.00%
Sweden 22.00%
Switzerland 21.10%
Estonia 21.00%
Chile 20.00%
Turkey 20.00%
Iceland 20.00%
Czech Republic 19.00%
Hungary 19.00%
Poland 19.00%
Slovenia 17.00%
Ireland 12.50%

Source: OECD Tax Database
PART II. Taxation of Corporate and Capital Income. Table II.1. Corporate income tax rate: Combined Central and Subcentral (column 4):
http://www.oecd.org/tax/taxpolicyanalysis/oecdtaxdatabase.htm

(Via The Tax Foundation – http://taxfoundation.org/article/oecd-corporate-income-tax-rates-1981-2013)

Whilst New Zealand ranks above the Simple Average, at number 11 (equal with Norway) we are still considerably below the Weighted Average (by GDP) and well below our major trading partners, Australia and the United States (figures not shown for China).

Another ranking is the Marginal Effective Tax Rate on Capital Investment, OECD Countries, 2005-2013. On this scale, New Zealand ranks 13th out of 34 nations. At a rate of 21.6%, we are well under the weighted average of 28.5%, though marginally above the unweighted figure of 19.6%. Australia, Japan, and the US rank well above us in higher marginal effective tax rates on capital investment.

So is New Zealand “over-taxed”?

Or are we hearing the remonstrations of a woman with considerable wealth, enjoying a life of luxury and privilege that 99% of New Zealanders could only imagine.

That’s 99% of us.

Horton belongs to the remaining 1%.

Which, in that context explains why she is bleating about having to pay anything resembling her fair share of taxation.

This blogger acknowledges that Horton may well contribute to charities. If so, good for her.

But contributing to charities is no substitution for taxation which ensures that State resources are fairly shared out, according to need, priorities, and maximising benefit for the country as a whole.

However Horton decides to prioritise her philantropy is her choice. But left to the random vaguaries of personal  philantropy, some will always miss out. Goodwill is important, but is no substitute for ensuring the widest, and optimally organised  distribution of resources to health, education, roading, public transport, the justice system, environmental conservation, etc, etc, etc, etc – all the things which New Zealanders enjoy and take for granted every day of their lives.

Why is it that with all their considerable wealth, the rich still feel the need to complain? With a dollar value of $220 million, Horton and her family will never have to worry about paying the mortgage of rent on time; whether their power bill will be higher yet again this winter; if they can afford to pay their children’s uniforms and “voluntary” school fees; and how much they’ll be able to afford to spend on groceries.

The infra-structure of this country did not materialise out of thin air; built up over-night by pixies. It was built by people paying taxes, and the State (the people’s collective will)  building everything from scratch.

When Horton switches on her light-switch tonight, I hope she spares a thought for the tax-dollars that went to pay for the dams; the access roads; the transmission lines; and the workers’ wages who built this incredible asset.

Rather than complain about taxation, Horton should count herself lucky, and give thanks to whatever deity she worships, that she was born in New Zealand.

It could easily have been Somalia.

They have little or no taxation.

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References

Radio NZ:  Philanthropist dismisses ‘rich tax’

NBR: The Rich List at a Glance (Wealth order)

NBR: HORTON family

Tax Foundation: Top Marginal Combined Individual Income Tax Rates in the OECD 2000 and 2006

Tax Foundation: Marginal Effective Tax Rate on Capital Investment, OECD Countries, 2005-2013

News.Com: Tax collecting a deadly job in Somalia, five taxmen killed this year

Previous related blogpost

Greed is good? (28 August 2011)

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election 2014

Above image acknowledgment: Francis Owen

This blogpost was first published on The Daily Blog on 10 February 2014.

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“You Break It, We Fix It” – Is That How It Works?

13 January 2014 6 comments

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It all began in 1984…

But first, let’s look at the Governor-General, Sir Jerry Mateparae’s 2014 New Year’s speech,

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"As a nation, and as communities, we need to both celebrate our successes, and examine how we can help those families facing particular difficulties, so every child can grow up in a safe and secure home."

As a nation, and as communities, we need to both celebrate our successes, and examine how we can help those families facing particular difficulties, so every child can grow up in a safe and secure home.”

