Debt and spending

September 11th, 2014 at 4:00 pm by David Farrar

A reader asked if I could provide data on what spending increases have occurred under National and Labour, as Labour keeps blaming National for the increase in debt.

Considering that Labour have opposed basically every measure of spending restraint in the last six years, I’m amused they think attacking National for too much debt is a convincing strategy.

The reality is that Governments have relatively little control over how much revenue they’ll receive (short of major tax changes), but what they do control is spending. And the reality is once new spending is added on, it is very very difficult to get rid of.

So how much has spending increased in the last five years of National, and Labour before that.

expenses

In 2004 core crown expenses were $41.6 billion. Labour increased them by a massive 54% over just five years to $64 billion. Yes 54% increase in five years. This is from the party that claims they will keep to the same fiscal track as National!

From 2009 to 2014 (based on PREFU forecast) core crown expenses only rose a further 11.4%.

Do you think a party that increased spending by 54% in five years, will get NZ back into surplus? Even with all their extra taxes, I can’t see it happening.

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$18 billion and rising

August 12th, 2014 at 4:00 pm by David Farrar

Steven Joyce points out:

Updated figures today show that Labour’s election-year spending spree is now up to almost $17.9 billion over four years – and counting, Associate Finance Minister Steven Joyce says.

“Labour’s own numbers show spending promises to date of $16.4 billion over four years,” Mr Joyce says.

“However, they have woefully underestimated the costs of introducing compulsory KiwiSaver, dismantling the electricity sector and paying a 12.5 per cent R&D tax credit.

“For example, Labour claims to be bringing 500,000 extra people into KiwiSaver from 1 October 2015, and would be paying them a tax credit that averages around $370 a year plus a $200 a year kick-start for the first five years. A simple calculation shows that the cost of this must be approaching $250 million in the first year, rather than $141 million as Labour is claiming.

“It’s interesting that Labour’s costing of exactly the same policy in 2011 was more than two-and-a-half times higher than it is now in 2014, so it  looks like they’ve cut a few corners this time around.”

Mr Joyce says when you put more realistic costs on these policies it takes Labour’s numbers to $17.9 billion over four years.

“More will be added to this bill as Labour makes more desperate promises – and that’s not counting the big spending of their prospective coalition partners the Greens,” Mr Joyce says.

Bye bye surplus, hello deficit it will be. Which means that Labour will have to keep increasing taxes.

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The Ministry of Taxis

July 28th, 2014 at 1:00 pm by David Farrar

Stuff reports:

When it comes to walking the talk, it seems Ministry of Health staff would rather just take a cab.

Last year ministry staff took more than 1000 taxi rides for less than $10 – at the same time as officially advocating walking as a way to increase New Zealand’s low levels of physical activity.

In the 2012-13 financial year, staff based in Wellington charged taxpayers for 8645 taxi trips with 1076 of those for journeys costing less than $10. Another 1942 taxis were taken for $10 to $15.

The Star-Times took a $10 taxi in central Auckland to see how far it would take us. We travelled 1.7km. The return journey on foot, at a leisurely stroll, took just over 16 minutes.

That’s around four taxi trips a day of under $10. It is hard to get a fare for under $10. The initial cab hire and phone call is almost $5 so you won’t get to go much more than a km.

The Ministry of Health’s physical activity guidelines suggest people should be active every day in every way possible, doing at least 30 minutes of physical activity five days a week.

The ministry’s website says you should walk whenever you can. “Remember: Even small increases in physical activity can produce measurable health benefits,” the site says.

Do as we say, not as we do!

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$760,000 to study religion!

October 30th, 2013 at 1:00 pm by David Farrar

The Dom Post reports:

A university professor who left the priesthood after a year has been awarded more than $760,000 of public money to study Kiwis’ spirituality and religious beliefs.

Joseph Bulbulia, of Victoria University, is one of 109 researchers who will receive a total of $59 million from the Marsden Fund over the next three years.

Professor Bulbulia said religion was “intensely important” to him, but “as for an afterlife, or God, I have no idea”.

I thought God and afterlife tended to be a fairly important part of religion!

Well except for Scientology, which is really a money making scam.

He migrated to Wellington from the United States in 2000, having left the priesthood earlier in his life and then had a daughter before he was married.

He hasn’t been to church for 20 years, other than to please his mother, but said research showed that some events, such as the Christchurch earthquakes, renewed people’s religious beliefs.

Do we need to spend $760,000 to research this?

The full list of Marsden Awards is here. The grant for a study of religious belief is one of the largest, which surprises me. Many of the other grants involve physical science which tends to be far more costly. Some of the more useful physical science ones include:

  • Does the southern edge of the Hikurangi Plateau control Otago tectonics?
  • Unraveling the magmatic processes responsible for phonolitic volcanism using the Mount Erebus lava lake and magmatic system
  • Reconstructing complex ground motion effects in Christchurch during the Canterbury earthquakes: what does this mean for future ground motion prediction?
  • Does investment into seed dispersal alter with plant height and island size?
  • UV-B radiation as a master regulator of photosynthetic performance and leaf organ development in sunlight
  • Improving radiotherapy outcomes: Chain release of drugs to kill refractory cancer cells and inhibit metastatic spread

All of the above awards (except the cancer one) are for less than the religion one. Other fairly dubious ones include:

  • The Crown: Perspectives on a Contested Symbol and its Constitutional Significance in New Zealand and the Commonwealth $604,000
  • Territorial Disputes and Civil Society in Northeast Asian Democracies

University staff can and do research in all sorts of varied areas, as is their right with academic freedom. But I would have thought with a relatively small pool of contestable grants for research beyond the normal, they would be prioritized towards things of more direct relevance for New Zealand.

