Standard & Poor’s just sabotaged Simon Bridges’ tax bribe announcement

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Poor Simon Bridges.

Since becoming Leader of the National Party, he has been dogged by embarrassing leaks (which appear to be ongoing even after Jami-Lee Ross’s departure from caucus); a once-trusted MP turned feral; another MP accused of bullying her staff; allegations of a culture of sexual harrassment in the Party; travel expenses that make him look profligate with taxpayers’ money; assorted bed-hopping; and a potential contender for his job breathing down his neck as his poll ratings continue to languish in single figures.

Never mind “it’s not easy being green” – being Blue right now is positively diabolical for Simon Bridges. The only thing missing is a National MP who is revealed to be an agent for a foreign power. Oh…

With indications that the Tax Working Group will shortly be making it’s final report back to the Coalition, and with expectations that it will recommend a Capital Gains Tax on property (excluding the family home), National has launched a multi-media campaign on taxation. Twitter, Facebook, as well as the msm have all carried National’s announcement to cut taxes (dressed up as “tax adjustments” to deflect criticism that National is once again planning to cut taxes for the rich).

It was revealing that Bridges decided to give his speech out-lining plans for  tax-cuts-dressed-up-as-tax-adjustments at the Canterbury Chamber of Commerce, in Christchurch. He would not dare make such a speech at the Child Poverty Action Group, foodbank, or community hall in a predominantly state housing area.

He made his pitch at the Canterbury Chamber of Commerce because those are the people who would – yet again – benefit from tax-cuts-dressed-up-as-tax-adjustments.

As well as offering the bog-standard tax-cut bribe, Simon Bridges also alluded to National’s so-called reputation for being a “prudent fiscal manager“;

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To which one couldn’t help but reply;

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But worse was to come for Simon Bridges.

A day later, international credit ratings agency, Standard & Poor’s, up-graded New Zealand’s sovereign outlook from “stable” to “positive”. The  S&P report noted;

“Accommodative monetary policy, population growth, higher wage outcomes and higher government spending” and a decline in the New Zealand dollar, was continuing to support growth, it said.

“We don’t believe trade tensions between New Zealand’s major trading partners will currently have a substantial impact on the country’s economy and external performance, particularly given that key exports are imported for domestic consumption in China, rather than for re-exporting.”

It was capitalism’s vote-of-confidence in a left-wing government with overtly left-wing policies.

Which stands in stark contrast with the credit-rating down-grade New Zealand experienced in 2010 and 2011 – under the right-wing, Key-led National government;

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New Zealand went from “stable outlook” in 2009 to “negative” by November 2010.  By September 2011, we had dropped from AA Positive to just AA.

In fairness, a sound explanation could lie with the fallout from the 2008 Global Financial crisis and Great Recession that followed.

But no. National compounded the fall in tax revenue resulting from the Recession by cutting taxes in 2009 and 2010, which reduced the tax-take even further. That meant only one recourse for then Finance Minister, Bill English: borrowing. Massive amounts of borrowing..

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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.

In opening remarks to the party’s annual conference in Wellington today Mr Key said National would incorporate Labour’s October 1 tax cuts, bring forward a second round to April 2009 – a year earlier than Labour – and a third round to April 2010.

Labour’s planned third round would not take effect until April 2011.

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

But deputy leader and finance spokesman Bill English told delegates National was prepared to borrow more to fund infrastructure.

He said New Zealand had one of the lowest levels of debt of any developed country and “additional borrowing” for infrastructure would boost economic growth.

Even after Treasury released a report predicting a $30 billion deficit, then National leader (and subsequent PM), John Key, was not prepared to abandon his party’s planned taxcut bribe;

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.

Mr Key said National anticipated that the figures would be bad but thought “even Michael Cullen could do better than this”.

But he said his party would proceed as planned with the announcement of their tax strategy on Wednesday and he said there would be tax cuts.

By mid-2009, National realised that spending cuts to social services would have to be made. The public were being “softened up” to the inevitable.

Despite drastic spending cuts to social services; ceasing payment to the NZ Superannuation Fund, and redundancies in the state sector – it was all futile and  insufficient to meet the duel cost of reduced revenue due to recessionary pressures and the – now obviously unaffordable – taxcuts.

By May 2011, the National government was borrowing $380 million per week. Debt stood at $71.6 billion.

National’s crazy borrowing had been exacerbated by tax cuts that we could ill-afford. This is why Standard and Poor’s took alarm at National’s tax-cuts and borrowings, and downgraded our credit outlook to “negative”. It could be said that New Zealand was ‘Going Greek’ in the South Pacific.

So when current National Party leader, Simon Bridges boasted that New Zealanders “trusted National with managing the economy. You know we’ll be careful with your money” – people with long memories reacted with justified derision.

Make no mistake – and let me spell it out with crystal clarity:  there is no such thing as a ‘free school lunch’ or tax-cuts without consequences. School lunches (which are a social necessity) are usually paid for by taxpayers.  Tax-cuts will be paid by all of us, if sufficient numbers of voters buy into Bridges’ tax-cut bribe.

Expect National to cut spending on vital social areas; sell remaining state assets (by stealth, if they can get away with it); stop contributions (again) to the NZ Super Fund; and increase user-pays government charges. Bridges may even go so far as to raise gst again.

As well as promising de facto tax cuts, Bridges has also made other, expensive promises;

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It is difficult to understand how National will pay for it’s promises with all those taxes abolished. And what does Bridges mean “in our first term“? What, exactly, are they planning for a second term?

We have heard this terrible “tax cuts” song before. It will not sound better the second time around.

I hope New Zealanders have better sense than to fall for this fiscal sleight-of-hand again.

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References

Radio NZ: Bridges – National caucus didn’t leak travel expenses

Otago Daily Times: More National Party leaks

Fairfax/Stuff: Another alleged recording of phone call between Simon Bridges and Jami-Lee Ross is leaked

Radio NZ: Maggie Barry bullying claims – Ex-staffer speaks out

Mediaworks/Newshub: National to conduct independent review into party culture

Radio NZ: Simon Bridges defends $113k expenses bill

Noted: Parliament’s star-crossed lovers who crossed each other

Otago Daily Times: Could Collins become National’s new leader?

NBR: Bridges clocks lowest Newshub-Reid poll rating of any National leader for a decade

Newsroom: Newsroom Investigation – National MP trained by Chinese spies

Mediaworks/Newshub: Capital gains tax set to be biggest political scrap of the year

Twitter: Simon Bridges

Facebook: Simon Bridges

Fairfax/Stuff: National promises three-yearly income tax cuts in first major speech of 2019

Fairfax/Stuff: Improved S&P outlook ‘underlines’ position of NZ economy, says Grant Robertson

The Treasury: Credit Ratings

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

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

Fairfax/Stuff: Labour Budget pledges face axe

NZ Herald: Govt borrowing $380m a week

Fairfax/Stuff: Government debt rises to $71.6 billion

Twitter: Simon Bridges – 30 January 2018 2.44pm – abolish taxes

Additional

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

Other Blogs

Greater Auckland: What happens if you get rid of the Regional Fuel Tax?

The Daily Blog: Yawn – Simon Bridges promises less than a weekly Big Mac Combo in tax cuts

The Standard: Show us the money Simon

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

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

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This blogpost was first published on The Daily Blog on 1 February 2019.

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Advertisement

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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Is this the Political Cartoon of the Year?!

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Can this political cartoon from a Fairfax community newspaper  be the most insightful and damaging to National, ever penned?

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After all the criticisms; all the protests; all the thousands of media stories; and seven years of blogging from myself – it all comes down to one searingly scathing cartoon.

The scandal of rotting hospital buildings and thousands suffering on waiting lists for surgery may prove to be the the beginning of the deconstruction of the myth of National’s “reputation as a responsible fiscal manager”.

The reality is brutally simple. So simple that even the most low-information voters should be able to comprehend: National won elections not on any fiscal responsibility – but by bribing the electorate with tax cuts.

With tax cuts came cuts to state services in health, education, border security, police, DoC, housing, etc. For many New Zealanders, our under-funded state services is more than an academic exercise by the Wellington ‘Beltway’. It’s personal;

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“Doing more with less” became a National government mantra that meant, in reality, over-worked, stressed, and under-paid teachers, nurses, doctors, police, et al, and essential public services pared back or cancelled entirely.

Unfortunately, it may take a while for it to sink through to New Zealanders that we cannot expect a Gold Standard of public services – whilst paying only for a cheaper Bronze-plated level.

We get what we pay for.

That brutal lesson in basic arithmetic started this year: taxes = services.

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References

Fairfax media:  Over 5000 at risk of going blind waiting for treatment, Ministry of Health says

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

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

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This blogpost was first published on The Daily Blog on 19 April 2018.

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Letter to the editor: Duncan Garner has a John Key-style brain-fade

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: 27 August 2017
subject: Letter to the editor

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The Editor
Dominion Post

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Duncan Garner’s column “Where’s that Brighter Future we were all promised” must be one of the worst researched and slanted pieces I’ve ever read.(26 August)

“When the Nats took command nine years ago they might as well have been presented with … the paralysing decade of deficits dished up by Labour.”

The term “decade of deficits” was coined by the National Party, not Treasury.

Treasury’s 2008 PREFU referred to deficits caused by “the sub-prime mortgage crisis, which developed in the United States in mid-2007, was the trigger for the unwinding of these imbalances and the world economy…this process of adjustment is expected to be protracted and to involve both developing and developed economies”.

In reality, Labour’s Finance Minister, Michael Cullen, posted eight budget surpluses in a row and paid down government debt. National, by contrast, increased debt to over $60 billion.

Cutting taxes in 2009 and 2010, National was forced to borrow even more.

Garner’s selective memory overlooks the GFC when he castigates “Labour’s never-ending golden economic summers had crashed, burned and disappeared” – but then excuses National’s “promise of a brighter future being ravaged by international economic cancers”!

No wonder the public distrust the media when a supposedly impartial journalist writes this kind of fake ‘news’.

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-Frank Macskasy

(Name & address supplied)

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References

Fairfax media: Duncan Garner – After nine years in power, why is National’s report card so full of fails?

Previous related blogposts

Labour: the Economic Record 2000 – 2008

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

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(Acknowledgement for meme: Michael Woods)

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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 English – Social Services under National’s tender mercies

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Context

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On 25 January, as Radio NZ returned to it’s normal broadcasting schedule (and putting away it’s dumbed-down “summer programming” until next December/January), John Campbell had his first interview with John Key’s replacement, Bill English.

Campbell raised several issues with English; the US withdrawal from the TPPA; the Pike River mine disaster; and the housing crisis. At this point, English made this staggering claim;

@ 5.58

“We’ve got a government actually with a good record on addressing, in fact, some of the toughest social issues. There may be disagreement over means by which we’re doing it, ah, but our direction is pretty clear. And you know over, certainly heading into election year we think that the approach the government’s developed around social investment, around increasing incomes is the right kind of mix – “

English’s bland assertion that “government actually with a good record on addressing, in fact, some of the toughest social issues” is at variance with actual, real, mounting socio-economic problems in this country.

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Key indicator #1: Unemployment

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The latest HLFS unemployment stats show an increase from 4.9% to 5.2% in the December 2016 Quarter. However, in all likelihood, the unemployment numbers are actually much, much, higher since Statistics NZ arbitrarily altered the way it  calculated what constituted  unemployment.

On 29 June 2016, Statistics NZ announced that it would be changing the manner in which it defined a jobseeker;

Change: Looking at job advertisements on the internet is correctly classified as not actively seeking work. This change brings the classification in line with international standards and will make international comparability possible.

Improvement: Fewer people will be classified as actively seeking work, therefore the counts of people unemployed will be more accurate.

The statement went on to explain;

Change in key labour market estimates:

• Decreases in the number of people unemployed and the unemployment rate

• Changes to the seasonally adjusted unemployment rate range from 0.1 to 0.6 percentage points. In the most recent published quarter (March 2016), the unemployment rate is revised down from 5.7 percent to 5.2 percent 

• Increases in the number of people not in the labour force 

• Decreases in the size of the labour force and the labour force participation rate

The result of this change? At the stroke of a pen, unemployment fell from 5.7% to 5.2% for the March 2016 Quarter (and subsequent Quarters).

If the “current unemployment figures” from Stats NZ are reported as “5.2%’, they may well be back to the original March 2016 figure of 5.7%, before the government statistician re-jigged definitions.

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Key indicator #2: Housing

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– Home Ownership

According to the 1984 NZ  Yearbook, in 1981 the number of rental dwellings numbered 25.4% of housing. 71.2% were owner-occupied. Nearly three quarters of New Zealanders  owned their homes.

Home ownership reached it’s maximum height in 1991, when it stood at 73.8%. Since then, it has steadily declined.

By 2013 (the most recent census survey), the numbers of rental dwellings had increased to 35.2% (up 33.1% in 2006). Home ownership had decreased to  49.9%  (down from  from 54.5% in 2006). If you include housing held in Family Trusts, the figure rises to 64.8% of households owning their home in 2013, down from 66.9% in 2006.

Whether you include housing held in Family Trusts (which may or may not be owner-occupied or rented out), home ownership has fallen steady since the early 1980s.

Renting has increased from 25.4% to 35.2%.

More and more New Zealanders are losing out on the dream of home ownership. Conversely, more and more of us are becoming tenants in our own country.

As Bernard Hickey from Interest.co.nz said in December last year;

Nearly two thirds of the 430,000 households formed since 1991 are tenants.

Think about that for a moment. It is a stunning revelation of how the young and the poor have been hit the hardest by the changes in New Zealand since the mid-1980s, and on an enormous scale.

It means two thirds of the kids born in those families grew up in rental accommodation, and more than 80% of those are private rentals (although the Housing NZ homes are often no better). That means they often grew up in mouldy, damp, cold and insecure housing. It’s true that some homes occupied by their owners are also below par, but it’s a much lower proportion and owners have the option to improve their homes through insulation and ventilation.

The NZ$696 billion increase in the value of New Zealand’s houses to NZ$821 billion between 1991 and 2015 means the 64% of owners in live-in houses have also had plenty of financial flexibility to improve those houses. Renters have had no access to that wealth creation and are not allowed to put a pin in the wall, let alone put in a ventilation system or some batts in the ceiling. The take-up for the Government’s home insulation and heating subsidies were vastly higher among home-owners than they were for landlords.

Those 284,000 renting households formed since 1991 have also often been forced to move schools and communities and all the roots that build families because New Zealand’s rental market is so transient.

[…]

It illustrates the scale of the fallout from that collapse in home ownership from 1991. Not only has it handicapped the education, health and productivity of a entire generation of New Zealanders, but it is set to magnify the likely growth in pension and healthcare costs of our ageing population. And that’s before the wealth and income inequality effects.

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– Affordability

In 2016, the 13th Annual International Demographia International Housing Affordability survey rated New Zealand as one of the most unaffordable housing markets in the world;

The most affordable major housing markets in 2015 are in the United States, with a moderately unaffordable Median Multiple of 3.9, followed by Japan (4.1), the United Kingdom (4.5), Canada (4.7), Ireland (4.7) and Singapore (4.8). Overall, the major housing markets of Australia (6.6), New Zealand (10.0) and China (18.1) are severely unaffordable. (p2)

[…]

In New Zealand, as in Australia, housing had been rated as affordable until approximately a quarter century ago. (p24)

A 2014 report by the NZ Institute for Economic Research stated  the “the average house price rose from the long-run benchmark of three times the average annual household income to six times“;

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The NZIER report refers to several reasons for increasing housing prices; slow supply of land; demographic demand (from ‘Baby Boomers’); and investor demand caused by lack of a capital gains tax. Interestingly, the Report also refers to an “over-supply of finance”;

The loosening of financial standards and rising household debt relative to income has happened over a long period of time. The increase in indebtedness has coincided with rising house prices relative to incomes. This suggests that increased household indebtedness has at least partly contributed to the increasing price of homes. (p14)

Prior to Roger Douglas de-regulating the banking/finance sector, New Zealand banks could only lend depositor’s funds as mortgages.

