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A Zero Budget is a Consequence of Failure a.k.a. Its About the Economy Stupid

Posted by David Parker on May 4th, 2012

David Shearer’s speech today blunted National’s attacks on Labour, and takes the economic debate towards growth in the economy, especially exports. This undermines National’s attempt to narrow the focus.

National is trying to convince NZers that when the government deficit is overcome they should be seen as good managers of the economy, even if the economy is stagnant, exports drop and more private debt and asset sales increase New Zealand’s net international liabilities.

Today’s announcement was an important step in overcoming the National Party’s attack on Labour over government debt.

When in government, Labour ran very substantial budget surpluses and reduced gross government debt from 38% of GDP to 17% of GDP, and net debt to close to nil. This is one of the main reasons NZ survived the GFC better than most European countries. Despite the fact that National opposed those surpluses and called for unaffordable tax cuts, they convinced NZers at the last election that Labour would rack up lots of debt.

Since National was elected, gross government debt increased from $31 billion in June 2008 to $80 billion in the 2011 PreFU – an increase of $49 billion. Net core Crown debt excluding the NZ Superfund increased from $10 billion to $54 billion, an increase of $44 billion.

Government debt will continue to rise until after the government returns to surplus. The trend towards surplus is obvious:

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Filed under: finance
57 Comments

Let them eat cake

Posted by David Parker on November 4th, 2010

The proposal to abandon gift duty is effectively another tax cut for some of NZs wealthiest families. It is yet another step to an unequal society where wealth is accumulating in fewer hands. Why does this offend me? Because a tax system should be fair, and neither aid in tax avoidance by those who can and should pay a fair share of taxes, nor aid in the undue concentration of wealth (and home ownership) based on accident of birth.

The government only collects $2m pa in gift duty and yet estimates NZers currently spend $70m pa on compliance costs. Ask yourself why they fork out that $70m pa? They don’t have to. They don’t think they are throwing that money away. So what benefits do they get by doing so?

There are a number. Some do it to protect assets. Politicians at risk of being sued for defamation often put their family house in a separate legal entity so that if they get sued their family does not end up on the street.  Entrepreneurs do similar in case they get cleaned out in their risky ventures. In both instances this is legal and proper, and can be done effectively under current rules, which allow a couple to gift 27k each = 54k pa free of any gift duty.

But how the wealthiest benefit is via no control on transfers of wealth between the different members of their family, and to other legal entities which they control which may have tax losses they can utilise. In such cases it is not about protecting assets but about avoiding taxation.

Instead of tax being paid at the rate of 33 cents, they transfer assets to spouses and children who pay tax on the income from those assets at the rate of 10.5 cents and 17 cents in the dollar.

So without a limit on gifts free of gift duty, you will see more income tax avoidance.

The justification that gift duty should be dropped because those using current rules, up to the current limit of 54k pa, incur compliance costs is ludicrous. It is not forced upon them, and they choose to do so because of the various advantages they perceive.

I find it stupid logic to reward those already using current rules to their advantage by dropping those rules completely so they can do it more.

Having rejected income splitting for tax purposes because it is unfair, National is effectively allowing an increase in income splitting for those who are wealthiest. You still can’t do it if you are a wage worker on the minimum wage, but you will be able to split your income by transferring valuable income producing assets if you are wealthy.

Once again, National show their true colours. The rich get richer and the rest struggle to make ends meet. We have a government who, having just increased the after tax income gap between high and low paid workers, is now aiding asset inequality to grow further.

No wonder younger voters are increasingly frustrated. They see that NZ is increasingly being run in the interests of the few. As the few achieve ever larger shares of income and wealth, home ownership rates continue to drop. Many people can no longer afford to own their own home, but those lucky to be born into already wealthy families get yet another lift up from this government.

Any pretence by National that they are aspirational for all New Zealanders should be seen as just that.

Tax policy should strive to achieve fair outcomes for all New Zealanders. Once again, National’s tax policy fails this test.

Filed under: Tax, Uncategorized, economic, housing, inequality
55 Comments

John Key is just another politician

Posted by David Parker on September 18th, 2010

So, as others have noted, our Prime Minister John Key has said he thinks Rodney Hide has handled the David Garrett fiasco well. The Herald reports John Key said Hide “has shown very good judgment” and has his full support.