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Regional spending

October 9th, 2013 at 1:00 pm by David Farrar

spending

 

This table comes from a just released Regional expenditure report by the Government.

What is interesting is that less spending by the Government occurs in Auckland than their share of the population. Wellington gets proportionally more direct Government spend, but apart from that most of the country is pretty proportional.

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Real fiscal restraint

May 18th, 2013 at 12:00 pm by David Farrar

Issue 17 2013 graph

 

This graph from the NZ Initiative is an insightful one. It shows the massive increase in real spending per capita up until 2009 and the fiscal restraint that has occurred since then.

Imagine if the growth from 2002 to 2009 had continued? Wed be approaching Greece.

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Science funding grows

May 2nd, 2013 at 12:00 pm by David Farrar

Stuff reports:

The Government has announced a multimillion dollar investment into science and innovation to help combat the biggest science challenges facing New Zealand.

At the Auckland War Memorial Museum today Prime Minister John Key announced an extra $73.5 million in funding for the science and innovation sector.

It brought the total funding to $133.5m over four years for Budget 2013.

Key said the funding put science at the heart of much of the Government’s thinking.

Science and Innovation Minister Steven Joyce said the funding would go towards 10 “challenges” that scientist could tackle.

These included research around helping New Zealanders’ health at the beginning and end of their lives, research into natural disasters, helping promote and protect the country’s biodiversity including its marine reserve, and the southern ocean.

The advisory panel, led by chief science advisor Sir Peter Gluckman, received 200 submissions on the challenges.

Joyce said not all challenges would be solved overnight but some had refined research areas.

I quite like the idea of funding for some specific challenges or goals.

It appears the Government is on track to be back into surplus for 2014/15. They have stopped the previous runaway growth in spending across the board – but allowed some increases in a few key areas such as science, tourism and hospitals.

The 10 national science challenges announced today are:

+ Ageing well – harnessing science to sustain health and wellbeing into the later years of life;

+ A better start – improving the potential of young New Zealanders to have a healthy and successful life;

+ Healthier lives – research to reduce the burden of major New Zealand health problems;

+ High-value nutrition – developing high-value foods with validated health benefits;

+ New Zealand’s biological heritage – protecting and managing our biodiversity, improving our biosecurity, and enhancing our resilience to harmful organisms;

+ Our land and water – research to enhance primary-sector production and productivity while maintaining and improving our land and water quality for future generations;

+ Life in a changing ocean – understanding how we can exploit our marine resources within environmental and biological constraints;

+ The deep south – understanding the role of the Antarctic and the Southern Ocean in determining our climate and our future environment;

+ Science for technological innovation – enhancing the capacity of New Zealand to use physical and engineering sciences for economic growth;

+ Resilience to nature’s challenges – research into enhancing our resilience to natural disasters.

 

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NZ Herald on private sector

January 11th, 2013 at 1:01 pm by David Farrar

The NZ Herald editorial:

An economy does not work very well, many countries have found, if every worthy service is financed from taxation and none need to put some of their energy into raising independent sustenance. Many a worthy service is provided from the private sector for a profit. But some of those that cannot carry a charge and make profits can offer value to commercial sponsors and capitalise in other ways on their popular appeal, and it is economically healthy that they should rely on those sources as far as possible.

The misconception that any good and essential service deserves a government grant is not confined to those who are not seeking a profit. Commercial firms are no less susceptible to government hand-outs and no less reluctant to present a case for them.

A mixed economy prospers when as many as possible of its goods and services are financed by voluntary trade and the proceeds of taxation are reserved for those that are essential and could not otherwise survive.

Absolutely. I’ll happily donate money to good causes, so they need less taxpayer funding. We have a wonderful volunteer ethos in New Zealand.

The rescue helicopter gives good value to its name-sponsor, Westpac bank, and its well-publicised work is guaranteed to elicit a good response to any appeal for public donations. The same is true of the Starship children’s hospital and of some prestigious state schools that can command high parental donations. Consequent reductions in their public grants are socially and economically justifiable.

Far from complaining that they are being penalised for success, the fortunate should be quietly proud of their reduced dependence on public money. They should be praised and celebrated for the proof of value that voluntary finance provides, and for the public money their fund-raising success has left in the purse for the less fortunate.

I just hope the Herald remembers their own editorial when there is some controversy over government funding!

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State property costs

November 23rd, 2012 at 10:00 am by David Farrar

Jonathan Coleman announced:

State Services Minister Dr Jonathan Coleman says a new Public Service property strategy is likely to reduce the office space foot print in Wellington by the equivalent of three Reserve Bank buildings.

Dr Coleman says Cabinet has approved the start of a centralised negotiation for future public service office space in the capital with accommodation leases due to expire for five large government agencies.

The leases due to expire include the Ministries of Social Development, Health, Education and Business Innovation and Employment, and the Crown Law Office.

The Property Management Centre of Expertise based within the Ministry of Social Development has been delegated to lead the negotiation for the accommodation needs. …

A business case presented to Cabinet indicated a reduction of the office footprint in Wellington of 30 per cent will save $338 million over 20 years, which is a 20 per cent reduction in cost compared with the status quo baseline.

