Kiwiblog

Constitutional law expert, Professor Philip Joseph slams the process around ECan:

A top New Zealand public law academic wants the Government to abolish legislation that sacked Environment Canterbury (ECan) councillors.

Canterbury University law professor Philip Joseph says the Environment Canterbury (Temporary Commissioners and Improved Water Management) Act, which was passed under urgency last month, breaches several principles of law, is “constitutionally repugnant”, contains “elements of subterfuge” and is a “constitutional affront”.

The act should be repealed and the 14 sacked regional councillors reinstated, he said. …

Joseph told The Press the act was “simply unacceptable”.

“What I’m concerned about is the idea of proper process, and this was a departure,” he said.

“This didn’t go through any select committee consideration, no submissions and no consultation. Why should urgency be taken on a matter such as this?”

While I support the decision to sack the Council, I agree with the criticism around process, and the lack of select committee hearings. Labour sacked the Rodney District Council using the same process (urgency with no select committee) but the ECan situation is more complicated with the powers ECan has also changing.

The Herald proclaims:

Super City u-turn: People power wins

What this reflects (if you ignore the ongoing hysteria from MrTwyford) is that the Select Committee has done its job. And in fact has time and time again made positive changes to draft bills.

Like Labour, I never supported the at large seats. Many people agreed and submitted saying so, and the Committee took them out of the bill.

Plans to set up agencies that would control most services and be virtually unanswerable to the public have been replaced with stronger accountability provisions, including allowing the Auckland Council to require the agencies to hold public meetings.

That seems a good compromise between automatically having all meetings in public (something no Council has in place for all CCOs) and leaving the decision solely to the CCO.

Local Government Minister Rodney Hide said he would consult Auckland’s mayors on the directors for seven council-controlled organisations (CCOs) and leave two vacancies on each CCO board for the Auckland Council to make appointments.

The CCOs need directors who are governing from day one, hence the Minister has to make some initial appointments, but once a Council is in place they can change them as they see fit.

The Auckland Council has also been given the power to appoint the chair and deputy chairs of the CCOs, and the CCOs will be made subject to the council’s long-term and other strategic plans.

This is one of the more significant changes. The ability to appoint and remove the Chair especially is key to making sure the CCO is moving in tandem with the Council.

The report of a special select committee, which received 786 submissions on the third Super City bill, also strengthens and more clearly defines the roles of 21 local boards.

The Government is still refusing to define the roles of local boards in legislation.

But it has listed an extensive list of non-regulatory functions that the boards will undertake and that the Auckland Council cannot take from them without negotiation.

And if I have it right, the Local Government Commission will mediate an disputes.

Local boards will have significant decision-making rights and funding for community, arts and culture, sports and library facilities, parks, reserves and beaches, town centre upgrades, mainstreet and business associations and waste management policies.

The final list of functions and first local board budgets will be set before July 23 by the agency designing the Super City.

I’m certainly a fan of keeping decisions as local as possible.

The Herald applauds changes to per-school budgets:

One of the more contentious decisions hidden in the Budget last Thursday was in the financing of early childhood education. The previous Government gave childcare centres an incentive to employ trained teachers, increasing their grants as they hired a greater proportion of qualified staff.

The Budget has done away with two of the highest bands of subsidy, effectively cutting funds to centres with more than 80 per cent of their staff trained. …

Fewer than half the country’s 4300 centres have more than 80 per cent of their teachers registered yet. The cost blowout over the past five years would have escalated further without the decision National has taken.

While the cut-off will save $295 million, Education Minister Anne Tolley plans to put $107 million back into other early education programmes, $91.8 million of it earmarked for Maori, Pacific and low-income areas. …

Plainly, National does not regard specialist teaching of pre-school children to be quite as important as Labour did. It is probably right. When the previous Government imposed training requirements, there were loud objections from childcare companies that some capable and dedicated staff would be unable to meet these. National does not want to drum them out of the industry.

Nice to see some balance on this issue.

The Press looks at the two Koreas:

Crises between the two Koreas have been so commonly in the headlines for 60 years that it is tempting to dismiss the present tension as a replay of the usual game that will come to nothing. But such is the unpredictability of the North, that would be unwise. …

The South Koreans’ painstaking investigation and the employment of international experts mean the findings are incontrovertible. Thus China, the North’s closest supporter, accepts that the boat went down as a result of a torpedo attack from an armament of the type employed by the North.