No-one else believes that, so what is going on?

In my opinion, it shows John Key to be just another politician.

It pains me to use that phrase, because it demeans all politicians and our parliamentary democracy.

Sometimes the mistakes made by MPs in any party reflect so poorly on the institution of parliament and MPs that most New Zealanders think less of us as a group and have less confidence in our democracy. Most MPs feel a degree of shame when this happens.   This week’s events are a case in point. It is not so much what David Garrett did many years ago, as the deception and hypocrisy by ACT since.  The public are right to feel misled and distrustful.

So when John Key says he stands by Rodney Hide and ACT’s handling of this, I feel let down by my Prime Minister. I do expect him to uphold the integrity of Parliament. He has not.

Rodney Hide has lost any shred of the moral authority that a Minister needs to maintain the confidence of a Prime Minister.

Now, I am not calling John Key dishonest or corrupt. But he trades on being different. On not being like other politicians. Yet, he so plainly is. The litany of bad mistakes he has tolerated in order to maintain his hold on power is long enough to make the conclusion that he is no higher being.  I won’t list them all but they include:

  • Allowing Hide to criticise National as being weak, lazy and easy to manipulate
  • Giving Hide more rope when the perk buster was busted on his ministerial perks
  • Letting Hide choose Boscawen (an MP with less than 2 years experience) to take over Roy’s portfolio in his Government when Hide and Key both said she had performed well as a Minister and it was clear what was going down was an internal implosion caused in no small part by Rodney Hide’s bullying and other mistakes
  • Allowing  Bill English to stay on as Deputy PM and Minister of Finance after changing accommodation expense rules to profit himself (or his family trust)
  • Brushing over Phil Heatley’s abuses of his Ministerial privileges

Add to that the latest errors of judgment by Hide and ACT, which have exposed ACT to ridicule and irrefutable allegations of hypocrisy and poor judgment.  John Key’s response, to back Rodney Hide and express confidence in him, shows he is in no special category of politician.

What should the leader of our country have done, you ask?  Well, Phil Goff called it correctly.  John Key should have stripped ACT of all its ministerial warrants. They are scandal ridden and unworthy.

After less than two years into its first, and I hope only,  term John Key’s government is tainted by disrepute.  John Key is the leader of that government. The Prime Minister’s own brand is tarnished.

John Key has stopped walking alongside New Zealanders. They know Key is wrong to support Hide and ACT. He is just another politician.

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Filed under: coalition management, politics
58 Comments

Ill Fares the Land – Why John Key should read Tony Judt

Posted by David Parker on July 21st, 2010

Ill fares the land, to hastening ills a prey, where wealth accumulates, and men decay. Oliver Goldsmith, The Deserted Village, 1779

This is the by-line to the 2010 book entitled “Ill Fares The Land” by Tony Judt on the growing inequalities of wealth and opportunity around the world.

I recommend the book, which David Cunliffe and Shane Jones each recommended to me. It examines the different outcomes for social cohesion and equality of social democratic cf conservative policies.

It describes well what is obvious to many in Labour. “We have entered an age of insecurity – economic insecurity, physical insecurity, political insecurity. ….. Insecurity breeds fear. And fear – fear of change, fear of decline, fear of strangers and an unfamiliar world is - corroding the trust and interdependence on which civil societies rest.”

There is much in this book which is worth reading. It has relevance to debates about total tax, our unjust tax mix, NZ’s appalling corrections policy, wealth inequality and the reality that our best assets now can only normally be afforded by NZers lucky enough to inherit wealth (and overseas investors from societies with concentrations of wealth).

We now see the differences between left and right playing out most weeks in parliament. This very week in parliament we are considering an Infrastructure Bill which has a rotten amendment by the government. It is another example of the sort of change in society caused by right leaning governments, which are described in the book.

