It’s the day after the Budget and Parliament is sitting in urgency to debate new tax legislation. The Taxation (Budget Measures) Bill is apparently so important that National have:

• Deferred the main Budget Debate;
• Removed normal select committee review;
• Imposed a retrospective effect.

So what is this tax bill about?

Is it the secret “base broadening measures”; National’s supposed answer to Labour’s future focussed capital gains tax?

Is it the closing of the major loophole by which half of the wealthiest 100 New Zealanders avoid being on the top tax rate?

Is it reinstatement of the Labour Government’s research and development tax credits, the key tool which was stoking our businesses’ engines of innovation?

Er, no, no and no.

The centrepiece of this Bill is picking the pockets of paperboys and papergirls.  Urgently taxing toddlers, if you will.

It’s laughable that National’s top economic priority is retrospectively stealing the pocket money of 68,000 kids.

But it’s incredibly sad that this is what government in our beautiful country has come to.

National has wrecked New Zealand’s economy.  Just yesterday they unveiled a horrific 17% plunge in exports.  But instead of getting a real plan to deliver a brighter future they’re plotting to tax toddlers.

The zero Budget of 2012 is yet another wasted opportunity for a country desperate for change.  It’s an insult to ordinary Kiwis who are working harder and longer for less and less.  It’s a slap in the face to law abiding families and small business owners who pay their taxes, and who deserve to get ahead instead of being pickpocketed.

New Zealand is losing 1,000 Kiwis every single week.  That’s 50,000+ a year.

Unemployment is up by 50,000+ since National took office.  The number on benefits is up over 50,000 too.

A zero Budget means zero hope for them, and all New Zealanders.

It also means zero pocket money for paperboys and papergirls.

I don’t think it’s any surprise to anyone that I’ve come out fighting over the extraordinary, but probably predictable decision by Kiwirail to put the Hillside workshops up for sale. In Saturday’s Otago Daily Times I was quite forthright in expressing my views. I used some rather unladylike language and had to ring my mum the day before to warn her.

I stand by what I said. I think the government (and Kiwirail) have pissed on Dunedin. I think many Dunedin-ites agree. Saturday’s ODT editorial seems to agree too though in more polite terms.

I think that the only way we’re going to sort things is for Dunedin people to take control ourselves. And to have a future Labour government backing rail.

I’ll do my best to help find a buyer for Hillside. I’ll continue to take the fight to parliament and I’ll remain a thorn in the side of this government and the local National List MP Michael Woodhouse who has seriously let down the people of Dunedin in the pursuit of his own career. I’ll advocate for the need for and the importance of this industry to remain in public hands, and indeed to just bloody remain in our country.

When I took this job on I understood that there are times when sticking up for your city is more important than towing toeing a party line that you don’t agree with and which is going to hurt your city. It’s a judgement to be rarely exercised. Sometimes the greater good is more important than a local issue. But every MP should have the right and the responsibility to stand up for their city. This was one of those times. Woodhouse didn’t even think about it.

He blocked a select committee hearing on the petition signed last year by nearly 14,000 people (mostly from Dunedin) calling on the government to save the Hillside and Woburn (Hutt) workshops. He has never been held accountable for refusing to allow the people of Dunedin, the Hillside workers and their union to have a say before a parliamentary committee. He should be.

His government is negligent, disingenuous and downright liars about their responsibilities for Kiwirail and its decision and their knowledge of those decisions. As my colleague David Parker has said; if the KiwiRail board had made the same announcement without telling a Labour government, the board would have been sacked. It is just nonsense and untrue for shareholding Ministers to say they didn’t know Kiwirail’s direction and decisions. And it is very clear that they don’t oppose Kiwirail’s decision to sell Hillside.

There’s more at stake than the nearly 130 jobs, the loss of wages, taxes, skills and the more than 137 year history of a competent and valued rail manufacturing plant to the city of Dunedin. There are more than 70 engineering businesses clustered around Hillside. It’s the backbone of our city. It’s becoming more high tech. It’s a hugely important part of our local and regional economy.

This government doesn’t give a stuff. They allowed (and encouraged) it to be run down and now it’s being sold because Kiwirail says it’s not viable. Kiwirail deliberately made it unviable.