The hope must be that the same considered approach will prevail now that the report has been made public, and in this, China’s role is vital.

Its ability to lean on North Korea is the best hope that the hysterical response there to the report will not escalate into another act of military bravado.

North Korea commits an act of war, and then threatens anyone who complains about it. They really are the most thuggish of the various regimes of ill repute.

Seoul wants punishment of the North by way of United Nations sanctions, on the grounds that the incident breached the Korean War armistice and the UN charter.

China’s veto power over a resolution triggering such a response is likely to be used, if only because the North says war will result if sanctions are imposed. Few countries would regret the veto’s use, even if they publicly deplored it.

I would. China’s protection of North Korea emboldens them.

The Dom Post talks finance companies:

Mark Bryers, who is bankrupt in New Zealand but not in Australia, was sentenced last week to 75 hours’ community work and fines of $37,470, plus court costs, after earlier pleading guilty to 34 charges laid by the Economic Development Ministry in relation to the running of Blue Chip. The charges dealt with book-keeping and a failure to attend a creditors’ meeting.

For many of the more than 2000 investors owed a total of $80 million after being caught in the February 2008 collapse of Blue Chip, the sentence is not enough. Some have had their futures destroyed, and their anger was on show at the court, where Bryers was described as scum as he entered. They believe he showed little sign of repentance.

The frustration is at the law’s inability to deliver what the aggrieved would see as justice. Bryers is legally guilty of paperwork failings, but those who lost their money believe they were taken advantage of in a more fundamental way.

That may be true, but the courts and justice system deal, as they should, with legality, not morality.

There is, for example, no suggestion that Mark Hotchin or Eric Watson did anything legally wrong in the collapse of Hanover Finance, which left more than 16,000 investors out of pocket when it froze more than half a billion dollars of assets.

There is morality, and then there is the law.

The ODT also focuses on finance companies:

There were gasps in the court from those investors present, many of whom had lost their houses and savings, when it became evident that Bryers would not serve a custodial sentence.

As he entered the court some had called him “scum”, others “thief” and still more “low life”.

After hearing of his sentence they pronounced their own verdicts outside the court: “he needed to go to jail,” said one; another insisted he should “pay the price”; a third said she felt “absolutely let down by the justice system”. …

Notwithstanding the fact – as pointed out by the ministry lawyer – that the charges were not of fraud, the penalties imposed seem extraordinarily light when set against the loss and suffering of those who invested with Bryers and the Blue Chip group.

Even though they were not of fraud, he still got off lightly.

Vernon Small critically looks at Labour’s claims on inflation:

Labour’s Phil Goff and his inner circle had settled on attacking over the forecast spike in inflation, figuring there was a ready market for suggestions the tax cuts would be swallowed by rising prices.

But the case Labour has tried to make risks backfiring, because frankly, the evidence looks a bit fishy.

I had planned to write along these lines, but glad Vernon has done it for me.

The Treasury forecasts that inflation will surge to 5.9 per cent next year before falling back and staying at 2.4 per cent for three years; well within the Reserve Bank’s 1 per cent to 3 per cent band. It also notes that “underlying” inflation would remain relatively subdued and have a limited impact on interest rates

Next year’s spike includes 2 per cent from the rise in GST, which is compensated for by tax cuts and increases in superannuation, benefits and support for others on state-supported incomes.

More than compensated for.

It also includes a contribution of 0.5 per cent from the rise in tobacco excise (that Labour enthusiastically supported in Parliament)

Which will only affect smokers, and for those whom quit smoking will save them money.

and another 0.4 per cent from the fuel and power prices associated with the Emissions Trading Scheme, which Labour would implement with bells on, pushing inflation much higher. (In any case, the inflationary impact of the ETS was already included in the December half-yearly update.)

Now this is crucial. Quite a few people are unhappy at the impact of the modified ETS scheme, which adds 0.4% on 1 July to overall costs through higher petrol and power charges, but what Labour have not mentioned is their unmodified ETS would add 0.8% to inflation. They had passed a law which would have doubled the price increase due to the ETS.

Take those and the impact of GST away, and underlying inflation next year would be about 3 per cent, close to the top of the Reserve Bank’s 1 to 3 per cent band, but not so unusual.

The other thing Labour has not mentioned is they have constantly called for more government spending. This would mean a higher deficit and more borrowing, which would be inflationary. So their crocodile tears over inflation are less than convincing – their stated policy is to spend more, and to have an ETS which doubles the impact on power and fuel prices at 1 July.