The Bill as introduced by Labour included provisions relating to affordable housing. Now I concede there is a proper debate to be had between Labour and National whether all of those provisions are appropriate.  Labour says yes, National no.  But there should be no argument about the provisions in the Bill banning restrictive covenants in subdivisions against low cost housing

Make no mistake, in effect National are saying they see nothing wrong in the developer of land being able by private covenant to exclude those who can only afford less expensive housing from a new suburb.  These sorts of restrictive covenant are new in New Zealand and ought to be stamped out.   Allowing private planning to exclude those less fortunate from living near them is not right. National thinks that gated communities of wealthier New Zealanders are the way to go.  It is yet another practical example of National’s right-wing values. It is wrong makes New Zealand a worse country.

It shows what a flawed set of values guides their decisions.

Filed under: Consumer Affairs, Uncategorized, civil liberties, community, housing, inequality, social democracy
72 Comments

Tax “Switch” is same old from National

Posted by David Parker on May 21st, 2010

I’ve been thinking about the hype the government has created about their ‘tax switch’.  True, by increased borrowing, they have shuffled a slightly larger amount than was expected, but it is still mainly a shuffle between taxing income and consumption which will have a limited effect on the shape of our economy. 

National has done what they always do – increased the proportion of tax paid by low and middle income groups and disproportionately decreased the tax paid by the wealthy. They have left capital untaxed. The switch to GST from income tax for low and middle income groups is largely illusory. GST is effectively a tax on labour for these groups, given that they have to spend all or virtually all of their wages/salaries on GST’d goods and services.

For those with higher disposable incomes,  the tax package make a significant change. They pay less. Their capital and intergenerational wealth transfers remain untaxed.  Inflated asset values – now  beyond the means of younger New Zealanders who have not inherited – will remain inflated. The intergenerational inequities on the economic as well as environmental front remain. Social mobility will continue to decline. Bernard Hickey’s analysis of this in recent months about this is spot on, and this budget does not do much to change it.

The tax bias driving excessive investment in property relative to the productive/ tradeable export sector remains. The constraint on claiming depreciation on buildings is a very timid step given the seriousness of the imbalance we now have. It hits commercial property as much as residential, and does not remove the more significant anomoly that allows a property investor to deduct from their other income losses from borrowing costs on their rental invesments, yet leaves them free to pocket capital gains (as an aside gains on property are seen as capital for tax purposes because the statutory definition of income assumes that income has a short-term temporal frequency, when in reality those who rent-out or farm property for a long term gain have a longer-term view of what amounts to their income).

Our lack of savings is only indirectly touched, and really only for those already better off.

As I said in my post earlier today (its worth reading the BERL budget analysis linked to that post), the current account deficit projected by this budget sees it climbing ever higher - up to 7%. So plainly the budget does not forsee a substantial increase in exports or savings.   

So where is the roughly 3% pa growth going to come from?  Well, as the BERL budget analysis shows, the assertion about a substantial increase in non-residential investment seems optimistic.  If that growth does not come to pass at all, or comes from a return to current account deficit funded consumption and property investment, then we will be even more in the cart.

The ’switch’ is not turning the tradeable sector on and the speculative sector off. 

The ’switch’ happening here is more akin to its other definition  – a whip – being used to protect capital and the capital class by decreasing their share of tax paid and increasing the proportion paid by the less wealthy. 

If this was going to fundamentally rebalance the economy, I might be able to see at least some justification. But the sad reality is this budget does little to rebalance the economy.  Rather it does just what National always does. It ‘rebalances’ taxes,  not the economy.

Filed under: Manufacturing, economic, finance
33 Comments

Why it’s clear the budget did not rebalance the economy

Posted by David Parker on May 21st, 2010

Bill English claims the budget achieves a rebalancing of the economy. Yet they did not ring fence losses from heavily leveraged rental properties being used to offset against other income, thereby leaving in place the bias in favour of real estate investment over manufacturing or other tradeables. They took few steps to increase savings. Their moves on R & D still add up to less than the R & D tax credit they previously cancelled.  They have cut depreciation rates on new short lived assets – the sorts of investments in plant and equipment businesses need to make to improve productivity and increase exports. 

The outcome is made clear in their own budget forecasts:  The current account deficit climbs from here on in, to a shade under 7% p.a. of GDP.  By 2014 total net external debt (ie government plus private sector) hits 100% of GDP.  And the National government pretends that these are the marks of successfully rebalancing the economy. Bollocks.

