Mycoplasma bovis, foot and mouth, National Party, and other nasty germs

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Intro

The Mycoplasma bovis crisis confronting New Zealand is a story that will be dissected and commented on for decades to come.

This was not simply a matter of a bacteria infecting cattle. This was a  story on many levels; of flouted rules; a significant inadequacy of the “free market”; critical under-funding by National (no surprises there);  and the best silver-lining that farmers could possibly hope for…

The ‘bovis’ hits the fan

22 July 2017: Mycoplasma bovis was first detected on dairy farms owned by the Van Leeuwen Dairy Group, near Waimate, in Canterbury. In what must rank as the Understatement of the Year, Ministry for Primary Industries (MPI) investigator, Kelly Buckle, announced;

”At the moment, we’re pretty confident it’s just on those two farms.”

By 1 August, a second dairy farm in South Canterbury had been confirmed with the infection. An ODT report stated;

The ministry was satisfied the containment measures in place were sufficient to control any spread of the disease from the properties involved.

By 29 May this year, the sobering reality of the outbreak turned earlier optimism of containment into a bleak joke;

The cull will involve 152,000 animals over 1-2 years – or an extra 126,000 on top of the planned cull to date.

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The estimated costs of attempting to eradicate Mycoplasma Bovis [sic] are $886 million over 10 years, against an estimated cost of $1.2 billion to manage the disease over the long term and an estimated $1.3 billion in lost production from doing nothing.

At this point the Government believes that 37 farms have infected livestock and 192 farms in total will face stock culling – 142 in the first year.

But high-risk animal movements have been traced to 3000 farms and 858 are under surveillance.

The ease of spread of the micro-organism quickly revealed a fatal flaw in the administration of our bio-security systems.

NAIT – the system that farmers nobbled

As the infection was detected on one farm after another, it soon became apparent that dairy farmers had either ignored, or been slow to comply with the NAIT (National Animal Identification and Tracing) system of tracking farm animals.

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As Alexa Cook reported for Radio NZ in December last year;

Under the National Animal Identification and Tracing (NAIT) system, all cattle and deer farmers must have stock tagged and registered, and also record and confirm any animals that are bought, sold or moved.

A March 2018 report from Radio NZ found that around half of the country’s farmers were flouting this critical process;

A review of NAIT found only 57 percent of farmers who record their animal movements, do so within the required 48 hours.

Agriculture Minister Damien O’Connor was not happy. He was moved to state the obvious;

“NAIT is an important part of our biosecurity net and it needs improvement.

Mycoplasma bovis is mostly spread through movement of infected cattle from farm to farm. This means cattle traceability between properties is critical to finding all affected animals, and stopping further infection”

O’Connor warned that farmers who ignored NAIT would face fines.

Even Federated Farmers was not impressed with the slackness shown toward NAIT.  Waikato Federated Farmers meat and fibre chairperson, Chris Irons, was highly critical of his fellow farmers;

“Let’s be frank – the National Animal Identification and Tracing (NAIT) scheme is not working as well as it should, and the blame lies with farmers.

Yes, NAIT could be easier to use but that’s not an excuse for not keeping animal tracking data up to date.

There are a lot of farmers who say NAIT is waste of time and money. If you have that view then I’m sorry, but I don’t think you care about the farming industry and are probably guilty of not being compliant.

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NAIT currently does a good job of tracking animals that are registered and all their movements recorded on the database. But the system is only as good as the data put into it.

Owners, sellers and third party buyers have to be diligent about recording cattle and deer movements on their NAIT accounts. The system is fit for purpose when the data is up to date, but falls down when it’s incomplete, or not entered at all.

If we have a fast moving outbreak it will be vital to have NAIT working so it’s up to all farmers to ensure they are compliant.”

Chris Irons was correct when he pointed out that “NAIT could be easier to use“. The system is clunky, with stock tags having to be manually scanned and then manually uploaded into the central system.  The manual aspect of it makes the system unwieldy and easy to “set aside to do later” – if at all.

Full electronic automation would cost millions, and would raise the question of who would pay. This blogger understands MPI was never adequately budgeted for full automation.

It is unclear who would pay for NAIT to be upgraded; the Ministry or farmers?

By May this year, the full extent of farmers’ undermining of NAIT became apparent. Prime Minister Ardern did not mince her words;

“There was a system in place, it has failed abysmally and we are now picking up the pieces of that.

We want to make sure that first and foremost we deal with the issue at hand and that is Mycoplasma bovis and trying to pin down its spread and still focus on the possibility of eradication. The second question is: How do we prevent this from ever happening again?”

Biosecurity NZ’s spokesperson, Geoff Gwynn, spelled out the consequences of the failure to carry out NAIT processes;

“It’s a reality of New Zealand’s farming system that large numbers of animals are sold and moved across big distances.

This response is serving to underline just how much movement takes place and it is this, coupled with poor record keeping through NAIT that is making our job very challenging.”

In part, the spread of Mycoplasma bovis has been a crisis of farmers’ own making.

The “she’ll be right, mate” attitude simply will not cut it in an age of rapid international travel. Harmful micro-organisms and other pests can easily cross the planet and humanity’s artificial borders within days or even hours, on the back of our 21st century transport technology.

But perhaps the greatest irony is that whilst farmers had been lax sharing critical information on stock movements as per NAIT requirements – they were far less shy demanding information from MPI on what was being done to  identify infected farms; eradication/containment of the microscopic invader; and compensation paid out post-haste for culled stock animals.

If farmers had complied with NAIT and provided stock transfer data in a timely and precise fashion, they might not now be in a position where they were braying for information from those same Ministry officials.

The dreaded disease whose name we dare to speak

Waikato Federated Farmers meat and fibre chairperson, Chris Irons, issued this stark warning to his fellow farmers;

“There’s too many farmers who are just ‘oh nah, just don’t want to do it’, but at the end of the day it’s got to be done because that’s the only way we’re going to be able to track any diseases.

If we get something faster than m.bovis – like foot and mouth or something – we’ve got to have a reliable system. At the moment the system is reliant on farmers doing their bit and having their records up to date.”

“Like foot and mouth or something“?!

Mycoplasma bovis is a nasty bug. There is little doubt in that. According to MPI, it is present in most other countries around the world. Only until last year, New Zealand was free of the disease. As MPI graphically described, it has multiple symptoms;

Major syndromes seen in other countries with Mycoplasma bovis include atypical mastitis in cows (both dry and in milk) – (the chance of this disease likely increases with increasing herd size), arthritis in cows and calves, atypical, difficult-to-treat pneumonia in calves, middle ear infection (otitis media) in calves, severe pneumonia of adult cows (usually rare), and abortion. All conditions are difficult to treat once the animal becomes sick.

Yet, Mycoplasma bovis is almost the agrarian version of the common cold when compared to a disease that every animal farmer must live in mortal fear of: foot and mouth (Aphthae epizooticae).

In a 2001 foot-and-mouth outbreak in Great Britain, farms were quarantined and isolated behind Police barriers;

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Movement was curtailed;

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Millions of stock animals were culled and incinerated on massive pyres;

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Each of those cases meant a farm having all of its livestock killed and burned. By the time the last case was confirmed at Whygill Head Farm in Appleby, Cumbria, on 30 September 2001, more than six million sheep, cattle and pigs had been slaughtered.

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The Guardian reported just some of the effects on British farmers and businesspeople;

The list of victims is long. At the head of it should be the nearly 3m animals slaughtered and burned, along with the 68,000 cows, sheep and pigs set to follow them on to the funeral pyres. Next on the list would be the clutch of farmers who, despite £125m already pledged in compensation, will be driven out of business by an epidemic that swept through their land as devastating as a tornado. After them, the hoteliers and restaurateurs who saw their livelihoods dry up as the world’s travellers declared Britain a medievally benighted no-go area.

The financial cost was horrendous; £3 billion to the public sector and  £5 billion to the private sector.

Tourism income  lost/displaced between £2.7 and £3.2 billion. It took nine months to bring foot-and-mouth under control and stop the spread.

Farmers who were not infected with foot and mouth, but still lost income through massive restrictions to livestock movement, were not compensated.

The invisible psychological effects were perhaps the worst;

The disease epidemic was a human tragedy, not just an animal one. Respondents’ reports showed that life after the foot and mouth disease epidemic was accompanied by distress, feelings of bereavement, fear of a new disaster, loss of trust in authority and systems of control, and the undermining of the value of local knowledge. Distress was experienced across diverse groups well beyond the farming community. Many of these effects continued to feature in the diaries throughout the 18 month period.

[…] The use of a rural citizens’ panel allowed data capture from a wide spectrum of the rural population and showed that a greater number of workers and residents had traumatic experiences than has previously been reported.

Despite the effects of Mycoplasma bovis, New Zealand’s meat and dairy exports are largely unimpeded.

That will not be the case if – or more likely – when foot-and-mouth reaches our shores. With tourism numbers at 3.3 million in 2015/16 and expected to reach 4.9 million visitors by 2023, it is only a matter of time when one individual carries the dreaded foot and mouth micro-organism into our country.

If 100% of New Zealand farmers are not 100% compliant with NAIT in the coming years, the nightmarish havoc wrought by a foot and mouth outbreak will be unlike anything Mycoplasma bovis has wrought.

It is a tough lesson, but the farming sector should be thankful of Mycoplasma bovis (and the person who inadvertently imported it). Whatever supernatural deities there might be have delivered a clear warning to us all.

Observe the rules. Follow the NAIT system.

No exceptions.

Or face worse consequences.

National, the Free Market and minimal-government

Remember this guy?

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He must be feeling a bit of a right ‘wally’ right now.

As ‘Advantage‘ recently wrote for The Standard;

Remember those Morrinsville farmers who protested against our ‘communist’ Prime Minister? Those are the guys we are feeding our taxpayer dollars towards right now

A  Herald report backed up the anonymous blogger’s observation;

The Government will cover 68 per cent costs and the dairy and beef industry bodies the remainder.

The estimated costs of attempting to eradicate Mycoplasma Bovis [sic] are $886 million over 10 years, against an estimated cost of $1.2 billion to manage the disease over the long term and an estimated $1.3 billion in lost production from doing nothing.

Perhaps this  US cartoon best shows how those with a distrust of “big government” (or any government) in their lives suddenly have a remarkable Road-to-Damascus conversion when faced with a crisis beyond their abilities to manage;

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Left to the ‘tender mercies’ of a small government, an unfettered free market, and minimal state involvement, how much could farmers expect as compensation for a disease outbreak and culling of their stocks?

Easy answer: nil. As in nothing.

They would be expected to buy their own insurance. User pays would be the rule.

Whether a farmer with an infectious disease would notify authorities (whether such “authorities” would even exist in a minimalist government is a moot point) without compensation, or any other personal benefit, would be an interesting question.

In a purist free market where everyone looks out for him/herself, what would be the incentive to act for the “greater good” of other people?

Fortunately we still have a State and the remnants of collective responsibility when faced with overwhelming circumstances.

Whether a person is a solo mother living in a State house or a farmer with a ten million dollar investment – the State exists to protect it’s citizens when faced with crisis beyond their coping abilities.

The  next time farmers read a media story of a State house tenant unjustly turfed out of their home, or a welfare recipient who has been abused by WINZ until driven to suicide – they should pause for a moment. Perhaps their sympathies may now  be just a little closer aligned with those at the bottom of the socio-economic heap.

National – the party of preference for most farmers – has said on multiple occasions that state assistance should be “targeted“; that tax-payers dollars should only go to those who are most-in-need (even though National then demonises those very same people-in-most-need).

In a free-market, small-government world, a minimal amount of state assistance might be channeled to the poorest of the poor. Just a barely sufficient amount to stave off starvation and prevent embarrassing piles of corpses from inconveniently cluttering up the streets. But state assistance to compensate farmers?

Forget it.

At election time, farmers should think carefully before ticking the Party box. They should ask themselves;

How small do they really want government to get?