Sounds good to me. If that achieve that, there are benefits beyond the direct savings. The ever increasing size of the public sector in the 2000s saw office rental costs in Wellington CBD skyrocket. This imposed significant costs on private businesses. Having reduced demand from the public sector should see smaller increases in rental prices for commercial tenants.

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Can we do this in NZ please

September 11th, 2012 at 10:00 am by David Farrar

The Brisbane Times reports:

 A national public health body has slammed the Newman government’s “gag order” on community organisations, saying it will strip service providers of one of their vital roles.

Queensland Health grant contracts now included clauses preventing non-government organisations advocating for state and federal legislative change, a spokesman for Minister Lawrence Springborg confirmed last night.

“We’re making it clear that we want to fund outcomes but not advocacy,” the spokesman said.

We badly need this in NZ. I’m all for funding of public health groups that provide actual public health services. But we spend tens of millions of dollars on groups that take the money and use it to lobby MPs on what the law should be. It is quite wrong that bureaucrats hand out money to lobby groups, to try and dictate policy to MPs.

There is nothing wrong with a taxpayer funded health group doing select committee submissions and the like. But some health groups are 95% taxpayer funded and as far as I can tell spend 95% of their resources on lobbying activities.

The Newman government raised concerns about advocacy when it announced in May that it was stripping about $2.5 million from the Queensland Association for Healthy Communities, which Queensland Health had previously funded to target HIV/AIDS prevention among gay men.

The group, which has a focus on lesbian, gay, bisexual and transgender health, spoke up in favour of the former Bligh government’s civil union legislation and has recently criticised the Newman government’s plans to ban same-sex couples from having a child through surrogacy.

In an interview to mark his 100th day in office in July, Mr Newman argued the organisation had not improved HIV rates “and they had become an advocacy group [and] we’re not going to fund advocacy groups”.

That’s a good example. I personally favour same sex marriage and adoption. But I don’t think taxpayer funded NGOs should be campaigning for them. I’m not saying that has happened in NZ, just using the Queensland example.

A bill banning funding of NGOs that are greater than say 25% lobbying activity would be an excellent bill for a backbench National MP.

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$300m saved

August 9th, 2012 at 7:00 am by David Farrar

David Fisher at NZ Herald reported:

John Ivil is the $300 million man – that’s the amount of money he and his team of public servants have saved the taxpayer in two years.

The former army logistics officer heads a team of negotiators who have turned the Government’s approach to spending money on its head.

Government departments have always taken an individual approach to buying goods and services, with $30 billion spent by agencies, hospitals, local councils and schools.

Public servants need cars, flights and office supplies, and each agency will head out into the market to try to strike the best deal with taxpayer money.

Now Mr Ivil and his team of 30 people at the Ministry of Business, Innovation and Employment promote the Government as the “customer of choice”, using the combined purchasing power to drive costs down and secure discounts.

Instead of Government departments going looking for the best deal, they now have the best deal looking for them.

Mr Ivil said his team had made $293 million in savings over the life of contracts secured so far (five to seven years).

Good stuff. Some people think that you can not save money in government without cutting services, but this is a good example that you can.
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CIS on think-tank funding

July 3rd, 2012 at 2:00 pm by David Farrar

Andrew Baker from CIS writes:

 One of government’s favourite ways to solve a problem is to throw money at it.  But what if the problem is a think tank or public policy institute?  The true value of a think tank is that they can say what they think – whether to the benefit or detriment to the government of the day.  When the government starts throwing money at think tanks, there is a real danger that they undermine their capacity to critique the government effectively and make a positive contribution to civil society.

I agree.

Unlike the CIS, many think tanks and university-aligned public policy institutes receive financial assistance from the Government.  This often takes the form of endowments, donations, corporate memberships or grants.  The latest example is the Gillard government’s $7 million contribution to refurbish the building that will house the Labor-aligned Whitlam Institute, the Whitlam Prime Ministerial Library and an art gallery.

Other examples include a $112 million contribution towards the Australian National Institute for Public Policy in 2010; the $30 million that the Brumby and Rudd governments gave to establish the Melbourne based Grattan Institute; the Centre for Social Impact’s $12.5 million endowment; the $7 million for the University of South Australia to establish the International Centre for Muslim and non-Muslim Understanding ‘under the leadership of former Prime Minister, the Hon Bob Hawke AC’; and the Howard Government’s $25 million endowment of the United States Studies Centre at the University of Sydney.

That is a huge amount of money being spent.

recent report by the Institute of Economic Affairs in the UK illustrated this point well when it found that thousands of politically active charities only survived because of taxpayer support.  Government intervention in the marketplace of ideas distorts public debate and the organic growth of civil society.  Allowing ‘zombie’ ideas without popular private support to live on long after they are declared dead by the marketplace is not in the public interest.

For the last 36 years the CIS has relied on philanthropy, private donations and individual memberships to fund our research and advocacy for small government and free markets. This makes the CIS more productive and efficient, and we are more able to say what we think is right than similar organisations that take taxpayer money.  Only without financial assistance from the government can a think tank be truly independent.

It is staggering how many lobby groups are effectively funded by the Government.