I ask you this. How is that that contracts have been handed to the Chinese to build rail wagons that are dubious in quality, when those same wagons could have been built here? They may have cost a bit more, but the workmanship would have been assured, the maintenance would have been less and have been more easily accomplished, and the people who built the wagons would have been earning decent wages and paying taxes in the New Zealand economy.

Kiwirail, and the government, has blocked any independent scrutiny of the dodgy process in awarding those contracts to China North Rail and the quality issues associated with the Chinese wagons. It’s time for some sunlight on both.

It is not false economy to manufacture in your own country. It’s our productive economy. I’d stand up for manufacturing jobs any day against paying for more pokie machines that create immeasurable social harm and are part of a mates deal to an organisation that will profit, might create a few more service economy jobs, but is unlikely add much more real value to our economy.

And I reckon that’s worth sticking up for.

Costs are down, focus is up, strategy is sharper. Performance measures are more rigorous.

NZTE’s emerging success gives the lie, however, to Bill English’s comment that there is nothing to be done about economic growth “it is what it is”.

And NZTE’s focussed success contrasts with the haphazard approach taken by Economic Development Minister Joyce’s to doing shady deals with individual corporates.

None of media (Canwest); Casinos (SkyCity) international film giants (Warner Bros) feature within NZTE’s strategy for target clients.

So if they are not prioirities for the experts, why is their Minister treating them so?

Likewise on FDI, NZTE is focussed on high-spillover investment that adds value to NZ, NOT selling farmland or assets that already exist. So why are National politicians doing the opposite?

Had it thought through the fatal flaws in its partial privatization drive, or has it been taken by surprise? Hat tip to Clayton Cosgrove for bringing SOE sale issues to the fore. Here’s a potted summary of some emerging commercial and economic development implications:

- When the SOE’s are partially privatised they become companies with a partial public shareholding, regulated by commercial law and not the SOE Act. They are no longer SOEs. They no longer have the Crown’s good corporate citizen obigations. Elbow #1.

- That is why the s9 Treaty Clause debate is so fundamental. Iwi are 100% right to be outraged that the Crown’s obligations under the Treaty of Waitangi could be sold down the river (literally). If the Crown’s response is to indemnify the private investor and bear 100% of the ongoing Treaty obligation, then the taxpayer is effectively subsidising the private investor. Clayton nailed this last week. Elbow #2.

- Minority shareholders rights include the ability to invest in future profitable expansion plans. Dilemma for Crown: pony up its 51% of those future capital requirements or face equity dilution below 51% and loss of residual control. The Govt’s response has been to hedge how much it wil initially sell. Does 45% leave it enough of a buffer? For how long? How long is a piece of string? How does this affect its sale proceeds? In a rare moment of frankness Bill English fessed up that those proceeds are only a “guess”. You bet they are. Elbow #3.

- Magically the Government’s new-found forecasts of SOE dividend loss are not, apparenty. These were shamefully omitted from the Pre-Election Economic and Fiscal Update (PREFU) because they were apparently too hard to calculate. They have since been found in a bottom drawer and Lo! they show there will be precious few future divvies, so little loss. Ooops Why would a private investor buy them then? Elbow #4.

- Except Air NZ of course, which will be as cheap as chips after its sad losses last year. Crazy, stupid fire sale. Elbow #5.

- Speaking of which, future takeover threats must now be managed. Minority shareholders have rights. If a future merger or takeover provides them a windfall, they have the right to sell, most likely to foreign corporates or hedge funds (subject to the 10% individual cap, if any). What would the Crown do in the face of such temptation? Could it face legal action from minorities if it blocked such a future sale? How is the public protected from future leveraged asset stripping? Elbow #6.

- Potential cross-shareholding complications arise, as confirmed by the Chair of the Commerce Commission at the Commerce Committee hearing this morning. (I can’t comment on the Committee’s views but can on the issues diiscussed in public hearing). Lets say a foreign energy company bought the maximum allowable shareholding in each of the 3 SOE generators – risks of information pooling, coordination and anti-competitive behaviour would need to be policed by the Commission. At best there would be a lag while consumers suffered and prices rose. The Crown itself would have to be subject to Commission oversight in this regard. Sound complicated? Elbow #7.