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My initial reaction upon hearing this statement from the Governor General was, thank god that the issue of deprivation facing children in our country is finally ‘trickling up’  the coridors of The Establishment.

It’s not like we haven’t been banging on for the last few years about the problems confronting us with child poverty; increasing inequality; homelessness; unemployment, under-employment; the growing wage-gap with Australia; etc, etc; etc; etc…

Once upon a time, New Zealand was one of the most equal societies on this planet. And we took great pride in that fact.

But then, something happened. Something disastrous which we were aware of; initially viewed with alarm; and then, like the frog in the pot of water steadily heating up, we got used to it.

We got Rogernomics.

Later followed shortly thereafter by the nastier, “crack-cocaine” version referred to as “Ruthenasia”.

From there, despite all the rhetoric and promises of wealth “tricking down”, things got worse. Much worse.

Sir Jerry’s speech was duly reported in the Otago Daily Times on 1 January;

The release of Children’s Commissioner Russell Wills’ report into child poverty in December found a quarter of Kiwi children were under the standard 60 per cent income poverty line, of which, 10 per cent were in severe and persistent poverty.

The report also highlighted the links between the lack of affordable housing and the preventable diseases spread through overcrowding.

Sir Jerry said while the structure and dynamics of New Zealand families had changed, the desire of parents to raise their children in a caring, loving environment had not.

“I often hear people say that everyone should have a New Zealand childhood.

“The care we provide to our most vulnerable citizens – our children – is a barometer of the wellbeing of our families and our society.”

But not all families could cope with the “inevitable challenges” life threw at them, Sir Jerry said.

IBID

Perhaps families could have coped better had National – not “life” – not thrown these challenges at them;

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English confirms big ACC levy rise likely

Source

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Note how only a month after being elected into office, National was already spinning the public meme that Labour was to blame for the consequences of National’s impending ACC levy-rises? Such would be National’s modus operandi for the following years; everything blamed on the previous Labour government; accept no responsibility whatsoever.

If National wins a third term in office this year (unlikely), will they still attempt to use Labour as a scapegoat for their unsuccessful policies?

In the meantime, National continued their policy of raising government charges and taxes,

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Budget 2010 - Income tax slashed, GST to 15 pc

Source

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English’s promise that income tax cuts would be “more than offset the rise in GST” ended up  hollow when more government charges were further raised;

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Tax hikes disguised as `reinvestment'

Source

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Yet more indirect tax rises were forthcoming;

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Petrol prices creep higher

Source

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And cuts to funding for social services. Again, children were targetted;

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Hundreds march over early childhood cuts

Source

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And hefty user-pays charges implemented and increased;

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Vulnerable children at risk from Family Court fees increase

Source

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With perhaps this, being the most odious and damaging of all to struggling low-income, poor families;

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Prescription fees increase

Source

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Although NZMA chair, Paul Ockelford, asserted that prescription charge increases were “unlikely to be a barrier for most”, that statement appears to be the kind of arrogant, self-delusional nonsense that people out of touch with reality readily express amongst polite company, at well-laden dinner tables, of the tut-tutting affluent classes.

As writer, Herman Melville pointed out,

Of all the preposterous assumptions of humanity over humanity, nothing exceeds most of the criticisms made on the habits of the poor by the well-housed, well- warmed, and well-fed.”

Reality away from the likes of  Mr Ockelford’s genteel circle  is much different, and grimmer;

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Pharmacies carry debt for prescriptions

Source

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From the above Herald story,

Nikki Turner, who works as a GP in Wellington as well as sitting on the Child Poverty Action Group, said any assumption that the $2 increase was a minor issue was not looking at the bigger picture.

“For a lot of people that’s fine, but for many people there are a lot of barriers to access to primary health care.”

New Zealanders on lower incomes, particularly those with large families or complex medical problems, would find the hike in prescription costs as another barrier.

“We know from the Ministry of Social Development’s own data on severe and significant hardship that many families don’t pick up prescriptions because of costs. If they’ve got a small amount of money left over, then prescriptions will go or they’ll delay picking them up,” she said.

Source

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And remember – National presided over two tax cuts in 2009 and 2010. Cuts which benefitted the highest income earners in the country.

