Taxpayers should not fund advocacy

June 28th, 2016 at 11:00 am by David Farrar

The Herald reports:

New Zealand’s biggest anti-smoking lobby groups face likely closure after a Government decision to slash funding for anti-smoking advocacy.

The Smokefree Coalition will close next month, Action on Smoking and Health (Ash) faces closure unless it can find new funding sources, and Smokefree Nurses Aotearoa and Pacific anti-smoking agency Tala Pasifika have all lost their funding from this week.

Instead, the Ministry of Health has awarded a single national anti-smoking advocacy contract to West Auckland-based Maori health agency Hapai Te Hauora.

Total funding for national advocacy has been cut from $1.7 million to $450,000.

There should be no funding for advocacy. It is appropriate to fund research and also good to fund cessation services, but taxpayers should not allow government departments to hand out money to lobby groups, so they can lobby MPs on what the law should be. The role of the public service is to serve, not to fund advocacy.

Ministry service commissioning director Jill Lane said the funding cut from advocacy would be redirected into “strengthening our frontline cessation services with improved training to get better quit results”.

The training budget has jumped from $286,000 to $1.6 million, lifting total spending on advocacy and training from $2.26 million to $2.37 million.

Ms Lane said the ministry’s total spending on tobacco control, including the Quitline service, was $61 million.

So more money for cessation services and less money for lobbying. Good.

Labour still thinks spending, not results, is what matters

May 13th, 2016 at 3:00 pm by David Farrar

Stuff reports:

Finance spokesman Grant Robertson mental health funding  was one of the “yawning gaps” in the health system. 

Labour figures showed his party increased health spending by an average of 8.1 per cent, while National had increased it by 3.4 per cent, he said.

“In the real world, that means people are not getting the surgeries they need, they’re not getting access to the mental health system, they’re not getting primary health care they need.” 

Health spokesman Annette King said Labour would fund health properly.

This sums up pretty much everything that is wrong with Labour. They think that what matters most is spending more money – rather than what that money actually achieves.

According to Labour, if DHBs manage to reduce their property costs by say $200 million, then that is bad as that is $200 million less spending. If DHBs save $100 million on accountants and increase spending on doctors by $50 million then Labour thinks this is bad because that is overall less spending.

I’m not sure Labour will ever get that what matters is results, not spending. Of course you need spending to achieve some things, but claiming an 8% annual increase in health spending is better than a 4% increase is focused on the wrong thing.

The reality is that almost every significant health indicator is better now than in 2008. A few are:

  • Youth smoking rates halved
  • Youth hazardous drinking rates halved
  • 100% of cancer patients now getting timely treatment, compared to 65% under Labour
  • 94% of patients being seen within six hours at ED, up from 70%
  • A 42% increase in the number of elective surgeries
  • An 18% increase in nurses and 27% increase in doctors
  • Immunisation rates up from 76% to 94%

Now if you go back to what Labour achieved despite their massive spending increases, well the answer will be not much. In fact the number of elective surgeries declined from 2000 to 2006.

Here’s the challenge for Labour. Don’t come up with a policy of simply promising more spending. Make a commitment on some outcomes.

Spending Demands in last year would require top tax rate of 100%

May 9th, 2016 at 9:00 am by David Farrar

Since the Budget last year I’ve been compiling a list of spending demands made by various MPs, unions, NGOs and others. For each spending demand I’ve calculated a ballpark annual cost of the demand, once fully implemented to see how much taxes would need to increase to fund the demands.

Well as of today the spending demands in the last year have topped a massive $14 billion. That would require the top tax rate to go from 33% to 100% to fund it.

And the scary thing is I have probably missed a few of the demands. This is just something I have done in my spare time. I’m hoping the Taxpayers Union will take up this task after this year’s Budget and keep a more robust check on things.

So what are the biggest items called for:

  1. 60,000 more state houses – $1.8 billion a year
  2. Eradicate all pests from the mainland – $1.47 billion a year
  3. Abolish tertiary fees – $1.2 billion a year
  4. Increase aid to 0.7% of GDP – $1.14 billion a year
  5. Change early childhood teacher ration from 1:5 to 1:3 – $1.04 billion a year
  6. Pay a community wage – $1.04 billion a year
  7. $1 billion a year for public housing  – $1 billion a year
  8. Increase welfare spending by $1 billion a year – $1 billion a year

Now these costs are not the work of hundreds of hours of economic analysis. They are a superficial ballpark estimate. In the case of the 60,000 more state houses, presumably there would be some rental income to offset them which I’ve not yet calculated. But there would also be ongoing repairs and maintenance and rental expenses. So again this is just about showing the huge amount of spending demands made by politicians and lobby groups, and how any Government that gave into them all would bankrupt the country. I’m sure people can and will quibble over individual cost estimates.

The spreadsheet of the demands is here –Spending Costs

I’ve broken down the demands by who is making them. Again this is incomplete. I suspect most of the stuff Labour MPs has called for, the Greens support also. So this is probably under-states the level of demand each group has made:

  1. NGOs – $5.54 billion
  2. Individuals – $3.51 billion
  3. Labour MPs – $2.47 billion
  4. Media – $1.56 billion
  5. NZ First – $1.44 billion
  6. Unions – $611 million
  7. Green MPs – $406 million
  8. Govt agencies – $181 million

Now again this is based just on if I have seen it in a news story. I’ve not gone through press releases from MPs, in which case I think the totals would be even higher.