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More taxpayer funded lobbying

June 26th, 2012 at 10:00 am by David Farrar

Last month I blogged on taxpayer funded lobbying. This should be of grave concern, because what it means is effectively you have Government Departments funding NGOs to lobby MPs on what the law should be.

I had a response from the Public Health Association, which was:

Hi David, We would like to respond briefly to your 14 May post about taxpayers funding lobbying. The Public Health Association (PHA) acknowledges you have a valid concern and would like to make it clear that none of the public money we receive is spent on lobbying or advocacy. It is part of our contract with the Ministry not to do so. Any lobbying we do is funded by membership fees, individual donations and fund-raising. Money we receive from the Ministry is spent only on activities such as supporting the public health workforce.

The reality though I believe is that if the vast majority of your expenses are staff, then there is no way you can say that no public money is spent on lobbying.

Now I do not advocate that a body which receives some taxpayer funding should not be allowed to express a view on issues. That would be wrong. But when a body is both primarily funded by the taxpayer, and the bulk of its work appears to be advocacy and lobbying – that is when I think it should not be allowed.

The PHA openly states “The PHA is a voluntary association that takes a leading role in promoting public health and influencing public policy.”, and over 50% of their income is from the Ministry of Health. Most of the remainder is their conference which is I believe 90% public sector funded. Actual voluntary membership fees are only 5% of their income.

I’ve also been sent examples in the alcohol area. An OIA from the Ministry of Health reveals taxpayer funding of Alcohol Healthwatch with $3.35m, the vast majority for “alcohol health promotion”.

Have a look at their website. It is all about lobbying MPs on the Alcohol Reform Bill.

The Health Sponsorship Council has a presentation on their website from ASH. Slide 16 is about how they must “Hold the Government to account”.  ASH is 89% taxpayer funded, and was saying this at a taxpayer funded conference.

This outbreak of taxpayer funded lobbying is not unique to New Zealand. The Institute of Economic Affairs in the UK has published a report called “Sock Puppets: How the Government lobbies itself and why“. It is a compelling read. They note:

For political parties, the benefits of supporting ‘sock puppet’ organisations extend beyond the short-term utility of progressing their legislative agenda whilst in government. Once the party loses power, these groups become a ‘shadow state’ using public money to promote the same political ideology. The new government must therefore choose between withdrawing the funding (which will prompt outrage from the threatened groups) and keeping it in place (which will mean funding politically hostile organisations).

I think the Government should apply a simple litmus test. No organisation which spends say more than 25% of their time or resources or lobbying should be eligible for government funding. They should be forced to split into totally separate organisations if they provide genuinely useful services which should remain funded, but this should not be used to have the bureaucracy use sock puppets to lobby Parliament and MPs on what the laws should be.

Lobby groups should be funded by their members and supporters, not by taxpayers.

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Spending transparency

June 9th, 2012 at 9:31 am by David Farrar

The Australian Taxpayers’ Alliance writes in the SMH:

It is a foundational principle of good governance that taxpayers should know how their money is being spent, and governments should be as open as possible. Taxpayers who wish to discover how their money is being used must trawl hundreds of pages of budget documents and submit time-consuming and costly freedom-of-information requests. Even then, information is scant. Ask any journalist. And these requests, as a Herald report showed on Monday, could be rejected in future as certain parliamentary departments are rendered exempt to FOI laws.

But it does not have to be this way. A transparency revolution is under way overseas, empowering citizens, opening governments to scrutiny, and transforming governance.

In 2006, in the US, the senators John McCain and Barack Obama co-sponsored the US federal funding accountability act. Its premise was simple: that taxpayer expenditure be placed online in an easily searchable database, so all taxpayers can find out how their money has been spent.

I have long advocated this for New Zealand.

Since then, the City of London, the European Union and 38 US states have enacted similar online portals – many with no thresholds, so every cent of taxpayer expenditure is publicly available. In some cases, literally every expense of government is made public after being entered into a database.

The benefits are obvious: not only are taxpayers empowered, but also savings can be easily identified, waste exposed and unethical behaviour discouraged. Those who want spending to remain hidden might argue that informing people is too costly, that it just cannot be done. But international experience proves this to be false. The website usaspending.gov, which provides the details of all US federal government expenditure of more than $US25,000 ($25,800), cost less than $1 million to set up – and the software is now available free of charge in the public domain.

This means it could be implemented in New Zealand very easily. You just need each government agency to exports its payments data into it.

Citizens have been searching these websites in record numbers. In Missouri, with a population smaller than NSW, 15 million hits were reported in the first year. Millions in savings have been identified. To use just one example, Texas reported $8.7 million in savings directly attributable to their transparency website in just the first year of operation.

Opening the government books to an army of online citizen investigators has uncovered waste and duplication, and made junkets or pork-barrel spending near impossible. Corruption and rorting cannot occur when the records are freely available – sunlight truly is the best disinfectant.

Another reason to support it.

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Where your taxes go

May 31st, 2012 at 2:00 pm by David Farrar

Worth checking out Where are my taxes. It details and shows graphically how much money per capita is spent on various activities. Some big items:

  • Superannuation $2,328
  • Primary schools $639
  • Family Tax Credits $480
  • Secondary schools $469
  • Tertiary Education $459
  • Domestic Purpose Benefit $413
  • Land and Transport $401
  • Student Loans $373
  • Early Childhood Education $313
  • Invalid’s Benefit $300
  • Accommodation Assistance $282
  • Unemployment Beneift $200
  • Sickness Benefit $177
  • Student Allowances $137
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Taxpayer funded lobbying

May 14th, 2012 at 2:00 pm by David Farrar

This is an issue that should be investigated by the Government or the Auditor-General. Yet again we have evidence of taxpayer-funded groups using their funding to lobby the Government for specific law and policy changes.