It is abundantly clear that those tax cuts were paid for by massive borrowings; state asset (partial-)sales; raising GST; cuts to funding for  state services; and raising user-pays charges for other State services (often for the most spurious reasons).

In simple, easy-to-understand-terms, low and middle income earners (but especially those on low and fixed incomes) ended up paying for tax cuts for the rich,

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Tax cuts - High earners set to benefit most

Source

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This is what National does.

In the meantime, unemployment is still at 7.1% and – according to the Children’s Commissioner, in his first Child Poverty Monitor – child poverty has dramatically worsened,

The 2013 Monitor shows that one in four Kiwi kids are growing up in income poverty and one in six are going without the basic essentials like fresh fruit and vegetables, a warm house, decent shoes and visits to the doctor. Ten percent of children are at the hardest end of poverty and three out of five kids living in poverty will live this way for much of their childhood.

[…]

Children’s Commissioner Dr Russell Wills says the project is about giving New Zealanders the full picture on child poverty rates and to get Kiwis talking about it.

“265,000 New Zealand children are living in poverty. Is this what we want for our kids?

[…]

The Child Poverty Monitor is funded by the J R McKenzie Trust, an organisation with a long history of involvement in important social issues. The Trust’s Executive Director Iain Hines says they initiated this project because they saw an opportunity to make a difference for children missing out.

“We are concerned that the rate of child poverty in 2013 is twice that of the 1980s. We think this is unacceptable. If New Zealand’s road toll was twice that of the 80s there would be outrage and immediate action taken to reduce it. We need the same momentum and action on child poverty.

It is mind-boggling that we have arrived at a state of affairs where child poverty is increasing each year – and successive governments seem unable/unwilling to tackle it.

To our shame, governments seem more interested in throwing money at multi-national corporations and yacht races rather than the nation’s children – our future.

National, in particular stands guilty of inaction.

This was clearly highlighted when it was revealed that the Children Commissioner’s report was funded by a private organisation, the J R McKenzie TrustKey’s government refused point-blank to fund the investigation and subsequent report. Instead, the cost – $500,000 – was paid by the Trust.

By contrast, National found it easier to hand out corporate welfare such as $30 million to the Rio Tinto private aluminium smelter. Or millions to the Rugby World Cup tournament. Even Southern China Airlines got a $4 million tax-paid hand-out, courtesy, National.

One thing is for certain – Dr Russell Wills should not be expecting to be re-appointed Children’s Commissioner when his term is up. Not if the Nats are still in office by then.

Just to remind the reader, in his speech, Sir Jerry said,

“But not all families could cope with the “inevitable challenges” life threw at them.”

Source

Unsurprisingly, I take great exception to Sir Jerry’s comments. It is not “life” that is throwing “challenges” at New Zealand’s families: it is successive government policies and inaction. And nor are they “inevitable”. The sun rising every day is inevitable – government policies are not.

Polices such as these have been carefully planned for years prior to National winning the 2008 election and  have been methodically and unscrupulously executed with deliberate  intent to further an agenda of gradual “transformation” to a user-pays, low-tax, minimal-State economy.

It is shameful and sickening that Sir Jerry now laments that  “not all families could cope”. Once again, those at the bottom of the socio-economic heap are blamed for their precarious position. Unfortunately Sir Jerry, not all of us can live at the Governor-General’s residence at tax-payers’ expense.

Some families, however, can cope better than others,

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The NBR Rich List 2013 - The Rich Continue to Get Richer

Source

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Perhaps equally galling is that even while our social problems worsen and poverty increases, people like John Key and Bill English continue to insist that things will, eventually, get better.

John Key in January 2008,

“This is a great country.  But it could be so much greater.  It has been so much greater. 

So the question I’m asking Kiwi voters is this:  Do you really believe this is as good as it gets for New Zealand?  Or are you prepared to back yourselves and this country to be greater still? National certainly is.

[…]

National knows New Zealand has a great future if we embrace good ideas and put them into action. And my sense is that in 2008, New Zealand is ready for those new ideas – ready for a fresh start.

At this election, the National Party has the chance to harness the growing mood for change and march New Zealand towards a better tomorrow.