In the meantime, our farming friend above should consider changing the text for his next sign;

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A little appreciation goes a long way.

Vote Biosecurity

As the twin effects of the 2007/08 Global Financial Crisis and two tax cuts in 2009 and 2010 impacted on government tax revenue, National was forced to break one of its election promises. It cut back on spending and public services.

It soon became apparent that no part of the State sector would be untouched by National’s then-Finance Minister, Bill English, as Richard Wagstaff of the PSA explained;

The Public Service Association is concerned about the significant risks involved in cutting jobs at MAF Biosecurity, whose staff work on our borders protecting New Zealand’s multi-billion dollar agriculture sector from pests and diseases.

MAF Biosecurity has today announced that’s its disestablishing around 60 jobs by cutting 30 filled positions and disestablishing 30 vacant positions. MAF Biosecurity says the job cuts are in response to falling trade and passenger volumes.

“But the government is also responsible for these job losses as it cut the baseline funding for MAF Biosecurity by $1.9 million in the Budget delivered in May,” says PSA national secretary Richard Wagstaff.

“Our concern is that the New Zealand’s economy depends on our farming and horticulture industries that could be decimated if diseases like foot and mouth and fruit fly got into the country.”

“MAF Biosecurity staff work to prevent these diseases and pests from crossing our borders so it’s vital that these job cuts don’t weaken our defences in this area,” says Richard Wagstaff.

Richard Wagstaff’s stark warning became a grim reality as fruit flies, moths, the psa virus, and then Mycoplasma bovis crossed our weakened border controls.

It is difficult to make direct comparisons with  some of the data from National’s Budgets. Categories were changed from the 2009 Budget to the 2010 Budget onward. Much of the budgetary allocations were “buried” with Vote Primary Industries.

However, it is clear that two overall categories can be compared;

• Border Clearance Services and Border Biosecurity Monitoring and Clearance
• The overall total of budgetary allocations to biosecurity which from 2012 onward were obtained from the Summaries of each document.

The figures appear to show a steady decline in biosecurity funding from 2008 (Labour’s Michael Cullen’s last budget) to 2014, of thirteen million dollars. This is not accounting for inflation, which would mean an even greater decline in funding levels.

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Note A: From Budget 2012, Vote Biosecurity was merged with Vote Agriculture & Forestry, and Vote Fisheries into the Vote Primary Industries.

Note B: Linked references to Budget documents listed below..

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Corresponding international visitor arrivals continued rising (with only a slight drop in 2009, post-GFC).

Annual imports fell post-2008,but regained steadily after 2011. By 2013, imports had all but returned to 2008 levels (not taking inflation into account).

What is clear is that biosecurity does not appear to have been adequately funded. National’s cost-cutting (until 2013 and 2014) must have impacted on our ability to monitor and prevent pest incursions.

This would appear to coincide with the appearance of several destructive pests recently;

• PSA virus in November 2010
• Queensland fruit fly in February 2015
• Red clover casebearer moth, late 2015
• Tau fly, January 2016
• Eucalyptus variegated beetle, March 2016
• Velvetleaf, March 2016
• Pea weevils, April 2016
• Culex sitiens mosquito, March 2018

Whatever “savings” National made by cutting back on biosecurity were, by definition, false economies. Once again, cuts to an essential state sector service inevitably created grave consequences.

This time for our farming sector.

The next time National promises tax cuts at election time and to make “efficiencies” to “do more with less“, this is a lesson that the farming sector should remember with some bitterness.

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Those so-called “cost-savings” didn’t come cheap. A fact farmers should bear in mind when it comes time to cull herds exposed/infected with Mycoplasma bovis.

 

Acknowledgement: thank you to a certain scientist who gave her time to proof-read my article and offer constructive criticism.

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References

Wikipedia: Mycoplasma bovis

NZ Herald:  Confidence mycoplasma bovis outbreak contained

ODT: Another meeting as second farm infected

NZ Herald: MPI will face ‘don’t give a damn’ attitude on M. Bovis, farmer says

Radio NZ: Incomplete farm records slow tracking of cattle disease spread

Radio NZ: Farmers face checkpoints in effort to stop cattle disease

Fairfax media: NAIT responsibility – the buck stops with farmers

Radio NZ: M Bovis spread – Tracking system has ‘failed abysmally’ – PM

NewstalkZB: Farmer slams Govt over bovis communication

MPI: Two-page summary of Mycoplasma bovis

Wikipedia: 2001 United Kingdom foot-and-mouth outbreak

The Guardian: The news from Ground Zero – foot and mouth is winning

BBC: When foot-and-mouth disease stopped the UK in its tracks

The Guardian: A catalogue of failures that discredits the whole system

National Audit Office: The 2001 Outbreak of Foot and Mouth Disease

NCBI: Economic costs of the foot and mouth disease outbreak in the United Kingdom in 2001

NCBI: Psychosocial effects of the 2001 UK foot and mouth disease epidemic in a rural population: qualitative diary based study

MoBIE: New Zealand Tourism Forecasts 2017-2023

Radio NZ: Man still repaying debt from unnecessary HNZ meth eviction

Fairfax media: Aggressive prosecution focus at MSD preceded woman’s death, inquest told

National Party: Low income earners to subsidise homes for wealthy

National: Achievements – Social investment

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

Mediaworks/Newshub: Labour – Key promised no job cuts, asset sales in 2008 speech

Fairfax media:  Jobs expected to go in state sector cuts

Scoop media: Risks involved in cutting MAF Biosecurity jobs

NZ Herald: New Zealand fruit fly free after successful operation

MPI: Red clover casebearer moth

Mediaworks/Newshub: Crown opens case in kiwifruit claim over Psa virus outbreak

NZ Treasury: Budget 2008 – Vote Biosecurity

NZ Treasury: Budget 2009 – Vote Biosecurity

NZ Treasury: Budget 2010 – Vote Biosecurity

NZ Treasury: Budget 2011 – Vote Biosecurity

NZ Treasury: Budget 2012 – Vote Primary Industries (inclu Biosecurity)

NZ Treasury: Budget 2013 – Vote Primary Industries (inclu Biosecurity)

NZ Treasury: Budget 2014 – Vote Primary Industries (inclu Biosecurity)

NZ Treasury: Budget 2015 – Vote Primary Industries (inclu Biosecurity)

NZ Treasury: Budget 2016 – Vote Primary Industries (inclu Biosecurity)

NZ Treasury: Budget 2017 – Vote Primary Industries (inclu Biosecurity)

NZ Treasury: Budget 2018 – Vote Primary Industries (inclu Vote Biosecurity)

NZ Treasury:  Budget 2012 – Introduction – Estimates of Appropriations 2012/13

Statistics NZ: Exports and imports hit new highs in 2017

Statistics NZ: International visitor arrivals to New Zealand – 2008 – 2018 (alt. link)

NZ Herald: Kiwifruit disease Psa explained

MPI: Pea weevil

MPI: Eucalyptus variegated beetle

Fairfax media: Velvetleaf, one of world’s worst weeds, confirmed on three Waikato farms

MPI: No further Tau flies found and restrictions now lifted

MPI: Culex sitiens mosquito

Radio NZ: English hints at further tax cuts

NZ Herald: Key pledges state service shake-up

Scoop media: Speech – John Key – Better Public Services

Additional

Wikipedia: Biosecurity in New Zealand

MPI: Keeping watch

Radio NZ: Failings in NZ’s stock tracking system (audio)

Radio NZ: Cattle and oysters – a catalogue of issues: Damien O’Connor (audio)

Radio NZ: One in five farmers ignoring safety regs – WorkSafe

Other Blogs

The Standard: It’s Time for a Cost-Benefit Analysis of Dairy Farming

Previous related blogposts

Bugs and balls-ups!

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This blogpost was first published on The Daily Blog on 15 June 2018.

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Tracy Watkins – Getting it half right on the “Decade of Deficits”

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Writing in the new, tabloid compact-sized Dominon Post on 2 May, political columnist Tracy Watkins mentioned the oft-parroted cliche from the Right, the so-called “decade of deficits”;

“Labour spent years in the wilderness after the global financial crisis gave it a “decade of deficits” as its legacy.”

Watkins left out a crucial factor in National’s ongoing deficits – a fact to be pointed out;

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from: Frank Macskasy
to: Dominion Post <letters@dompost.co.nz>
date: 5 May 2018
subject: Letter to the editor
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The Editor
Dominion Post
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Tracy Watkins’s recent opinion piece referred to “decade of deficits” as Labour’s “legacy” in 2008 (1 May). She fleetingly mentioned the Global Financial Crisis as a contributing factor. English himself called the GFC “the deepest, most synchronised recession since the 1930s”.

Nowhere did Watkins mention that Labour’s finance minister paid down this country’s government; posted eight surpluses in a row; as well as funding long-term initiatives such as Working For Families (essentially a tax cut) and NZ Super fund.

Watkins resurrected the tired old fictional trope of Labour’s “first budget is all about playing to the wider masses to show it can be trusted with the chequebook”.

What was also missing was another crucial contributing factor to the so-called “decade of deficits” – a term first coined by former PM, John Key and National’s pollster, David Farrar, in October 2008.

The missing factor were the tax cuts of 2009 and 2010, which reduced government tax revenue by several billions of dollars. The 2010 cuts alone slashed tax revenue by an estimated $2 billion pa.

A Regulatory Impact Statement from Treasury, dated 9 December 2008, warned National;

“With a deteriorating global economic out look New Zealand is expecting weaker economic growth in the next few years, resulting in slower tax revenue growth and increased government expenditure.”

National borrowed billions to make up the shortfall – in essence funding taxcuts through offshore bankers.

So who is it that cannot be “trusted with the chequebook”?
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-Frank Macskasy

[citations, address, and phone number supplied]

 

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References

Fairfax:  Why Labour isn’t about to fall for the ‘spend more’ honey trap

Fairfax:  Tax cuts off as Govt fights recession

Kiwiblog:  PREFU – Ten years of deficits

Fairfax media:  Nats blame Labour for ‘decade of deficits’

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

Treasury: Regulatory Impact Statement – Changes to Personal Tax, the Research & Development Tax Credit and KiwiSaver

Additional

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

Previous related blogposts

That was Then, This is Now #19 – A “Decade of Deficits”

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This blogpost was first published on The Daily Blog on 10 May 2018.

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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.

[…]

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.

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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

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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

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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!

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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.

[…]

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…

[…]

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!

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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.”

 “I believe that an ongoing programme of personal tax cuts that delivers the sort of magnitude that we’ve had in the past is potentially possible.

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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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

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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.

[…]

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.

[…]

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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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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Then it was the turn of  Rape Crisis;

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

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

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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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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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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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Above image acknowledgment: Francis Owen/Lurch Left Memes

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The Mendacities of Mr Key #3: tax cuts

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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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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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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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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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Above image acknowledgment: Francis Owen

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When the Rich Whinge about paying tax

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

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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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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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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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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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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?

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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.”

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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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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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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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Source

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Yet more indirect tax rises were forthcoming;

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Source

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

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Source

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And hefty user-pays charges implemented and increased;

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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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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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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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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 Trust.  Key’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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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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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?

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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

Source

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Government Budgets

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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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

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

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

– See more at: http://thedailyblog.co.nz/2013/12/13/the-real-level-of-unemployment/#sthash.MTmhTjhH.dpuf

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Letter to the Editor: National squanders our super fund!

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Source

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FROM:     “f.macskasy”
SUBJECT: Letters to the editor
DATE:     Fri, 13 Dec 2013 13:46:03 +1300
TO:     Dominion Post <letters@dompost.co.nz>

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The Editor
Dominion Post

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The Commission for Financial Literacy and Retirement Income is calling for tax-free status for the NZ Superannuation Fund (aka “Cullen Fund”) set up by the previous Labour Government to fund baby boomer’ retirement.

Investment contributions were “suspended” by the incoming National Government in May 2009, costing us an estimated $40 billion in lost investment returns by 2040, according to investment analyst, Bernard Hickey.