As a result, mortgage money was “tight”, and scarcity helped keep house prices down. Vendor’s expectations were kept “in check” by scarcity of bank funds. Prior to the mid 1980s, Vendor’s Finance (by way of a Second Mortgage) were commonly-used financial tools to assist house-owners to sell and buyers to complete a purchase.

Once the banking sector was opened up, and monetary policy relaxed, cheap money flooded in from overseas for banks to on-lend to house-purchasers. As property investor, Ollie Newland vividly explained in the 1996 TV documentary, Revolution;

“I got a phone  call from my bank manager to say some bigwigs were coming up from Wellington to have a chat with me. I thought it was just one public relations things they do. I had a very small office, it wasn’t much bigger than a toilet cubicle, and those five big fellows  crowded in with their briefcases and books and they sat on the floor and the arms of the chairs – I only had one chair in the place – and stood against the walls. Their first words to me were, we’re here to lend you money. As much as you want. For somebody like me, and I’m sure it’s the same for everybody else, to suddenly be told by the bank manager that you could have as much money as you want, help yourself, that was a revelation. We thought we had died and gone to heaven.”

Unfortunately, the side affect of this was to increase vendor’s expectations to gain higher and higher prices for their properties. Combined with recent high immigration, and a lack of a comprehensive capital gains tax, and the results have been troubling for this country;

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As well as increasingly unaffordable housing, we – as a nation – are sitting on a trillion-dollar fiscal bomb.

Think about that for a moment.

Little wonder that in September last year, the Reserve Bank issued the sternest warning yet that we were headed for impending economic mayhem;

A sharp correction in house prices represents a key risk to the financial system, and one that is increasing the longer the current boom in house prices persists. A severe downturn in house prices could have major implications for the banking system, with over 55 percent of bank loans secured against residential property. Moreover, elevated household debt levels and a growing exposure of the banking system to investor loans could reinforce a housing downturn and extend reductions in economic activity, as highly indebted households are forced to reduce consumption and sell property.

As with many other individuals, institutions, organisations, business leaders, left-wing commentators, media, political pundits, political parties, the NZIER was (and still is) calling for a comprehensive capital gains tax to be implemented.

Even then, this blogger suspects we may be too late. National (and it’s predecessor, to be fair) have left it far to late and the economic horse has well and truly bolted.

Even a Capital Gains Tax at 28% – New Zealand’s current corporate tax rate – may be insufficient to dampen speculative demand for properties.

Meanwhile, the dream of Kiwis owning their own homes continues to slip away.

Depressingly, New Zealanders themselves have permitted this to happen.

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– State Housing

If the Middle Classes and their Millenial Offspring are finding it hard to buy their first home, think of the poorest  families and individuals in our communities. For them, social housing consists of packing multiple families into a single house; living in an uninsulated, drafty,  garage; or in cars.

Last year, the story of mass homelessness exploded onto our media and our “radar” as New Zealanders woke up to the reality of persistent poverty in our cities;

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Although on occassion, the mainstream media found them themselves  in embarrassingly ‘schizophrenic’ situations as they attempted to reconcile reporting on our growing housing crisis – whilst raising advertising revenue by  promoting “reality” TV programmes that were far, far removed from many people’s own disturbing reality;

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According to UNICEF;

295,000 New Zealand kids are living beneath the poverty line, which means they are living in households where income is less than 60% of the median household income after housing costs are taken into consideration.

One way to alleviate poverty is to provide state housing, at minimal rental, to families suffering deprivation. Not only does this make housing affordable, but also strengthens a sense of community and reduces transience.

Transience can have deletarious effects on families – especially on children – who then struggle with the stresses of losing friends; adjusting to new neighbourhoods, and new schools.

A government report states that transience for children can have extreme, negative impact on  their learning;

Nearly 3,700 students were recognised as transient during the 2014 year. Māori students were more likely to be transient than students in other ethnic groups.

[…]

Students need stability in their schooling in order to experience continuity, belonging and support so that they stay interested and engaged in learning.

All schools face the constant challenge of ensuring that students feel they belong and are encouraged to participate at school. When students arrive at a school part-way through a term or school year, having been at another school with different routines, this challenge may become greater.

Students have better outcomes if they do not move school regularly. There is good evidence that student transience has a negative impact on student outcomes, both in New Zealand and overseas. Research suggests that students who move home or school frequently are more likely to underachieve in formal education when compared with students that have a more stable school life. A recent study found that school movement had an even stronger effect on educational success than residential movement.

There is also evidence that transience can have negative effects on student behaviour, and on short term social and health experience

Writing for The Dominion Post, in April 2014, Elinor Chisholm and  Philippa Howden-Chapman pointed out the blindingly obvious;

Continuity of education and supportive relationships with teachers are critical for children’s educational performance.

“Churn” is not good for educational performance or enrolment in primary health care, where staff can ensure children are properly immunised and chronic health problems can be followed up.

It was for this reason that, in our submission on the Social Housing Reform Bill late last year, we strongly recommended that families with school- age children should be excluded from tenancy review.

Secure tenure and stability at one school would allow children the best chance of flourishing. In high- performing countries such as the Netherlands, children are explicitly discouraged from changing schools in the middle of the school year.

The bill had announced the extension of reviewable tenancies to all state tenants (new state tenants had been subject to tenancy review since mid- 2011). However, the housing minister, as well as the Ministry of Business, Innovation and Employment, had made clear that the disabled and the elderly were to be excluded from tenancy reviews.

In our submission, we acknowledged the Government for recognising the importance of secure tenure.

People who are compelled to move house involuntarily can experience stress, loss, grief and poorer mental health. Housing insecurity is also associated with poorer physical health.

National’s policy of ending a state “house for life”;  increased tenancy reviews for state house tenants, coupled with the sale of state houses, is inimical to the stabilisation of vulnerable families; the well-being of children in those families; and to communities.

In 2008, Housing NZ owned 69,000 rental properties.

By 2016, that number had dropped significantly to 61,600 (plus a further 2,700 leased).  National had disposed of some 7,400 properties.

Between 2014 and 2016, at least 600 state house tenants lost their homes after “reviews”.

This, despite our growing population.

This, despite John Key’s own family having been provided with the security of a state house, and Key enjoying a near-free University education.

This, despite John Key, ex-currency trader,  and multi-millionaire, admitting in 2011 that New Zealand’s under-class was growing.

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Key indicator #3: Incomes & Inequality

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In June 2014, Oxfam reported on New Zealand’s growing dire child poverty crisis;

The richest ten per cent of New Zealanders are wealthier than the rest of the population combined as the gap between rich and poor continues to widen.

Oxfam New Zealand’s Executive Director Rachael Le Mesurier said the numbers are a staggering illustration that the wealth gap in New Zealand is stark and mirrors a global trend that needs to be addressed by governments in New Zealand, and around the world, in order to win the fight against poverty.

“Extreme wealth inequality is deeply worrying. Our nation is becoming more divided, with an elite who are seeing their bank balances go up, whilst hundreds of thousands of New Zealanders struggle to make ends meet,” said Le Mesurier.

Figures for the top one per cent are even more striking. According to the most recent data, taken from the 2013 Credit Suisse Global Wealth Databook, 44,000 Kiwis – who could comfortably fit into Eden Park with thousands of empty seats to spare – hold more wealth than three million New Zealanders. Put differently, this lists the share of wealth owned by the top one per cent of Kiwis as 25.1 per cent, meaning they control more than the bottom 70 per cent of the population.

Oxfam New Zealand’s Executive Director, Rachael Le Mesurier, was blunt in her condemnation;

“Extreme inequality is a sign of economic failure. New Zealand can and must do better. It’s time for our leaders to move past the rhetoric. By concentrating wealth and power in the hands of the few, inequality robs the poorest people of the support they need to improve their lives, and means that their voices go unheard. If the global community fails to curb widening inequality, we can expect more economic and social problems.”

A 2014 OECD report placed New Zealand as one of the worst for growing inequality;

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Not only was inequality a social blight, but according to the report it impacted negatively on economic growth;

Rising inequality is estimated to have knocked more than 4 percentage points off growth in half of the countries over two decades. On the other hand, greater equality prior to the crisis helped increase GDP per capita in a few countries, notably Spain.

According to the OECD assessment,  income inequality had impacted the most on New Zealand, with only Mexico a close second;

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The OECD Report went further, making this “radical” observation;

The most direct policy tool to reduce inequality is redistribution through taxes and benefits. The analysis shows that redistribution per se does not lower economic growth.

The statement went on to “qualify”  any suggestion of socialism with a caveat. But the declaration that “analysis shows that redistribution per se does not lower economic growth” remained, constituting a direct contradiction and challenge to current neo-liberal othodoxy.

In August 2015, former City Voice editor, and now NZ Herald social issues reporter, Simon Collins revealed the growing level of child poverty in this country;

The Ministry of Social Development’s annual household incomes report shows that the numbers below a European standard measure of absolute hardship, based on measures such as not having a warm home or two pairs of shoes, fell from 165,000 in 2013 to 145,000 (14 per cent of all children) last year, the lowest number since 2007.

Children in benefit-dependent families also dwindled from a recent peak of 235,000 (22 per cent) in 2011, and 202,000 (19 per cent) in 2013, to just 180,000 (17 per cent) last year – the lowest proportion of children living on benefits since the late 1980s.

But inequality worsened because average incomes for working families increased much faster at high and middle-income levels than for lower-paid workers.

The net result was that the number of children living in households earning below 60 per cent of the median income after housing costs jumped from a five-year low of 260,000 in 2013 to 305,000 last year, the highest since a peak of 315,000 at the worst point of the global financial crisis in 2010.

In percentage terms, 29 per cent of Kiwi children are now in relative poverty, up from 24 per cent in 2013 and only a fraction below the 2010 peak of 30 per cent.

In September 2016, Statistics NZ confirmed the widening of  income inequality from 1988 to 2015,  between households with high  and  low incomes;

• In 2015, the disposable income of a high-income household was over two-and-a-half times larger than that of a low-income household.
• Between 1988 and 2015, the income inequality ratio increased from 2.24 to 2.61.  

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The neo-liberal “revolution” took place from the mid-to-late 1980s. Hardly surprisingly, the rise in income inequality takes place at the same time.

Income inequality dipped from 2004 when Labour’s “Working for Families” was introduced.

However, income inequality worsened after 2009 and 2010, when National cut taxes for the rich; increased GST (which impacts most harshly on low-income families and individuals); and increased user-charges on essential services such as prescription fees, ACC levies, court fees, etc. Increasingly complicated WINZ requirements for annual re-applications for benefits and complex paperwork may also have worsened the plight of the country’s poorest.

Despite all the promises made by the Lange government; the Bolger government; and every government since, our neo-liberal “reforms” have not been kind to those on low and middle incomes.

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Key indicator #4: Child poverty

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According to Otago University’s Child Poverty Monitor in 2014;

Child poverty has not always been this bad – the child poverty rate in the New Zealand many of us grew up in 30 years ago was 14%, compared to current levels of 24%.

Thirty years prior to 2014 was the year 1984. David Lange’s Labour Party had been elected to power.

Roger Douglas was appointed Minister of Finance. The Member for Selwyn, Ruth Richardson, was also in Parliament, taking notes.

The term “trickle down” entered our consciousness and vocabulary. It promised that, with tax cuts; privatisation; winding back state services; and economic de-regulation, wealth would trickle down to those at the bottom of the socio-economic ladder.

How is that working out for us so far?

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So much for  the “aspirational dream” offered to us by “trickle down” economics.

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Key indicator #5: The Real Beneficiaries

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In June last year, Radio NZ reported  the  latest survey of household wealth by Statistics NZ. It found;

“…the country’s richest individuals – those in the top 10 percent – held 60 percent of all wealth by the end of July 2015. Between 2003 and 2010, those individuals had held 55 percent. The richest 10 percent of households held half of New Zealand’s wealth, while the poorest 40 percent held just 3 percent of total wealth.”

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Following hard on the heels of the Stats NZ report,  Oxfam NZ made a disturbing revelation;

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Three years after her previous public warning,  Oxfam New Zealand’s, Rachael Le Mesurier, was no less scathing. Her exasperation was clear;

“The gap between the extremely wealthy and the rest of us is greater than we thought, both in New Zealand and around the world. It is trapping huge numbers of people in poverty and fracturing our societies, as seen in New Zealand in the changing profile of home ownership.”

National minister, Steven Joyce responded. He was his usual mealy-mouthed self when interviewed on Radio NZ about the Oxfam report;

“There’s always inequality but again you have got to look at those reports carefully because in that report a young medical graduate who has just come out of university would be listed as somebody who is in the poorest 20 per cent because they have a student loan.They’ll pay that student loan off in about four years and they’ll be earning incomes of over $100,000 very quickly.

So although they’re in those figures today, they won’t be in those figures in five years’ time.”

Which appears to sum up the National government’s head-in-sand attitude on child poverty and income inequality.

Economist, Shamubeel Eaqub, though, had a different “take” on the issue and warned;

“Every time we see a new statistic on inequality, whether it’s in terms of income, opportunities or wealth, it shows very clearly that New Zealand is being ripped apart by our class system.”

When economists begin to issue dire social warnings, you know that matters have taken a turn for the worse.

So where does that leave our New Dear Leader Bill English  with his insistence  that “we’ve got a government actually with a good record on addressing, in fact, some of the toughest social issues”?

English’s assertion to John Campbell on Radio NZ, on 25 January, (outlined at the beginning of this story) makes sense only if it it is re-phrased;

“We’ve got a government actually with a good record on addressing, in fact, some of the toughest wealth-accumulation issues. There may be disagreement over means by which we’re doing it, ah, but our direction is pretty clear. And you know over, certainly heading into election year we think that the approach the government’s developed around private investment, around increasing incomes for the wealthiest ten percent is the right kind of mix – “

Not a very palatable message – but vastly more truthful as income inequality continues to wreak appalling consequences throughout our communities and economy.

Otherwise, English appears to reside not so much in the Land of the Long White Cloud, but in the Realm of Wishful Thinking.

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References

Radio NZ: Checkpoint – Bill English on the challenges of his first month as PM

Scoop media: Unemployment rate rises to 5.2 percent as labour force grows

Statistics NZ: Household Labour Force Survey – Revisions to labour market estimates

NZ 1984 Yearbook: 3A – General Summary – Census of population and dwellings 1981 (see “Tenure of Dwelling”)

Statistics NZ: Owner-Occupied Households

Statistics NZ: 2013 Census QuickStats about national highlights – Home Ownership

Interest.co.nz: Bernard Hickey says the collapse in home-ownership rates among families formed since 1991 is an unfolding disaster for NZ’s economy, our society and the Government’s finances

International Demographia: 13th Annual  International Housing Affordability

NZ Institute for Economic Research: The home affordability challenge

Monetary Meg: What is vendor finance?