This is an extremely bad thing. The Government should not be effectively paying people to lobby Parliament and the Government a specific way.  Just as Ministries are forbidden to lobby, it is equally wrong for them to contract other groups to lobby.

This was first exposed in 2003. Then ACT MP Rodney Hide revealed that Action on Smoking and Health (ASH) and five other NGOs were receiving taxpayer money from the Ministry of Health to help lobby MPs on the Smoke-free Environments Amendment Bill (the one that banned smoking in bars and cafes).

The Director-General of Health then ordered a State Services Commission investigation into the matter (the Hunn/Brazier inquiry). Hunn and Brazier considered that the advocacy and lobbying clauses in six contracts were unacceptable under public service standards and in their view could compromise the political neutrality of the Ministry of Health. They recommended that future agreements with NGOs explicitly exclude lobbying activities.

The Treasury’s most recent guidelines (2009) for contracts with non-governmental organisations also make it clear: “Government agencies should also be careful to ensure that contracts do not breach public service standards of political neutrality”.

However, the Health Ministry is still funding the “advocacy” and “awareness raising” that these organisations engage in. The Ministry still funds ASH and other organisations like the Public Health Association – it is just more careful about what it puts in the contracts.

The current ASH contract allows it to “liaise with government and private health agencies, the media and any other appropriate organisations to raise public awareness of tobacco related issues and developments”. It says it will “prepare and distribute media briefings, commentary and releases on key tobacco issues. This will include maintaining relationships with key media.”

A quick look at the ASH website makes it clear it is a lobby group, but a lobby group that gets 89% of its funding from the taxpayer. I am all in favour of taxpayer funding quit smoking initiatives, but not funding a lobby group. One of its values is “A dedication to influencing public policy and social norms to tobacco related harm.” It has a page on its current campaigns, of which seven are about law changes, only one is actually about quitting smoking,

The current ASH contract provides for it to receive $578,000 p.a of taxpayer money in 2012. I’d say the vast majority of this goes on lobbying and media activities.

The Public Health Association received $311,967 from government grants in 2011, $305,843 in 2010 and $323,498 in 2009. In its financial statements it lists an item of income as “Advocacy/Healthy Public Policy”, as well as “Informed Debate/Communications”.

The PHA says that it “takes a leading role in promoting public health and influencing public policy…Our goal is to improve the health of all New Zealanders by progressively strengthening the organised efforts of society by being an informed collaborative and strong advocate for public health.”

On its website it has a letters to the editor guide.  It says: “Do you feel strongly about a public health issue? Write a letter to the editor using our simple letter writing techniques, list of email addresses and examples of sample letters (alcohol, housing, tobacco, oral health and preventing family violence).”

Smoke-free Coalition

The Smokefree Coalition (www.sfc.org.nz) says it is “committed to preventing the uptake of smoking among young people and reducing the smoking rates of all New Zealanders” and it has published a road-map for how to make NZ smoke-free by 2025. It received $167,213 in 2011 and 2010 and $179,890 in 2009 from government. This represented 98%, 96% and 95% of its funding in each of those years.

Those are just three examples where there is over a million dollars a year of government money going to NGOs for lobbying.

Another example is  the Turanga website (a government funded anti-smoking research initiative) has posted a page listing “3 ways to support a tobacco tax increase.” One of the ways is to write to MPs. The website directs readers to http://www.taxtobacco.org.nz/ in which readers can fill in their name and write a personal message to Key, Ryall, English or Turia. Readers can select from a range of sentences that they have written for them.

Now I personally support an increase in tobacco tax. But that is not the point. Government money should not be used for NGOs to campaign for what the law should be. It is the thin end of corruption.

The second way of supporting a tobacco increase is: “ASH have some tax postcards to send to John Key, Bill English, Tony Ryall and Tariana Turia. If you would like a batch please email ash via their website www.ash.org.nz with your postal address and let ASH Director Ben Youdan know how many you need.”

That is also explicitly political lobbying.

As an individual taxpayer I’d be quite happy to donate some of my money to anti-smoking groups. But the Government should only fund anti-smoking groups which actually provide stop smoking services or genuine medical research. They should not fund advocacy groups to influence public opinion on future law and policy changes. ASH and the PHA should have their public funding removed, and they should rely on donations like all the other advocacy groups out there have to.

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Government Expenditure

April 17th, 2012 at 9:00 am by David Farrar

The left have been trying to push a meme that this Government has not been spending enough money. That if only we did not have the tax cuts, we would be able to have extra spending. Putting aside the fact that National’s tax packages have had less of a fiscal impact than Labour’s proposed tax cuts, I thought it would be useful to look at actual spending by term. Has National really been slashing spending? If only. First let us look at total expenditure.

The dark blue line is total government expenditure for each term of Government (from 1 July after each election). So total government expenditure increased 21% under National, from Labour’s last term. If you compare to the last term of National’s 4th Government it is a whopping 131% higher. It is also 92% higher than Labour’s first term.