Worse still, National has taken $3 billion in tax from the Superannuation Fund.

Government accounts have been in dire straits  since the 2009 and 2010 tax cuts, with at least $4 billion lost in revenue. This has forced National to borrow heavily from overseas and partial asset sales to fund the revenue short-fall.

All so the Nats could fund tax cuts (mostly for top income earners) we could ill afford.

Leeching $3 billion from the NZ Super Fund should be seen in the same light; scrambling by National to make up for the drop in tax revenue.

This is how National presents itself as a “prudent fiscal manager of the economy”; by making economic decisions for short-term benefit (for a select few) at the expense of long-term planning (for the majority).

As always, it will be up to our children to pay for this mess.

Frank Macskasy

(Address and phone number supplied)

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Previous related blogposts

National guts Kiwisaver

Authors of our own mis-fortune?

Regret at dumping compulsory super – only 37 years too late

References

Beehive: New Zealand Super Fund – fact sheet

Interest.co.nz: Bernard Hickey says the National Govt’s decision to suspend contributions to the NZ Super Fund will have cost about NZ$40 bln in lost investment returns by 2040

Radio NZ: Government urged to scrap tax on super fund

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= fs =

Two Tax Strikes against Dunne?

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First, there was the Carpark Tax.

That didn’t go down well…

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Acknowledgement: Government ditches controversial car park tax plan

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Strike one.

Then there was the “Talk Tax” on cellphone, ipads, smartphones, laptops, and  all manner of other gadgets. The business sector didn’t like that idea, either…

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Acknowledgement: TVNZ – Cellphone, laptop tax plan scrapped

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Strike two.

Next up, perhaps one of the meanest taxes ever…

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

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Made all the meaner because children cannot vote and therefore this is taxation without representation.

By contrast, the tax cuts of 2009 and 2010 gave the biggest cuts to the wealthiest in this country,

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The 2010 tax cuts alone gave Dear Leader an extra $291 extra per  week, on his old salary of $390,000 p.a. (see: $4b in tax cuts coming) – on the backs of school children doing paper-rounds and other part-time work, for pocket money, it could be said.

Key’s  salary has since increased to 411,510 – plus perks, allowances, superannuation, etc (see: Salaries payable under section 16 of Civil List Act 1979).

For Key, it’s apparently a “non-issue,

“A lot of people didn’t know they were entitled to them so they didn’t bother claiming. The amounts were fairly small and overall we have been trying to clean up the tax code.”

See:  Key rejects criticism of ‘paperboy tax’

I guess when you have $50 million stashed in bank accounts all over the place it’s fairly hard to identify with a kid earning $40 a week?

By what definition of fairness can we justify someone earning $390,000 a year getting an extra $291 a week – whilst paper boys and girls – who are paid a pittance anyway – are taxed for the few dollars they work for? Are we really that desperate as a nation? And then we wonder why our young people are buggering off to Australia and elsewhere?

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If there’s one single example of where our society has gone terribly wrong since 1984 – this, to me, is it.

It’s fairly apparent to everyone except the most sycophantic National supporter that the ’09 and ’10 taxcuts left a gaping hole in the government’s revenue. (see: Outlook slashes tax-take by $8b) Dunne’s pathetic attempts at raising additional taxes is simply a consequence of tax-cuts that were unaffordable three years ago – and remain unaffordable to this day.

On the issue of the “Paperboy/girl Tax”, I look forward to the business sector campaigning hard to scrap that, as they did with the “Carpark” and “Talk” taxes.

After all, the members of the Employers and Manufacturers Association have kids of their own.

Isn’t campaigning on behalf of your own children as important as a carpark?

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Additional

Key defends tax cuts in light of zero Budget (2 April 2012)

Key rejects criticism of ‘paperboy tax’ (25 May 2012)

Car park tax opposition cuts across cultural, class divide (19 March 2013)

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= fs =

Did National knowingly commit economic sabotage post-2008?

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By now, it has become fairly well known that National’s tax cuts in 2009 and 2010 were unaffordable and impacted disastrously on government revenue (and subsequent spending) in following years.

In 2008, National tempted voters with promises of “self funding” tax-cuts. (Though “self funding” was never very clearly explained.)

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

[…]

This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services.

Source: Economy – Tax Policy 2008

The pledge of  “no requirement to cut public services  ” was also one that was made (and subsequently broken in dramatic fashion).

In May 2008, Key was making bold statements  of  “meaningful”  tax cuts,  “north of $50“,

John Key…  said National would be looking at economic figures and what other promises Dr Cullen made in the budget on Thursday… But he was “very confident” National could deliver an ongoing programme of tax cuts, like that promised in 2005”.

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

Despite the growing black clouds of  a global downturn, Key was still optimistic. When questioned by Sue Eden of the NZ Herald whether National’s tax cuts programme of 2005 were still credible given uncertain economic circumstances, Dear Leader replied,

“Well, I think it is.”

See: IBID

By early August 2008, as United States mortgage-institutions Fannie Mae and Freddie Mac  were  sinking into a credit crisis, Key remained defiant in the face of looming recessionary forces,

National will fast track a second round of tax cuts and is likely to increase borrowing to pay for some of its spending promises, the party’s leader John Key says.

But Mr Key said the borrowing would be for new infrastructure projects rather than National’s quicker and larger tax cuts which would be “hermetically sealed” from the debt programme.

The admission on borrowing comes as National faces growing calls to explain how it will pay for its promises, which include the larger faster tax cuts, a $1.5 billion broadband plan and a new prison in its first term.

It has also promised to keep many of Labour’s big spending policies including Working for Families and interest free student loans.

Mr Key today said there would be “modest changes” to KiwiSaver.

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

How does one ” “hermetically seal” tax cuts  from the debt programme ” ?!

The ‘crunch’ came on 6 October 2008, when Treasury released a document known as the “PREFU” (Pre-Election Economic and Fiscal Update). This Treasury report analyses and discloses the fiscal and economic state of the nation, with short and medium-term outlooks, based on international and local trends.

The 2008 PREFU started with this dire warning,

The economic and fiscal outlook has deteriorated since the Budget Update

In the five months since the Budget Update was finalised, we have witnessed a number of significant domestic and international developments: in particular, the deepening of the international financial crisis, the slowing housing market, and growing pressure on households and businesses. These developments are key factors in our updated view of the economy and the government’s finances set out in this Pre-election Update.

We are now expecting weaker economic growth over the next few years, resulting in slower growth in tax revenue and higher government expenditure. Combined with increases in the costs of some existing policies, these factors lead to sustained operating balance deficits and higher debt-to-GDP ratios.

The economic outlook is weaker …

Imbalances have built up during nearly a decade of sustained growth, including inflation pressures, an overvalued housing market, high household debt and a large current account deficit, with implications for interest rates and the exchange rate. With the economy slowing, these imbalances are starting to unwind – as are imbalances in the global economy – but there is a long way to go.

See: PREFU 2008 – Executive Summary

The opening statement went on to state with unequivocal frankness,

The international financial crisis has deepened and is having an adverse impact on global economic growth. New Zealand is expected to feel the effects of the financial crisis principally through the tighter availability and increased costs of credit, but also through a fall in business and consumer confidence, falling asset values and lower demand and prices for our exports.

[…]

The weaker economic growth that we are forecasting is reflected in reductions in our tax revenue forecasts. Compared with the Budget Update, we expect tax revenue to be on average around $900 million lower for each of the next three years.

• The weak outlook for the household sector will have a direct impact through GST, which is forecast to grow by around 4% per annum over the next five years, compared with 7.5% over the six years to 2007.
• With firms’ margins under pressure and profitability low, underlying corporate income tax is forecast to decline by 3% in the 2009 June year, and growth is expected to be negligible in 2010 as accumulated tax losses offset profits.
• A relatively robust forecast for wages over the next few years helps to keep underlying growth in PAYE up at around 5% per annum.

The largest single change in government spending in the Pre-election Update is an increase in the expected costs of benefits. Compared with the Budget Update, benefit expenses are around $500 million per annum higher, reflecting both an increase in numbers of beneficiaries as a result of the slowing economy, and the impact of higher inflation on the costs of indexing benefits.

[…]

As a result of the various factors set out above, the government’s debt outlook deteriorates. This leads to higher debt servicing costs, which are forecast to be around $500 million per annum higher

See: IBID

Treasury continued – in considerable detail – to outline the gloomy prospects  for New Zealand’s fiscal and economic short-term and medium-term outlooks (see:  Fiscal Outlook),

In Risks and Scenarios, Treasury wrote,

Since the Budget Update, global developments have been more in line with the alternative scenario than the Budget forecast and global financial and economic conditions have worsened significantly. On the domestic front, finance companies have continued to face reduced debenture funding and more finance companies went into receivership or moratorium in the past three months. The speed and magnitude of the slowing in domestic demand has been more abrupt and greater than forecast in the Budget Update.

Reflecting these recent international and domestic developments, we have made significant downward revisions to our growth forecasts in this Update. However, the financial turmoil has intensified since the finalisation of our economic forecasts. As a result, we have seen the downside risks to our growth forecasts increase markedly, particularly in the years to March 2010 and 2011.

See: 2008 PREFU – Risks and Scenarios

Unlike his “lack of knowledge” over the GCSB monitoring of Kim Dotcom, or the Police report on John Banks, John Key cannot feign ignorance over the 2008 PREFU report,

“John Key has defended his party’s planned program of tax cuts, after Treasury numbers released today showed the economic outlook has deteriorated badly since the May budget. The numbers have seen Treasury reducing its revenue forecasts and increasing its predictions of costs such as benefits. Cash deficits – the bottom line after all infrastructure funding and payments to the New Zealand Superannuation Fund are made – is predicted to blow out from around $3 billion a year to around $6 billion a year.”

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

Especially when Bill English admitted his knowledge of the PREFU,

“The figures outlined in the Prefu are a bit worse than we expected, and we are currently digesting them. However, National is not content to run a decade of deficits.”

See: IBID

In an example of black-humoured irony, English went on to say,

“New Zealand can no longer afford Michael Cullen and Labour’s big-spending low-growth policies.”

See: IBID

But evidently New Zealand could afford National’s  “ big-tax-cutting low-growth policies“?

On 6 October 2008, Key reacted to the PREFU (proving he had full knowledge of it’s contents, and made this astounding comment when questioned about National’s planned tax cuts, at 0:40,

“REPORTER: What is your growth programme, does it include tax cuts?.”

“JOHN KEY: It certainly does include tax cuts. We have a programme of tax cuts.”

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See: Key reacts to [2008] PREFU figures

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Key’s comments following 0:40 seem equally bizarre, and at 2:28 admits that “… we can’t deliver anything other than, ‘yknow,   a legacy of deficits for New Zealand…” – and still continues to warble on about cutting taxes, including trying to justify “debt for future growth“.

The consequences were a $2 billion hole in government tax revenue (see:  Outlook slashes tax-take by $8b;   Govt’s 2010 tax cuts ‘costing $2 billion and counting’); budget deficits (see:  Budget deficit $1.3b worse);   increased borrowings (see:  Govt borrowing $380m a week); cuts to the State sector in terms of services and jobs (see:  Early childhood education subsidies cut; 10 August: Unhealthy Health Cuts, 2500 jobs cut, but only $20m saved); and surreptitious increases in government charges and taxation elsewhere (see:  Petrol price rises to balance books; Student loan repayments hiked, allowances restricted;  Prescription charges on the rise); and asset sales  (see: Govt says asset sales will cut debt).

The point of this blogpost is simple.

It’s not to look back, at the past…

… it is to look forward to the future.

When National makes Big Promises, be wary of the nature of said promises, and the underlying , invisible “hooks” contained within them.

Quite simply when the Nats offer you a “tax cut”, the first question that should pop into your head is not, “Oh goody, I wonder how much I’ll get!”

The first thought should instead be, “Uh oh, I wonder how much that’s going to cost me!”.

Because as sure as evolution made little green apples and the sun will rise tomorrow, the Nats care very little about your pay packet.