Radio NZ: NZ immigration returns to record level

NZ On Screen: Revolution

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

Reserve Bank: Regulatory Impact Assessment of revised LVR restriction proposals September 2016 – Adequacy Statement

The Guardian: New Zealand housing crisis forces hundreds to live in tents and garages

Fairfax media: One in 100 Kiwis homeless, new study shows numbers quickly rising

Al Jazeera: New Zealand’s homeless: Living in cars and garages

NZ Herald: Homelessness rising in New Zealand

Radio NZ: Homeless family faces $100k WINZ debt

TV3 News: The hidden homeless – Families forced to live in cars

TV1 News: Housing crisis hits Tauranga, forcing families into garages and cars

UNICEF: Let’s Talk about child poverty

Education Counts: Transient students

Dominion Post: Housing policy will destabilise life for children

NZ Herald: State housing shake-up – Lease up on idea of ‘house for life’

Radio NZ: Thousands of state houses up for sale

Housing NZ: Annual Report 2008/09

Housing NZ: Annual Report 2015/16

Fairfax media: Nearly 600 state house tenants removed after end of ‘house for life’ policy

NZ Herald: Key admits underclass still growing

Oxfam: Richest 10% of Kiwis control more wealth than remaining 90%

NZ Herald: 300,000+ Kiwi kids now in relative poverty

Statistics NZ: Income inequality

Law Society: Civil court fee changes commence

Fairfax media: Prescription price rise hits vulnerable

Salaries.co.nz: ACC levies to increase in April 2010

Radio NZ: Thousands losing benefits due to paperwork

Scoop media: Health Issues Highlighted in Child Poverty Monitor

NZ Herald: Hungry kids foraging in pig scraps ‘like the slums of Brazil’

Fairfax media: Damp state house played part in toddler’s death

NZ Herald: More living in cars as rents go through roof

NZ Doctor: Tackle poverty to fight rheumatic fever

Radio NZ: 10% richest Kiwis own 60% of NZ’s wealth

Fairfax media: Wealth inequality in NZ worse than Australia

Radio NZ: Steven Joyce responds to Oxfam wealth inequality report

Additional

Dominion Post: Kids dragged from school to school

Other Blogs

The Standard: John Key used to be ambitious about dealing with poverty in New Zealand

Previous related blogposts

Lies, Damned lies and Statistical Lies

Lies, Damned lies and Statistical Lies – ** UPDATE **

National exploits fudged Statistics NZ unemployment figures

2016 – Ongoing jobless tally and why unemployment statistics will no longer be used

CYF – The Hollowing Out of a State Agency

The Mendacities of Mr Key # 18: “No question – NZ is better off!”

Foot in mouth award – Bill English, for his recent “Flat Earth” comment in Parliament

The Mendacities of Mr English – Fibbing from Finance Minister confirmed

Rebuilding the Country we grew up in – Little’s Big Task ahead

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This blogpost was first published on The Daily Blog on 7 February 2017.

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= fs =

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

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Introduction

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

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

Total students in 2009: 751,330* 

spend per student: $14,341.88

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

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

Total students in 2016: 776,948**

spend per student in 2016 dollars: $14,215.36

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

spend per student in 2008 dollars: $12,367.37

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

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

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

*  Not including 9,529 international fee-paying students

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

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

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Tax-cuts and Service-cuts

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

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

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

1 October 1986 – Labour

1 October 1988 – Labour

1 July 1996 – National

1 July 1998 – National

1 October 2008 – Labour

1 April 2009 – National

1 October 2010 – National

 

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

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

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

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

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

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

[…]

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

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

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

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

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… cuts to NGOs offering support services;

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… and  leaving district health boards in dire financial straits;

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

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

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

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Tax cuts, slashed services, and increasing user-pays

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

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

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

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

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

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

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

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

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

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

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Graphic acknowledgement:  NZ Herald

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

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

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Education, Inc.

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

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

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

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

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

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

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

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

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

Thirteen percent said they were looking to increase parent donations.

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

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

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User-pays is hard to pay

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

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

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

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

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

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

Because we can’t have both.

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

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Postscript

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From a Dominion Post article on 24 January;

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

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

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

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

[…]

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

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

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

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

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

LOANS ON THE RISE

Median loan balances

2010 – $11,399

2012 – $12,849

2014 – $13,882

2016 – $14,904

Median repayment times for a bachelors/graduate certificates or diplomas

2010 – 6.9 years

2012 – 7.8 years

2014 – 8.5 years

 

 

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References

Reserve Bank NZ: Inflation calculator

Treasury: Vote Education 2008

Treasury: Vote Education 2016

Educationcounts: School Rolls – Student Rolls by School 2005-2009

Educationcounts: School Rolls – Student Rolls by School 2010-2016

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

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

The Press: Four forced off waiting list die

Otago Daily Times:  Heartwatch Insurance Cover

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

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

Radio NZ: Patients suffering because of surgery waits – surgeon

Fairfax media:  Prescription price rise hits vulnerable

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

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

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

Youtube: Kansas Tax Cuts –  A Closer Look

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

Fairfax media: Student loan defaulters to face border arrest

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

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

NZ Herald: Student loan debt – 728,000 people owe nearly $15 billion

Radio NZ: Kiwis overseas $840m behind on student loan

Radio NZ: Govt tightens education purse strings

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

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

NZ Herald:   Schools using foreigners’ fees to staff classrooms

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

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

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

Radio NZ: Schools consider parent donation hike

Dominion Post: Student loans are getting bigger and harder to pay off, new figures show

Additional

Motherjones: Trickle-Down Economics Has Ruined the Kansas Economy

The New Yorker: Covert Operations

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

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

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

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

Previous related blogposts

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

12 June – Issues of Interest – User pays healthcare?

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

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

The seductiveness of Trumpism

Steven Joyce – Hypocrite of the Week

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

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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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Rebuilding the Country we grew up in – Little’s Big Task ahead

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2007: John Key says Housing is in crisis

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On 20 August 2007, National’s new leader, John Key, made a stirring speech to the  Auckland branch of the New Zealand Contractors Federation. In it, he lambasted the then-Clark-led Labour government;

“Over the past few years a consensus has developed in New Zealand. We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse.

This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.

The good news is that we can turn the situation around. We can deal with the fundamental issues driving the home affordability crisis. Not just with rinky-dink schemes, but with sound long-term solutions to an issue that has long-term implications for New Zealand’s economy and society.

National has a plan for doing this and we will be resolute in our commitment to the goal of ensuring more young Kiwis can aspire to buy their own home.”

(Hat-tip: Bert)

In 2007, Key described “home affordability and ownership” as a “crisis”.

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2016: John Key says Housing is a more like a “challenge”

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Almost exactly five years, one of my first blogposts involved the looming housing crisis. On 3 August, 2011, I wrote;

The shortage of state housing is a serious matter, though. This critical problem of decent, affordable housing is not helped by the fact that the Fourth National government (1996-1999) sold around 13,000 State Houses in the 1990s.  These properties were supposedly made available to tenants – but actually went mostly to property speculators (who later sold them for tax-free capital gains).

When Labour was elected to power in November 1999, they immediatly placed a moratorium on the sale of state housing. According to HNZ, they currently ” own or manage more than 66,000 properties throughout the country, including about 1,500 homes used by community groups”

This government has re-instated the sale of state houses.  It does not take rocket science to work out that selling of state housing reduces the availability of housing stock.   Housing Minister Phil Heatley said that,

“… about 40,000 of the 69,000 state house stock will be available for sale,”  but then added,  “that the vast majority of tenants do not earn enough to be required to pay market rent means relatively few will be in a position to buy“. (Source.)

There seems to be nothing stopping tenants from buying their state house and immediatly on-selling it to a Third Party.

Is it any wonder that the shortage of state housing is not being addressed in any meaningful way?

That was five years ago.

The housing crisis appears to have only recent dawned on National ministers. As Social Housing Minister, Paula Bennett  said on 25 May this year;

“Certainly what we’ve seen is it has been more acute in the last two years.”

It is most certainly not a recent problem.  It is only “new” if you are a well-paid National minister, living in a tax-payer-funded residence.

In my blogpost five years ago, I offered a solution to the housing crisis confronting this country;

Solution: build more houses.

This may seem like a ‘flippant’ answer to a desperate problem – but it is not.

The building of 10,000 new state houses may seem an outrageously expensive idea.  But it would address at least three pressing problems in our economy and society;

1. Persistantly high unemployment.

2. Low growth.

3. Inadequate housing for the poorest of our fellow New Zealanders.

At an average housing cost of $257,085 (calculated at DBH website @ $1,773/m for a 145 square metre, small house), the cost (excluding land) is $2.57 billion dollars,  including GST (approximate estimate).

By contrast, the October 2010 tax cuts gave $2.5 billion to the top 10% of income earners.

For roughly the cost of last year’s tax cuts, we could have embarked on a crash building-programme to construct ten thousand new dwellings in this country. …]

It would be a boom-time, as two and a half billion dollars was spent on products and services.

Would it actually end up costing taxpayers $2.57 billion dollars? The answer is ‘no’.  Government would actually re-coup much of that initial outlay through;

• gst
• paye
• other taxes
• reduced spending on welfare for unemployed
• and investment re-couped by rent paid for new rentals

Would it work?

Yes, it would.  An NZIER survey expects a strong pick-up in 2013 when the rebuilding phase hits full-flight, with 3.9% annual growth predicted from a previous forecast of 2.6%.

[…]

There is no reason why a determined government cannot adopt a bold programme for economic growth.

Instead of borrowing to pay for tax cuts we can ill afford, we should be investing in jobs.  The rest will almost invariably take care of itself.

We have the resources. We have the money. We have the demand for new housing. What else is missing?

The will to do it.

National has been half-hearted in it’s will to address this crisis. It has implemented a few lukewarm, ad hoc measures, but they are five years too late and too little.

Some of National’s announcements have been panic-driven;

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At other times, National has indulged in it’s favourite past-time of “blame-gaming”;

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By 2016, under Key’s watch, homelessness has increased; housing affordability has worsened, and home ownership has plummeted. Our esteemed Dear Leader no longer calls it a “crisis“. It is now just a “challenge“;

“I don’t think it’s a crisis, but prices are going up too quickly.”

“There are plenty of challenges in housing, and there have been for quite some time.”

Make no mistake, this is a direct consequence of National’s laissez-faire approach and an opportunistic reliance on mass immigration to keep the economy afloat at a time when dairying is no longer the main driver of economic growth.

By any definition, National’s “hands off” approach to housing – whether social housing for the poor or affordable housing for the Middle Classes – has been an abject failure.

The mood for change has never been as palpable since the dying days of the Shipley-led National government in 1999.

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The Labour Response

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On 10 July, Labour leader Andrew Little congratulated Labour on it’s 100th year birthday. He also put the boot firmly and fairly up National’s backside for it’s hopeless track record on housing.

If the supply of food were in short-supply and expensive as is housing for poor and middle-class New Zealanders, there would be rioting in the streets by now. By morning there would be a revolutionary government sitting in the Ninth Floor of the Beehive and Key and his ministerial cronies would be in hiding, exile, or under arrest.

Little began with a brief, but accurate refresher course in New Zealand history;

“We’re here to celebrate Labour’s creation of the welfare state, the achievements of widespread home ownership and the creation of state housing, a free health system and a free education system.

In short, we celebrate the building of a nation.

We celebrate and we remember the image of Michael Joseph Savage carrying the very first furniture into the very first state house.

Offering hope to people that the years of depression were over and there were brighter days ahead.

We’re here to celebrate the beginning of the reconciliation between Maori and Pakeha and the restoration of the mana of the Treaty of Waitangi.

We’re celebrating the decision to make New Zealand nuclear free. We celebrate the courage shown by thousands of New Zealanders who marched against the Springbok Tour.

We’re celebrating KiwiBank. Kiwisaver. Working for Families. The Cullen Fund.

We celebrate Homosexual Law Reform and we remember the scene of the packed galleries in Parliament rising in song after we passed Marriage Equality.

These are Labour achievements.

This is the legacy of our party.”

Little omitted Labour’s de-railing in the 1980s at the hands of a small cadre of Neo-liberal fifth columnists. They who delivered our country into the hands of  global finance. They who were the  authors of a failed economic experiment that caused generations of misery, and rewarded the top 10% with unearned wealth. They whose names will pass into history and be quietly forgotten.

This was a moment where Little – like his predecessor David Cunliffe –   turned his back on neo-liberalism and announced to the country that the experiment was over. Labour would take back the reigns of responsibility for ensuring housing for all;

“After eight years, this government’s lost touch.

And nowhere, nowhere, is this government more out of touch and out of ideas than on housing.

Housing is at the core of a good life.

It provides security and stability.

It helps families put down roots in their communities and save for retirement

It is one of the most common sources of capital for people setting up their own small business.

The ambition of widespread homeownership sits at the heart of our social contract. It is at the heart of the Kiwi Dream.

The promise that if you work hard and do the right thing, you can earn a place of your own.”

A few salient statistics drove home the worsening crisis to anyone who needed convincing;

“Since 2008, when this government came to office, the average house price in Auckland has nearly doubled.

But over the same period, incomes have increased by only 24%.

In the last year, house prices in Auckland have increased by $2600 a week.

Twenty six hundred dollars a week.

It’s crazy. How on earth do you save enough to keep up with that?

[…]

The proportion of Auckland houses being bought by investors has now reached 46% – around twice the level of first home buyers.”

Little went on to explain how the housing crisis went in tandem with other worsening social indicators;

“And then there is the hard edge of the crisis.

The rising poverty and homelessness that National turns a blind eye to.

We’ve all heard the stories of Kiwi kids admitted to hospitals with respiratory illnesses because the cold damp homes they have to live in are making them sick.

We’ve all seen the awful media reports in the last few weeks about what life is like for those who can’t find any home at all.

Of the 42,000 people living in overcrowded conditions or in garages or in cars.

Of children sleeping under bushes in South Auckland.

We’ve seen the story of the 11 year old girl, whose mother has a job, but whose family spent months living in a van before they were taken in by Te Puea Marae.

She said that the hardest part is actually not being able to read in the van, because you don’t have space. And there’s not much light because it would waste the battery.”

These are matters raised that Labour’s opponants on the Right cannot easily dismiss or explain away. These are real events from real New Zealanders living under the currently all-too-real neo-liberal system.

Increasing child poverty; income/wealth disparity; and a worsening housing crisis – all of which are the spawn of thirty years of neo-liberalism.

Those who maintain that poverty has deepened because the “market” has not been sufficiently de-regulated, nor government reduced, nor taxes sufficiently cut, need to ask themselves; “At what point does an experiment that is showing no signs of positive improvement have to be concluded as an abject failure”?

As Little demanded from the party-faithful;

“When did this become the New Zealand we lived in?”

Little then laid out what he called Labour’s comprehensive plan to take to the  election next year. He said that a Labour government would;

 

• …urgently address the shortage of emergency housing – with $60 million to provide 1400 new beds in emergency accommodation – enough for 5100 extra people a year. With the existing support that will take the number of people helped each year to over 8,000.

 

• …reform housing New Zealand – so that instead of being run like a corporation making a profit off the most vulnerable, we can invest hundreds of millions of dollars in building thousands of new, modern, high quality state houses instead.

 

• …will build 100,000 new affordable homes to be on sold to first home buyers.

 

• …will set up an Affordable Housing Authority to deliver ambitious new urban development projects, at scale and at pace. We are going to change the face of our towns and cities, and fix this housing crisis. The Authority will have a target to meet: 50% across all of the homes in its developments will have to be affordable. The Authority will look after the Government’s urban land holdings, and will make sure there is a pipeline of land for future needs – for housing, business, schools, parks and hospitals.

 

• …ban offshore buyers from the market unless they are willing to build a new home and add to the stock..

 

• …will extend the bright line test so that if you sell an investment property within five years, you’ll pay the full tax on it. That means the short term speculators won’t be able to get away tax free anymore. It means ending the tax incentives to speculate in short term property gains at the expense of families trying to get into a home.

 

• …will begin consulting on how to end the loop hole of negative gearing.

 

Perhaps Labour’s most audacious plan is to set up a new “Affordable Housing Authority”.

If one reads his speech a certain way, he is planning on reviving a newer, 21st century version of the old Ministry of Works (which was privatised by National in late 1996.) If so, it could be the most direct  way to build houses for people in desperate need.

Considering that most of this country’s infra-structure was built by the old Ministry of Works (or similar state bodies), including the telecommunications systems being used to upload this blogpost onto this website, it would not be a far-stretch of the imagination that it could be done again.

If so, this wasn’t just a speech – it was a Manifesto for the Last Rites of Neo-liberalism.