The best analysis of the economic effect of the budget is BERL’s.  They highlight that the current account deficit goes up, and our indebtedness continues to climb   i.e. every year we own less and less of NZ. 

Note they are also suspicious of the affordability of the tax cuts, because the budget assumes a dramatic rebound in non-residential private investment.  The budget projection seems hard to accept given current cash flow constraints and credit restrictions faced by businesses.

Filed under: economic, economy, finance
22 Comments

Dr Smith continues to defend the indefensible

Posted by David Parker on April 29th, 2010

Dr Smith may be good at obfuscating, but its not an admirable skill. This week he claimed the figures used by Phil Goff at question time to highlight the drastic reduction in (mainly) women accessing counselling following sexual crimes were incorrect. They were Dr Smith’s own figures, in answers to parliamentary questions. Phil rounded the historic monthly ACC approvals for October 2008 down from 312 to 300 and contrasted it to the patently unjustifiable 6 approvals in February 2010. Only to the extend of the rounding to 300 – which was to the advantage of the government! - were the figures ‘incorrect’, as Dr Smith stated.

Dr Smith should be criticised for this.  He should be held to account. He was repeatedly warned by all and sundry that his plan was patently wrong. Not just by us in Labour - but by numerous professional associations (the Psychologists, the Psychotherapists, the Social Workers), Rape Crisis and many individuals adversely affected by the change. His misrepesentation of the work by Massey University, which he purported to use to justify the changes, was such that they publicly stated their advice was not being implemented.

There can be no doubt the changes were wrong. There can be no doubt Dr Smith has responsibility. There can be no doubt that you don’t need a time and money wasting inquiry to conclude injustice and suffering has been caused. It is abundantly clear that neither Dr Smith nor ACC can justify the over 95% decrease in the number of people being approved for counselling – at a time when sexual crimes have increased.

The Minister’s stubborn refusal to restore the prior rules in the interim while this mess is sorted out sees these injustices multiply. The consequences are very real for the sometimes desperate people currently unable to get help.

Surely the proper thing for the Minister to do is to admit error and restore the prior rules, because the new ones are plainly unfair. Few people in this job like to say Ministers are pesonally responsible for tragic outcomes, but if hundreds if not thousands of sexually abused women are denied counselling, then it is likely that avoidable self harm by some will occur.

Dr Smith needs to admit his error and do the right thing NOW.  I’m surprised John Key has not already intervened.

Filed under: ACC, community, health, law and order
15 Comments

Crucible Lake

Posted by David Parker on December 20th, 2009

I sometimes worry that too few NZers have the skills to get into the backblocks and enjoy our country’s remote and beautiful places. I know Graeme Dingle takes some in-trouble youth and exposes them to the challenges of the outdoors, but this is only for a relatively small number of our youth.

A generation ago a much higher proportion of NZers had the skills. Most had a parent or uncle who served in WW2 or did compulsory military training and learnt some outdoor skills. Many knew farmers and stayed on a farm sometimes. Still more went camping at Christmas.

This loss of skills means fewer enjoy the splendour of our backcountry. This leaves them poorer in spirit and our outdoors with fewer advocates for its continued protection. The folklore of speights and Toyota hilux adverts is not enough.

Is it too much to expect of our urban schools to include more outdoor recreation in secondary schooling? Can it be too hard to give every secondary school pupil this experience? I am one who does not favour school pupils going overseas for language or cultural tours (I’m not a grinch – just don’t like the pressure put on parents and teachers to raise the dough, when in many cases the parents have not travelled themselves).

Far better that we put a lesser resource into outdoor ed. We have some of the world’s wonders on our backdoor, but should use them more.  Being at one with nature is good for us as a community.

Went to lake Crucible today. Beautiful. Lake iced over – can walk on it at this time of year. the sun shined. the flowers were blooming on the trail up. Idyllic.

Filed under: Uncategorized
7 Comments

Mining in National Parks

Posted by David Parker on December 20th, 2009

IMG_5146 IMG_5152After a couple of very wet days in steep valleys have managed to get a satelite connection. Thought I was humping this extra weight in to no avail.