They care only about “rewarding hard work” [translation: more income for the rich] and “making the veconomy more competitive”  [translation:  implementing their neo-liberal agenda for their ideological crusade to turn this country into a Market-driven economy, away from an egalitarian society].

In the process, if they have to turn our country into a slow-rolling, economic train-wreck, then so be it.

They can always blame someone else,

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See video: Key blames Labour for his Govt’s wage gap failings

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Key even blames Labour for the  global recession !? (see @ 0:48)

In the meantime, did National recklessly  damage the New Zealand economy with unaffordable tax cuts, despite Key & Co being given ample warning by Treasury – simply to get elected in 2008?

Draw your own conclusions.

The evidence speaks for itself.

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Additional reading

The Atlantic: Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds (16 Sept 2012)

References

National Party: Economy – Tax Policy 2008

NZ Herald: National’s 2005 tax cut plans still credible – Key (20 May 2008)

NZ Herald: Nats to borrow for other spending – but not tax cuts (2 Aug 2008)

The Treasury:  Pre-election Economic and Fiscal Update 2008 (6 Oct 2008)

NZ Herald: $30b deficit won’t stop Nats tax cuts (6 Oct 2008)

BBC News: Bank shares fall despite bail-out (13 Oct 2008)

Bay of Plenty Times: John Key: We cannot afford KiwiSaver (11 May 2011)

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Johnny’s Report Card – National Standards Assessment – Growth

To Whom It May Concern; the following Report Card detail’s Johnny’s achievements over the last four years.

The following contrasts compare four years, ranging from the end of 2008 to the end of this year, 2012.

Whilst it is acknowledged that the Global Financial Crisis impacted harshly on our society and economy, it is also fair to say that National has had the benefits of starting out with a sound economy (surpluses, low unemployment, etc)  in 2008 and four years in office to make good on it’s election promises.

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Growth

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Recent history:

In the past, whenever National (or the right wing “Labour-ACT” government of the 1980s) came to power, the result was never very good,

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Source: Dunedin Star

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Source: Otago Daily Times

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Source: Otago Daily Times

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Source: Otago Daily Times

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The rhetoric:

“The National Party has an economic plan that will build the foundations for a better future.

* We will focus on lifting medium-term economic performance and managing taxpayers’ money effectively.

* We will be unrelenting in our quest to lift our economic growth rate and raise wage rates.

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

* We will invest in the infrastructure this country needs for productivity growth.

* We will be more careful with how we spend the cash in the public purse, monitoring not just the quantity but also the quality of government spending.

* We will concentrate on equipping young New Zealanders with the education they need for a 21st century global economy.

* We will reduce the burden of compliance and bureaucracy, and we will say goodbye to the blind ideology that locks the private sector out of too many parts of our economy.

And we will do all of this while improving the public services that Kiwis have a right to expect.  ” – John Key, 29 July 2008

See: 2008: A Fresh Start for New Zealand

” Growing the economy is the Government’s number one priority, and science and innovation have a key part to play in that growth.

Indeed, this Government has made science and innovation one of the six cornerstones of its economic growth agenda. We’ve done this because New Zealand needs an economic jolt. Our productivity and economic growth have been sluggish for decades and as a result we have slipped down the OECD’s ranking of national wealth per capita.

Our performance compared to other smaller advanced economies has been uninspiring at best. For example, in 1976 our per capita income was slightly ahead of Australia. It was nearly 20 percent greater than the OECD average.

We are now 20 percent behind the OECD average. Australia, by contrast, is still about 20 percent ahead.

Finland is another example of our relative decline. In 1979 our per capita income lines crossed – New Zealand going down and Finland going up. The Finns are now about 20 percent ahead of us.

So, how do we turn the situation around? ” – John Key, 1 July 2011

See: National Economic Development Forum

Present  reality:

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Full story

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Full story

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Full story

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Full story

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Two things would be fair to say,

1. National inherited an economy with low unemployment and net government debt at an all time low of 5.6% of New Zealand’s GDP, net. (Far from being fiscally profligate as National claims, Labour actually behaved more responsibly than National has done, as the information below clearly illustrates.)
2. The Global Financial Crisis was not an event of National’s making. (Though the ideology of corporate greed, profiteering, and minimal government oversight which contributed to the Crisis is most certainly one that National shares.)

As Treasury data shows, New Zealand’s net government debt situation worsened from 2008 to June of 2012,

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Source: Treasury – Financial Statemement of the Government of New Zealand

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Source: IBID

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Table 16 above opened with a net government debt of 5.6% – left by the outgoing Labour government.

It closed with 25% net government debt – a fourfold increase – courtesy of National’s “prudent fiscal management”.

As the Treasury document explained,

Net debt increases as a result of cash deficits and
declines as a result of cash surpluses. It also
fluctuates in line with valuation movements in the
underlying financial assets and liabilities of the Crown
and movements in the amounts of currency issued to
New Zealand banks.

Net debt increased this year, continuing the steady
increase since the global financial crisis (figure 11).
Net debt increased from last year primarily due to
additional borrowings over the year to meet the
residual cash deficit (refer table 17).

Source: IBID

In other words, National took in lower revenue – taxes – which  inevitably resulted in increased borrowings; slashing of State services and funding; increasing user pays for other state services;  mass redundancies of state sector workers, and impending partial state asset sales.

The Treasury document goes on to show how much revenue was lost between 2008 and 2012,

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Source: IBID

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A recent NZ Herald report has updated Treasury’s expections. The tax-take, GDP growth, and unemployment outlooks are not good,

A weaker economic outlook over the next four years has taken a bite of nearly $8 billion out of the Government’s forecast tax revenues for that period.

Nevertheless the Treasury is still forecasting a return to surplus, though only just, on schedule by 2015.

The forecasts in yesterday’s half-year economic and fiscal update are in line with the latest consensus forecasts, which means they are significantly weaker than in the Budget.

The growth track is lower by around 0.5 percentage points a year.

It reflects downwards revisions to expected growth among New Zealand’s trading partners, and a kiwi dollar expected to remain around present levels until the first half of 2014, so that net exports subtract from growth for the next couple of years.

Unemployment has been revised higher; it is 7.3 per cent now and still expected to be 5.6 per cent by March 2016.

See: Outlook slashes tax-take by $8b

The forecast rate of tepid growth is on top of low to negative growth in the last four years,

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Source: tradingeconomics.com

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So what caused the drop in government tax revenue? And why did the lower tax revenue impact on higher unemployment and lower domestic growth?

The answer, in part, is not hard to uncover, and the following reports tell the story of how National undermined (sabotaged?) our nation’s government accounts.

First, we were offered The Bribe,

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Full story

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Then we got the warning signs,

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Full story

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Full story

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Full story

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We were not exempt from the looming storm that was the coming Global Financial Crisis ,

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Full story

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National’s response?

The prudent step to take would have been to cancel the tax cuts as simply unaffordable.  (Labour’s Phil Goff generously promised to support National had it taken such a prudent measure. See: Labour would support deferral of tax cuts)

As a nation, we  would then maintain social services (education, housing, healthcare, justice system, early childhood education, superannuation, etc)  – or cut taxes. We could not have both. Not without even further massive borrowings from overseas.

National’s decision to persevere with their taxcuts beggered belief for those who understood the seriousness of the GFC and the recession we had fallen into,

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Full story

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The consequences of  National’s irresponsible cutting of taxation revenue was utterly predictable,

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Full story

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Full story

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Writing for the NZ Herald, Brian Fallow put the cost of taxcuts at $8 billion. (See:  Outlook slashes tax-take by $8b)

Only a fool (or devoted National supporter – the two are not mutually exclusive) could believe that we could give away billions in tax cuts without resorting to massive borrowings to cover the shortfall.

The result was a government deficit rising fourfold from 2008 to 2012, as the above Treasury stats clearly show.

National then desperately needed to balance the books. It scrimped and scrapped by cutting the state sector; raising taxes (gst, fuel tax, ACC levies, government charges, etc) elsewhere; closing tax exemptions for property investors; and cutting back on services (see: Student allowances a thing of the past for post-graduate students ).

Even paper delivery kids were not exempt from the grasp of this Scrooge-like ‘government’. See:  Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour)

It also desperately needed to proceed with it’s state asset sales.

A cynic with a conspiratorial ‘bent’ might suspect that National deliberately manufactured it’s own debt crisis so that it could justify the partial privatisation of Meridian, Genesis, Might River Power, Solid Energy, and Air New Zealand, to it’s corporate/investor/aspirationist constituent-base.

In doing so, not only was the door left open for their privatisation agenda – but the side-effects of tax cuts left National with few options and manouvering room for job creation policies.

With net government debt quadrupling in four years from $10.2 billion (2008)  to $50.6 billion (2012), and taxation revenue falling from $56.7 billion (2008) to  $55 billion (2012), their hands were seemingly “tied”.

Compounding matters,    National cut back state services and  fired thousands of state sector workers, resulting in a further drop in  expenditure, all of which  impacted harshly on the economy.

Whether Free Marketeers like it or not, the state is the #1 business generator in our economy and society. When it cuts spending, the flow-on effects on  other, down-stream businesses, is inescapable.

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Full story

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With higher income earners either saving their tax cuts or paying down debt, tax cuts failed to “fire” the economy as Little Leader said in 2009 and Dear Leader adamantly predicted in  2010,

“By taking firm, early and decisive action, the Government is managing the downturn to cushion the immediate impact on New Zealanders and to enhance future growth.” – Bill English, 28 May 2009

See: Budget 2009 – House goes into urgency

“We’ve cut all personal income tax rates, GST has increased to 15%, and we’ve boosted NZ Super, Working For Families, and benefit payments by 2.02% to compensate for the rise in GST.

Today’s changes are just one part of our comprehensive plan to grow the economy, create jobs, boost incomes, and raise living standards for all New Zealanders. The tax package improves incentives to work, and tilts the economy towards savings, investment, and exports.” – John Key, 1 Oct 2010

See: Tax cuts today

In May 2010, Key had even used the migration issue as justification to cut taxes for higher income earners, professionals, and others in top brackets,

“We can be envious about these things but without those people in our economy all the rest of us will either have less people paying tax or fundamentally less services that they provide.

They include doctors, entrepreneurs often, scientists, engineers, lawyers, accountants, school principals and nurses.

On Thursday you will see a deliberate attempt to make sure those people stay and put their skills to work here in our economy.” – John Key, 18 May 2010

See:  Key again defends tax cuts

BS. All of it is, BS.

None of it worked, of course. The economy not only failed to grow – it  stagnated or contracted (see:  Economic recovery stagnates – NZIER). And despite two tax  cuts, migration to Australia skyrocketed – ten thousand higher than under the previous Labour government’s last four years.  (see related blogpost:  Johnny’s Report Card – National Standards Assessment y/e 2012: migration)

Up until 2011, two of our most important  industries – manufacturing and construction – contracted, at a time when the Christchurch re-build should have been growing their turn-over and profitability. The downturn in manufacturing and construction had a flow-on effect on the  Wholesale Trade sector,

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Source: New Zealand in Profile: 2012 – Economy

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Other measures of the economy show no sign of improvement,

Bank profits back over $3 billion while economy stagnates (24 April 2012)

then “good news”,

Pickup in economic growth predicted (29 Aug 2012)

followed two months later by bad news,

Businesses gloomy about economic growth (9 Oct 2012)

Current Account Deficit Widens (19 Sept 2012)

 Trade deficit widens as dairy values fall (27 Nov 2012)

Terms of trade continue to drop (4 Dec 2012)

Govt deficit up as tax take dips (5 Dec 2012)

Deficit $169m wider than predictions (6 Dec 2012)

Growth forecast cut, debt seen higher (18 Dec 2012)

Current account gap narrows as trade balance shrinks (19 Dec 2012)

Outlook slashes tax-take by $8b (19 Dec2012)

Whichever way one looks at it, it’s a mess.