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Property Investors throw their toys out of the cot

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The reactionary response from the NZ Property Investors Federation was utterly predictable. They were miffed. All of a sudden, their tax-free pot of gold was about to be denied to them

The Federation’s executive officer, Andrew King, bleated like a spoiled brat who had just been told to share his toys;

“In one part of his speech, he said there were homeless people and people living in overcrowded conditions and they wanted to do something about that.  How does making it harder to provide rental homes to these people achieve it? Unbelievable.”

It may have escaped King’s somewhat narrow-attention, but homelessness and over-crowding has worsened during the time that his members have enjoyed spectacular tax-free gains. What were they doing in the last eight years?

He also compared businesses, shares, and farms with housing;

“No other investment is like that. If you do the same with a farm, with shares, with a business, all of those wouldn’t be affected, just rental properties – it’s just wrong.”

Generally speaking, people do not live in “shares”,  “businesses”, or farm paddocks (yet). People live in houses. That is the critical difference.

On top of which, astronomical rents are directly contributing to homelessness and over-crowding;

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So to whine that, all of a sudden, Labour’s housing policies will “ make it harder to provide rental homes to these [homeless] people” is contemptible.

His members should be held to account for their part in our housing crisis. The sooner that a capital gains tax is introduced at the same rate as New Zealand’s company tax (28 cents in the dollar), the better.

Mr King’s absurd “pity me” comments have crossed the borderline into territory commonly known as;

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National discovers Problem & Solution!

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Last year, as stories of homelessness; over-crowding; fewer available  Housing NZ homes; and worsening housing affordability began to make headlines around the country,  National was grabbing money from a government department tasked with caring for the most vulnerable people in our society;

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In all, National has raked in over half a billion dollars from Housing NZ;

Housing NZ dividends under National

HNZ Annual Report 2009-10 – $132 million   (p86)

HNZ Annual Report 2010-11 – $71 million   (p66)

HNZ Annual Report 2011-12 – $68 million   (p57)

HNZ Annual Report 2012-13 – $77 million   (p47)

HNZ Annual Report 2013-14 – $90 million –  (p37)

HNZ Annual Report 2014-15 – $108 million –  (p33)

HNZ Statement of Performance Expectations 2015/16 – $118 million – (p12)

Total: $664 million (over seven years)

See more here: National’s blatant lies on Housing NZ dividends – The truth uncovered!

Labour took dividends as well, around a third of National’s figure. The difference between the two is that Labour builds State housing, whilst National continually flogs them off.

This amounts to looting a critical government organisation that is akin to thieving from a charity.

This year’s 2016 Budget indicated that Housing NZ would pay a  dividend  of $38 million  and $54 million next year, for 2017.

Twenty four hours after Andrew Little gave his speech to the country, Housing NZ suddenly announced no dividends would be paid for the next two years;

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Labour’s Grant Robertson offered his rationale for National’s policy U-Turn;

“The first we hear from National that they suddenly believe Housing New Zealand needs to retain that money to invest in state houses is the morning after an announcement by the Labour Party that Housing New Zealand will never be required [by Labour] to provide a dividend to the government.

This is not a coincidence, this is a panicked, desperate response from the government.

What we know is that National has extracted dividends from Housing New Zealand over recent years and it’s quite clear that National has seen Housing New Zealand as a cash cow in the past.”

Bill English refuted allegations that National was panicking over Labour’s housing announcement only 24 hours previously;

“It’s nothing to do with Labour and the Greens. This is a $20 billion entity – you don’t come up with capital plans for the next five years because Labour puts out a press release.”

He also denied that National was  looting Housing NZ;

“We don’t accept that taking the dividend is stealing from state housing, because the dividend is not the constraint on what gets built…

…If there was less dividend, we’d just put in more capital – it’s not driven by the availability of the cash.”

National takes money in the form of dividends and taxes  from Housing NZ – whilst non-government charities are tax-free? And he earnestly claims it is not “stealing”?!

English then issued the most ridiculous explanation ever heard, that the figures in this year’s May 26 Budget “appear to be based on older HNZ numbers dating from almost a year ago“.

Yeah, right, Bill.

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Is the Finance Minister really expecting New Zealanders to believe that the government’s May 2016 budget was full of inaccurate figures?

What is really galling is that Bill English, Steven Joyce, and other National Ministers expect us – the public – to believe this rubbish. It is revealing just how stupid they think we are.

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Who is in charge anyway?!

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Whenever National implements unpopular legislative changes, they often point to Labour having carried out similar policies.

In 2014, National “borrowed” Labour’s policy by implementing free health-care for children under 13.

Last year, National raised benefits by $25 (to take effect this year) for people on welfare.

This year, having their ‘hand forced’ by Labour’s housing policy, the Nats have cancelled dividends from Housing NZ for the next two years.

National seems to be highly influence by Labour.

Which  raises the question; who is actually setting policy and governing the country? Because it appears we almost have a de facto Labour Government pulling the strings.

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A Cautionary Note for Labour

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On TVNZ’s Q+A on 10 July, Corin Dann quizzed Andrew Little on Labour’s policy toward Housing NZ tenants. Corin  Dann specifically asked Little about whether or not tenants should have state houses for life;

Corin Dann: You talk about state houses – an extra thousand state houses. Does Labour believe that someone should have a state house for life?

Andrew Little: I think we think when people are in circumstances where they can’t afford to buy their own home, can’t afford to rent, they’ve got to have a home. They’ve got to have a home, get their life on track, underway.

Corin Dann: Do they have it for life?

Andrew Little: If they’re at a point in their life where their circumstances have changed, and actually, they can afford to buy, my view is I would rather work with them to get them to buy that house so we could then release some funds to build the next state house.

Corin Dann: So you keen National’s policy? They don’t keep them for life?

Andrew Little: Well, I don’t agree with the policy that says we’ll target elderly people on fixed incomes in a state house and see if we can toss them out. That’s not a solution to anything. But what I would say is people who have gone into a state house early, got their lives sorted out,…

Corin Dann: They should move on if they can.

Andrew Little: …the circumstances are right, if we can sell that house to them, why wouldn’t we? And use the funds then to build the next state house for the next vulnerable person.

Selling State houses to tenants is text-book privatisation policy for National, and was a prime plank for the Bolger and  Shipley-led governments in the  1990s.

It is a dangerous road for a Labour government to go down.

Selling a state house to a tenant may seem a kindly gesture from a  benevolent left-wing government.

But eventually a National-led government will be elected back into power. Their track record on selling State houses is evident and they would have no hesitation in taking a Labour policy of selling State housing to tenants and expanding on it.

This is thin-edge-of-the-wedge, slippery-slope stuff.

This is mis-guided to the extreme, and will provide a future right-wing government a ready-made policy to act upon. And not in a nice way.

If Labour is serious in returning to it’s social democratic roots, it would do well to think carefully before embarking on such a naive policy.

Instead, it should consider the following;

[1] Transience

Transience is one of the greatest problems affecting low-income, poverty-stricken families. Moving from one house to another is debilitating to such families – especially for children.

A government report states that transience for children can have extreme, negative impact on  their learning;

Nearly 3,700 students were recognised as transient during the 2014 year. Māori students were more likely to be transient than students in other ethnic groups.

[…]

Students need stability in their schooling in order to experience continuity, belonging and support so that they stay interested and engaged in learning.

All schools face the constant challenge of ensuring that students feel they belong and are encouraged to participate at school. When students arrive at a school part-way through a term or school year, having been at another school with different routines, this challenge may become greater.

Students have better outcomes if they do not move school regularly. There is good evidence that student transience has a negative impact on student outcomes, both in New Zealand and overseas. Research suggests that students who move home or school frequently are more likely to underachieve in formal education when compared with students that have a more stable school life. A recent study found that school movement had an even stronger effect on educational success than residential movement.

There is also evidence that transience can have negative effects on student behaviour, and on short term social and health experience

Encouraging families to stay long-term in State housing not only creates a sense of community amongst tenants; stability for fragile, vulnerable families,  but assists in the long-term stability and education of children.

Not only is a state house “for-life” fair, it provides real, tangible, long-term benefits.

[2] Guaranteed Tenancy

Low-income, vulnerable families in State housing must be given guaranteed, protected security-of-tenure.

Currently, tenants are exposed to the winds-of-change whenever there is a change in government. Their tenure is at the pleasure of right-wing governments, and mass-evictions have been commonplace under John Key’s administration;

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A progressive government must do all within it’s power to protect such vulnerable families. Otherwise what is the point of throwing out right-wing regimes when their ideologically-driven policies no longer palatable, and well past their Use-By date?

Tenancies must be secured. Either by the use of long-term contracts, enforceable in Courts of law, or by some other means such as entrenched legislation.

Labour-led governments come and go.

But tenancies for our most vulnerable must be protected from the whims of others.

[3] State Housing Protected

As well as protection for tenants of state housing, state houses themselves must be entrenched and protected from the rapaciousness of right-wing governments.

In modern, First World societies, the power of contract is supposedly sacrosanct.

It should not be beyond a progressive government to use some means of contract-law to safe-guard state housing. Once this is accomplished, it should make it near-impossible for a right-wing regime to wreak havoc with the lives of the poor.

Perhaps it is time to look at how we can make the concept of contract-law work in the favour of those who have least wealth to lose.

There is much more work to be done.

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References

Scoop media: Key – Speech to New Zealand Contractors Federation

theyworkforyou.co.nz: State Houses—Sale and Disposal

NZ History: Construction and sale of state houses, 1938-2002

Housing NZ Corporation: Rent, Buy or Own – overview (archived page)

Beehive: State houses available to buy from today

TV1 News: First home buyers set to be disappointed with Budget

Department of Building & Housing: Estimated building costs (archived page)

Dominion Post: Inequality report ignores tax cuts for rich – Goff

NZIER: Home

TVNZ News: NZ economic outlook grim until 2013 – NZIER (archived page)

Interest.co.nz: Paula Bennett announces plan to offer $5,000 to homeless Aucklanders

Hive News: Hive News Tuesday – Key blames ‘Dirty Politics’ for lack of state house sale debate

Reuters: NZ Prime Minister says central bank should get on with housing measures

Parliament Today: Housing NZ’s Woes Blamed on Labour

TV3 News: Housing blame game flares up in Parliament

NewstalkZB: Govt accused of blaming Auckland Council for its own failings on housing

Sharechat: Key blames Labour for barrier to foreign buyer ban

Youtube: Bill English Blames Greens for Housing Crisis

Otago Daily Times: Homelessness increasing in NZ

NZ Herald: Auckland has the fifth least-affordable houses in the world

Fairfax media: NZ home ownership at lowest level in more than 60 years

TV3 News: Key – No housing crisis, foreign buyers’ influence ‘minor’

TV1 News: Is there a housing crisis? John Key fails to say yes or no after being put on the spot

Labour Party: Andrew Little’s Centenary policy speech

Treasury: Income from State Asset Sales as at May 2014

Fairfax media: Labour’s plan to tax property investors slammed as ‘attack’ on rental property providers

Radio NZ: High Auckland rents forcing people onto the streets – Sallies

IRD: Company Tax Rate

Radio NZ: Housing NZ to pay Crown $118m dividend

Radio NZ: Housing NZ confirms it will not pay govt dividend

Fairfax media: Bill English denies U-turn after Steven Joyce reveals Housing NZ won’t pay dividend

National Business Review:  Govt blames outdated Budget figures for Housing NZ dividend U-turn

Metro mag: Opinion – Is John Key the finest actor of his generation?

NZDoctor.co.nz: Free care for the under-13s features in growth Budget

Radio NZ: Welfare increases – what $25 buys you

TVNZ: Q+A – Corin Dann and Andrew Little (video)

TVNZ: Q+A – Corin Dann and Andrew Little (transcript)

Te Ara NZ Encyclopedia: Housing and government – Total Housing Stock

Education Counts: Transient students

Dominion Post: Housing policy will destabilise life for children

Fairfax media: State tenants face ‘high need’ review

NZ Herald: Elderly, disabled included in state house review

NZ Herald: State tenants to make way for workers

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Our growing housing problem

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

Housing; broken promises, families in cars, and ideological idiocy (Part Toru)

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National’s blatant lies on Housing NZ dividends – The truth uncovered!

State house sell-off in Tauranga unravelling?

Upper Hutt residents mobilise to fight State House sell-off

Park-up in Wellington – People speaking against the scourge of homelessness

National and the Reserve Bank – at War!

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This blogpost was first published on The Daily Blog on 12 July 2016.

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= fs =

Letter to the editor – National’s “pennies from heaven”

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from: Frank Macskasy <fmacskasy@gmail.com>
to: NZ Herald <letters@herald.co.nz>
date: Sun, Jul 3, 2016
subject: Letter to the editor

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The Editor
NZ Herald

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At the recent National Party Conference, Key took a rather childish swipe at other political parties by suggesting that their economic policies were predicated on “pennies from heaven”, referencing Bing Crosbie’s song by the same name.

In the next breath, he advised faithful National party followers that his government would be borrowing $1 billion from overseas lenders, to build houses in a belated attempt to address growing homelessness in this country.

Maybe not “pennies from heaven”, but dollars from overseas banks?

Meanwhile, National is still hinting at more tax cuts to come. This will further increase indebtedness of the government (ie, all New Zealanders) from the current $60 billion (approx) to an estimated $93.9 billion (gross) by next year, according to Treasury.

All of which has to be borrowed and paid back.

There are no “pennies from heaven” – a lesson National has failed to learn.

Who, amongst us, still believe National are “sound, prudent” fiscal managers? Anyone?

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-Frank Macskasy

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[address and phone number supplied]

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References

Radio NZ: $1 billion fund to boost housing build

NZ Treasury: Residual Cash and Net Core Crown Debt (2016)

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= fs =

Budget 2016 – Who wins; who loses; who pays?

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“The point is if we’re going to have a tax programme [of tax cuts] – we’re not ruling that out in for 2017 or campaigning on it for a fourth term. But having probably a bigger one, to be blunt.” – John Key, 16 May 2016

“Philosophically we believe in lower taxes and smaller government, and government’s definitely getting smaller.”- John Key, 16 May 2016

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Paula Bennett denies there is a housing crisis in New Zealand;

“I certainly wouldn’t call it a crisis. I think that we’ve always had people in need.” – Paula Bennett, 20 May 2016

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Paula Bennett announces plan to offer $5,000 to homeless and state house tenants to leave Auckland and go live in provinces;

“I would say to those that are homeless that there is a chance that they could get a house in days if they were willing to look outside of Auckland.” – Paula Bennett, 25 May 2016

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“Very quietly, a cut here and a decrease there, a failure to keep up with inflation in one place, and ignoring increasing population in another place, the Government is walking away from New Zealand’s longstanding social compact.

In his Budget speech, Bill English proudly says that government expenditure is down to less than 30 per cent of GDP, and that’s the way that it’s going to stay.

But how is this retreat from the economy achieved?

It happens by spending less on health and less on education, and not spending enough on housing for the least well off New Zealanders.”–  Deborah Russell, 26 May 2016

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“While it’s true the overall numbers of Housing NZ homes haven’t risen dramatically, the mix is changing and there are more in Auckland and less in places that we don’t need them.” – John Key, 27 May 2016

 

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“Sadly, it seems once again that the Budget is a missed opportunity for children, while the military and Government spy agencies do extremely well. I don’t recall seeing any public opinion polls or evidence indicating the need for more investment in either of these areas, especially when there is such desperate need among families with children.

The Government has achieved its objective of appearing fiscally responsible and not much else. But through a lack of planning and an apparent lack of caring children are living in garages or cars, and do not have the nutrition or warm clothing that they need. Kiwi kids have a right to better lives than that.” – Vivien Maidaborn, New Zealand Executive Director, Unicef, 29 May 2016

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“We would like to see some tax reductions, particularly for those middle income taxpayers who find themselves getting into higher tax brackets.” – Finance Minister Bill English, 27 May 2016

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There is absolutely zero doubt in my mind that the 2016 Budget is geared 100% toward building up a surplus for tax cuts to be announced next year. Just in time for the 2017 Election. John Key and Bill English have strongly indicated as much with their “kite-flying” with hints of cuts-to-come.