We know this isn’t as good as it gets.  We know Kiwis deserve better than they are getting.  We are focused on the issues that matter and we have the ideas and the ability to bring this country forward. 

National is ambitious for New Zealand and we want New Zealanders to be ambitious for themselves. “

Five years later, John Key, in December 2013,

“I am passionate about the future of New Zealand, and I’m in politics to make a difference for the better of our society.

By 2038, young people of today will be our leaders – whether it be in politics, business, academia, education, sport or arts.

They will guide the values, principles and direction of the country in years ahead.

One thing I’m sure of is while we will still be a young country, we will be a more confident multicultural country than we are now, a country that was built on a bicultural foundation. And today’s young people will help guide that future.

From the calibre and talent I see in our youth today, there is cause for real optimism about the years ahead.”

According to Key and other right-wing politicians, we just have to keep persevering with their policies.  So that, sometime in the future, things will “get better”.

Even as they get worse.

Getting worse since 1984…

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Hungry kids scavenge pig slops

Source

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This blogpost was first published on The Daily Blog on 6 January 2014.

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References

John Key:  A Fresh Start for New Zealand

Otago Daily Times: English confirms big ACC levy rise likely

Scoop media: Government delivers April 1 [2009] tax cuts, SME changes

NZ Herald: Tax cuts: High earners set to benefit most

Dominion Post: Petrol prices creep higher

NZ Herald: Budget 2010: Income tax slashed, GST to 15 pc

Dominion Post: Tax hikes disguised as `reinvestment’

Sunday News: Hundreds march over early childhood cuts

NZ Herald: Govt borrowing $380m a week

Scoop media: Vulnerable children at risk from Family Court fees increase

Statistics NZ: 2013 Census QuickStats about national highlights – Work-Unemployment

NZ Herald: Prescription fees increase

Radio NZ: Pharmacies carry debt for prescriptions

Otago Daily Times: Governor-General urges Kiwis to care for children

Radio NZ: Challenge to help vulnerable families

Fairfax media: Govt pays $30 million to Tiwai Pt

Scoop media: NZ’s first monitor of child poverty released

Scoop media: Wellington philanthropic trust helping with survey of child poverty

Scoop media/NBR: The NBR Rich List 2013: The Rich Continue to Get Richer

NZ Herald/John Key: Kids of today offer bright future for NZ

Fairfax media: Hungry kids scavenge pig slops

Additional

Facebook: Inside Child Poverty New Zealand

Facebook: Child Poverty Action Group (CPAG)

Scoop media: Inequality keeps rising, says UC social research expert

Previous related blogpost

A Blighted Future – the price of an apple

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Journalists encouraging irresponsible government policy?

6 January 2014 3 comments

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John Armstrong - Cutting tax tempting for National

Source

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Sorry, John, but precisely WHO is talking about tax cuts?

Because so far, all I’m hearing is a couple of journos putting the question to Dear Leader and his faithful little side-kick, Lassie Bill English. No one else is seriously contemplating cutting taxes – not when New Zealand’s sovereign debt is now $60 billion as at 9 November this year – and  increasing by $27 million every day since Key’s hopelessly  incompetent government came to power in 2008.

According to Hamish Rutherford, writing for Fairfax Media, this equates to $13,000 for every man, woman, and child in New Zealand – and expected to increase by another $10 billion by 2017.

We need to address this problem – not fuel it by increasing consumption of imported goods, thereby worsening our balance of payments.

For god sakes, stop encouraging National to engage in any further irresponsible slashing of revenue.  National’s two previous tax cuts in 2009 and 2010 did nothing to  help stem the growth in our sovereign debt. Not when revenue fell by up to $4 billion after those tax cuts.

We have other priorities.

For example, why is the Wellington City Mission short of $2 million to carry out it’s valuable work to assist the poorest in our society? It is obscene that the Mission will have to consider reducing some services, as Chief executive Michelle Branney recently suggested.

Why are New Zealand’s poorest families unable to afford basic  medicines since this government-for-the-rich increased prescription charges in January 2013? When National cut taxes, it attempted to make up for the revenue shortfall by raising GST (despite promising in 2008 not to) and increasing government charges such as for prescriptions, Court fees, etc.