And it’s simply a bad joke for Key to reassure us,

“While I think we have to acknowledge that the last three years have been pretty tough with the Global Financial Crisis, on a relative basisNew Zealand’s been doing a better than a lot of other countries.” – John Key, 17 Nov 2011

See: Key and Goff Q&A: Creating jobs

Trying to suggest that we  are nowhere as bad off as other nations such as the US, Spain,  Greece, etc – so our current stagnating economy is somehow  acceptable – is sheer rubbish.

One might as well justify National’s poor performance and reckless decision-making by stating we are better off than Zimbabwe, Haiti, or Bangladesh,

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We should not be “worse off” than those nations – we headed into the Global Financial Crisis with relatively good economic indicators!

There is Always An Alternative!

A responsible government would have abandoned any prospect of taxcuts and prepared policies to keep people in work; off the unemployment queues;  paying taxes; and contributing to the economy.

Policies such as,

• Government procurement favouring local providers over imports from other nations. This would have kept companies such as Kiwirail from closing their Dunedin Hillside workshops, with the loss of over 150 jobs (see:  Dunedin workshop sale will see job losses – Kiwirail)
• Government intervention in the value of the New Zealand dollar. The high dollar has destroyed some 40,000 manufacturing/exporting jobs in this country – swelling the ranks of the unemployed to 175,000 (see: Unemployment up to 7.3pc – a 13 year high, Job losses blamed on high NZ dollar: more forecast, Rakon a victim of high dollar – union, etc). Other OECD nations have thrown away the mopnetarist rule book and engaged in quantitative easing to preserve their manufacturing base. The choice is either that – or losing more jobs and increasing expenditure on unproductive social welfare.
• Government implementating a mass construction programme of 10,000 new state houses. (see previous blogpost:  Can we do it? Bloody oath we can!)

With Option #3, National appears to have missed the obvious.

Injecting several billion into a crash-programme to build ten thousand homes for New Zealanders, who are currently struggling to buy their own houses, makes sense.

The Christchurch re-build has proven this to be the case, as the NZ Herald reported on 20 December 2012,

The economy grew at an annual pace of 2.5 per cent, and was 2 per cent higher than the same quarter a year earlier. Revisions to previous quarters showed New Zealand dipped back into recession in the second half of 2010, with two 0.3 per cent contractions in each quarter.

 The New Zealand dollar dropped to 83.33 US cents after the figures were released, from 83.60 cents immediately before.

Construction kept the economy ticking over with a 4.5 per cent expansion, contributing 0.2 of percentage point to overall GDP. Electricity, gas, water and waste services grew 4.4 per cent in the quarter, contributing 0.1 of a percentage point in growth to GDP, underpinned by an increase in hydroelectric generation.

“Residential and non-residential building activities were both up strongly this quarter, and both were boosted by Canterbury,” Statistics NZ said in its report. “The upper North Island also contributed to the growth in residential building activity.”

The Canterbury rebuild, which is expected to top $30 billion, is widely seen as the saving grace for an economy that has struggled to recover from its deepest recession in two decades, and has been getting some help from a resurgent property market in Auckland in recent months.

See: Economy grows 0.2pc – saved by construction

Statistics NZ national accounts manager Rachael Milicich didn’t split hairs. She bluntly stated,

 “The growth in the latest quarter was driven by construction.”

See: Economic activity up 0.2 percent

As for the tax cuts stimulating the economy with extra spending – you can forget that pipedream. According to Statistics NZ,

Household consumption expenditure, which measures the volume of spending by New Zealand households, was flat this quarter (0.0 percent).

See: IBID

National not only bought the 2008 election with promises of unsustainable, unaffordable tax cuts – Key, English, Joyce, et al, squandered an opportunity to keep 70,000 New Zealanders in paid employment (see: Employment graph, 2008-2012).

It was all so unnecessary.

Addendum

In March 2008, the then Finance Minister, Michael Cullen said,

“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.”

See: [Labour]Government will not borrow for tax cuts

According to Treasury, the current net government debt as at 30 June 2012  stands at… 24.8% of GDP – just shy of 25%,

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Source: Treasury – Financial Statemement of the Government of New Zealand

Cullen called it 100%.

It’s a shame that 1,053,398 voters couldn’t look past their own selfishness, and the lure of cash dangled before them, by a Party that was hell-bent on it’s own agenda to win power at any cost.

For New Zealand, that cost measured $50 billion and 175,000 unemployed.

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= fs =

John Key: liar, liar, pants on nuclear fire!!!

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In early 2010…

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“Yeah, National is not going to be raising GST. National wants to cut taxes, not raise taxes…What I’m saying is if we do a half decent job as a government at growing our economy I’m confident that won’t be happening and that’s not on our agenda.”

Source

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December 2012,

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Full story

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Interesting…

After two tax cuts in 2009 and 2010, National is now having to raise taxes in other areas to make up for the billions it has lost in revenue.

English admitted as such in this Fairfax Media story,

This morning Gerry Brownlee announced plans to increase excise tax on petrol by 3 cents a litre, in each of the next three years. This would raise Government income by up to $300m a year.

While English said the increase would have an impact on the Government’s accounts, he denied it was done to ensure the forecasts showed a surplus.

“Without the changes, we would have fallen short of the surplus track.”

Today’s announcement also saw forecasts that by 2015-16 the New Zealand Debt Management Office would borrow $6.5b more than it forecast six months ago.

“That is a concern,’’ English told reporters.

See: Growth forecast cut, debt seen higher

Yeah, I’ll bet “that’s a concern“.

This is in stark contrast to warnings we were given in mid-2008,

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Full story

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Well, we got our tax cuts. (Mostly for the top 1%, as usual.) And National borrowed hand-over-fist to make up the revenue shortfall.

It was not enough.

Which is why National is partially selling off our state power companies, Solid Energy, and Air New Zealand.

But it’s still not enough.

So the Nats will be slyly raising taxes and government charges (eg, road user charges, medicines, etc). Even children delivering newspapers were targetted.

All to re-coup the lolly-scramble they initiated in 2009 and 2010.

This, however, does not surprise me.  Since the Muldoon Era, I have realised that National’s so-called reputation for being “prudent fiscal managers” is a myth. Most likely perpetrated and perpetuated by National’s taxpayer funded spin doctors.

National is no more “fiscally prudent” than a shopaholic who justifies his/her spend-up by explaining that  ” I saved heaps – it was all on “Sale” – And I put it on the Card !!”

When Key and his cronies promised us tax cuts in 2008, it was well into the Global Financial Crisis (see: Blog Timeline – specifically Year 2008). The Nats knew full well that tax cuts were unaffordable.

Michael Cullen tried to warn the country.

But 1,053,398 voters in 2008 took the bribe and thought nothing about who or how we would pay for National’s promises.

Well the answer is blindingly obvious; we are paying for it.

And now we’ll be paying for it every time we fill up at the petrol stations.

How happy are National voters now, I wonder?

Silly buggers – shafted by the Party they voted for!

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Acknowledgement

Gordon Campbell: On last night’s debate between John Key and Phil Goff

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= fs =

Tax cuts and jobs – how are they working out so far, my fellow New Zealanders?

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Setting the scene

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The Rhetoric…

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

National Party: Tax Policy 2008

The Reality…

“The public service has slashed 555 jobs in the past year and is expected to lose almost 400 more by June 2014, the government has revealed.”

Fairfax Media: 555 jobs gone from public sector

“Treasury today published the Government’s financial statements for the 10 months ended April 30, which showed the debt mountain had grown to $71.6b.”

Fairfax Media: Government debt rises to $71.6 billion

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The Rhetoric…

“In the longer term, our tax package encourages people to invest in their own skills and make best use of their abilities, because they get to keep more of any higher wages they earn. It encourages them to look for and to take up better and higher-paying jobs that make more use of their skills.”

National Party: 2008: Personal Tax

The Reality…

” Thousands of New Zealanders – including many disillusioned immigrants – are looking for new jobs and new lives in Australia…

… And, judging by the long queues for the $15 event, it seems many of the employers will have no problem finding takers among job seekers who say they are fed up with New Zealand and believe the lifestyle, pay and opportunities are far better across the Tasman.”

NZ Herald: Fed-up Kiwis head to Oz en masse

” The unemployment rate rose half a percentage point to 7.3 per cent in the September quarter, the highest level since June 1999, according to Statistics New Zealand’s household labour force survey. “

NZ Herald: Unemployment up to 7.3pc – a 13 year high

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Consequences

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On 1 October 2010, as National implemented it’s second round of tax cuts, John Key made this statement,

“Our changes to the tax system are about:

• Helping hardworking families get ahead
• Boosting growth to create jobs and lift incomes
• Encouraging savings and investment
• Making the tax rules fairer for all New Zealanders.

Many of you have told me that you are worried about the increasing cost of living. That’s why the tax changes are so important.

From today, the average family will be about $25 a week better off, even after the increase in GST. The average earner will be about $15 a week better off. A retired couple receiving only NZ Super will be about $11 a week better off.

National was elected to secure a brighter future for New Zealanders and we are delivering on our promises.”

See: National Party: Special Edition – Tax cuts today

It is a common theme amongst the New Right and neo-liberal dogma that cutting taxes equates to more jobs. The idea is that with more money in people’s pockets; they spend more; consumption rises; industry has to produce more; and subsequently hires more staff.

That’s a lot of assumptions to make. As John Key, Bill English, and other National ministers stated, many people used their tax cuts to save and/or pay off debt,

“One of the things we are trying to do is lift the national savings rate. When you lift the consumption taxes and lower personal taxes, you encourage people to save. That’s definitely happening, we’ve got a positive savings rate in New Zealand now.” – John Key, 2 April 2012

See: Key defends tax cuts in light of zero Budget

“And I think it is going to keep dropping. Kiwis have got the message that debt is a bad thing” – but they had been convinced about the merits of saving more. People do want to save and they know there is no free lunch.” – Bill English, 14 March 2012

See: Debt being paid off, but savings not growing

And even if people do spend more, there is no guarantee that businesses will hire more staff. Much of our consumer goods now originates from overseas, and what we spend here in NZ probably has little effect with overseas manufacturers.

Even locally, there is certainly no guarantee that an extra $15 or $20 in taxcuts will result in more jobs. Especially when gst, fuel, electricity,  and government charges have risen to eat up tax cuts for low and medium paid workers.

” New Zealand finance bosses are feeling good about the economic recovery, but research shows that optimism doesn’t extend to hiring new staff.

Global finance and accounting firm Robert Half’s survey of 200 chief financial officers and finance directors found 79 per cent were confident about the prospects of national growth in 2012.

Those who thought their own company would pick up speed in the year ahead made up an even higher proportion, at 87 per cent.

However, the rise in confidence did not translate to more jobs – just 13 per cent planned to take on new finance and accounting staff. “

See: Confidence up, but jobs still not a priority

So John Key’s hopelessly optimistic vision of   “boosting growth to create jobs” has become a distant dream, based on -?

• Naive faith in a discredited “free market” dogma?
• Helping out his rich mates?
• A misguided belief that creating jobs could be easily done at the stroke of a pen?
• Free Market fairies and Employment angels?!
• All of the above?

To make the picture complete, I present for the reader’s interest this graph, correlating the ’09 and ’10 tax cuts, with unemployment levels,

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Source

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The graph above vividly illustrates the fallacy linking tax cuts to job creation.

Indeed, after two taxcuts, this country has little to show for it except slashed state services; thousands of state sector workers sacked; and having to borrow billions more from overseas to make up for the shortfall in the tax-take.

The closure of two schools for disabled children, Salisbury Residential School in Nelson and McKenzie Residential School in Christchurch, is perhaps the most tragic face of National’s harsh policies.  When we cut taxes, we cut essential state services, there is no other option.

National supporters and low-information voters may hold cherished beliefs  that cutting taxes are a good thing – until they themselves, or a family member,  requires a state service that has been wound back, or eliminated altogether.