Funding for various state services have either barely increased – or drastically cut. The result has been a $700 million surplus – which appears to have been achieved at the expense of cutting funding for social NGOs and state services for the most vulnerable people in our society.

Some of the winners and losers from this year’s Budget…

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Winner

GCSB and SIS;

Funding for spy agencies (GCSB and SIS) will increase over the next four years by $178.7 million.

Loser

Department of Conservation;

For 2015/16 Budget, allocated $471,932,000

For 2016/17 Budget, allocated $430,190,000

Budget: Cut $41,742,000

Who Pays?

Endangered species throughout New Zealand and future generations of New Zealanders.

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Winner

Prime Minister’s Department;

For 2015/16 Budget, allocated $65,710,000

For 2016/17 Budget, allocated $77,442,000

Budget: Increase $11,732,000

Loser

Radio NZ;

For 2015/16 Budget, allocated $31,816,000

For 2016/17 Budget, allocated $31,816,000 (Based on zero change to NZ on Air funding; $128,726,000.)

Budget: frozen – nil increase since 2008/09.

Note, based on the Reserve Bank Inflation Calculator, Radio NZ’s funding should be around $36,570,000 and it’s funding freeze by National constitutes a 14.9% under-funding;

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Who Pays?

We all do.

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Winner

Education – Charter Schools;

Funding for up to seven new charter schools will be provided in the 2016 Budget, the Government has announced. – NZ Herald

…$328.9m of capital funding and $20.2m of operating funding would go towards public private partnerships (PPPs) for seven new schools and three rebuilds. – Fairfax media

Loser

Public schools operation grants – frozen;

School operational funding has been frozen in this year’s Budget in favour of targeted funding for [under-achieving, at-risk] 150,000 kids.

[…]

… $43.2 million over four years will be provided to those schools with under-achieving students, and it’s expected the money will be used to raise achievement, there’s no accountability attached to the funding.

[…]

The targeted funding works out at about $1.79 per student, per school week – schools won’t even know which students are being targeted as the policy’s designed not to identify them. – Fairfax media

Early Childhood Education subsidy-funding – frozen;

Early childhood education providers got no increase to their government subsidies for the second consecutive year. – Radio NZ

Who Pays?

Our children.

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Winner

NZ military –

The Defence Force receives new operating funding of $300.9 million over four years as part of Budget 2016 to support the work it does, Defence Minister Gerry Brownlee says. – Gerry Brownlee, Minister of Defence

Loser

Home Insulation Programme –

National has cut home insulation funding to its lowest ever level in Budget 2016…

[…]

Budget 2016 allocates just $12 million this year for the Warm Up New Zealand programme this year and $4.5 million for the Healthy Homes programme, compared to $23.9 million for Home Insulation last year. – Scoop media/Green Party

Who Pays?

 

• “low-income tenants, particularly those with high health needs.
• …young children (newborns to 5-year olds) who are living in cold, damp and unhealthy homes.” – Jonathan Coleman, Simon Bridges

 

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There are three significant stand-outs for this Budget…

1 – This Surplus was achieved at the expense of the poor.

With school operational funding frozen; no increase for early childhood education funding;  a dire crisis of homelessness; State houses being sold of by National; and a critical shortage of housing – it does not take much wit to understand that Bill English’s $700 million Budget surplus was achieved by under-spending in key social areas.

Worse still, National continues to doggedly pursue it’s policy to sell up to eight thousand state houses  by 2017.

Compounding National’s mis-management of the country’s scandalous housing crisis is National’s unrelenting and inhumane demand for dividends from Housing NZ.

This far, National has extracted over half a billion dollars from Housing New Zealand by way of dividends.

Housing NZ dividends under National

HNZ Annual Report 2009-10 – $132 million   (p86)

HNZ Annual Report 2010-11 – $71 million   (p66)

HNZ Annual Report 2011-12 – $68 million   (p57)

HNZ Annual Report 2012-13 – $77 million   (p47)

HNZ Annual Report 2013-14 – $90 million –  (p37)

HNZ Annual Report 2014-15 – $108 million –  (p33)

HNZ Statement of Performance Expectations 2015/16 – $118 million – (p12)

Total: $664 million (over seven years)

The above figures do not include taxes paid by Housing NZ to the National government.

Imagine how many state house could have been built by Housing NZ in the last seven years.

Imagine that every low-income family that needed a warm, dry, home – could have had one by now.

Imagine that instead, National will be demanding another dividend this year from Housing NZ – and will be effectively giving it away by means of tax-cuts to affluent New Zealanders.

2 – Many so-call “increases” are illusory.

When taken over a four year period many of English’s Budget “increases” are actually a cut in expenditure. Just two examples from many;

School  funding for 150,000 under-achieving, at-risk school children, was budgeted at  $43.2 million This sounds good. But that figure is spread not over the 2016/17 period – but  over four years.

Same with the Warm Up New Zealand and Healthy Homes Initiative, touted by Ministers Coleman and  Bridges as;

“…to insulate rental houses occupied by low-income tenants, particularly those with high health needs” and “to reduce preventable illnesses among young children (newborns to 5-year olds) who are living in cold, damp and unhealthy homes”

The media release touted;

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But look further into the detail;

The investment includes:

• $18 million of operating funding over two years to extend the Warm Up New Zealand programme to insulate rental houses occupied by low-income tenants, particularly those with high health needs.

• $18 million over four years to expand the Healthy Homes Initiative to reduce preventable illnesses among young children (newborns to 5-year olds) who are living in cold, damp and unhealthy homes.

This is how English created his Budget “surplus” – with cleverly concealed cuts to social programmes that impact on the poorest; most powerless; most desperate people in our society.

And we wonder why entire families are living in garages, cars, and tents?

And we wonder how it came to be that children are dying from mould in damp houses?

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3 – This is an Ideological Budget

Make no mistake – this was an ideological budget with “Neo-Liberal Approved” stamped in big, red letters all over it. It was cold-blooded and remorseless in it’s pursuit of specific objectives;

• reducing government spending on the poor, by freezing/cutting expenditure on social services
• increased government spending on security agencies (spy, defence, police), in case the 1981 up-rising is repeated
• satisfying demands from National’s business, conservative, and anti-welfare constituents
• to give Bill English a second surplus
• set the stage for tax cuts to be announced in next years’ budget
• and offer an electoral bribe to voters in time for the 2017 general election

As is almost always the case, those at the bottom of the socio-economic heap are the ones who pay for National’s ideologically-inspired budget. Sometimes they pay with their lives.

Expect more of the same next year.

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Addendum

Spotted at a Z Service Station in the Hutt Valley; this Charity “voting” box, where customers vote for the charity of their choice. The charity gaining  most tokens wins a $4,000 donation from Z. Of the four, Fostering Kids NZ is ‘miles’ ahead with tokens;

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Z staffer, Manpreet, standing beside Coin-Vote Box, at a Service Station in the Hutt Valley

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Note the level of support for Fostering Kids NZ;

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It is refreshing to see indications that  New Zealanders are still compassionate to children  from vulnerable, less well-off families. There is still hope for our society, even if people like Key, English, Bennett, Tolley, et al have turned their heads to look the other way.

Acknowledgement: Many thanks to Deborah L for her sharp eye, spotting, photographing, and sending me the above images along with relevant info.

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References

Fairfax media: Prime Minister John Key hints at $3billion tax cuts for next election

Fairfax media: John Key is beating the tax cuts drum for 2017 with bigger surpluses ahead

Radio NZ: No housing crisis in NZ – Paula Bennett

Interest.co.nz: Paula Bennett announces plan to offer $5,000 to homeless Aucklanders and state house tenants to leave Auckland

NZ Herald: Dr Deborah Russell – Budget 2016 – How do we look after all New Zealanders?

Radio NZ: Checkpoint – PM puts onus on Auckland Council to create land supply

Fairfax media: Budget 2016 – A bare-minimum budget for children

Radio NZ: Tax cuts may be on cards – English

NZ Herald: Budget 2016 – $700m surplus this year

Radio NZ: Budget 2016 – SIS and GCSB get extra $178.7 million over four years

Budget 2016: Vote Conservation

Treasury: Budget 2016 – Vote Prime Minister & Cabinet

Budget 2016: Vote Arts, Culture and Heritage

NZ on Air: Radio NZ Funding Decisions 1993-2016

Reserve Bank: Inflation Calculator

Budget 2016: Vote Education

NZ Herald: New charter school funding announced

Fairfax media: Budget 2016 – School property and early childhood the big winners

Radio NZ: Budget promises funding for nine new schools

Treasury: Summary of Initiatives in Budget 2016

Budget 2016: Defence Force receives $301m new funding

Scoop media: Government cuts Warm-Up programme that saves lives

Beehive.co.nz: $36m for warmer, healthier homes

Radio NZ: Thousands of state houses up for sale

Fairfax media: Damp state house played part in toddler’s death

Interest.co.nz: Govt sees NZ$0.7 bln OBEGAL surplus in 2016/17

TV3 The Nation: Interview with Bill English

Additional

NZ Herald: Shamubeel Eaqub – House crisis puts Auckland’s future at risk

Other bloggers

The Daily Blog: Budget 2016 – What Bill English Didn’t Say In His Speech

The Daily Blog: The rules for the old too good for children?

The Standard: The Mother Budget

The Standard: Key’s powerful speech on the urgent housing crisis

The Standard: John Key used to be ambitious about dealing with poverty in New Zealand

The Standard:  Budget 2016 – F for Fail

Previous related blogposts

Tax cuts & school children

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

The Mendacities of Mr Key #3: tax cuts

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

National spins BS to undermine Labour’s Capital Gains Tax

John Key’s government – death by two cuts

A Message to Radio NZ – English continues fiscal irresponsibility with tax-cut hints

The consequences of tax-cuts – worker exploitation?

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

National’s blatant lies on Housing NZ dividends – The truth uncovered

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This blogpost was first published on The Daily Blog on 2 June 2016.

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Letter to the editor – Who are the Real Greedies?

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It is amazing how many blame the victims of neo-liberal ideology, rather than looking at the causes of why things happen.  Are some people really so simple-minded that they can’t see beyond their immediate prejudices…?

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So yet again, I point out some ‘home truths’ to people like Ms Moore, who seems to have selective amnesia when it comes to recent history…

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: Sat, May 21, 2016
subject: Letter to the editor

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The editor
Dominion Post

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In attacking so-called “loan defaulters”, Sylvia Moore has targetted the wrong group. (letters, 20 May)

She is indeed correct that increased student fees and student loans were introduced in 1992. Before that, tertiary education was near-free.

Beneficiaries of free tertiary education were people like John Key, Bill English, Steven Joyce, et al. Even Paula Bennett was recipient of free tertiary education, through the Training Incentive Allowance – which she scrapped in 2009 after becoming Minister for Social Welfare.

When Moore states that “perhaps if they [student loan defaulters] repaid their loans, the government, might be able to allocate a grant to parents in need of help” misses the point that since 1986 there have been seven tax cuts. The last two in 2009 and 2010 cost over $2 billion per annum

That is why schools and hospitals are being under-funded and children are in need in equipment such as lap-tops, as Ms Moore pointed out.

It is a double standard that we now saddle our youth with massive student debts and threats of prosecution.

Perhaps she should cast her ire at National Ministers who have gained personal benefit from free education and are now abusing their power to force others to pay for what they got for free.

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-Frank Macskasy

[address and phone number supplied]

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References

NBR: Bennett cutting a benefit that helped her – Labour

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

Previous related blogposts

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

Roads, grandma, and John Key

John Key’s track record on raising wages – 4. Rest Home Workers

Aged Care: The Price of Compassion

Tax cuts & school children

Nick Hanauer – a devastating demolition of the Neo-liberal dogma of tax cuts!

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

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

The consequences of tax-cuts – worker exploitation?

The Mendacities of Mr Key #3: tax cuts

A Message to Radio NZ – English continues fiscal irresponsibility with tax-cut hints

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This blogpost was first published on The Daily Blog on 22 May 2016.

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The consequences of tax-cuts – worker exploitation?

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Fun Fact #1

Since 1986, there have been no less than seven tax cuts in New Zealand;

1 October 1986 – Labour

1 October 1988 – Labour

1 July 1996 – National

1 July 1998 – National

1 October 2008 – Labour

1 April 2009 – National

1 October 2010 – National

Fun Fact #2

John Key says he supports New Zealanders paid higher wages. In fact, he stated  that desire in 2007, and repeated it in  2008, 2009, 2010, 2011, and 2012;

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“We think Kiwis deserve higher wages and lower taxes during their working lives, as well as a good retirement.” – John Key, 27 May 2007

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

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“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

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“I don’t want our talented young people leaving permanently for Australia, the US, Europe, or Asia, because they feel they have to go overseas to better themselves.” – John Key, 15 July 2009

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“Science and innovation are important. They’re one of the keys to growing our economy, raising wages, and providing the world-class public services that Kiwi families need.” – John Key, 12 March 2010

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“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

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“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

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“We want to increase the level of earnings and the level of incomes of the average New Zealander and we think we have a quality product with which we can do that.” –  John Key, 19 April 2012

Mr Key has not repeated those statements since April 2012.

Fun Fact #3

The gender pay gap in New Zealand has worsened, from 9.9% last year to 11.8% this year;

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Source

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Timeline

2012

Kristine Bartlett and the Service and Food Workers Union lodge a claim with the Employment Relations Authority, alleging Ms Bartlett’s employer Terranova Homes and Care Ltd was in breach of the Equal Pay Act 1972.

November 2012

Ms Bartlett’s case referred to the Employment Court as it raises an important question of law.

June 2013

A preliminary Employment Court hearing held on questions of law.

23 August 2013

Landmark ruling on equal pay welcomed

Unions are hailing an Employment Court decision which allows a female rest home caregiver to argue she is underpaid because she is in a female-dominated industry.

Hutt Valley woman Kristine Bartlett is arguing her employer Terranova Homes is violating equal pay for equal work legislation, saying she would get more money if she was not working in an industry dominated by female staff.

The Employment Court held a preliminary hearing after Terranova Homes argued the court could only compare staff within its own workplace and not look at other workplaces.

The three court judges say the legislation makes specific provision for work predominantly performed by women.

The law says pay rates must be the same as male employees with the same, or substantially similar, skills, responsibility and service performing the work under substantially similar conditions and with substantially similar effort.

The judges said there was no way gender discrimination in pay could be removed if they could not compare pay rates more widely.

January 2014

Terranova appealed this ruling to the Court of Appeal.

February 2014

A decision on a landmark pay equality case has been reserved by the Court of Appeal.

The Employment Court last year found in favour of Lower Hutt caregiver Kristine Bartlett, who argued her $14.32 hourly pay rate was a result of gender discrimination under the Equal Pay Act.

The ruling – which paves the way for pay equality in the female-dominated aged care sector – has been challenged in the Court of Appeal by Ms Bartlett’s employer, Terranova Homes. The two-day hearing finished yesterday with the decision by Justices Mark O’Regan, Lynton Stevens and Christine French reserved.

October 2014

The Court of Appeal has supported an Employment Court decision which ruled that a Lower Hutt rest home worker should receive pay parity with other equivalent sectors.

Kristine Bartlett won her landmark Employment Court case last year – arguing that being paid less than 15 dollars per hour, despite working in rest homes for over 20 years, was discriminatory. Her employer, Terranova Homes and Care, took the issue to the Court of Appeal. But the Appeal Court has dismissed the appeal, saying the language and purpose of the Equal Pay Act back up the decision by the Employment Court.

November 2014

Today the New Zealand Aged Care Association will appeal to the Supreme Court on behalf of TerraNova Homes and Care Limited in their case with the Service and Food Workers’ Union and Kristine Bartlett.

“This case has vast implications for all New Zealanders and we felt compelled to have the highest court in the land settle the questions around the Equal Pay Act 1972 once and for all,” said Martin Taylor, CEO of the NZACA.