Back to the original dilemma: did John Key know about all these issues when he started this privatisation crusade? If so, why was the Government not more transparent about them all before the election – with the public and even with its potential coalition partner?

Oh yeah, I momentarily forgot. It’s politics.

That being the case, lets fight this crazy plan to the last comma.

I have written an op-ed for the Herald on why the “Ratings Ref” yellow carded NZ.  Standard and Poors and Fitch agree on what is fundamentally wrong.  They say:

• First “very high external imbalances, accompanied by high household and agriculture sector debt” (S&P). These are mainly house and farm mortgages borrowed through the banks from foreign lenders to fuel our property obsession.
  • That’s not a new problem and it has levelled off a bit with the recession. But it is at historically high levels and makes New Zealand “an outlier among peers” according to Fitch.
• Second, “dependence on commodity income” says S&P.  Despite record milk prices we are still not paying our way in the world.  The current account deficit is a long term issue. But it will worsen to 6.9% of GDP while the Net International Investment Deficit (NIID) will grow from 78% to 85% over the next five years.
• Third “emerging fiscal pressures associated with (our) aging population” (S&P), including health and superannuation.  Suspending the NZ Super Fund pre funding hasn’t helped.

The reaction from Bill English on Q & A yesterday was uttlerly inadequate.  He maintains the government will keep on doing what it is doing.  As if that has done any good so far  – $37 billion extra debt, 47,000 more unemployed and 3.6% lower GDP now than when they were elected.

Here is the Government’s spin, and some perspective on it:

• “We have worked hard to control government spending and succeeded”.  The problem is that some $37 billion of debt has been added since the National Government took office – some $18 billion in this year alone.  While nobody blames any government for earthquakes – and the ratings agencies recognise that both sides of the political spectrum are exercising fiscal restraint, this is not enough to avoid a downgrade.   The agencies’ arenot swayed by the prospect of liquidating $5 billion of SOE assets.
• “We are better placed than some other countries”.   Being “better placed” than Iceland, Greece or Portugal is cold comfort.  Nor is it sufficient, in the face of paralysis in the US and chaos in Europe, to take refuge in Chinese and Australian expansion.  The risks of a slowdown in both economies are significant, and s the ratings agencies demand New Zealand  takes responsibility for its own future.
• “We are still on track for surplus in 2014-15.  So she’ll be right”.   As if.  The precise timing of short term fiscal balance is not the issue that has worried the ratings agencies.  The long term deterioration driven by poor savings performance, weak exports and the mountain of real estate debt is.  Clutching at such irrelevant straws only highlights the absence of better ideas. 

Proof of the bankruptcy of National’s ideas is in this sobering fact:  only one quarter of OECD countries have been downgraded by Fitch in the last three years.  The last time this happened to NZ was in 1998.  It is nonsense to say we are riding the waves better than most.  To the contrary New Zealand is highly exposed, and saddled with a government that has no plan.

Labour has the policies and the political courage to make a difference and to do what is needed: capital gains tax, strong saving policy, monetary reform and strategic economic development.  It is vital that we implement them before it is too late.

Be in no doubt: what happened on Friday is a very serious development that will have repercussions for many years.  I will write further on what this means for the average Kiwi family.

Regarding Government spending, Dr Brash said the current National Government had spent much more than the previous Labour Government.

Dr Brash went on to say that both the previous National and Labour governments had managed government debt well, meaning the current John Key-led Government started from a good point. However under Prime Minister John Key and Finance Minister Bill English’s watch, government debt has gone from bad to worse.

This reminded me of our debate with National MPs in 2009. National claimed that ACC was leaking millions of dollars under Labour, we argued that the figures do not back up the National Governments unjust cutting of services and upping of ACC levies and that National’s claims were nothing more than scaremongering.

But it has now proved that the ACC debacle of 2009 was just a pre-cursor that led to the National Government hiking ACC levies before they privatise the organisation should they get another term in office.

The world will be a much nicer place if politicians would say what the issues really are (as they are).