It is just about unimaginable that the Nats will go ahead and mine these beautiful and pristine areas. Some beautiful alpine meadows here too. What about some more dairy cows too?  I suspect this will end up as an attempt to make mining easier in the Coromandel and maybe Kahurangi National Park. Perhaps they are also going to remove the requirement of the consent of the Minister of Conservation as a prerequsite to DOC land being open for mining. They have already done something similar in respect of developments in the foershore and seabed under their RMA changes this year. this would be a mistake. We effectively as citizens delegate these decisions to the government to take on our behalf. We take these decisions for ourselves for our own land, but rely upon them to protect our collectively owned lands in the DOC estate.

Came over Gillespie Pass in winds and rain. Was a little worried some of our lighter track party would get blown off ridge. Not too much snow on the pass so once we were up there it was easy going down into Siberia.

Running out of battery.

Stopped raining so heading off to Crucible Lake today.

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Filed under: conservation
9 Comments

Question 11 – Parker

Posted by David Parker on December 16th, 2009

I invited Gerry Brownlee to accompany me on a tramp in the Mt Aspiring National Park, and followed it up with a question in the house.  He declined my gesture of Christmas goodwill, but with good humour. The clip of the question is attached. I’m off anyway and am taking a sattelite phone and my laptop. Technology permitting I hope to highlight why even considering opening National Parks to mining is a stupid idea.

Click here to read my letter of invitation to Gerry Brownlee.

Filed under: Energy, climate change, conservation, environment, humour
8 Comments

Help protect ACC

Posted by David Parker on November 19th, 2009

accworks

The governement is scaremongering, as shown by their encouraging the media to report increases of $130 a year for a car and then proposing an increase of $30.

$30 is bad enough, but why did they exaggerate more than four-fold? Because they have to fool New Zealanders into thinking that ACC is broke to justify their outrageous plans to cut cover and privatise.

Above is a screenshot and link to our ACC Works website where you can help stop National increasing your ACC costs and cutting your ACC cover.

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Filed under: ACC
6 Comments

The ETS – Progress or antediluvian?

Posted by David Parker on September 17th, 2009

We’re lucky Charles Chauvel in leading our negotiations with the National Party kept a clear paper trail. It shows that Labour was acting in good faith in those negotiations, and makes the shonky deal between National and the Maori Party inexcusable. It’s easy to see now why the Maori Party tried to withdraw their minority select committee report. It shows them to be either incompetent or dishonest.

I know the detail of ETS is not interesting to everyone, but it is important to understand what National has done to the ETS, and how far we were offering to compromise in order to achieve a better outcome. So here’s where we were at.

Three main issues were outstanding:

1.  Date of entry for sectors.

The government proposed delaying stationary energy until June 2010, bringing forward transport fuels to June 2010 and delaying entry of agricultural emissions from 2012 until 2015.

We said we could not see the policy justification for delaying the entry of agriculture given that NZ already accounts for, and is liable for the costs of, increases in those emissions under the Kyoto protocol. We believe that sound economic theory requires that those real costs to the NZ economy be passed on to the agriculture sector so that they factor them into their business decisions.

Nevertheless we indicated that if agreement could be reached on the other two issues we might be able to compromise on the proposed dates of entry, given the political aim of the government to ease entry for the agriculture industry. We indicated that that compromise might be our accepting the changes to the dates for stationary energy and transport, with the date for agriculture being delayed until a date in the middle.

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Filed under: Energy, M?ori, agriculture, climate change, environment
3 Comments

Sexy Coal Brownlee

Posted by David Parker on August 29th, 2009

National’s Gerry Brownlee made a video clip last year which he entitled “Sexy Coal”.  The mind boggles at Gerry being the poster boy for anything, but he’s certainly trying for “Mr Lignite 2009″.

Coal is the biggest source of greenhouse gas emissions in the world after oil, but National want more of it.

Gerry confirmed in his speech to the mineral industry on Wednesday that he wants to help the industry mine more of it – including in National Parks!

Mining is currently banned in National Parks. Elsewher on the DOC estate it is not prohibited – indeed a miner can apply for permission to mine on other DOC land without a public hearing, unlike someone appliying for a tourism concession. So when he says National is looking at loosening up mining including in National Parks, he means it. Maybe because National is in the title he thinks they own them.

This is the third action to promote the use of coal that Gerry has pursued since the election.