Why are New Zealanders needlessly suffering from rare diseases because PHARMAC cannot afford life-giving medication?

Why are poverty-related diseases making a come-back with such a vengeance?

Children’s Commissioner Dr Russell Wills…

… report is expected to reveal a 12 per cent rise from 2007 to 2011 in hospital admissions for poverty-related illnesses such as acute bronchiolitis, gastroenteritis, asthma, acute upper respiratory infections and skin infections.

“Most New Zealanders will find the numbers of children affected by disease shocking,” Wills told the Herald on Sunday, “but for those of us working clinically with families in poverty it is not surprising.”

Wills also works as a paediatrician in Hawke’s Bay. He said hospital wards were now full of poor, sick children every month of the year – not just in winter. There was no longer a “summer lull” in diseases.

English found himself so cash-strapped after their tax cut profligacy that, by 2012, he was even reaching into the meagre pay-packets of newspaper delivery boys and girls to grab extra tax revenue.

Instead of frittering away taxes, we need to be looking at the real problems confronting us;

  • Address child poverty problems

When children go to school hungry because families cannot afford sufficient food after paying high rents, electricity bills, etc. then there is something seriously wrong with our country.

Especially when we are now seeing children eating out of rubbish bins because there is no food at home for them. I refuse to believe that most New Zealanders want this kind of society for their children.

This is not the New Zealand I grew up in.

The next Prime Minister must make this a #1 priority, and begin with taking on the role of Minister for Children and implementing a comprehensive Food In Schools programme (not the shonkey half-measures undertaken by National earlier this year).

Next on the agenda; returning welfare payments to pre-1991-slash levels (inflation indexed); reduce prescription prices for medicine;  and implement a massive job creation programme.

  • Pay down debt

From 2000 to 2008, Clark’s administration not only paid down debt, but also posted Budget surpluses,

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Government Debt

New Zealand Government Debt To GDP

Source

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Government Budgets

New Zealand Government Budget

Source

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To be fair, Labour’s Finance Minister, Michael Cullen did not have the Global Financial Crisis to contend with. But by exercising fiscal prudence –  instead of  tax-cut lolly-scrambles demanded by the then-National opposition – he left the country in a fit state to weather the on-coming financial storm that was about to envelope the planet.

By the time National came to power in 2008, the global financial crisis was well and truly upon us, with the collapse of Lehman Bros on 15 September 2008. The GFC had started earlier, and signs were apparent to all but the most intransigent optimist that dark storm clouds were on the horizon.

As unemployment rose and economic activity slowed, National persevered stubbornly with it’s tax-cut programme – a move that would further indebt this country and put our government’s books back into the red again. At one stage, National was  borrowing $380 million  a week to make up for the shortfall.

This despite the fact that it was common knowledge that we were facing a dire crisis, as Tracy Watkin and Vernon Small reported on 23 April 2009,

The recession was expected to blow a $50b hole in the economy during the next three years, plunging the Government further into the red as costs climb and tax revenues fall.

“That’s $50 billion we will not recover as a nation, and $50 billion that cannot be taxed by the Government,” Mr English told a business audience in Auckland.

And yet, despite his own candid admission, English went ahead with tax cuts that we could ill afford, and had to make up with massive borrowings; cuts to government services; increased user-pays; mass sackings of state sector worker, and eventual partial asset sales. Even welfare was targetted for “reforms” (read; cost cutting) to claw back government spending.

Little wonder that by September 2011, credit rating agencies Fitch and Standard & Poors had downgraded us.

  • Invest in upskilling the unemployed

Why are we importing tradespeople from overseas when we have 7.1% (153,210) unemployment in this country?

National’s response to the skills shortage was this ideological fob-off from Bill English, in June 2011,

In the first place, it is the responsibility of the companies that expect to rebuild Christchurch to ensure that they have the skills.

And to ensure that everyone understood that National was maintaining it’s long-held tradition of shirking responsibility, he added,

Of course it will be tight, because they are competing with very, very large salaries, particularly those in Western Australia where something like $250 billion worth of capital projects are in the pipeline.”