On the other side of the ledger, as the economy improves, the Treasury expects wages to increase by 2.6 per cent next year (the year Labour chooses, because of the unflattering comparison with the 5.9 per cent inflation spike) and then rise by 3.5 per cent, 3.7 per cent and 3.9 per cent in subsequent years, while inflation is tipped to stay at 2.4 per cent.

These are just forecasts, and should be taken with the usual shaker of salt. But if you take one year into account you should be prepared to take them all.

On that basis, wages could well outstrip inflation in the next four years, and beat underlying inflation by even more.

As is generally the case.

Does Labour really want to argue that, as well as compensating for any GST rise, the Government should offset all the effects of inflation? That was above 3 per cent in 2001, 2006 and 2008 – when Labour was in power – and there was no similar call then.

Personally I would be delighted if Labour adopted a policy of giving people tax cuts every year to compensate for inflation. But somehow I don’t think they intend to.

The Victoria University Debating Society is holding a public debate tonight on the issue of liquor law reform. The debate will be held in Government Buildings Lecture Theatre One (on the Stout Street side of the Old Government Buildings, Lambton Quay, Wellington) at 6:30pm.

The topic is “THAT WE SHOULD RAISE THE DRINKING AGE”. Each speaker will be invited to speak about the drinking age (technically, the alcohol purchase age) and other issues related to alcohol and the law, before the debate is opened up to questions from the audience. There will be coffee and tea after the debate.

The speaking lineup is as follows:

Gerard Vaughan – CEO, Alcohol Advisory Council of New Zealand
Roger Kerr – Executive Director, New Zealand Business Roundtable
Iain Lees-Galloway – Labour Spokesperson on Alcohol & Drug Issues
Jenna Raeburn – Spokesperson, Keep It 18
Jo Goodhew MP – National Party MP for Rangitata
Stephen Whittington – New Zealand Debating Champion

Chairperson: Seb Templeton, President of the Victoria University Debating Society.

The debate promises to be an informative event and a great opportunity to hear from a range of views. It is open to the public, so I highly recommend that you come along.

The left tend to measure most things by talking about inequality, and how anything that increases inequality is bad. Inequality, being the gap between those on the lowest incomes and the highest incomes.

This of course means that most of the focus grows on how to divide up the cake, rather than grow the cake.

But even putting that to one side for a moment, I want to make the case for focusing on social mobility rather than merely inequality.

In many cases inequality is a normal and good thing. It is a good thing that a 50 year old with 30 years of experience gets paid more than a 16 year old with no experience.

It is also a good thing that someone who spends six years at medical school and four years of specialisation gets paid more than say a parliamentary researcher.

For the vast majority of New Zealanders, they start their working life earning a lot less then they finish it. And this is good – otherwise you extra skills and experience are not valued.

So I reject many measures of income equality as unsophisticated and even counter productive.

The measure that I would like more emphasis placed on is social mobility. I don’t have a problem with a 19 year old earning $10 an hour as a kitchen hand if when they are 30 they are earning say $25 an hour as a cook. However I will agree that someone who spends their life earning just $10/hour is going to have a relatively deprived life.

But for me the solution is not to raise the minimum wage to $25/hour, but to have a society and a labour market which will help people on $10/hour gain skills and experience so they move up the pay scale.

In the UK social mobility has historically been difficult with such a class ridden society. In New Zealand I think it is far less so. Few people really care about where you were born (unless it was Palmerston North) and what your parents did.

In a society with very low levels of social mobility, I can understand why reducing inequality is more important. But in a society which does have opportunities, I want the emphasis to go increasing social mobility, rather than merely the blunt instrument of inequality. If you take inequality to extreme measures, then you end up like the old USSR where cleaners and surgeons get paid much the same.

The data on social mobility in NZ is fairly sparse – partly because you have to measure it over extended periods of time. But that is where I would like more focus to go.

Very strange feeling as I just learnt about a death via Twitter for the first time. Just 140 characters to numb you.

Somewhat appropriately, yet sadly, it was about one of the most well known people online – Paul Reynolds of McGovern Associates.

Paul was one of the thought leaders in New Zealand. He was a familiar voice to many on Radio New Zealand for many years, and a regular speaker around the country on ICT and the future. He was an inspiring force.

He was also a lovely caring man, whose departure will be felt by many.

My thoughts go out to his family and closest friends.

UPDATE: You can leave a tribute to Paul at InternetNZ, who will pass them onto his family.

