The facts:
NZ is the third fattest country in the OECD (astounding). The productivity and health costs associated with this are huge – and growing.
Auckland University and Otago University medical schools undertook a joint research project into ways to influence consumer behaviour around the purchase healthy foods. Three groups were set up; 1) control group, 2) a group given very targeted information and education about the outcomes of healthy purchases, and 3) a group that were given information and a 12.5% price discount. The result: no change from control group (expected), no change from the group given a high level of education and information only (surprising), however, a 11% increase in the purchase of healthy food by those who received a 12.5% discount.

After consultation with a lead member of this research team, we decided that one of the best ways to influence buyer behaviour and promote healthy choices was provide a price incentive. This works. Six months after the study had finished and prices returned to normal for the third group, the researchers found the majority in this group were still making healthy purchase decisions.

So, education alone will not work in changing the eating habits / purchase decisions of the vast majority of NZers. A price incentive does. If anyone has a more effective way to directly target the obesity problem then I am very interested in hearing, because while it is a problem now, it is set to become an epidemic within a short space of time.

As an aside, we did briefly consider a ‘fat tax’ on unhealthy foods, however, ‘unhealthy’ is very difficult to define (under many definitions, milk and cheese are ‘unhealthy’) and so we decided that in this case, it is easier to remove a tax than add one.

The rising cost of living will be a feature of the election campaign. The median real wage has dropped substantially under the National government.

The Regional Public Health service here in Wellington has produced an interesting study on food costs for families, using data from the University of Otago food cost survey.

While the study notes that on average New Zealanders spend 16% of their income on food, the study shows that in order to put a healthy meal on the table, many New Zealanders would need to spend a far greater percentage of their income on food.

International studies indicate that if you are spending more than 30% of your disposable income on food, you are experiencing ‘food stress’. This study shows that to purchase a basic healthy diet, many low income New Zealanders will be spending a far greater percentage than that.

For example for a family living off the minimum wage would need to spend 34% of their income before rent and 50% of their income after rent to do this. For a beneficiary family the situation is even more difficult with a range of 43% (before rent) and 74% (after rent) required.

Obviously this will be next to impossible for many people. The social and economic consequences of an unhealthy diet are obvious, not only for the individuals concerned, but for the country as a whole. Obesity and poor nutrition will contribute to high health costs, poor quality of life and a cost to us all through the health system and the human cost of lost opportunity.

The rising cost of food, and the impact of the GST increase are all contributed to making this situation worse. John Key showed he was getting out of touch when he described going to foodbanks as a lifestyle choice. The unaffordabilty of the basics is the reality that many families are facing.

While some people like to disparage Labour’s policy of removing the GST from fresh fruit and vegetables that is a step in the direction of making healthy food more affordable. Making our tax system fairer, including through the tax free zone and lifting minimum wages are also part of our plans to give people the income they need to provide for their families. It is vital for all our futures.

So, if you have examples of goods and services that have increased by more than 2.5%, please let me know.  I am building a simple database to prove that the increase in the cost of living, brought on by the increase in GST, is having a significant impact on Kiwis who are really struggling with stretched budgets.  I should note that it is not illegal to increase prices in NZ, and a NZ Herald poll highlighted the fact that over 1/3 of companies planned to use the GST rise as an excuse to whack up prices – so are they? 

Especially interested in price increases from state-owned organisations. 