Now next let us look at it in terms of real or inflation adjusted expenditure, which the red line. Ideally inflation should be 1% or so, so the impact is minimal, but that has not always been the case. Real expenditure is 11% higher than from the previous term, and 69% up from the 4th National Government.  It is 50% higher than in Labour’s first term.

Now total expenditure includes SOEs and the like. A more common measure is the core crown expenditure, which excludes this. In nominal terms this increased 19% from Labour’s last term, 83% from Labour’s first term and 105% from the last National Government. This is the green line

To take account of inflation we also have the purple line of core real expenditure.  Well this term National’s core real expenditure was 9.6% higher than the last term of Labour. It is 43% higher than Labour’s first term and 51% higher than the 4th National Government.

Finally we have also had population growth. I don’t accept that all government expenses should increase per capita, but to take account of this we have the light blue line which goes on the second axis. It shows National is spending in real terms per capita 6.2% more than the last term of Labour. It is 28% more than Labour’s first term, and 32% more than the last National Government.

It is interesting to look at the real increase per capita for the last four Governments. The 1st term of Labour saw this increase a modest 2.5%. The second term of Labour saw it increase 6.2% – the exact same increase as under National. The outlier is Labour’s third term is when it increased 13.8% as Labour was so embarrassed by the size of its surpluses it invented all sorts of new spending schemes.

So Labour trying to portray National as mean and stingy, and cutting spending to fund tax cuts is just bonkers. If anyone should be complaining, it is fiscal conservatives who think government spending shouldn’t increase in real per capita terms (something the Government has now agreed to in principle, thanks to ACT).

People may be interested in the real increases from Labour’s last term to National’s first term. They are:

  • Health +11.4%
  • Education +8.3%
  • Law & Order +7.9%
  • Defence 5.0%
  • Welfare +9.2%

Remember those when someone claims National has slashed education or health funding.

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The net fiscal impact of National’s tax and spending changes

April 10th, 2012 at 2:00 pm by David Farrar

I’ve blogged previously on the outrageously dishonest spin from Labour that tax revenues are down 4% of GDP over four years, and trying to assert it is all due to the one set of changes in 2010. Even some journalists who should know better have repeated such absurdities.

I’m going to blog in two parts on this issue. The first part will be today looking at what the Treasury macro-economic advice was for the impact of the tax and spending changes, and tomorrow (if I have time otherwise later in the week), I’m actually going to analyse the actual changes in tax revenues through the 2008 BEFU, the 2008 PREFU, 2008 DEFU, 2009 BEFU, 2009 HYEFU, 2010 BEFU, 2010 HYEFU, 2011 BEFU, and finally the 2011 PREFU. This looks at the changes in overall tax revenues, individual tax revenues, corporate tax revenues and GST.

It is important to understand you need both the forecasts of what a change will do, and what actually happened. Neither are the total picture, but together they give us a reasonable picture.

You see the reality is that if Treasury says (for example) hiking the top tax rate from 33c to 39c will bring in $900m/year of extra revenue, and a Government does it, and revenue only goes up $700m, then no-one really knows why the revenue gain was less than projected. It might be that it did increase revenue by $900m, but that economic growth was flatter and so taxable income was lower. Or it could be that the increase lead to greater tax avoidance, and the increase did not achieve as much extra revenue as projected.

It is easy to diss Treasury projections – even I have done so. But it is worth noting how massively complicated it is to forecast tax tax over an entire economy. Many individual companies have problems forecasting income just for that company. Now imagine having to forecast income for the aggregate of every company and person in New Zealand, without having the knowledge of what is happening in individual companies.

What we have below is the official net fiscal impact as forecast by Treasury for National’s tax and spending changes. As you will see the total effect of these tax changes is negative during the 2008 – 2010 period, which is when there was a fiscal stimulus policy to help cushion the recession, and in the first two years, providing support to the economy during the recession, and have been net positive from 2010 onwards.

Net fiscal impact of the Government’s tax changes ($million increase (decrease) in the operating balance)

 

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

Election tax package1

(133)

(238)

(37)

188

198

198

Budget 2009 cancellation of 2nd and 3rd tranches2

105

553

956

999

999

SME tax package3

(294)

(189)

214

(108)

(108)

(108)

Budget 2010 tax package4

(460)

(90)

(40)

175

Budget 2011 tax changes5

537

783

823

Total

(427)

(322)

270

1,483

1,832

2,087

 1. fiscal impact = revenue (2/3*removal of R&D tax credit + KiwiSaver changes + cancelling remaining tranches of Labour’s tax cuts) minus costs (personal tax + IETC). Source: Cabinet Paper CAB(08)585.

2. cancellation of the 2010 and 2011 tax cuts as announced in the 2009 Budget. Source: Treasury Report T2009/418.

3. SME tax package as announced in February 2009. Source: BEFU 2009, Table 1.7.

4. fiscal impact = revenue (GST increase + depreciation + LAQC + thin cap + WFF + GST base + tobacco + increased audit) minus costs (personal tax + company + PIE and savings vehicles + GST compensation). Source: Budget 2010 Executive Summary, Table 1.

5. savings from changes to KiwiSaver and WFF tax credits. Source: Budget 2011 Executive Summary, Table 2.

It is worth recalling that during this period Labour opposed every single spending cut made by National.