A very astute analysis by NZPA Political Editor Peter Wilson:

Wellington, May 23 NZPA – Post-budget best case scenario for the Government: Most people react responsibly, saving or investing their tax cuts. Inflation rises but far less than Treasury’s forecast. Reserve Bank raises interest rate by a quarter of one percentage point, says it’s because the economy is growing and has nothing to do with the budget. Families realise they really are better off, Labour fails to find anyone who says they are worse off. Petrol and power price rises caused by the introduction of the emissions trading scheme are accepted as necessary to deal with climate change. New Zealand First slips to less than 1 percent in the polls. Solo mum says “I’m voting National”. All Blacks win World Cup.

Post-budget worst case scenario for the Government: Most people spend their tax cuts, saying they don’t have a choice because GST at 15 percent is hurting. Inflation rises above 6 percent. Reserve Bank announces vicious interest rate rise and blames the budget. Families realise they aren’t better off, Labour finds hundreds who say they’re worse off. Opposition to emissions trading scheme becomes a serious problem. NZ First reaches 7 percent in the polls. Wealthy property owner says “I’m voting for Winston Peters”. All Blacks lose to France in quarter-final.

I think it will be obvious in a couple of months which scenario emerges.

The HoS reports:

A blonde model was having a relationship with disgraced Bridgecorp boss Rod Petricevic when he allegedly signed off more than $1 million in “dishonest” payments to her, according to investigators.

Janita Wright received $1.12m for claimed data entry, marketing and consultancy work from her former companion’s finance company.

However, a Government investigation failed to find evidence of work Wright had invoiced for, and said the call centre she operated for Bridgecorp had little traffic.

“Any call centre activity would have been in the weekend only and only minimal, with an average of 5 calls per weekend,” the Ministry of Economic Development (MED) report said.

The MED found at least 41 payments between February 2004 and June 2007 to a company controlled by Wright and that most were personally authorised by Petricevic.

Now let;s work this out. Five calls a weekend is 250 calls a year or around 900 calls over the payment period.

So she got paid around $1,300 per call. Nothing suspicious there at all. No.

The HoS reports:

Anti-whaling activist Pete Bethune, imprisoned in Japan, believes he will be found guilty and fears a lengthy jail sentence.

He knew this of course when he illegally boarded the Japanese ship.

Personally I hope the Japanese Government just deport him, rather than put him on trial. I suspect he wants to be a martyr for the cause – which is why he did it.

Meanwhile, his wife Sharyn revealed financial and personal pressures of her husband’s long absences have caused the couple to separate.

Not a huge surprise, as Bethune has spent four of the last five years

The Waikato Times reports:

A two-month-old baby left home alone by his parents was found to have cannabis in his system, a Hamilton court has been told.

Details of the child’s neglect were revealed in the Hamilton District Court yesterday as his parents, Rosina Ann Wilson, 43, and Paul Cheyne, 53, were sentenced to 12 months’ intensive supervision.

Both had earlier pleaded guilty to charges of abandoning a child and cruelty to a child.

The charges related to an incident on May 27, 2008, in which Wilson and Cheyne admitted leaving their two-month-old son home alone.

The couple were unable to say how long they were away from the address.

Most parents panic if their baby is out of sight for even 30 seconds. How could anyone just leave a two month old at home alone?

New Zealand is the only country in the OECD that has a ban on asset sales. Even socialist governments throughout Europe have sold assets where there is no need for the state to own them, or at least own 100% of them.

A welcome sign that National may go into the 2011 election with a more flexible policy is reported by the NZ Herald:

The National Government has given its strongest indication yet that it will sell state-owned assets should it get a second term.

Finance Minister Bill English yesterday singled out Kiwibank as a particularly attractive asset for buyers.

But he said the Government would not sell assets without a mandate from the public.

The public will get to decide.

Mr English, fresh from delivering the 2010 Budget, told a gathering of South Island business people yesterday that the Government might consider a change of policy “to free up capital and put product on the market for Kiwi mums and dads”.

Kiwibank was a good example of an asset that needed to be dealt with. It had reached the size where it needed either a Government guarantee or an “awful lot of capital”.

“If there’s any asset that’s regarded as risky by credit rating agencies, it’s a small, fast-growing bank,” he said.

“So one option would be to go to the market and raise capital. Keep majority Crown ownership, but raise the rest of the capital from the market.

Makes sense to me.