“In handing down its recent judgement, the Court of Appeal said the decision was finely balanced with strong arguments favouring both sides. We believe the issue must be seriously looked at and tested again.

22 December 2014

Supreme Court denies Terranova leave to appeal in landmark pay equity case

The Supreme Court has denied aged care provider Terranova Homes and Care, at the centre of a landmark court case paving the way for gender pay equity, leave to appeal the ruling.In October the Court of Appeal dismissed an appeal by Terranova Homes against an earlier Employment Court ruling backing Lower Hutt rest home worker Kristine Bartlett’s claim that women care workers’ low pay was discriminatory. She took a case against her employer, arguing her $14.32 an hour pay rate was a result of gender discrimination under the Equal Pay Act.

The Service and Food Workers Union also made a claim on behalf of 15 other caregivers employed by the company, asking for a statement of the general principles to be observed for implementing equal pay.

In a Supreme Court decision out this afternoon, the judges said it considered the company’s appeal premature.

20 October 2015

Equal pay on the way for women?

The government has set up a taskforce to look into pay equity issues, which could lead to a change to the current law.

Minister for Workplace Relations and Safety Michael Woodhouse said unions and employers had agreed to a working group to establish principles for dealing with pay equity claims.

It had been prompted by a recent Court of Appeal decision on pay rates in the aged care sector, which found women in predominantly female workforces were paid less.

Early 2016

Case scheduled to go before the Employment Court  to early 2016 (dates to be determined). 

(Acknowledgement: Much of the above Time-line, with  exceptions, is re-published from the New Zealand Aged Care Association.)

 

The Case: exploited labour

The case of Kristine Bartlett  is a relatively simple one. For twentytwo years working-experience in rest-home facilities she earned just barely above minimum wage. Since the 1990s, her wages have risen by $5.

Ms Bartlett’s profession is predominantly female, and like many female-dominated professions, it is paid less than male-equivalent jobs.

As Fairfax media Christie Hall wrote  on 19 January;

“Her [Kristine Bartlett ] case is the first time New Zealand’s courts have grappled with the “nurses versus firemen” debate – essentially an argument that occupations traditionally seen as “women’s work” are less valuable and, therefore, attract a lesser rate of pay.”

On  23 August 2013,  the Employment Court ruled that Ms Bartlett’s was in fact underpaid because she worked  in a female-dominated industry. (The document is well-worth reading and provides sound, rational, and carefully-constructed argument for advancing equal pay for women.)

Subsequent Court decisions have upheld the Employment Court (see Timeline above).

The NZ Aged Care Association (NZACA) has expended large sums of money on legal action to thwart  the cost of raising wages for aged-care workers. NZACA fears the increased cost of a ballooning wages-bill impacting on it’s members, which has traditionally relied on low-paid labour to operate.

In October 2014, in a press release published on nzdoctor.co.nz, NZACA stated;

Unfortunately the Government subsidy for aged care is not enough for providers to make a profit. Over the last decade, 200 aged care facilities have closed primarily for financial reasons. The majority of these facilities relied on the government’s subsidy for their revenue.

[…]

The existing aged care sector cannot afford to increase all aged care worker’s wages at an estimated cost of $120 – $140 million alone – the sector will need increased Government subsidies to prevent further closures of our aged care facilities.

In an undated statement on NZACA’s website, the Association states;

The Government contract undervalues the worth of caregivers working in the private aged care sector. A caregiver working in a District Health Board geriatric hospital receives on average $17.50 an hour compared with an average hourly rate of $15.30 in our sector.

NZCA has been lobbying Government for many years to put more money into this sector which cares for New Zealand’s most vulnerable citizens.

And in November 2014, NZACA’s CEO, Martin Taylor, stated;

“Another reason why we need to appeal is that there are hundreds of rest homes operated by individuals and community trusts from Kaitaia to Bluff who have told us they would close if wages went up significantly and funding stayed the same.

When you understand this reality we have no option but to appeal, despite everyone agreeing caregivers are worth more.”

On 23 December last year Service and Food Workers Union National secretary, John Ryall, said it was about time the Government  took responsibility to achieve gender pay equity;

“The Government is the sector funder and it is really up to it to decide whether it wants a resolution to the long standing pay equity issue,” he said.

Encouraging National to act will be no easy task to achieve.

Bronwen Beechey, writing for Fightback! on 17 April 2015, pointed out National’s apalling track record when it came to implementing equal pay legislation;

The Employment Equity Act was passed in 1990, but repealed within months after the National Party came to government.

In 2009, the current National government abolished the Pay and Employment Equity plan of Action and the Pay and Employment Equity Unit that had been set up in the Department of Labour in 2004.

A cynic would suggest that low wages assist National to reduce the amount it has to pay to subsidise aged-care workers. It is providing a service ‘on-the-cheap’, in a way similar to  fast-food chains employing staff at minimum wage, to produce  high-carb, fat-laden, ‘fast food’.

In fact, it would not be the first time that National has been exposed as supporting low wages – despite Key’s pious utterances otherwise.

Three and a half years ago, on  10 April 2011, on TVNZ’s Q+A, English made his now-infamous comments justifying a low-wage economy;

“Well, it’s a way of competing, isn’t it? I mean, if we want to grow this economy, we need the capital – more capital per worker – and we’re competing for people as well…

… we need to get on with competing with Australia. So if you take an area like tourism, we are competing with Australia. We’re trying to get Australians here instead of spending their tourist dollar in Australia.”

Three years later, on 30 July 2014, John Key appeared to ‘forget’ his earlier pronouncements on increasing wages when he responded to a question in Parliament from David Cunliffe;

Hon David Cunliffe: Will the Prime Minister support the pay increase for the quarter of a million workers who would directly benefit from Labour’s minimum wage changes, which will provide a significant boost to the economy through boosting workers’ spending power?

Rt Hon John Key: In a word, no. The reason for that is I am not so irresponsible that I would say to 6,000 New Zealanders that they are losing their jobs because the Labour Party is polling at 25 percent—

No wonder E Tu  union spokesperson, Alistair Duncan, was wary of how National would respond to the Court rulings, as he said on 21 October;

“This is a well-timed and very smart move – if we can deliver genuine equal pay, it will be a very good thing.  But it’s not certain and we now need to work very hard to make sure we get equal pay for equal value.”

Meanwhile, as aged-care workers (and low-paid women workers in other industries) have had their case validated by the Courts, employers are not so happy. A new ‘bogey-man’ was erected by the Employers and Manufacturers Association CEO;

Employers and Manufacturers Association chief executive Kim Campbell said the task force would need to establish clear terms of reference, because comparing the relative value of different jobs was complex.

He said any decision to boost pay rates in some industries would come with a cost.

“The government has the greatest interest in this because they’re paying for most of the aged care and hospital workers and they must be concerned that if you increase their salaries, people’s taxes may go through the roof.”

This argument that, by increasing wages, people’s taxes “may go through the roof” is not just over-the-top scare-mongering – but is instructive of the mentality of individuals like Kim Campbell.

The argument that Campbell is putting forward is that taxpayers are entitled to cheap labour.

Is this the inevitable consequence after seven tax cuts, spanning twentynine years?

Because if reduced tax revenue has resulted in central government being unable to pay fair wages for workers (whether as state sector employees or subsidised workers in the private sector), then we have created a rod for our own backs.

Regardless whether sufficient tax revenue exists or not, Campbell’s suggestion that taxpayers are somehow justified in expecting an exploited workforce is odious. It is attempting to re-create a quasi-modern-day slave work-force.

The Employment Court addressed this very issue in it’s 22 August 2013 Judgment:

History is redolent with examples of strongly voiced concerns about the
implementation of anti-discrimination initiatives on the basis that they will spell
financial and social ruin, but which prove to be misplaced or have been acceptable as
the short term price of the longer term social good. The abolition of slavery is an old
example, and the prohibition on discrimination in employment based on sex is both a
recent and particularly apposite example. [pg 32]

If successive governments were foolish in cutting taxes (usually as election bribes) to such a level that the State can no longer afford to pay for services New Zealanders expect as of right, then the solution is crystal clear: raise taxes.

Or go without.

I doubt many National-voting New Zealanders will happily contemplate a future in their dotage without a workforce of aged-care staff who are remunerated sufficiently to wipe the spittle from their wrinkled chins; change their faeces-and-urine-soaked underwear; and all the other myriad tasks associated with necessary good care.

Just how much do New Zealanders want aged-care in their twilight years?

If we do, we should be prepared to pay for it.

National Prompted to act

The successful court cases supporting Kristin Bartlett’,  equal-pay case has prompted National to finally move on the problem;

The government has set up a taskforce to look into pay equity issues, which could lead to a change to the current law.

Minister for Workplace Relations and Safety Michael Woodhouse said unions and employers had agreed to a working group to establish principles for dealing with pay equity claims.

It had been prompted by a recent Court of Appeal decision on pay rates in the aged care sector, which found women in predominantly female workforces were paid less.

Mr Woodhouse said there were other cases before the courts.

“We believe the most efficient way to deal with that, and to step back and take a look at what the principles for pay equity might look like is to get this working group together, and I’m very pleased we’ve been able to do that.”

Unions had agreed to put legal action on hold until March 2016 to allow the working group to proceed, he said.

This problem could never be resolved without government involvement. By subsidising aged-care workers, it is in effect, a secondary employer, and therefore has responsibilities to make good an untenable and unfair situation.

Otherwise, if National cannot resolve this decades long problem, more radical and direct solutions need to be considered.

Possible solutions

1. Where aged-care facilities are non-profit, increase subsidies paid directly to workers or change their employment status to State employees, with similar pay rates, benefits, and protections.
2. Where an aged-care company, are profit-making ventures that return a dividend to shareholders, such Oceania (45 facilities), Ryman (25 facilities), and Radius (19 facilities), they should be made by law to increase the wages of their staff first and foremost.
3. Nationalise the aged-care industry. Looking after the elderly should not be an “industry” where the profit motive (in many instances) is the guiding principle. This should be no more acceptable than having primary schools or hospices run as businesses.

If private enterprise cannot pay it’s workers a fair wage, as well as operate effectively, then the State has a responsibility to intervene and assume a more direct role.

Neo-liberal activists and fellow-travellers may balk at such a suggestion, but they should consider one important factor they may have forgotten: we all grow old eventually. Including free-marketeers.

Appendix1

Legislation.

Equal Pay Act 1972

Court may state principles for implementation of equal pay

• The court shall have power from time to time, of its own motion or on the application of any organisation of employers or employees, to state, for the guidance of parties in negotiations, the general principles to be observed for the implementation of equal pay in accordance with the provisions of sections 3 to 8.

Appendix2

Employment Court.

[108]

Reference was also made to the likely high costs of adopting a broader
approach, if it leads to a significant wage increase for the plaintiff members.
The Aged Care Association made the point that it receives funding from the Government,
via the Ministry of Health, on a per bed basis and that it would not be able to absorb
any increase. Although the Ministry was invited to appear as intervener it apparently
declined to do so. Accordingly, we did not have the benefit of hearing from it. In
any event, it is apparent that the Government of the day, in promoting the Bill, was
aware of the potential financial implications of the legislation. The Minister
of Labour made the point that female industries would feel the greatest impact in terms
of cost, a point later echoed by the Hon E S F Holland. [pg 31]

[109]

Further, and more fundamentally, the expressed concerns relating to cost
overlook one important point, namely the unquantifiable cost (including societal
cost) of adopting an approach which may have the effect of perpetuating
discrimination against a significant and vulnerable group in the community simply
because they are women, doing what has been described as undervalued women’s work. [pg 32]

[110]

History is redolent with examples of strongly voiced concerns about the
implementation of anti-discrimination initiatives on the basis that they will spell
financial and social ruin, but which prove to be misplaced or have been acceptable as
the short term price of the longer term social good. The abolition of slavery is an old
example, and the prohibition on discrimination in employment based on sex is both a
recent and particularly apposite example. [pg 32]

– Employment Court – Judgment: 22 August 2013

Appendix3

Employment Court.

Never let it be said that the Employment Court is bereft of a sense of humour, as this comment suggests;

[31]

The purpose of the Equal Pay Act is plain, and is reflected in its long title. [p 9]

– Employment Court – Judgment: 22 August 2013

Appendix4

On 2 April, Aged Care Association’s CEO, Martin Taylor, left his role at NZACA and assumed a new position  as Labour leader, Andrew Little’s,  director of research and policy. The nzdoctor.co.nz press release refers to Taylor’s role in the Kristin Bartlett equal-pay case.

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References

Ministry for Women: Gender pay gap

Radio NZ: Caregivers back equal pay campaign

New Zealand Aged Care Association: Equal Pay Case

TV3 News: Landmark ruling on equal pay welcomed

NZ Herald: Landmark pay equality case decision reserved

Scoop media: Court dismisses appeal by Hutt rest home, supports decision on equal pay

Scoop media: TerraNova Case Appealed To Supreme Court

Scoop media: Supreme Court denies Terranova leave to appeal in pay case

Radio NZ: Equal pay on the way for women?

Radio NZ: Landmark ruling for women

Fairfax media: Where next for equal pay

Nzdoctor.co.nz: Understanding caregiver wages in aged residential care

Fightback!: Fight for Equal Pay continues

TVNZ Q+A: Guyon Espiner interviws Bill English (April 2011)

Parliament: Hansards – Wage Rates – Growth, Inequality, and Minimum Wage

Legislation: Equal Pay Act 1972

Employment Court: Judgment: 22 August 2013

Nzdoctor.co.nz: Andrew Little headhunts Aged Care boss Martin Taylor

Additional

NBR:  National bows to minimum wage myths – ACT

NZ Herald: Battle to close the pay gap

Previous related blogposts

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

Roads, grandma, and John Key

John Key’s track record on raising wages – 4. Rest Home Workers

Aged Care: The Price of Compassion

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This blogpost was first published on The Daily Blog on 26 October 2015.

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A Message to Radio NZ – English continues fiscal irresponsibility with tax-cut hints

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To: Radio NZ, Morning Report
Txt no: 2101
Date: 15 October 2015

Hospital DHBs are in debt; community groups underfunded; and there’s a $60 billion government debt hangjng over our heads – and English is planning an election bribe with hints if tax cuts? This is irresponsible in the extreme. Question is, will kiwis buy this bribe? As long as they know we will end up paying for it with higher debt and slashed public services. We get what we pay for, or in this case, what we don’t pay for.

-Frank Macskasy

 

 

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References

Radio NZ: English won’t guarantee future surpluses

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= fs =

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

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Sunday Star Times <letters@star-times.co.nz>
date: Thu, Sep 4, 2014
subject: Letters to the editor

 

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The editor

Sunday Star Times

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National must be in panic-mode if they are resorting to the tactic of bribing voters with promised tax cuts.

Key and English both maintain that the government’s books will be “back in surplus” next year.

That is not the whole truth. In  fact, it is a lie.

The government (and therefore taxpayers) owe $68 billion in debt that this government has borrowed since 2008.

On top of that, the dairy pay-out to farmers is expected to fall dramatically, taking more revenue out of the economy and reducing the government’s tax-take.

And we still have billions to spend on re-building Christchurch.

In the light of this, it is grossly irresponsible for any politician to be making promises that are simply unsustainable.  Tax cuts will have to be paid for and simply putting it “on tick” and adding it to the $68 billion debt is verging on criminal negligence.

I sincerely hope that voters think carefully before accepting this bribe. We should be smarter than that.-Frank Macskasy

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[address & phone number supplied]

 

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Above image acknowledgment: Francis Owen/Lurch Left Memes

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Letter to the Editor – Time for a bribe

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: Thu, Sep 4, 2014
subject: Letter to the editor

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The editor

Dominion Post

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John Key justifies his electoral bribe of tax cuts saying that his government will be “back in surplus” next year.

This is a lie. A $68 billion lie.

Because $68 billion is the debt that government (and we, the public) owe after six years of borrowings.