Over the six years of National’s first two terms, the total projected impact of National’s tax changes (and cancellation of spending commitments) has been a net improvement of $4.9b. In other words compared to the policies put in place by Labour in 2008, National’s changes were projected by Treasury to result in $4.9b more revenue over two terms.

It is worth noting these are only the direct tax (and cancelled spending commitments) changes. This is not taking into account National slashing to the contingency for new spending from over $2b a year to $800m and eventually zero. That has also had am impact in the billions.

Now as I said, we will also look tomorrow at what actually happened to tax revenues, but many factors impact tax revenues as well as policy changes. These figures for now show how preposterous Labour’s deception is about how the 2010 tax package is somehow primarily or totally responsible for a decline in tax revenue of 4% of GDP or $7b/year.

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NZ Herald on Spending Cap

December 9th, 2011 at 12:00 pm by David Farrar

An excellent editorial in the NZ Herald:

Sir Roger Douglas has departed the political stage again but he may have left another enduring monument in Act’s agreement with National this week. A law to cap increases in government spending could prove to be as effective as one of his great legacies of the 1980s, the Reserve Bank’s inflation target.

Like the monetary target, the spending cap will sometimes be honoured in the breach but the target is no less effective for that. When it is breached, there needs to be a good reason, and a credible path set to bring inflation back into line. So it will be for the fiscal cap.

I think many have under-estimated the political power the cap will have.

It is too easy, as the previous government proved, to take on ever larger commitments when business is booming, the workforce is fully employed and tax revenue is providing budget surpluses. The country hardly noticed that state spending was steadily becoming a greater proportion of the economy in the years that surpluses also enabled continuing reductions of public debt.

More generous medical subsidies, paid maternity leave, early education, interest-free student loans, higher public service pay rates, a “super goldcard” are not the kind of expenses that can be wound back when the business cycle turns down and revenue drops. They instantly become entitlements that a future government fears to threaten.

Exactly. And the sad reality may be that the days of debt fuelled 3%+ growth could be in the past for-ever. In a new debt-averse world, with Europe taking a decade or more to get its debt under control, we may never get growth again like we have had in the 1990s and 2000s.  We may need to get used to 2% growth being the norm. This is why we need to stop Governments from imposing costs on New Zealand we can’t pay for.

Ultimately, of course, a parliamentary majority can do whatever it wants in this country and no Parliament can bind the next. A statutory spending restriction can be breached and even repealed as readily as the Bill of Rights Act. That act requires the Attorney-General to alert Parliament to proposed legislation that would breach the rights enshrined. The public takes note, the government needs a convincing case to proceed in political safety.

Laws of such limited power should not be under-rated. The lack of any stronger sanction is a strength, it makes it harder for a future government to repeal a statute that can do more than keep governments honest.

And hopefully it will increase the financial literacy of the public. We will know how much more a Government is planning to spend over the baseline amount per capita.

National has been not much keener than Labour on a legislated spending limit but it is already living within the limit agreed with Act. The cap is a credit not only to Sir Roger who has long argued for it, but to the recently deceased director of the Business Roundtable, Roger Kerr, who maintained a lonely watch against rising public expenditure, and Don Brash whose brief leadership of Act restored its focus on economic fundamentals.

Fiscal responsibility is a prosaic, thankless contribution to public welfare but if government spending rises no faster than population growth and low inflation from here on, we should all be better off.

Absolutely. If you look at all OECD countries over the last fifty years, those who manage to have the state consume a lower proportion of GDP have on average much much higher economic growth than those with a higher proportion.

Now it is a balancing act of course. If the state only consumed 5% of GDP, then we’d probably have no publicly funded schools or hospitals. But the current level of state spending is the highest in our history, so I don’t think drawing a line at today’s spending level and saying real spending per capita should not increase beyond today’s level is if anything a little on the generous side.

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The Taxpayer Relief Regulated Period

August 26th, 2011 at 1:00 pm by David Farrar

My column at the NZ Herald is about how today is the start of the Taxpayer Relief Regulated Period.

We are now officially within three months of the general election. Today is the start of what the law calls the regulated period. It restricts how much money political parties can spend of their own money on election advertising, but more popularly cuts off taxpayer funded election advertisements from MPs. …

So if from today you see anything from your MP or from a parliamentary party that has the crest of the House of Representatives on it (indicating Parliament has paid for it), and it is advocating either explicitly or implicitly for or against a party or candidate, then you should send a copy of it to the New Zealand Herald who I am sure will happily inquire to the Parliamentary Service whether the taxpayer is due any refunds.

Only 13 weeks to go until E-day!

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Taxpayers Rights Bill

August 11th, 2011 at 10:00 am by David Farrar

Audrey Young at NZ Herald reports:

A bill capping core Government spending increases to the rate of inflation and population changes was introduced to Parliament yesterday as part of National’s support agreement with Act.

But it is not expected to pass a second reading after consideration by the finance and expenditure select committee.

The Spending Cap (People’s Veto) Bill was introduced by Regulatory Reform Minister and former Act leader Rodney Hide.

It was referred to in the confidence and supply agreement as the Taxpayers’ Rights Bill.

It provides that the only way the cap can be lifted is by majority vote in a referendum.

I like the principle behind the bill – that spending should be capped in real terms, and you need public permission to go higher.

There’s a few countries in Europe that could have benefited from such a law.