Straight after the election Gerry had a hand in changing the boundaries of the new Otiaki conservation park. He excluded the main stem of the main river in the park (the Manuherikia) so as to leave all of the lignite reserves outside the park boundary. Most of the lignite was outside the park anyway, but Gerry thought small proportion of lignite inside the proposed park more more important than the river.

Then he revoked the restrictions on more base-load coal fired electricity generation – despite the fact that we are blessed with amonst the cheapest renewable electricity options in the world – we have lots of geothermal and wind already consented and cost competitive.

Now its mining in parks.  Although he’s now trying to down play the lignite angle now, the ODT reported that he specifically talked up the coal in parks angle in his speech. 

I’m not opposed to all mining. I use steel and aluminium, wear a gold ring. I’m not in the camp that says all mining is bad.   But mining in National Parks?  For lignite! What is he on?

Maybe Mr Lignite has never walked more than a hundred metres from his car, but hopefully he’s seen a few photos.  Does he really think a lignite mine would fit in? They don’t come small. Maybe someone can load some links to those big mines in Australia, or the ferris wheel-like diggers they use in Germany.

Is this part of the Minister of  Toryism’s support for  the 100% Pure campaign?  Perhaps the Nats are trying to justify their pathetically small greenhoue gas reduction target. 

Perhaps Sexy Coal Brownlee wants to star in “The Age of Stupid – 2″

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Filed under: Energy, Uncategorized, conservation, environment
29 Comments

Say “No” to Mr Burns

Posted by David Parker on August 7th, 2009

A respondent to my recent blog opposing more dams on the Clutha River suggested NZ should go nuclear. I wish it was a wind-up, but the myth of cheap safe nuclear needs to be exposed whenever it is raised.

I’m happy to summarise why Labour is so resolute in our opposition to nuclear power in NZ.

Nuclear waste remains dangerous for thousands of years. Not hundreds, but thousands. So long that it is hard to comprehend.

The environmental risks posed by toxic radioactive waste are real. So are accidents. Remember Chernobyl?

A nuclear power plant would be NZ’s biggest security risk. NZ is a low-risk country – not a no-risk country.

These are serious issues, as is the misuse of nuclear materials for weapons. The consequences of nuclear war are so dreadful we seldom talk about them these days.

These realities are enough for me, but some people still say “do it, it’s cheap”. But it’s not.

Nuclear would be far, far more expensive for NZ than our renewables, for a number of reasons.

Firstly, they don’t come small. The high capital cost of constructing an individual nuclear power plant means large plants are required in order to recoup the multi-billion dollar investments required.

Because of the small size of the NZ market (which needs an average of around 130MW of new capacity each year), if you built a 1000MW nuclear plant you would build 7 years ahead of demand. You would have paid for 7 times as much as you need that first year. That means the effective unit cost of the power you actually need is much higher.

Like all other types of generation, nuclear is sometimes unusable while maintenance is carried out. So you if you were reliant on a big chunk of power like that, you’d need some extra reserve. A number of smaller renewable generating facilities provide that diversity without having to have extra reserve generation and so are cheaper for us.

You would have to import the nuclear fuel, and pay for the cost of an independent nuclear regulator and safety agency.

As if that’s not enough, the costs of decommissioning are huge, as is the cost of securely disposing of waste for thousands of years. The UK looked at those costs recently and from memory found the decommissioning costs alone were close to the original construction costs.

So, notwithstanding the Nats relaxing foreing investment rules in NZ, I doubt that Mr Burns or Homer will be coming to NZ anytime soon.

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Filed under: Energy, disarmament, environment
35 Comments

People Power

Posted by David Parker on July 30th, 2009

I see from a recent NZ Energy & Environment weekly (15 July) that Contact Energy have lost an astounding 10% of their retail customer base. 10% of their customers is huge.

This followed their large increase in directors fees, but I for one think another reason is at play in Otago, where their customer base is substantial. Contact is proposing more hydro dams on the Clutha.

This is very unpopular down our way. Remember the “Save Manapouri” movement or the controversy over the Clyde dam (pushed through by empowering legislation by a National government).

Is the lesson for Contact is “don’t mess with our rivers if you want to keep your customers”?

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Filed under: Energy, environment
14 Comments