Whilst most of us understand that cutting taxes does not lead automatically to the Holy Grail of  more jobs, our Dear Leader seemed stunned by the shock rise in unemployment,

“I’m very surprised with the numbers I’ve seen this morning, goodness knows what the next one will look like.”

See:  Key ‘surprised’ by high unemployment rate

Oh goodness, Dear Leader. “Surprised”, were we?

How can he have been surprised when unemployment has been rising since January, when it was at 6.4%?!

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Source

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Was he not paying attention – much like his briefing at GCSB offices when Kim Dotcom’s arrest was discussed?

Mr Key really needs to bring his mind back from the golf courses of Planet Key.

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Postscript

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Speaking from Japan (where it’s probably the safest place for him, right about now) John Key dismissed ideas of investing in job creation policies, saying,

 “It would be a dangerous precedence for us to start saying we are going to support a particular industry over another where there’s change. If you want to roll that all the way back we’d still be producing cars in New Zealand and that probably wouldn’t be in New Zealand’s best interests.”

See: No tax break plans to keep jobs in NZ – Key

Key is happy to throw  tax breaks at the highest income earners in this country – but thinks that tax breaks for preserving jobs “wouldn’t be in New Zealand’s best interests“?!?!

And let’s not forget the generous tax breaks he gave to Warner Bros – a multi-billion dollar corporation – as a ‘sweetener’ to keep “The Hobbit” in New Zealand (when there was in reality no risk of production going overseas, according to Peter Jackson).

This man may have been raised in a state house, by a solo-mum, but it appears that he has lost all perspective. His fitness to be Prime Minister has to be seriously questioned.

Only six months earlier, Key was reported in the Dominion Post thusly,

“The number of unemployed people increased 6.1 per cent to 160,000 but the labour force participation rate also rose, by 0.6 points to 68.8 per cent.

Key said the unemployment rate was “a very weird one at the moment”.

About 9000 jobs had been created and the Government was on track to create 170,000 over four years, he said.” – Dominion Post, 7 May 2012

See: Key – “Europe shows zero Budget wisdom”

Deluded? Make up your mind after  he went on to say the following (Warning: Contains Crazyiness),

“The number of people looking for work or in work is virtually a record in New Zealand, the second highest rate ever. What that shows you is that New Zealanders are more confident the economy is coming right and actually bothering to look for work. I know it sounds crazy.” – John Key, 7 May 2012

See: Ibid

Well, yes; crazy.

Only John Key could be so utterly disingenuous as to laud rising unemployment as ” New Zealanders are more confident the economy “.

Batshit crazy, actually.

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Sources

Fairfax Media: Key defends tax cuts in light of zero Budget

National Party: Special Edition: Tax cuts today

Radio NZ: Tax breaks to save jobs ‘a dangerous precedent’

TV3: Opinion – Is our economy collapsing?

Sh*t to p*ss you off

TV3: NBR Rich List 2011 – NZ’s wealthy doing just fine

NZ Herald: We’re doing all right, says English, despite GDP slowdown

NZ Herald: Fed-up Kiwis head to Oz en masse

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= fs =

The betrayal of our young people

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In 2007…

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“Today, in the suburb where I grew up, I want to talk about what I consider to be an important part of The Kiwi Way. I want to talk about opportunity, and hope, and how we can bring these to some of the most struggling families and communities in New Zealand.

Part of The Kiwi Way is a belief in opportunity and in giving people a fair go.

As New Zealanders, we have grown up to believe in and cherish an egalitarian society. We like to think that our children’s futures will be determined by their abilities, their motivation and their hard work. They will not be dictated by the size of their parent’s bank balance or the suburb they were born in.

We want all kids to have a genuine opportunity to use their talents and to get rewarded for their efforts. That’s The Kiwi Way, and I believe in it. After all, I was one of the many kids who benefited from it…

… You might ask “where will the money come from?”

The fact is we are already spending millions of dollars for Wellington bureaucrats to write strategies and to dream up and run their own schemes. I want more of those dollars spent on programmes that work, regardless of who thinks them up and who runs them.”

– John Key, 30 January 2007

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Unemployment rate December 2007:

77,000 (3.4%)

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In 2008…

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“The National Party has an economic plan that will build the foundations for a better future.

• We will focus on lifting medium-term economic performance and managing taxpayers’ money effectively.
• We will be unrelenting in our quest to lift our economic growth rate and raise wage rates.
• We will cut taxes, not just in election year, but in a regular programme of ongoing tax cuts.
• We will invest in the infrastructure this country needs for productivity growth.
• We will be more careful with how we spend the cash in the public purse, monitoring not just the quantity but also the quality of government spending.
• We will concentrate on equipping young New Zealanders with the education they need for a 21st century global economy.
• We will reduce the burden of compliance and bureaucracy, and we will say goodbye to the blind ideology that locks the private sector out of too many parts of our economy.
• And we will do all of this while improving the public services that Kiwis have a right to expect.  “

– John Key, 29 January 2008

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In 2010…

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“90-Day Trial Period extended to all employers

The 90-day trial period is to be extended to enable all employers and new employees to have the chance to benefit from it, says Minister of Labour Kate Wilkinson.

The extension is among planned changes to the Employment Relations Act 2000 that Prime Minister John Key announced today in a speech to the National Party Conference.

“The Government is focused on growing a stronger economy and creating more jobs for New Zealand families.”

“There are a lot of people looking for work and the changes announced today will help boost employer confidence and encourage them to take on more staff….”

… “Trial periods were introduced to encourage employers to take on new staff and I’m pleased to see this is occurring”.”

– Kate Wilkinson, Minister of Labour, 18 July, 2010

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In 2012…

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Household Labour Force Survey: June 2012 quarter

Unemployment: 162,000 (6.8%)

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“New youth pay rates kicking in

The Government will re-introduce a a youth pay rate which will see 16-to-19-year-olds making a minimum $10.80 per hour.

The new pay rate, to be called the ‘starting-out wage’, will not be compulsory but 40,000 teens will be eligible.

It will kicks in on April 1 next year and the Government estimates it will create up to 2000 youth jobs in the first two years.

The starting-out wage will be set at 80 per cent of the adult minimum wage, which is currently $13.50 per hour.

It will apply for six months after starting with a new employer. The move was National Party policy ahead of the election last November.”

– Dominion Post, 9 Oct 2012

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The above facts and stats tell a grim story.

The prologue to this story are the high expectations which John Key presented to the people of New Zealand in 2007 and 2008.

In 2007, Key spoke of  “opportunity, and hope, and how we can bring these to some of the most struggling families and communities in New Zealand “.

In 2008, Key pledged that  “we will be unrelenting in our quest to lift our economic growth rate and raise wage rates.”

Four years later;

• unemployment is on the rise again,
• the 90 Trial Employment Period has failed to generate new jobs,
• National’s promise of 170,000 new jobs – made at the election last year – has failed to kick-start,
• the exodus to Australia is increasing, with a net loss of almost 40,000 people over the past year,
• thousands of redundancies have added to our unemployment

National’s latest ‘offering’? To cut the minimum wage for 16 to 19 year olds.

The logic of this policy – planned to start on 1 April 2013 – defies comprehension. In fact, the only way it can be understood is that National is utterly desperate.

New employment figures are due out on 4 November from Statistics NZ, and this blogger predicts that unemployment will rise from 6.8% (currently) to 6.9% or even 7%.

Quite simply, none of National’s policies have worked.

Even Key’s promise to raise wages has been an abject failure, sending thousands of kiwis to Australia and further afield, in search of jobs.

National’s plan to cut the wages of young New Zealanders is similar to their cynical ploy to depict welfare beneficiaries as lazy, drug-users, criminals, etc.

Instead, they are targetting 16 and 17 year olds – who have no vote – and have no voice in Parliament.

And they are targetting 18 and 19 year olds – who are adult enough to drink, get married, and go to fight in wars overseas – but will not be paid an adult’s wage.

National claims that the new youth rates will create 2,000 new jobs. Aside from mocking this figure as a gigantic step down from the 170,000 “new jobs” promised last year – it is more likely that those 2,000 jobs will simply displace older workers.

In doing so, the employment of young people on lower pay will simply mean,

1. Less money spent by young people on services and consumer goods,
2. Young people unable to support themselves fully
3. A new motivation to send more New Zealanders overseas
4. New Zealand becoming a low wage economy of the South Pacific

How can a young New Zealander survive on $432 a week – less tax?!

It wasn’t too long ago that Bill English admitted on TVNZ’s Q+A, on 6 November 2011,  that it was almost impossible to live on the full minimum wage ($13.50/hr),

“GUYON:  Okay, can we move backwards in people’s working lives from retirement to work and to wages?  Mr English, is $13 an hour enough to live on? 

BILL:  People can live on that for a short time, and that’s why it’s important that they have a sense of opportunity.  It’s like being on a benefit.

GUYON:  What do you mean for a short time?

BILL:  Well, a long time on the minimum wage is pretty damn tough, although our families get Working for Families and guaranteed family income, so families are in a reasonable position.” Source

If it’s “ pretty damn tough ” to live on $13 or $13.50 an hour – what on Earth must it be like to try to survive on $10.80 per hour?

And how does our smile & wave (and forgetful) Dear Leader reconcile slashing the minimum wage by his promises to raise wages?

Specifically, these promises,

“We will be unrelenting in our quest to lift our economic growth rate and raise wage rates.” – John Key, 29 January 2008

“We want to make New Zealand an attractive place for our children and grandchildren to live – including those who are currently living in Australia, the UK, or elsewhere. To stem that flow so we must ensure Kiwis can receive competitive after-tax wages in New Zealand.”  – John Key, 6 September 2008

“We will also continue our work to increase the incomes New Zealanders earn. That is a fundamental objective of our plan to build a stronger economy.” – John Key, 8 February 2011

“The driving goal of my Government is to build a more competitive and internationally-focused economy with less debt, more jobs and higher incomes.” – John Key, 21 December 2011

By now, more and more New Zealanders are waking up to one simple reality; National cannot lead this country to prosperity or anything remotely resembling it. Their policies for growth seem predicated on,

• cutting wages
• asset sales
• bullying and demonising beneficiaries
• planning dangerous and unsound deep-sea drilling of the East Coast of the Nth Island
• mining in conservation lands

It is the height of desperation and bloody-mindedness that National’s major policy of job-creation relies on cutting wages as some kind of “bribe” for employers.

It is the depth of stupidity that will see young people on $10.80 displacing older workers, as employers cut costs in order to maximise their profits – especially as consumer spending is dropping. (See: Electronic card spending drops in September)

It is this sense of sheer miserly selfishness that resulted in,

• tax cuts in 2009 and 2010 which benefitted the richest in this country
• abolishing tax credits for children, so they were now taxed on their megre earnings from jobs such as paper-delivery

Is this, then, an act of desperation from John Key and his inept “government”?

You better believe it is. And things are about to get a whole lot worse as National turns this country into a low-wage economy, making us the ‘Mexico’ of the South Pacific.

My message to New Zealand is two-fold;

1.

Voters: if you want more of this incompetant government that takes money from our young people, whilst cutting taxes for the richest  – vote National.

For those foolish people who vote National: enjoy your life here in New Zealand. Do not follow us to Australia.

2.

Labour Party: pull your finger out. It is high time you started firing on all cylinders and presented this country with an alternative vision and road.

Now’s good.

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Additional

Radio NZ: Listen to report on Checkpoint

Radio NZ: Listen to Checkpoint interview with Phil O’Reilly (Business NZ)

Radio NZ: Listen to Peter Conway on Checkpoint (CTU)

Radio NZ: New teenage workers’ pay rate set

Fairfax media: New youth pay rates kicking in

Fairfax media: Division over ‘starter’ wage

Other Blogs

The Jackal: National determined to increase exodus

No Right Turn: The return of youth rates

 

 

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= fs =

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

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Full story

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Kudos to Human Rights Commissioner,  Dr Judy McGregor, for getting out of her office  to  work  ‘undercover’ in a residential aged care hospital. She discovered, first hand, the incredible hard work that rest home care-workers do – for the obscenely pitiful sum of $13.61 – caring for our elderly parents, grandparents, other family members, spouses, and friends.