New Zealanders should reflect on that before voting. We are being bribed with money we don’t have; must be borrowed from offshore; and will have to be paid back.

What is supremely ironic is that John Key and Bill English then have the gall to label Labour and the Greens as “fiscally irresponsible”?

National won the 2008 with promises of tax cuts.

They were unaffordable then, they are unaffordable now.

$68 billion in debt. Think about it.

-Frank Macskasy

 

[address & phone number supplied]

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Above image acknowledgment: Francis Owen/Lurch Left Memes

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Letter to the Editor – fiscal irresponsibility by National

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from:     Frank Macskasy <fmacskasy@gmail.com>
to:          “The Wellingtonian” <editor@thewellingtonian.co.nz>
date:      Wed, Aug 27, 2014
subject: Letter to the editor

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The Editor

“The Wellingtonian”

At a time when the Capital Coast DHB is so strapped for cash that it is cutting back on services for the mentally unwell (see: Fears for mentally ill forced to streets), our esteemed Prime Minister – or the “Prime Minister’s office – there is evidently a distinction – is once again attempting to bribe New Zealanders with tax cuts.

Never mind that, collectively, as a nation, we have a $69 billion dollar debt that accrues millions in interest payment, and must be paid back.

Never mind that we have 250,000-plus children living in poverty as the jobless and working poor cannot afford the high cost of living.

Never mind that people in Christchurch  face a housing shortage and massive rent hikes. Evidently, according to earthquake-minister Gerry Brownlee, the free market will sort that out.

It beggars belief that we have a major political party so irresponsible with finances that it is willing to spray money around to win votes, rather than address our multi-billion dollar debt and critical social problems confronting our nation.

They do not deserve to be re-elected government.

-Frank Macskasy

 

[address and phone number supplied]

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References

Fairfax media: Fears for mentally ill forced to streets

Fairfax media: Christchurch rent crisis ‘best left to market’

 

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Above image acknowledgment: Francis Owen/Lurch Left Memes

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= fs =

Letter to the editor – fiscal prudence or another election bribe?

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from:     Frank Macskasy <fmacskasy@gmail.com>
to:          Dominion Post <letters@dompost.co.nz>
date:     Tue, Aug 26, 2014
subject: Letter to the editor

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The Editor

DOMINION POST

.

So let me get this straight…

We have in this country, currently,

* a colossal debt estimated to rise to  $67.9 billion by  2018,

* a quarter of a million children living in poverty,

* Christchurch residents facing a critical housing shortage,

* and cuts to health and education

– and our esteemed Prime Minister is talking about tax cuts?!

Perhaps he can also tell us where the cash for tax cuts will come from? More borrowings from off-shore, as National did for the 2009 and 2010 tax cuts?

And perhaps he can tell us which generation will pay off the massive $67-plus billion debt if he’s going to lavish us with tax cuts?

National continually accuses Labour, the Greens, and Mana-Internet for being profligate spenders.

But nothing compares to this government which took us from zero debt in 2008; implemented two clearly unaffordable tax cuts funded by borrowing from off-shore banks; and ballooned debt out to nearly $70 billion dollars.

This is not prudent fiscal management. It is a very expensive election bribe.

More fool us if we take this bribe. A bribe with other people’s money. A bribe to be paid back by our children.

-Frank Macskasy

[address & phone number supplied]

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from:     Frank Macskasy <fmacskasy@gmail.com>
to:          NZ Herald <letters@herald.co.nz>
date:      Tue, Aug 26, 2014
subject: Letter to the editor

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The editor

NZ Herald

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John Key’s desperation is showing. How else to explain National’s dangling of a tax-cut carrot in front of voters, barely a few weeks out from the election.

As if a $67 billion debt isn’t enough, he wants to cut taxes and presumably borrow more money from off-shore to fund those cuts.

Where else will the money come from? Pixies cultivating money trees?

Meanwhile we have critical problems confronting our nation;

* over 250,000 children living in poverty,

* Cantabrians faced with a snails-pace rebuild; mounting housing shortage; and skyrocketing rents,

* cuts to social services such as health and education.

The last round of tax cuts in 2009 and 2010 were paid by increasing user-charges such as medical prescriptions and raising GST from 12.5% to 15% – increases which hit low-income earners the hardest.

National paid for the ’09 and ’10 tax cuts with massive borrowings.

How much will be have to borrow to fund these tax cuts?

Who will pay it back?

Our children?

Shame on us if we fall for this scam.

We are better than this.

-Frank Macskasy

  [address & phone number supplied]

 

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References

Fairfax media:  Surplus on track, Treasury figures show

Fairfax media: National’s tax cut mixed message

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Above image acknowledgment: Francis Owen/Lurch Left Memes

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= fs =

Letter to the Editor: Sure, why not let the poor starve, Ms Mitchell?

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A letter-writer to the Dominion Post, Silvio Famularo, recently suggested that increasing benefits for the poor would be a positive move. Rightwing blogger; failed ex-ACT candidate; and self-proclaimed welfare “expert”, Lindsay Mitchell, would have none of it. She responded on 27 May with her own letter to the editor;

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This was my response,

 

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FROM: "f.macskasy" 
SUBJECT: Letters to the editor
DATE: Tue, 27 May 2014 23:59:18 +1200
TO: "Dominion Post" <letters@dompost.co.nz> 

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The Editor
Dominion Post


.

In replying to Silvio Famularo, who advocated for raising
benefits for the poor because they spend more, rightwing
blogger and ex-ACT candidate, Lindsay Mitchell derided the
suggestion by asserting that "to increase benefit
expenditure the government would have to increase taxation".
(27 May)

Since 1986, successive governments have cut taxes seven
times. Eight, if one includes Working for Families
tax-rebates.

Which would explain why we have high user-pays such as
tertiary education, prescription charges, "voluntary school
donations", etc, and GST rising from 10% in 1986 to the
current 15%.

Mitchell claims - without any evidence - "that means taking
more money off people who will in turn have less to spend on
the same goods and services".

If  National can provide million dollar subsidies to Warner
Bros, Rio Tinto, Charter Schools, et al, then perhaps it is
not so much a matter of "taking more money off people" - but
re-directing resources to those who need it most.

Raising progressive taxation on high income earners would
not take bread of their table - but would certainly put food
on the tables who are least well off.

Or have we totally abandoned any notion of being an
egalitarian society where we only look out for ourselves,
and devil take the hindmost?


-Frank Macskasy
[address & phone number supplied]

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References

Dominion Post: Letter – Benefit boost has direct effect

 

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Above image acknowledgment: Francis Owen/Lurch Left Memes

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= fs =

Letter to the Editor: Kiwi style or American style?

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FROM:       "f.macskasy" 
SUBJECT:     Letters to the editor
DATE:        Wed, 14 May 2014 23:59:33 +1200
TO:         "Dominion Post" <letters@dompost.co.nz> 

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The Editor
Dominion Post

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I am dumbfound. Absolutely gobsmacked.

With New Zealand's sovereign debt now around $60 billion (as
at November 2013) and having increased by $27 million a day
since National took office - John Key is kite-flying with
suggestions of further tax cuts?!

Is this how National exercises fiscal responsibility -
bribing voters with yet more unaffordable tax cuts?

Previous tax cuts in 2009 and 2010 were paid for with assets
sales; taxing children on their paper rounds; increasing
prescription charges; as well as unsuccessful  attempts to
tax carparks and cellphones. Currently, National is planning
to sell off 5,000 State houses that were once homes to
low-income families.

Instead of tax cuts, New Zealanders might care to tell the
Prime Minister that we should be funding education so that
parents don't have to fork out  $357 million a year in
so-called "voluntary donations" and spend long hours 
fundraising to pay for  supposedly "free" schooling.

It is patently simple. We can have free education and public
healthcare. Or we can have tax-cuts. But we cannot have
both. 

This is the moment we decide whether we want public services
for all New Zealanders, regardless of their financial
circumstances - or an American-style user-pays.

I hope we choose wisely.


-Frank Macskasy
[address & phone number supplied]

 

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References

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

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

Radio NZ: PM John Key dangles tax cut carrot

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Above image acknowledgment: Francis Owen/Lurch Left Memes

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= fs =

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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= fs =

Radio NZ: Nine to Noon – Brian Easton – 7 February 2013

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– Nine To Noon –

 

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– Friday 7 February 2014  –

 

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– Kathryn Ryan & Brian Easton –

 

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Income inequality in New Zealand is set to become a central election issue, but is it really getting worse?

Brian Easton offers a solution how to address income inequality. Listen and find out what he suggests.

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Click to listen: Brian Easton, Economist ( 13′ 37″ )

 

 

 

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Acknowledgement: Radio NZ

(Hat tip: Murray Simmonds)

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= fs =

Corporate Welfare under National

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In case there are still one or two New Zealanders remaining who haven’t yet cottoned on to one very simple truism about National in office, let me spell it out; they are rank hypocites of the highest order.

And in case you, the reader, happen to be a true-blue National supporter, let me explain why.

In the last four years, National has been beavering away,

• slashing budgets
• sacking nearly 3,000 state sector workers
• closing schools
• attempting to close special-needs services such as Nelson’s Salisbury school
• cutting state services such as DoC, Housing NZ, Police, etc
• freezing wages for state sector workers (whilst politician’s salaries continue to rise)
• cutting back on funding to various community services (eg; Rape Crisis ands Women’s Refuge)
• and all manner of other cuts to  state services – mostly done quietly and with minimum public/media attention.

In return, the Nats successfuly bribed us with our own money, giving us tax-cuts in 2009 and 2010. (Tax cuts which, later, were revealed not to be as affordable as what Dear Leader Key and Little Leader English made out – see:  Key: $30b deficit won’t stop Nats tax cuts, see: Government’s 2010 tax cuts costing $2 billion and counting)

One such denial of funding for public services is an on-going dispute between PHARMAC and the New Zealand Organisation for Rare Disorders (NZORD) which is struggling  desperately to obtain funding for rare disorders such as Pompe’s Disease,

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Acknowledgement: Fairfax Media – Mum not prepared to wait and die

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NZORD and it’s members have been lobbying National for the last four years to gain funding for much-needed medication. They are in a dire situation – this is a matter of life or death for them.

This blogger has blogged previously about their plight,

Previous related blogposts

• Priorities? (19 Oct 2011)

• Terminal disease sufferer appeals to John Key (12 Nov 2012)

• Terminal disease sufferer appeals to John Key – Update & more questions (28 Nov 2012)

• Health Minister circumvents law to fulfill 2008 election bribe? (18 Dec 2012)

• Johnny’s Report Card – National Standards Assessment – Compassion (9 Jan 2013)

• “There’s always an issue of money but we can find money for the right projects” – John Key (20 Jan 2013)

• “One should judge a society by how it looks after the sick and vulnerable” – part tahi (4 March 2013)
• “One should judge a society by how it looks after the sick and vulnerable” – part rua (4 March 2013)
• “One should judge a society by how it looks after the sick and vulnerable” – part toru (4 March 2013)

This blogger has also  written directly  to the Prime Minister and to Health Minister, Tony Ryall.

One response from Minister Ryall is presented here, for the reader’s attention,

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.

So there we have it, folks. If you’re a New Zealander dying from a rare disease, and PHARMAC won’t fund life-saving medication – don’t expect an assistance from this rotten government. Their response will be, and I quote,

“While I share your concern [snort!!!]  for people with Pompe disease, as I advised you in my letter of 22 November 2012, in the current fiscal environment, unfortunately funding is not available for all treatments.”

So “in the current fiscal environment, unfortunately funding is not available for all treatments“?!

But funding is available for;

$1 Rugby – $200 million to subsidise the Rugby World Cup (see:  Blowouts push public Rugby World Cup spending well over $200m)

$2 Movies – $67 million paid to Warner Bros to keep “The Hobbit” in New Zealand (see:  The Hobbit: should we have paid?) and $300 million in subsidies for “The Lord of the Rings” (see:  Hobbit ‘better deal than Lord of the Rings’ – Key)

$3 Consultants – After sacking almost 3,000 state sector workers (see:  555 jobs gone from public sector) – and with more to come at DoC – National seems unphased at clocking up a mind-boggling $1 billion paid to “consultants”.  (see:  Govt depts clock up $1bn in consultant fees)

And on top of that, we are now faced with the prospect of a trans-national corporate – Rio Tinto – with their hands firmly around Meridian Energy’s neck, attempting to extract a greater subsidy from the SOE powerco. The story began in August last year,

.

Acknowledgement: NZ Herald – Rio Tinto seeks power deal revision

.

We know why. Despite implausible assertions to the contrary by National Ministers, Genesis Energy, and Rio Tinto executives – the partial sale of SOE powercos (Meridian, Genesis, and Mighty River Power) have made them vulnerable to the demands of Big Businesses.

Rio Tinto  knows that the share price of each SOE will be predicated on marketplace demand for shares.

They know that if there is less demand for electricity, then the price of power may (note: may) drop; those SOE’s profits will drop; and the price of shares will drop.

That leaves shareholders out of pocket and National with egg on it’s face. And a whole bunch of  Very Pissed Off Voters/Shareholders.

Think: Warner Bros. Think: corporate blackmail to shift ‘The Hobbit’ overseas. Think: National not wanting to risk the wrath of Peter Jackson and a thoroughly manipulated Public Opinion. Think: National looking at the 2011 election. Think: panic amongst National ministers and back-room Party strategists.

National capitulated.

This is precisely what is happening with Rio Tinto, Meridian, and National.

In the space of six and a half hours yesterday (28 March 2013),  events came to a dramatic head. The following happened in one day:

9.15am:

Via a Press Release from Merdian Energy;

“Thursday, 28 March 2013, 9:15 am
Press Release: Meridian Energy

New Zealand Aluminium Smelter’s electricity contract

For immediate release: Thursday, 28 March 2013

Meridian was approached by Pacific Aluminium, a business unit of global mining giant Rio Tinto Ltd, the majority shareholder of New Zealand Aluminium Smelters Ltd (NZAS), in July 2012, to discuss potential changes to its existing electricity contract.

Since talks began, various options have been discussed and Meridian has offered a number of changes and concessions to the existing contract.

Chief Executive of Meridian Energy, Mark Binns, says that Meridian has advised Pacific Aluminium of its ‘bottom line’ position.

“Despite significant effort by both parties there remains a major gap between us on a number of issues, such that we believe that it is unlikely a new agreement can be reached with Pacific Aluminium,” says Mr Binns.

In the event no agreement can be reached, Meridian will seek to engage with Rio Tinto and Sumitomo Chemical Company Ltd, the shareholders of NZAS, who will ultimately decide on the future of the smelter.

Meridian signed a new contract with NZAS in 2007, after three years of negotiations. This current contract commenced on 1 January 2013 and remains unaltered and binding on the parties.” – Source

To which Rio Tinto replied,

10.15am:

In a NZ Herald story,

CEO  of Pacific Aluminium (the New Zealand subsidiary of Rio Tinto), Sandeep Biswas responded with,

“We believe a commercial agreement that is in the best interests of NZAS, Meridian, the New Zealand Government, and the people of Southland can be reached. We look forward to continuing productive negotiations with a view to achieving a positive outcome for all parties.” – Source

De-coding: “This ain’t over till the Fat Chick sings, and she’s nowhere to be seen. You guys better start hearing what we’re saying or this is going to turn to sh*t real fast; we’ll close our operations at Bluff; 3,200 people employed by us directly or  indirectly will be told ‘Don’t Come Monday’;  your Southland economy will collapse like a Cyprus bank, and National can kiss goodbye to it’s re-election in 2014. Ya got that, sunshine?”

11.15am:

That got the attention of National’s ministers Real Quick,

The Government has opened discussions with Tiwai Point aluminium smelter’s ultimate owners Rio Tinto in a bid to broker a deal after talks between the smelter and Meridian Energy reportedly broke down.

[…]

“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.

