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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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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?!

24 April 2018 4 comments

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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

1 September 2017 Leave a comment

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Frank Macskasy - letters to the editor - Frankly Speaking

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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!

25 February 2017 1 comment

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

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2017 Election – Opening Gambits and Giveaways

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

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Historical Context

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

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

In January 2008;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Prime Minister John Key says beneficiaries who resort to food banks do so out of their own “poor choices” rather than because they cannot afford food. “But it is also true that anyone on a benefit actually has a lifestyle choice. If one budgets properly, one can pay one’s bills. “And that is true because the bulk of New Zealanders on a benefit do actually pay for food, their rent and other things. Now some make poor choices and they don’t have money left.”

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

The Joy of Joyce’s Tax Bribe

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

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

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

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

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

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

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

Joyce voiced this concern on 8 February;

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

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

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

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… to more user-pays in education;

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…in healthcare;

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

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

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

Almost 57,000 student loan borrowers found in Australia

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

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

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

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

Who else will National target to squeeze money out of?

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

What further user-pays will be implemented?

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

 

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

 

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

In 2005, as Leader of the Opposition;

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

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

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

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

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

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

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

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

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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.

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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

12 February 2017 3 comments

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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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house-price-to-income-ratio-new-zealand-housing-affordability

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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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homelessness-in-new-zealand

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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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oecd-2014-income-inequality-increased-in-most-oecd-countries

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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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oecd-2014-estimated-consequences-inequality-cumulative-growth

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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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income-inequality-nz

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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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living-in-cars-rheumatic-fever-mouldy-houses-hungry-children-new-zealand

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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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wealth-inequality-in-nz-worse-than-australia

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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 SummaryCensus 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

31 January 2017 4 comments

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Introduction

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

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

Total students in 2009: 751,330* 

spend per student: $14,341.88

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

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

Total students in 2016: 776,948**

spend per student in 2016 dollars: $14,215.36

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

spend per student in 2008 dollars: $12,367.37

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

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

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

*  Not including 9,529 international fee-paying students

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

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

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Tax-cuts and Service-cuts

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

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

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

1 October 1986 – Labour

1 October 1988 – Labour

1 July 1996 – National

1 July 1998 – National

1 October 2008 – Labour

1 April 2009 – National

1 October 2010 – National

 

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

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

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

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

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

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

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

[…]

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

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

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

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

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cuts to NGOs offering support services;

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… and  leaving district health boards in dire financial straits;

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

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

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

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Tax cuts, slashed services, and increasing user-pays

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

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

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student-loan-defaulters-to-face-border-arrest

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

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

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

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joyce

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

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

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

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

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

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Graphic: acknowledgement - NZ Herald

Graphic acknowledgement:  NZ Herald

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

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

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Education, Inc.

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

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schools-using-foreigners-fees-to-staff-classrooms

 

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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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parents-fundraise-357m-for-free-schooling

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

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

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

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

Thirteen percent said they were looking to increase parent donations.

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

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

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User-pays is hard to pay

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

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

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

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

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

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

Because we can’t have both.

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

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Postscript

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From a Dominion Post article on 24 January;

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

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

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

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

[…]

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

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

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

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

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

LOANS ON THE RISE

Median loan balances

2010 – $11,399

2012 – $12,849

2014 – $13,882

2016 – $14,904

Median repayment times for a bachelors/graduate certificates or diplomas

2010 – 6.9 years

2012 – 7.8 years

2014 – 8.5 years

 

 

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References

Reserve Bank NZ: Inflation calculator

Treasury: Vote Education 2008

Treasury: Vote Education 2016

Educationcounts: School RollsStudent Rolls by School 2005-2009

Educationcounts: School RollsStudent Rolls by School 2010-2016

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

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

The Press: Four forced off waiting list die

Otago Daily Times:  Heartwatch Insurance Cover

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

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

Radio NZ: Patients suffering because of surgery waits – surgeon

Fairfax media:  Prescription price rise hits vulnerable

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

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

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

Youtube: Kansas Tax Cuts –  A Closer Look

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

Fairfax media: Student loan defaulters to face border arrest

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

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

Radio NZ: Govt tightens education purse strings

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

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

NZ Herald:   Schools using foreigners’ fees to staff classrooms

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

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

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

Motherjones: Trickle-Down Economics Has Ruined the Kansas Economy

The New Yorker: Covert Operations

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

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

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

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

Previous related blogposts

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

12 June – Issues of Interest – User pays healthcare?

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

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

The seductiveness of Trumpism

Steven Joyce – Hypocrite of the Week

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

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