IBID

That’s the problem with a government that places it’s faith in a free market solution to everything (except corporate welfare) – nothing happens.

Wouldn’t it have made more sense to offer free skills training to every unemployed person in New Zealand, along with subsidised accomodation in Christchurch for workers moving from other towns and cities to take up work offers?

There would have been a cost, to be certain. But that would have been off-set by (a) reduced welfare payments; (b) upskilled workers who would continue to use their new training for subsequent building projects; (c) more taxes paid by more employed workers;  and (d) a flow-on effect to other businesses as income-earning workers spent their wages.

The $4 billion frittered away in tax cuts would have made a considerable dent in our unemployment and given a much needed boost to our economy. And by providing work to the unemployed, the government would have saved millions in welfare.

But by sitting on it’s hands and doing nothing, National has maintained the status quo; 160,000 unemployed wasting their time, and requiring more of our taxes to be paid for the dole.

Is this crazy or what?

Hopefully an incoming Labour-Green-Mana(-NZ First?)  will have more sensible policies than what we’ve seen thus far from National. (Which won’t be hard to achieve.)

And other areas which desperately require State intervention,

  • A fairer taxation system, including reducing (or even eliminating) GST; introducing a comprehensive Capital Gains Tax;  looking at a Financial Transactions Tax (or “Robin Hood” tax, as Mana refers to it); making the first $20,000 tax free; and increasing tax for the top 1%.
  • A sensible pricing system for electricity especially for low/fixed-income earners.
  • Increase funding for early childhood education.
  • More state housing, so our fellow New Zealanders have a decent roof  over their heads.
  • Invest in public transport, especially in Auckland, before the city grinds to a stop.

Those are the things we need to look at. Not cutting taxes for the well off (which is usually what the Nats end up doing).

These should be the priorities of a sensible government. Anything, everything,  else is grossly irresponsible.

Otherwise, what the hell are we leaving our children?

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debt-mountain-cartoon.

May I have some food, a home, parents

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Postscript

Armstrong’s article on tax cuts features a large image of a smiling David Cunliffe. Note; Cunliffe. Not English, nor John Key.

Is there a subtle sub-text being conveyed here that I’m missing? Perhaps I’m getting the wrong ‘message’ from Armstrong’s piece, especially when he finishes with this intriguing comment,

Overall, English will not want to tie himself to future tax cuts without more solid evidence they can be sustained.”

My… that almost sounds like a veiled warning, doesn’t it?

This blogpost was first published on The Daily Blog on 30 December 2013.

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References

Bill English: Dr Cullen maintains tradition of tax-cut denial

Wikipedia: Bankruptcy of Lehman Brothers

NZ Herald: Govt borrowing $380m a week

Fairfax media: $50b hole in economy

TV3 News: Double credit downgrade a double blow for NZ economy

Fairfax media: Key ‘no GST rise’ video emerges

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

The Press: Irish rush for quake jobs

NBR: Chch rebuild companies will have to find skilled workers – English

TV1 News: Rise in prescription charges ‘not fair’ – Labour

NZ Herald: Tax cuts: High earners set to benefit most

NZ Herald: Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour

Fairfax media: $4b in tax cuts coming

Dominion Post: Bennett expects welfare reform to save $1.6b

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

Radio NZ: Pharmacies ‘carry cost’ of increases

NZ Herald: Child poverty ills rising

Fairfax media: Hungry kids scavenge pig slops

Fairfax media: Mum Not Prepared To Wait And Die

Radio NZ: PM defends record of helping poor families

Radio NZ: 5th year in deficit at City Mission

Radio NZ: Funding declined for housing project

NZ Herald: John Armstrong: Cutting tax tempting for National

The Atlantic: Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds

Sources

Trading Economics:  New Zealand Government Debt To GDP

Trading Economics: New Zealand Government Budget

Statistics NZ: Household Labour Force Survey: September 2013 quarter (6 Nov 2013)

Roy Morgan: New Zealand real unemployment down 0.3% to 8.5% and a further 8.6% (down 1%) of workforce are under-employed (5 Dec 2013)

Statistics NZ: 2006 Census

Statistics NZ: 2013 Census

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