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Herald on Labour’s attacks

May 10th, 2011 at 3:00 pm by David Farrar

The NZ Herald editorial:

Last week it was his police protection, this week Premier House. The week before, it was the Prime Minister’s use of air force travel, before that, the limousine fleet replacement. Labour seems to think the public begrudges John Key the usual trappings of office.

Not that police protection is one of the trappings. Labour’s claim that anyone would enjoy or invite the company of a security squad was silly beyond words.

I think “silly beyond words” is the polite equivalent of “fucking stupid”.

Premier House in Wellington, where Prime Ministers can live and entertain, is being repainted and recarpeted at a cost of $275,000. Mr Key says it had not been repainted for 11 years. He says he is happy to accept any scrutiny he is put under but wonders why Labour is raising such trivial issues. He is not alone.

I encourage Labour to continue with their campaign. I’m looking forward to the next installment where they reveal that the PMs Office uses 100 gsm paper in their printers and that they could save money if they went for 80 gsm paper.

The public remembers that Labour’s last Prime Minister made use of Premier House, that her police protection was accommodated in a house beside her own in Auckland and that she used the air force or chauffeured limousines when it suited her. It is odd that one of her senior Cabinet ministers, Pete Hodgson, should be leading these lame attacks on her successor.

He should be among the last to question, for example, whether a Prime Minister needs security accompanying him inside Parliament buildings sometimes. Helen Clark asked for it when members of the Exclusive Brethren sect used to try to speak to her on her walk to the chamber.

And Whale Oil produced half a dozen photos showing this.

Labour’s leader should call him off. Most of the public finds this focus on the Prime Minister’s office trite and desperate. In the days leading up to a Budget, the Opposition should be promoting its own view of the state of the economy and what it would do about it. If it needs to criticise Mr Key, his risk-aversion gives Labour plenty of grounds. He has ruled out increasing the pension age, a levy for Christchurch and capital gains tax. He needs to do more than he may find palatable if more private investment is to flow into productive ventures.

Normal expenses of state are nickels and dimes beside the decisions the country needs.

And the reality is that Key has brought in an unprecedented level of transparency over Ministerial spending, has banned taxpayer funded Ministerial travel for spouses, and also banned first class travel (which under Labour could be used for anything beyond Australia).

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Ministerial House expenses

May 9th, 2011 at 11:24 am by David Farrar

Labour have gone from transport to bodyguards and now to paint in their desperate desire to splatter John Key. Maybe at some stage they will remember the public want to hear some policies from them on reducing the cost of living. At the moment their only policy is to increase power prices by 3% and petrol by 3c/litre.

Under this Government, all the ministerial houses are actually being sold, except for Premier House, Vogel House and Bolton Street as they are held in trust. But let us look at some of the house costs under Labour and see how they compare to around $200,000 on painting Premier House:

  • $1.133m on Vogel House when Jim Anderton lived there
  • $46.6m on Government House
  • $215,000 on Premier House in 2000
  • $177,000 on Matt Robson’s Wadestown Ministerial House
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Flights to Vanuatu

May 4th, 2011 at 2:00 pm by David Farrar

Whale Oil blogs on the McCully air force plane to Vanuatu:

I thought I was defi­nately onto a bash­ing of immense pro­por­tions here. But as I learned from a cou­ple of screw up over the past few years, fact check­ing is paramount.

I checked inter­na­tional flights into and out of Van­u­atu. This is where the story started to come un-raveled. The tim­ing of the meet­ing meant that inter­na­tional flights didn’t pro­vide use­ful con­nec­tions. I think from mem­ory that if they had used com­mer­cial flights then all the Pacific diplo­mats in atten­dence would ahve had to have stayed over 3 more days before the next com­mer­cial flight out from Vanuatu.

Although the RNZAF Boe­ing may have gone over next to empty and con­fig­ured for VIP travel at short notice, how­ever it returned with a greater num­ber of pax on the return leg to New Zealand (I didn’t receive any pas­sen­ger details, but I’m sure it wouldn’t be too hard to find out who has used the ser­vice after the fact if one was that inquis­i­tive), one can only spec­u­late at to who they may be, but as even politi­cians don’t repli­cate that fast it seems log­i­cal that for­eign dig­ni­taries were using the ser­vice and New Zealand as a trans­port hub, which is hardly unheard of, and hardly the travel rort which the first leg made it appear.

Whale has shown no hestitation putting the boot into National MPs over perks, when he thinks it is justified. In fact i doubt any blogger has been as consistent as he has, in attacking MP spending. So when he says this is no big issue, I tend to believe him.

I had a similiar issue to McCully when I was in Noumea. The lack of commercial flights meant I had to stay for six days, for a two day conference. I’m pretty sure Murray would have been happy to holiday in Vanuatu for a few days, but instead he did some diplomacy by transoporting a few of his pacific peers back with him.

I recall Helen Clark got an air force flight back from Australia when there was a problem with Ansett, so this faux outrage at use of air force is fairly tiresome.

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Quote of the Day

May 1st, 2011 at 11:00 am by David Farrar

Danyl at Dim-Post:

Sometimes I just want to strap the entire spectrum of left-wing politicians into dentists chairs and patiently explain to them – using chisels and barbed wire – that most the state’s wealth comes from ordinary people working hard and then giving a huge chunk of their income to the government, so spending it is a sacred trust not an endless opportunity to squander it all on gimmicks and whims and political stunts.

This is in relation to the $500,000 to be wasted on a by-election.

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