And also interested in organisations that have rebelled and dropped prices (like Saphire and Heath coffee shop in Napier: dropped the price of coffee by 50c in protest)

You know, the tax cuts that gave the wealthy substantial coin back ($1m = $1,000/wk extra in the hand), but those on the median wage minimal; and certainly not enough to cover the cost of increases bought on by rises in GST, petrol etc.  Those admissions were:

1. ‘That the tax cuts aren’t stimulatory’.  Hold on a second: what was that Bill?? We are in the middle of a recession, and the govt spends around $14b on a measure that isn’t stimulatory!  Help me out here, because I don’t understand this one.  If this ‘switch’ was just about ‘rebalancing’ and not about economic stimulation and recession busting, then why not at least wait until the economy is firing again, and in the meantime, spend some of the $14b on getting the economy up and running!!!
2. ‘That New Zealand is the only country in the world undertaking tax cuts like these’.  Yep.  Wonder why?  Perhaps because trickle down / supply side economic theory that these tax cuts are based on (and confirmed by Treasury Sec Whitehead) died with the dawning of the 21^st C.  Perhaps because such theories have been disproven.  Perhaps because Bill English really is mismanaging the economy in the most expensive, worst, diabolical possible way.  Perhaps all of the above…!
3. That he didn’t think people would start saving and paying down debt so soon’.  Groan.  There are about 1,000 books on JM Keynes, his theories, his philosophies, his thoughts, the implementation of his theories, philosophies and thoughts etc etc.  Know what – they all say that during a recession a govt shouldn’t give tax cuts to the wealthy because… the wealthy save and retire debt and it does nothing to stimulate the economy.  Just like has happened.  It’s not rocket science.  It’s always been out there – and it appears that every finance minister / treasurer in the western world read at least one or two of these books on Keynes; well, all except one Bill English.

Damn!!

• the progressive case against GST exemptions – James Caygill
• the progressive case for GST exemptions – David Choat

Herald’s view this morning…

Today, many kiwis received tax cuts.  Here are some facts about this tax policy:

• the top 10% of wage and salary earners get 42% of the tax cuts:
• the bottom 20% get 2%. 
• people on a $1,000,000 salary (according to the IRD, there are around 650 people who earn $1m or more) have just received around $1,000 per week extra: people on New Zealand’s median wage of $28,000 per year will get just over $4.63 after accounting for the GST increase.
• the tax cuts will cost just over $4b per year, or $14.3b over 4 years. 
• after accounting for the greater revenue due to the increase in GST to 15%, the government will still need to borrow around $1b to fund tax cuts.
• New Zealand Institute of Economic Research (NZIER), in its Sept 2010 update said: “We estimate around 50% of households will be worse off than a year earlier as rising food prices, GST and other one-off charges more than offset personal tax cuts” (p8)

When I bring up the argument around fairness and equity, some say the top earners pay a disproportionate share of the tax therefore deserve tax cuts.  I don’t buy into this, because whilst the top 10% of tax payers do pay a disproportionate amount of the tax, they also earn around 32% of all income

But it comes back to the question of ‘what sort of society do we want to live in?’  Lets face it, New Zealand has a pretty good standard of living.  For example, our schools are well resourced and our hospitals are first world.  Due to universal superannuation, we have the lowest level of geriatric poverty in the OECD (2% v Australia’s 24%), our Accident Compensation system is generally acknowledged as a great model (well, it was until Nick Smith started butchering it).  All these, and many more, services are paid for from tax revenue.  The more money that is spent on tax cuts, the less there is to provide the essential services that New Zealanders have come to expect. 

In many cities, these tax cuts will increase the gap between the few that have a lot and the many who are struggling with higher costs associated with the increase in GST, ETS and 4.5% inflation.  This angers me greatly. 

Some of the country’s richest men have been responsible for causing the most harm to our nation and its citizens.  The sort of society I wish to live in is one where every citizen is treated with respect and dignity and is valued for who they are, not how much they earn.  This is what I will fight for as long as I represent you in parliament.

Is it fair that someone on $1,000,000 gets $1,000 a week extra in the hand per week, and someone on the median income of $28,053 gets $4.64 in the hand per week after GST?

Is it fair that a regressive tax is increased to make a progressive tax less so?

Is it fair that the Minister of Revenue gets a tax cut of around $140 per week in the hand whereas someone on the median wage in his electorate gets about $5?

Nope didn’t think so – and neither do the vast majority of New Zealanders.