The media report referred to,

” Although there were hoists to pull people from beds, there was still a lot of heavy lifting, and she was constantly worried she would hurt or drop someone.   ” – Ibid

This blogger is aware of the risks to resthome workers from heavy lifting. I am aware of one young woman who was a worker for Presbyterian Support Services, in the late 1990s. She damaged her back and went on  ACC for rehabilitation. Within a few months, she had lost her job at PSS;  ACC used one of their corporate medical specialists in Auckland to “re-assess” her; and she was ‘transferred’ to WINZ and put on to a sickness benefit. No further rehab – she was now a beneficiary and someone elses’ problem.

New Zealanders should be very worried about the poor pay and support given to resthome careworkers.

We are all aging.  A growing number of us will end up in rest homes – to be cared for by these low-paid workers. And we’ve been lucky so far in that resthome workers are deeply dedicated to their clients. As Dr McGregor said,

” The complexity of the job was actually a surprise for me. It’s quite physical work, and it’s emotionally draining because you are obliged to give of yourself to other people.   Saint-like women do it every day so that older New Zealanders can have a quality of life… At the end of the day, carers are being paid less than the minimum wage for work that is grossly undervalued. “

The question we should be asking ourselves is; how much longer can we rely on the good will of these workers?

All New Zealand workers are getting older – and this includes those rest home workers currently caring for the aged and infirm. The number of workers paying taxes to support retirees will be dropping from now onwards  (a fact which National continues to ignore),

” At present, there are about 18 elderly people (i.e., 65 years and over) per 100 people of ‘working age’ (i.e., 15-64 years). By 2051, this ratio is predicted to increase to 43 per 100. ” – Source

Which means that as we move closer to the middle of this century, there will be fewer and fewer people in the workforce. This will put pressure on labour demand. That will result in pressure on wages. That  will result in  a labour shortage, as we saw in the early 2000s, during the previous Labour government.

As we Baby Boomers and Gen Yers reach retirement – who will be caring for us? Who will be wiping our chins and butts?

CTU spokeswoman Eileen Brown said that pay and work conditions had been a concern since the 1990s, and had continued to worsen. She’s right,

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When this issue was presented to Dear Leader, he leapt into instant, immediate, action,

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Full Story

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As Key said,

” It’s one of those things we’d love to do if we had the cash. As the country moves back to surplus it’s one of the areas we can look at but I think most people would accept this isn’t the time we have lots of extra cash.

“You could certainly change the proportion of where you spend money in health. We spend about $14.5 billion in the overall health sector.

“What’s going to go to pay the increase in this area? If you said all of the increase is going to go into this area, that would be roughly $600m over the forecast period which is four years… So that would have left us $1bn for other things.

“We put the money into cancer care and nursing and various other things. On balance, we think we got that about right. “

No, Mr Key, you did not “get this about right”.

How can you have “got it about right”, Mr Key,  when careworkers for our aged and infirm are paid rates that have been thoroughly condemned, by Dr McGregor, as  ” a form of modern-day slavery “?

It is interesting that John Key complains about a lack of funds,

” It’s one of those things we’d love to do if we had the cash. As the country moves back to surplus it’s one of the areas we can look at but I think most people would accept this isn’t the time we have lots of extra cash. “

Perhaps National would not have to wait until “ the country moves back to surplus ” – had they not cut taxes in 2009 nand 2010.

The 2009 tax cuts cost New Zealand $1 billion in lost revenue – there was no corresponding rise in GST,

” New Zealand households will get a billion-dollar-a-year boost from tax cuts which take effect this week, Finance Minister Bill English and Revenue Minister Peter Dunne said today. “

See:  Government delivers April 1 tax cuts, SME changes

Despite a rise a GST, the 2010 tax cuts  resulted in a $1.6 billion to $2.2 billion drop in taxation revenue.

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

That’s roughly $3 billion in lost revenue. Which would have been ample cash to even double the wage rate for careworkers.

The  first round of tax cuts on 1 April 2009 defies any logic. Especially when one considers that Treasury was already predicting a massive Budget blow-out and deficit as the global financial crisis and recession impacted on our own economy. The looming deficit was already known, a month before,

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Full story

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Even the Opposition Labour party was supportive of a more rational, prudent fiscal approach,

” Labour has recently said it would support the government if it deferred the April tax cuts because of the rapid deterioration of the global economy. Prime Minister John Key has said the cuts will go ahead. ” – Ibid

Madmen were in control of the country’s treasury, and were hell-bent of spraying tax-dollars around,  as if we were still in the booming mid-2000s.

Unfortunately, three years later, the tax-cut revellry was over; Treasury was empty; and we are living the consequences of the ‘Mother of All Fiscal Hangovers‘, owing billions in debt. (As an aside – it’s crazy how so  many New Zealanders still harbour delusions of National’s “prudent fiscal management”.)

Little wonder that John Key is adamant that we don’t have the cash to raise the wages of our lowest paid healthcare/resthome workers. He’s telling the truth.

Because Dear Leader and National ‘partied like drunken sailors’ and frittered $3 billion away in an orgy of profligate tax cuts.

That is why rest home workers are struggling to survive on $13.61 an hour.

I wonder… who’s going to look after us when we retire?

Because as more workers retire, and the labour market shrinks, we are  faced with only two stark choices,

1. Reverse the taxcuts and/or User Pays to pay for rest home workers in the coming decades,
2. Or learn to wipe your own chins and butts.

It’s our call.

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Postscript

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Mainstream Media Reports

Resthome spy hails saint-like workers

PM: No money for aged care workers

MPs get pay rise package of $7000

Related blogposts

1 March – No Rest for Striking Workers!

No Rest for the Wicked

References

Facing an Ageing Workforce: Information for Public Service HR Managers

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Is this where I insert, “I told you so, NZ!”?

In the last couple of years,  this blogger has been pounding away, wearing out one keyboard after another; shooing cats of piles of documents; drinking enough coffee to deny me sleep for the rest of the decade…

To make a point.

By early 2008, recession was looming following a banking crisis that started in the US,

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John Key’s history in international finance would have alerted him immediatly of the looming crisis. It was irresponsible of him to campaign on tax cuts when he must have known they were unachievable, as New Zealand’s economy began to slump.

To point out the blindingly obvious:  New Zealanders in 2008 voted tax cuts for themselves that we could ill-afford as a nation. We were warned, even as far back as 2008,

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No one who voted for National in 2008 can genuinely claim ignorance – we were warned. News of the building crisis and recession filled the media. New Zealanders’ greed for money simply outstripped their common sense,

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We should have taken note when John Key “assured” us,

“Our tax policy is therefore one of responsible reform…  We have ensured that our package  is appropriate for the current economic and fiscal conditions… This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services… National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.’ “ – National Party: Tax Policy

Yeah, right.

Despite all the media reports; despite all the warnings; despite all the criticisms that National’s programme of tax cuts was unaffordable, on 8 November 2008,  1,053,398 New Zealanders voted for National.

As a result of cutting taxes in April 2009 and October 2010, government revenue dropped. The supposedly “fiscally neutral “tax-switch” wasn’t so much a “switch” as a parlour-trick. It wasn’t our money that John Key was giving back to us – it was money borrowed from overseas.

The first tax cuts kicked in on 1 April 2009. That was followed by this media report,

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The second round of tax cuts took effect on 1 October 2010. Predictably, that was followed by this media report, eight months later,

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Yesterday, the NZ Herald  published this piece penned by Bernard Hickey. It wasn’t just highly critical of the National  – it accused the John Key’s government of;

• being fiscally irresponsible
• enacting policies designed to please its wealthy backers
• borrowing money overseas, to fund taxcuts
• economic treason
• and generational selfishness

Bernard Hickey did not mince his words,

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Hickey went on to state,

“The charts reveal the results of the cut in the income tax rate from 39 to 33 cents, which was in theory partly paid for by an increase in the GST rate from 12.5 to 15 per cent. They also reveal a massive reversal in a decade-long trend of improvement in New Zealand’s public debt position.

Our tax-to-GDP ratio has crashed from almost 34 per cent in late 2008 to 29 per cent last year, which means yet more borrowing on the horizon.

At the same time, the tax from individual incomes has fallen from around 32 per cent to around 24 per cent.

This is a direct result of the cut in the top personal tax rate and consumers’ shift to spending less and saving more. This means the higher GST rate is not collecting the revenue expected.

Meanwhile, interest-free student loans and Working For Families are deepening budget deficits. That is being paid for with increased Government borrowing to the tune of 15 per cent of GDP.

A collapse in the corporate tax take is only partly responsible and is largely due to the recession rather than any change in policy. It is now rebounding but the tax-to-GDP ratio is worsening.

This is unsustainable without an immediate and extended surge in economic growth, which few expect.

Voters will have to repay this debt in decades to come. Why are they not revolting at this national act of selfishness?” – Ibid

To illustrate his point, Hickey charted New Zealand’s economic progress (or lack, thereof),

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Hickey condemns the borrowing-funded tax cuts by calling it for what it is: inter-generational theft. It is a massive debt that will have to be repaid by loading that debt onto future generations of taxpayers.

Like hell !!

Many of the next generation won’t have a bar of paying of their parents’ debt. They’ve already decided to take the only logical step,

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Bernard Hickey, and many other political, economic, and social commentators have highlighted the bad decisions that voters continually make. Unsurprisingly, we all like tax cuts – who wouldn’t want more money to spend on nice, new, shiny things.

Voting for wealth is not enough to make us wealthy. Especially if, at the same time, we expect all the nice things that a modern social democracy has to offer; free education; free healthcare; good roads and public transport; a pension at retirement; and lots of other state services funded by – taxation.

Well and truly, we have shot ourselves in the foot. We voted for more wealth, through taxcuts, and comprehensive social services – and we’ve ended up with neither.

And we have no one to blame but ourselves. We did this; 1,053,398 New Zealanders voted for it.

Here’s an idea: every single person who voted for National in 2008 and 2011 should be sent an invoice for their share of our country’s debt. Wouldn’t that be a lovely prospect?

Meanwhile, the final word goes to National’s Finance Minister, Bill English,

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A few previous blogposts on tax cuts

A warning from a very, very rich man (17 August 2011)

Greed is good? (28 August 2011)

Blood from a stone? (27 January 2012)

Tax cuts & school children (2 February 2012)

Authors of our own mis-fortune? (20 February 2012)

The Muppet Show – Kiwi style! (21 February 2012)

Additional

Surplus date looks increasingly tough, says Key

Budget deficit keeps getting worse

 

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How Can A Minister of Finance Get It So Wrong???

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Five days ago, Finance Minister Bill English released a statement on the part-privatisation of several State Owned Enterprises. It is worthwhile re-printing his statement in full, and responding to it, point-by-point,

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Running up $5-$7b more debt not the answer

by Hon Bill English, Finance
23 February 2012

Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders, Finance Minister Bill English says.

Speaking to an Auckland Chamber of Commerce and Massey University business lunch today, he said the challenge was how the Government pays for forecast growth in taxpayers’ assets over the next few years.

“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

The rationale for offering New Zealanders minority stakes in four energy companies and Air New Zealand is quite simple, Mr English says.

“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.

“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.

“We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing.

“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.

“Most nights on television, we see the consequences of countries in Europe and elsewhere borrowing too much. We don’t want that for New Zealand.”

Secondly, under the mixed ownership programme New Zealanders will get an opportunity to invest in big Kiwi companies so they can diversify their growing savings away from property and finance companies.

“Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”

Thirdly, mixed ownership will be good for the companies themselves, Mr English says.

“Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won’t have to depend entirely on a cash-strapped government for new capital to grow.

“We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders.”

In his speech, Mr English reiterated the Government’s economic programme this term would focus on rebuilding and strengthening the economy.
It’s main priorities are:

•     Responsibly managing the Government’s finances.