“In the meantime, we understand Meridian’s existing contract with Pacific Aluminium remains in place at least until 1 January 2016 with significant financial and other obligations beyond that.” – Source

Barely two hours had passed since Meridian had lobbed a live grenade into National’s state asset sale programme, and it’s fair to say that the Ninth Floor of the Beehive was in a state of panic. It was ‘battle stations’. Red Alert. National ministers were, shall we say, slightly flustered,

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.

12.00pm:

By noon, the markets were reacting. Though share-market analysts were attempting to down-play the so-called  ‘Phoney War’ between Meridian and Rio Tinto, Devon Funds Management analyst, Phillip Anderson, remarked that,

“…the announcement had hit Contact’s share price – the company was down 3 per cent in early trading but is now down only 1.2 per cent.” – Source

If Contact’s (a fully privatised ex-SOE) share price had dropped 3% on the strength of these media stories, it is little wonder that share-market analysts were down-playing the brinkmanship being played out by Meridian and Rio Tinto. If the share-market was spooked enough, Contact’s share price would plummet, as would that of Mighty River Power – estimated to be in the $2.36 and $2.75 price-range. (see:  Mighty River share tips $2.36 to $2.75).

In which case, National would be floating shares worth only a fraction of what ministers were seeking. In effect, if Rio Tinto closed down operations, Key could kiss goodbye to the partial sale of energy SOEs. They would be worthless to investors.

3.43pm:

By 3.43pm, and six and a half hours since Meridian’s press release, National had negotiated some kind secret deal with Rio Tinto.  We don’t know the terms of the deal because though it is our money, National ministers don’t think we have a right to the information,

The Government is negotiating a new taxpayer-funded subsidy with Tiwai Point aluminium smelter’s owners and has all but acknowledged its assets sales programme is being used by them to get a better deal on power prices.

State Owned Enterprises Minster Tony Ryall this morning said the Government has opened discussions with the smelter’s ultimate owners global mining giant Rio Tinto in a bid to broker a deal over a variation to the existing electricity contract.

[…]

“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.”

Mr Ryall indicated the Government had offered Rio Tinto “a modest amount of money to try and help bridge that gap in the short to medium term but there’s still a very big gap in the long term… We’re not interested in subsidising this business in the long term”. – Source

Ryall added,

“…they’re pretty tough negotiators and I’m sure they look at what else is happening in the economy when they make their various decisions…

…”they certainly haven’t got the Government over a barrel.”

Three questions stand out from Ryall’s statement,

1. If  State subsidies for electricity supply to Rio Tinto’s smelter are “short to medium term” – then what will happen when (if?) those subsidies are lifted? Will shareholders “take a bath” as share prices collapse in value?
   
2. Does Ryall think we are fools when he states that Rio Tinto did not have the government “over a barrel” ?! Is that how National views the public – as morons?
3. How much is the “a modest amount of money” that Ryall is referring to?

Perhaps the most asinine comment from Ryall was this, as reported by TVNZ,

“The electricity market is capable of dealing with all the issues relating to the smelter,” said Ryall.

Acknowledgement: TVNZ News – Talks break down over Tiwai smelter contract

Really?! In what way is “the electricity market … capable of dealing with all the issues relating to the smelter” when the government has to step in with what could be millions of dollars worth of subsidies? Is that how “the market” works?!

This blogger has two further questions to put to Minister Ryall. Both of which have been emailed to him,

.

Date: Thu, 29 March 2013, 6.43pm
From: Frank Macskasy <fmacskasy@yahoo.com>
Subject: Re: Your correspondence to Hon Tony Ryall
To:  Tony Ryall  <Tony.Ryall@parliament.govt.nz>

Kia ora,  Mr Ryall,

I am in receipt  of your emailed letter to me, dated 5 December 2012, regarding the non-funding of certain medications for sufferers of Pompe Disease. Firstly, thank you for taking the time to respond to this issue in a thorough and timely way. Several of your other ministerial colleagues seem to lack that simple etiquette.

I note that, as Minister of SOEs, you have been in direct negotiations with Rio Rinto, and have offered the company subsidised electricity for the  “short to medium term”.

This will no doubt cost the taxpayer several millions (hundreds of millions?) of dollars.

If  National is able to provide such largesse to a multi-national corporation, please advise me as to the following;

1. Why is the same subsidy for cheaper electricity not offered to ALL New Zealanders? Or even those on low-fixed incomes? Why provide a multi-million dollar subsidy just to a billion-dollar corporation when New Zealanders could do with a similar cut in their power bills?

2. In your letter to me, dated 5 December 2012, you point out that,

“While I share your concern  for people with Pompe disease, as I advised you in my letter of 22 November 2012, in the current fiscal environment, unfortunately funding is not available for all treatments.”

If National has millions of dollars available to subsidise multi-national corporations, them obviously your statement on 5 December 2012 that “in the current fiscal environment, unfortunately funding is not available for all treatments” – is simply not credible.

It is obvious that your government can find money when it wants to. This applies to Rugby World Cup funding, consultants, movie-making subsidies, etc.

As such, I hope you are able to find the necessary funding for medication for people suffering rare disorders.

You are, after all, Minister for Health as well as Minister for State Owned Enterprises.

Regards,

-Frank Macskasy
Blogger

PS: Please note that this issue will be canvassed further on the blogsite, The Daily Blog.

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Minister of Health. Minister for SOEs. Minister for corporate welfare.

Which ‘hat’ will Tony Ryall be wearing today?

And will he find the necessary funding to save the lives of sick New Zealanders?

This blogpost was first published on The Daily Blog on 31 March 2013.

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References

NZ Herald: Rio Tinto seeks power deal revision (10 Aug 2012)

Scoop.co.nz:  New Zealand Aluminium Smelter’s electricity contract Press Release (9.15am, 28 March 2013)

NZ Herald:  Smelter counters Meridian – power deal still possible (10.15am, 28 March 2013)

NZ Herald:  Govt steps in to sort out stalled Tiwai power deal (11.15am, 28 March 2013)

NZ Herald:  Tiwai stoush may affect Mighty River price  (12.00pm, 28 March 2013)

NZ Herald:  Govt offser Tiwai subsidy (3.43pm, 28 March 2013)

Related references

NZ Herald:  Mighty River share tips $2.36 to $2.75 (20 March 2013)

Related to previous blogposts

Pharmac: The politics of playing god (16 June 2011)

$500,000 a year to keep toddler alive (5 Feb 2013)

Rare disease sufferers want pricey treatments (1 March 2013)

Rare disease takes awful toll on boy (1 March 2013)

Call for an Orphan drugs access policy to overcome Pharmac’s systems failure (28 Feb 2013)

Bill English – do you remember Colin Morrison? (4 Feb 2013)

Related Opinion

NZ Herald – Fran O’Sullivan – Govt intervention doesn’t cut mustard (30 March 2013)

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= fs =

More dispatches from Planet Key

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Planet Key’s #3 Moon “Brownlee”; Largest of the Moons, it tends to disturb other bodies through it’s presence. “Brownlee” has a rough surface and highly abrasive atmosphere that many find obnoxious. “Brownlee’s” gravitational influence has a negative, perturbing,  influence on nearby bodies such as Planet Christchurch.

Brownlee recently let rip at Christchurch City Council for not carrying out repairs to council-owned community housing fast enough,

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Acknowledgement: Radio NZ

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Consider for a moment that Brownlee, as the Canterbury Earthquake Recovery  Minister, is in constant contact with CERA, Christchurch’s mayor, and anyone else remotely connected with that city and it’s re-build.

Brownlee has channels of communications that are open to him that allows him to discuss issues and problems as they arise.

So what was the purpose of this display of public excoriation of the Christchurch Council and especially the vilification of one Councillor, Yani Johanson?!

Does Mr Johanson not have a telephone?

Email? Skype? A paper letter? Smoke signals? (The latter seems to work well for the Vatican.)

Could Brownlee not have sat down around a table and asked the most basic of questions,

“How can we help?”

Or is the public display of testosterone-fuelled machismo Minister Brownlee’s new modus operandi when dealing with those who fall within his ministerial orbit?

This kind of authoritarianism may be the norm in Zimbabwe, Burma, or North Korea – but here in New Zealand it comes across as the cries and foot-stamping of a petulant child.

Meanwhile, National ministers should look in their own backyard when it comes to housing,

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Acknowledgement: Dominion Post

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Christchurch has been wracked by two massive earthquakes and thousands more quakes since. Every aspect of their basic infra-structure was damaged or ruined to varying degrees.

I think we can cut them some slack when it comes to re-building an entire city, from beneath ground-up.

Meanwhile, nearly eighteen months later, with no earthquakes or any other major disasters (unless one  calls a National Government a major disaster), one wonders why National ministers have not progressed any further to re-build Pomare’s state housing?

After nearly a year and a half, all we’re seeing is a vast vacant lot, where once peoples’  homes existed,

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Any ideas, Mr Brownlee?

(More on this issue in an up-coming blog-story)

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Planet Key’s #4 Moon “Dunne”; covered in a dense, white atmosphere; “Dunne” is known to move from Planet Key to Planet Labour depending on which mass is greatest. The largest surface object on “Dunne” is the ‘Make Me a Minister’ volcano, which erupts whenever there is a nearby power-source.

As Minister of Revenue and Flashy Hairstyles, Peter Dunne is charged with taxation issues in this country.

No doubt his job was made considerably harder with two tax cuts (2009 and 2010) which considerably reduced taxation revenue for the State. (see:  Govt’s 2010 tax cuts costing $2 billion and counting, see:  Outlook slashes tax-take by $8b) Indeed, English was forced to tax children and their paper-rounds. (see:  Key rejects criticism of ‘paperboy tax’)

Taxing kid’s meagre earnings. That’s how low and desperate National ministers have gone, to make up for the 2009/10 ‘lolly scrambles’ when the Nats  gave away billions in unaffordable tax cuts.

To try to fill the fiscal hole that Bill English, Peter Dunne, et al, have put themselves into, they’ve been scrambling to raise government charges  and tax everything and anything else that moves. (see: Prescription fees increase, see: Vulnerable children at risk from Family Court fees increase, see: Student fees rise faster than inflation, see: Petrol price rises to balance books)

The latest attempt to raise new taxes is Peter Dunne’s ‘carpark tax’,

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Acknowledgement: Fairfax media

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Well, well, well… a new tax?

A new fringe benefit tax?!

This is interesting.

Because John Key has always insisted that his Party cuts taxes and doesn’t increase them. Specifically, way back on 4 April 2005, when National was in Opposition,

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National Party Finance spokesman John Key has signalled an overhaul of the Fringe Benefit Tax, during a speech to the Auckland Rotary Club today.

“The next National Government will cut the red tape and compliance costs that are choking our businesses and preventing them from getting off first base,” he says.

“A practical example of what I am talking about is in the area of Fringe Benefit Tax.

“Today I want to announce that National will revamp Fringe Benefit Tax to remove a substantial amount of the paperwork that currently occupies too much administrative time for many of our businesses, especially the small ones.

[…]

– We won’t entertain suggestions of applying FBT to on-premises car parks.” 

Acknowledgement: Scoop.co.nz

And again in 2010, when a video was uncovered where Dear Leader was quoted as saying,

“National is not going to be raising GST. National wants to cut taxes, not raise taxes.”

See: Key ‘no GST rise’ video emerges

When challenged on this in the House, just recently,  Minister for Everything, Steven Joyce, responded with this bit of bovine faecal material,

“I would say that I think a fair amount has changed since that statement was made back in April 2005, which was when Don Brash was leader of the National Party. Since that time we have had three leaders of the Labour Party, and maybe a fourth leader of the Labour Party—”

Source: Parliament Hansards – 9. Tax System Changes—Employee Car-parks

Yeah. Lot’s of things have changed. Like, for example, the difference between being in Opposition and Promising the Moon – and being in Government and having to explain why the Moon is still out of reach.

And when the Nats have to make smart-arse comments about Labour’s leaders, then you know they’re really on the ropes. Defensive much, Mr Joyce?

Like Key’s broken promise on GST, the “carpark” tax is another instance of National breaking it’s election promises. Which indicates, mainly, that National’s tax-cuts were never as affordable as they made out in 2008.

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Acknowledgement: National Party

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Planet Key’s #5 Moon “Bennett”; “Bennett” originated from the asteroid belt, where many poorer dwarf-planets with low mass; minimal mineral wealth; and mostly invisible, are locked in orbits that will take them nowhere. “Bennett” gravitated to the National Zone where her mass and mineral wealth increased by close association with  Planet Key and it’s many  moons.

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To repeat and quote Bennett, when she stated on TVNZ’s Q+A on 29 April 2012,,

“There’s not a job for everyone that would want one right now, or else we wouldn’t have the unemployment figures that we do. “

See:  TVNZ  Q+A: Transcript of Paula Bennett interview

To quote Minister Bennett’s latest utterances on this issue, on 12 March 2013, when hundreds of  people recently queued for just seven jobs at Carter Holt Harvey in Auckland,

“Well I am absolutely thrilled that 200 turned up quite frankly we’ve got more than 50,000 on the unemployment benefit but work expectations of them I think the fact that they are lining up that they want those jobs um speaks for itself and about peoples’ motivation to get work.”

 

“There’s always a lot of people going for certain types of jobs and if in particular if they are lower skilled they feel they can do them, they don’t have a lot of work experience, they have been out of work for some time.”

 

“No I don’t feel there is a job for everyone and I think it’s damn tough but I am incredibly proud of New Zealanders and their  motivation and the fact that they want them and I know that the economy is improving and we are going to see more happening.”

See: TV3  – Campbell Live:  Sign of the times: hundreds queue for 7 jobs

Acknowledgement for transcript:  Waitakere News – Don Elder, Paula Bennett and the rest of us

Ok, so the lightbulb has finally clicked in Bennett’s head. New Zealand has a problem. We do not have enough jobs for the number of unemployed and solo-parents who want to work.

It’s not often that a politician acknowledges the bleedin’ obvious – so kudos to her for having the  courage to do so. (John Key might learn a thing from Bennett in terms of not ducking  issues.)

However, if there are not sufficient jobs to go around – what is the point in wasting taxpayers’ money and Parliament’s time on this exercise in futility,

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Acknowledgement: NZ Herald

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And why is language like this used by Bennett,

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Acknowledgement: NZ Herald

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If there are insufficient jobs – as Bennett herself has now acknowledged on at least two occassions, then ipso facto, the following must be true;

1. The only ‘trap’ is a lack of work – not welfare
2. Why “reform” the welfare system  when welfare itself is not broke – it’s the economy that is not working (as are 170,000 people)
3. Why muddy the waters with  rhetoric like  “trap of benefit dependency“; “introduce expectations for partners of beneficiaries and make beneficiaries prepare for work“; or that welfare had “become a bit of a trap for quite a few people“?

What does “a bit of a trap for quite a few people” mean? That it’s a “little” trap as opposed to a “big” trap? Or is she attempting to minimise the impact of her beneficiary-bashing by trying to soften her rhetoric?

So the “dog whistle” rhetoric filters down to the right wing; the ill-informed; and other welfare-hating cliques in our society – but the message is watered-down for the Middle Classes who are uncomfortable with victimising the unemployed, or who may even know someone who recently lost their jobs.

That’s the trouble with beneficiary bashing during times of high unemployment. Most of us know someone who has lost their job through no fault of their own. Bennett is walking a tight-rope here.

Eventually, people will be asking; why are National ministers  wasting time on pointless welfare “reform” when it’s jobs we need?

Once that message percolates into the collective consciousness of the masses, National will be left standing naked – their corrupt, bene-bashing, dog-whistle politics exposed for all to see.

A few questions for Ms Bennett,

Why are you messing around with welform “reform”, when it’s jobs that we need?

Why aren’t you and your well-paid ministerial colleagues reforming the economy to create more jobs?

How much are these “reforms”  costing us, the tax-payer?

How many extra jobs will welfare “reforms” create?

I don’t expect answers to these questions because, really, they are unanswerable.

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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.

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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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