Labour leader Phil Goff said state-owned asset sales were “absolutely all on” if National won a second term, “and they might not even wait until then”.

Mr Goff should know all about selling assets without a mandate. However National has made it very clear they will only sell or part sell significant assets with a specific mandate.

A reader requested this graph. It shows the average tax rate (including low income rebate and independent earner tax credit) at each $10,000 band for April 2008 and October 2010.

A full time worker (without children) earning a bit over the minimum wage at $15/hr has had, over 2.5 years, their average tax rate drop from 19.1% to 12.5%.

A full time worker earning the average wage at almost $25/hr has had their average tax rate drop from 22.7% to 16.0%.

I think I have made more out of iPredict on the budget, than I did from the actual tax cuts.

I’ve just had a total of $1,250 paid out on GST not going up before 1 July (it goes up 1 Oct) and the top tax rate going to 33c (or 34c) and it got paid out today so my iPredict bank balance just got $1,250 higher.

I’ve invested recently in the UK Labour leadership contest – my money is on David Miliband – for now anyway.

I’ve done some calculations on what the tax cuts mean for working families who get WFF payments. The assumption is one parent working rather than two, which is the conservative scenario maximising tax paid.

The pink line is the standard average tax rate at each $10,000 band.

If you have even just one child you do not pay any income tax until you are earning $42,000! And you keep receiving WFF until you earn $74,000.

With two kids, then your family pays no income tax $50,000 of income. And you receive WFF until you earn $89,000.

If kid number three turns up, then you pay no tax until $56,000 and you receive WFF payments until you income exceeds $105,500.

And for the Catholics amongst us, kid number four means no net income tax until you reach $63,000. And you keep getting WFF until your combined earnings exceed $120,500.

Well, in all the excitement of the budget I haven’t forgotten

This is our tauhou or as it is variously known, white-eye, wax-eye or silver-eye. In this shot, this bird is scolding another bird.

The scientific name is Zosterops lateralis. It managed to establish a population here naturally via migration from Australia in the 1800s.

As always, the image links to a larger version.

While the tax scale is a bit flatter after the changes in the budget, it is still a highly progressive system when you look at the overall average tax rates at various income levels.

• Those who earn up to $40,000 pay no more than 15% income tax
• Those who earn up to $70,000 pay no more than 20% income tax
• Those who earn up to $110,000 pay no more than 25% income tax

In other words 67% of taxpayers will be paying no more than 15% average income tax.

88% of taxpayers will pay no more than 20% income tax.

The top 12% of taxpayers will still pay 49% of all income tax, which I estimate is over 90% of net income tax!

Out drinking last night, and someone remarked that the official tax calculator (which is very good) assumed people spent all their after tax income. Hence it over estimates the impact of the GST increase.

It was suggested that one needs a tax calculator for people who are good at saving, hence I suggested the name that we need a kosher tax calculator

And Deloittes have such a beast here.

You enter in your income, and how much you spend on goods and services ranging from none, not much, some, half, lots, most to all.

Play away!

Go to www.taxguide.govt.nz to see how you are affected. Quite a neat site with four calculators:

1. Workers with no Government support
2. Workers who get WFF
3. Those on Superannuation
4. Those on a benefit or student allowance

You just insert your income, partner’s income, and the level of rent or mortgage payments and your overall savings are calculated.

The $1.1 billion cap on new spending has almost all gone ($800m) on health, education and science. Most agencies have a nil increase. Over four years DHBs get an extra $1.4b.

A stronger economy (economic growth is so vital) means we are predicted to return to surplus by 2015/16 and net debt peaks at 27.4% in 2014/15. That is welcome but only will happen if fiscal discipline is maintained. Also if we have a recession every ten years or so (which tends to happen) then that only gives us a couple of years of paying off debt before we may face similar problems again. The reality is that there may not be significant extra funding for anything until around 2017.

While this is better than the disaster inherited by the Government (net debt projected to never peak), the reality is that net debt is still going to increase from $27b this year to $63b in 2014. On average that is still an increase in net debt of $175 million a week!

GPD is now forecast to grow 3.2% in the year to March, up from 2.4%

The operating deficit for this year is projected to be $8.6 billion. Now does someone want to try telling me that the Government should be spending even more money? It is clear we need less spending, not more.

In what is overall a very good budget, this is the weak part. The deficit is still too high, and another fiscal shock could still stuff up us badly. It would be nice for the Government to set a target (as a % of GDP) to which they want to get spending under. I think 30% is a good target to aim for.