Bill English’s repeated lines such as “in the last long nine years” and “economic mismanagement by Labour” may give him an instant boost in his blame game, but the facts will be spelt out sooner or later – just as Dr Brash did this morning.

On the Saturday of the conference, which by the sounds of things Captain Panic Pants and friends wanted to be a total non event, Bill English was taken on about whether assets would actually stay in Kiwi hands. Just how he would ensure this has been the subject of numerous questions in Parliament, but Bill revealed his hand to the delegates.

His answers are incredibly waffly and weak, and the second questioner in the video even says he is not convinced by English’s answer to the first question. Basically he said he could not guarantee that assets will stay in New Zealand hands, does not know how so-called Mums and Dads will be at the front of the queue and even said that they will not finalise how this will happen until after the election.

The problem with that is the “keeping assets in NZ” pledge is a critical part of the policy. The reality is it will not happen, and English has now acknowledged this. New Zealanders don’t like asset sales because they know just how much value has been lost from them over the years, and we want to keep key infrastructure in New Zealand hands. The Nats sale plans are bad economics and bad politics, and even their members know it!

With Labour, we will own our future, and keep public assets in the ownership of all New Zealanders.

Cuts of up to 30 front line staff at Child, Youth and Family make a lie of National’s promise not to cut front line services.

Our community, our children deserve better. We cannot stand by and let these cuts occur.

In April, Bill English said National was ‘committed to moving resources from the back office to the frontline so we can deliver improved public services to taxpayers with little or no new money over the next few years’. *

Questions:

• How is reducing the number of frontline social workers in Dunedin “moving resources to the frontline”?
• How is making highly trained social workers redundant who support and protect our most vulnerable children going to “deliver improved public services to taxpayers”?

The Government needs to honour its promise to retain front line services. All New Zealanders should demand that the Government reverse this appalling decision.

* [Source: Minister of Finance press release, “Room for savings in state sector back office” dated 13 April 2011]

First the leader of the National Party, John Key, shrilly claimed it would be a “dagger through the heart” of western capitalism – or as Bomber Bradbury put it “aliens were coming to eat our pets”.

Then Bill English said it was a good idea in theory – but wasn’t comprehensive enough.

So with tweedles dee and dumb at cross-purposes, they called in the “cavalry” on Sunday – a Steven Joyce press release with some bodgied numbers from his Beehive hacks.

It tried very hard to construct a strawman and then shoot it down.   Trouble was, the strawman bore no resemblance to Labour’s policy.

First, Mr Joyce alleged that our tax plan had not replaced the capital value of the non-sale of SOEs:  “You see Labour done a big lie, and said it is a choice of asset sales or their tax package. But they have not calculated for any increased borrowing through no sales”.

John Armstrong made the same mistake in his Herald column: ”In May’s Budget, National cunningly “booked” the money from its planned post-election sell-off of such shares even though the money has yet to be realised.  Some of that “money” has been set aside for $900 million in capital spending.  Labour has exacted revenge for this trickery by simply ignoring it” .

Sorry John, our numbers do incorporate the asset sales revenue because it’s in National’s net debt track and our net debt track is based on theirs. Not getting that revenue is essentially the sole reason why our net debt track is above National’s in the first few years.

Second Mr Joyce  tried the line that we had not modelled in the cost of interest on debt.  Wrong again.  Interest costs are fully included.

Third, he argued we would achieve “$0″ on our tax avoidance crackdown.  Wrong again:  IRD says there is $3.5 bn in colleectable tax debt (of $5.5 bn total); and over $300m p.a. in avoidance through trust structures; as well as -$500m on the $200 bn invested in property.   Bill English says there is $5 back for every extra $1 in IRD tax collection.  IRD says 30:1.  It all makes our provosion that rises over 5 years up to $300m look pretty modest.

Three strikes and your credibility is out, Steven.

Bill English has admitted the government infrastructure plan released today does not contain detail on any infrastructure project that had not already been announced over the past 2-3 years.

That’s right this is actually a non-news story. The article goes on to say how there was little in the way of specifics or detail in the announcement. I am getting more and more feedback from all parts of the political spectrum of real concern that the National Party has no plan to lift the NZ economy out of its current state. This non-news announcement just adds to that.