•     Building a more productive and competitive economy.

•     Delivering better public services within tight financial constraints.

•     Rebuilding Christchurch.

“So there will be no big surprises from this Government,” Mr English says. “We have laid out our economic plan and Budget 2012 will focus on implementing that plan.”

Source

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Firstly, let’s call a spade, a spade here. Whilst National ministers use the euphemistic term, “mixed ownership model”, the issue here is partial-privatisation of state owned enterprises.  National’s spin-doctors may have advised all ministers and John Key to always use the phrase “mixed ownership model” – but the public are not fooled.

To begin, I take great exception to English’s opening statement,

“Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders…”

Opponants of National’s part-privatisation do not “need to explain” anything. It is up to National to explain why it feels the need to part-privatise tax-payer owned corporations that are efficient and give a good return to the State.

Demanding that the  “opponents of the Government’s mixed ownership programme need to explain” their opposition is the height of arrogance.  Governments in western-style democracies are accountable to the public – not the other way around.

English then goes on to say,

“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

Pardon?

“…we are not reducing our assets” ?!?!

Selling 49% of Genesis, Meridian, Solid Energy, Might River Power, Air New Zealand (from 75% to 51%) down to a 51% holding is “not reducing our assets” ?!?!

Bill English’s command of his namesake language is strange at best. I believe this is what George Orwell wrote about in his dystopian novel, “1984“, when he described “doublethink“,

“To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them…”

English laments that “our challenge is how we pay for their growth, while getting on top of our debt”.

This involves two distinct issues;

Paying for the growth of state assets.

Genesis, Meridian, Solid Energy, Might River Power,  and Air New Zealand are all profitable enterprises in their own right. In the 2010 financial year, these  assets made a combined profit of $581 million dollars.  None of these five SOEs are loss-makers.

They can each pay for whatever growth programme they require, using their profits.

Where National interfered in SOE operations, the results were highly distorted,

“Genesis paid out no dividend and had a zero yield on its operating profit of $293 million.

It had a 30.5% shareholder return on total assets.

Meridian had a dividend yield of 10.4%, achieved by paying out 428.8% of its profit. The increase came from the $300 million special dividend it received during the sale of Tekapo A and Tekapo B stations to Genesis, which was forced by the Government to borrow to pay for the purchase.” – Source

The reason that there is a  “challenge [in] how we pay for their growth”  is simple: National demands high dividends from these  SOEs (often by forcing them to borrow) leaving little for the companies to reinvest in their own growth.

Under-funding is a problem only because National has created the problem.

Getting on top of debt.

Linking  New Zealand’s $18-plus billion dollar debt to funding the growth of SOEs is  deliberate sophistry (ie; a deliberate deception).

The reason we have out-of-control debt is because,

• the global banking crisis and recession hit New Zealand’s export-driven economy as it did nearly every other country  (which is also why we have high unemployment – which makes National’s current beneficiary-bashing all that much more repugnant);
• the two earthquakes which damaged or destroyed much of Christchurch;
• and two tax-cuts in 2009 and 2010 which we could ill-afford; benefitted the top income earners/wealthy; and left a gaping $1.4 billion “hole” in the government’s revenue.

As a society and as an economy, we had no control over the first two crises to hit us.

But we sure had control over our taxation policy, and doling out generous tax cuts to millionaires and wealthy businesspeople was a luxury we could not afford. (Many maintain that National was “rewarding” certain affluent socio-economic groups for electoral support at the ballot box.)

Next. English states,

“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.”

???

National appears confused (as with most of its ad hoc policies) as to the proceeds it may gain from the partial sales. Only a year ago, Key stated authoritatively,

“If we could do that with those five entities … if we can make some savings in terms of what were looking at in the budget and maybe a little on the upside you’re talking about somewhere in the order of $7 to $10 billion less borrowing that the Government could undertake.” – John Key, 26 January 2011

Then again, as recently as eleven days ago, English let slip that,

“I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes.  That’s an honest answer.” – Bill English, 17 February 2012

The best description of Key and English on asset part-sales: clueless.

It is also worrying that National is selling state assets to pay for  “other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets“.

Every householder will tell you that if  you have to sell of your furniture; whiteware; tv, family car, to pay to maintain your home – then you are in deep financial trouble.

What National is doing is “selling the household furniture to pay for painting the house”.  Selling off assets to pay for maintenance is not sustainable – eventually you run out of stuff to sell. It is a really dumb idea.

But more than that, it indicates that National is not “earning” enough, by way of taxation revenue to pay for it’s house-keeping. If we have to borrow or sell assets to do simple things like paint schools or properly resource hospitals – then it is a fairly clear indication that taxation revenue is insufficient for day-to-day operations of public services.

It also indicates that we are paying for the 2009 and 2010 tax cuts by selling state assets.

This is not “fiscal prudence” – this is foolish profligacy.

Bill English again demands, in his speech,

“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.”

No,  Mr English. Perhaps you should “honestly explain to New Zealanders” why you believe it makes greater commerciall sense to part-sell  profitable assets that are returning a higher yield on investment, than what the government pays to borrow?

“The Government is estimating a $6 billion reduction in net debt after the sale of the state-owned enterprises – but concedes the savings on finance costs will be less than what it would have booked from dividends and retained earnings if it kept them.

Treasury  forecasts released today in the Government’s budget policy statement outline the forecast fiscal impact of selling up to 49 per cent in each of the four State-owned power companies – Mighty River Power, Meridian, Genesis Energy and Solid Energy – and by reducing the Crown’s current shareholding in Air New Zealand.

They assume a price of $6 billion – the midpoint in previous estimates of a $5 billion to $7 billion sale price – and a corresponding drop in finance costs of about $266 million by 2016.

But the trade-off is the loss of an estimated $200 million in dividends by 2016 and the loss of  $360 million in forecast foregone profits in the same year.

Documents supplied today state that the overall fiscal impact of selling a partial stake in the SOEs is a reduction in net debt, but the Government’s operating balance will also be smaller, because foregone profits would reduce the surplus.” – Source

Yet, only a year ago, Bill English was forced to concede that state owned power companies were indeed, highly profitable. In fact, he was complaining bitterly about State-owned generators  “earning excessive returns”,

“Generally the SOE model has been quite successful in that respect. But if you look at those returns being generated particularly out of the electricity market, the Government has taken the view that that market is not as competitive as it should be.” – Source

The State will be losing money on the deal; earning less dividends from the SOEs than the cost of borrowing. The sums simply don’t add up.

There also seems to be some confusion (no longer a surprise) as to what National intends to do with sale proceeds.

On the one hand Bill English sez he wants to reduce debt,

“We are firmly focused on keeping the Government’s overall debt as low as possible and that is the most important consideration over the next few years.” – 16 February 2012

And a week later, English is spending it,

“First, the Government gets to free up $5 billion to $7 billion…  to invest in other public assets like modern schools and hospitals…”  – 23 February 2012

I guess Mr English is hoping that no one is paying attention?

Further in his speech, English makes this rather candid admission,

“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.”

And there we have it, folks: the clearest statement yet from our Minister of Finance that the partial-sale of our state assets has little to do with giving “mum and dad” investors a share in our power companies; or making them more efficient; or paying down any of our $18+ billion debt; or putting a new coat of paint on your local school – the government is desperate to raise cash because it  “is spending and borrowing more than it can afford “.

The tax cuts of 2009 and 2010 were never “fiscally neutral” as National kept insisting.

The “tax switch”  left a $1.4 billion “hole” in the government’s revenue and this is how they are attempting to “plug that hole”.

We have been conned.

The tax cuts will be funded by the sale of state assets that we, as citizens of this country, already own. And because the bulk of tax cuts benefitted the highest income earners/wealthy – who are also in a better position to acquire shares in Genesis, Meridian, Solid Energy, Might River Power,  and Air New Zealand – the transfer of wealth from low and middle income earners will be two-fold.

The legacy of John Key’s government will be to make the rich richer, and for the rest of us, we can look forward to,

• more expensive power
• losing half ownership of our taxpayer-created state assets
• and the top 10% to increase their wealth even more

But, to be generous, I will leave the last word to the Hon. Bill English,

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"Would you be willing to increase the mortgage on your house to go and borrow the money to buy shares on mighty river power?" Bill English, 16 February 2012

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Tax cuts & school children

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Source

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Despite recession hitting our economy in 2008, and despite a looming $30 billion deficit, John Key’s government proceeded with tax cuts in April 2009 and October 2010.

To make up for the billions lost in taxation revenue, government borrowed millions every week,  from overseas banks, and began a programme of harsh cost-cutting,

“Finance Minister Bill English is is not ruling out an increase to the ratio of students to teachers, saying all Government departments are tasked with finding ways to save money, and staff costs are one of them.

Mr English says there is clear evidence that class size does not affect the quality of students’ education.” – Source

What did the tax cuts cost us?

The PSA published the following report,

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Tax cuts widen the gap between rich and poor

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•  Government chose to make tax cuts in worst recession in 70 years
•  Total tax cuts worth $5.5 billion
•  Top 10% income earners got tax cuts worth $2.5 billion
•  GST increased to 15% – hurts low and middle income most
•  Tax cuts + GST left $1.4 billion hole in budget

Since 2008, National has introduced tax cuts that cost New Zealand around $5.5 billion a year in lost revenue. Most of the benefit has gone to the wealthiest.

National’s first set of tax cuts – the personal tax cuts and ‘Independent earner rebate’ taking effect in April 2009 – cost approximately $1 billion a year.

The second set of cuts – cutting the top income tax rate from 38% to 33%, and the company rate to 28% – will cost $4.5 billion a year, according to figures from the 2010 Budget. That gives a total of $5.5 billion.

National claimed that because it was also increasing GST, the tax changes would be “revenue neutral” – that is, the increase in GST would cancel out the income tax cuts. In fact, the losses from the income tax cut will outweigh the gains from GST by $1.4 billion. In other words, the so-called “tax switch” has blown a $1.4 billion hole in the budget.

The tax cuts have also made New Zealand a less fair place. According to Labour, the wealthiest 10% of New Zealanders will get 43% of the tax savings. And the gap in take-home pay between someone on $30,000 and someone on $150,000 a year grew by $135 a week as a result of the tax cuts.

New Zealand’s income tax rates are among the lowest in the OECD, as the Tax Working Group acknowledged.
In Australia , for example, income over $80,000 is taxed at 37%, and income over $180,000 is taxed at 45%.

Figures from the OECD itself show that, before National’s tax cuts, New Zealand’s “all in” top income tax rate – a measure that includes all taxes on income, including local and regional ones – was 38%. In contrast, the all in top income tax rate in Australia was 47%, and in most countries it was higher still.

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Bill English says,

“…all Government departments are tasked with finding ways to save money, and staff costs are one of them.”

No doubt as part of government’s desperate attempt to cover the “$1.4 billion hole in the budget“, courtesy of their  ’09 and ’10 tax cuts.

The tax cuts have benefitted the top 10% of our economy, with the top 1% increasing their wealth by a staggering 20%,

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Even John Key did rather well out of the tax cuts,

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For John  Key,  to suggest that the latest research showed the income gap in New Zealand was actually narrowing, is breath-takingly disingenuous. The reality of every day life for New Zealanders is different from that of a millionaire who has long since lost touch with Mr and Mrs Everyperson,

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It’s abundantly clear: Government is cutting the very social services that we need, to remain a First World nation.

National gave us tax cuts and put a few extra dollars into our pockets – and a whole lot more into the deep pockets of the country’s richest people.

New Zealanders obviously haven’t got their heads around one simple, inarguable fact; we don’t get something for nothing. If we want social services, then we need to pay for them.

Now, the chooks have come home to roost. We are having to pay for those tax cuts – or rather, our children are paying. Children who never voted for this shabby government.

I wonder what the 1,058,638 people who voted for this government are feeling right now? Are you folks feeling warm fuzzies?

Because all I’m feeling is the chill of a society that values tax cuts more than our children and their future.

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