Labour against cost savings

April 7th, 2016 at 10:00 am by David Farrar

Stuff reports:

Close to 100 government jobs will go as the Ministry of Justice introduces a compulsory work-from-home initiative, prompting concerns the move will snowball across other departments.

The ministry has confirmed a restructure will see 202 management and staff positions disestablished and 111 new positions created, along with fixed term positions as staff move to a “home environment” later this year.

In a statement, collections general manager Bryre​ Patchell​ said about 100 collections registry positions will move from office to home over the next 13 months.​

The restructure, which will mean specialist collections units at courts around New Zealand will close, is thought to be the first of its kind in New Zealand’s public sector.

Basically you don’t need an office to make phone calls.

Labour justice spokeswoman Jacinda Ardern didn’t buy the efficiency line, and said this came down to cost-cutting – at the expense of face-to-face service and staff morale.

“If they will do this for this department, they will do it for others,” Ardern said.

She feared staff were being forced into their homes away from supportive environments.

“It’s not being posed as something where they are being given the choice. If you are already working in a hard environment it’s a huge thing to have that person working in isolation.

“Overridingly, this is a cost-saving initiative.”

Once again Labour opposes an initiative that saves taxpayers money. Almost without fail they will back unions over taxpayers. They think the more money you spend on something, the better it is. There seems to be no concept of value for money.

MOH cost blow out unacceptable

March 8th, 2016 at 3:00 pm by David Farrar

Stuff reports:

An $18 million blowout refitting the Health Ministry’s head office in 2014, has bought a strong rebuke from Treasury, accusing the ministry of “serious financial mismanagement”.

That’s very strong words, but justified.

Independent auditors were called in to investigate how the ministry “miscalculated” the levels of its cash reserves, and a $24 million refit required a further $18 million from the Government to complete.

Some projects, especially IT, will cost more than originally forecast. But a 75% blow out on a building refit is well beyond acceptable. It isn’t entirely clear if the $18 million is extra costs or cash they thought they had, but didn’t. Either scenario is unacceptable.

The Director General of Health, Chai Chuah, said the Health Ministry’s corporate finance team made a mistake in its forecasts, TVNZ reported.

It was forced to ask for the funding boost at the last budget.

TVNZ reported Treasury was very concerned about the funding miscalculation, citing papers describing it as “serious financial mismanagement”.

In a letter to Ministry of Health Director General of Health Chai Chuah, Treasury chief executive Gabriel Makhlouf said the “the new bid for funding brings into question the governance and financial management practices of the Ministry”.

PwC was bought in by Chuah to investigate.

Labour health spokeswoman Annette King has called for Chuah’s resignation, while Chuah said he accepted the ministry made a mistake.

I’m not sure Chuah should resign, but someone at senior management should.

Health Minister Jonathan Coleman said he made it clear to Chuah the project management was unacceptable. He confirmed changes had been made, including “in finance personnel”.

It is unclear what change means. Maybe they have been promoted?

UK to ban taxpayer funded lobbying

February 12th, 2016 at 12:53 pm by David Farrar

The Telegraph reports:

Charities in receipt of Government grants will be banned from using these taxpayer funds to engage in political lobbying, The Telegraph can disclose.

A new clause to be inserted into all new and renewed grant agreements will make sure that taxpayer funds are spent on improving people’s lives and good causes, rather than covering lobbying for new regulation or using taxpayers’ money to lobby for more government funding.

We  need to do this in NZ also. In theory NGOs are not allowed to use taxpayer funds to lobby, but the rules are so loose, they get easily avoided by just calling their lobbying campaigns “information campaigns”.

The Institute of Economic Affairs, a right of centre thinkank, has undertaken extensive research on so-called “sock puppets”, exposing how taxpayers’ money given to pressure groups is paid to fund lobbying campaigns on policies such as a sugar tax and the environment.

Officials are hoping that the clause will ensure that freedom of speech is protected, while stopping taxpayers’ money being diverted away from good causes.

Matt Hancock, the Cabinet Office minister, told The Telegraph: “Taxpayers’ money must be spent on improving people’s lives and spreading opportunities, not wasted on the farce of government lobbying government.

It is constitutionally repugnant for the Government to spend money funding campaigns to tell Parliament and the Government what the law should be.

The exact phrase that will be inserted into all new and renewed grant agreements reads: “The following costs are not Eligible Expenditure:- Payments that support activity intended to influence or attempt to influence Parliament, Government or political parties, or attempting to influence the awarding or renewal of contracts and grants, or attempting to influence legislative or regulatory action”.

At a minimum this should go into all contracts here.

I’d go further and deem any NGO that is 90% or more taxpayer funded as a de facto public organisation that the OIA applies to.

A stairwell is a lot cheaper than a lift

February 10th, 2016 at 9:00 am by David Farrar

Stuff reports:

The Ministry of Education (MoE) has spent almost $20 million on a redesign of its new office block, including $2.5m on a 12 floor staircase named “the Stairway to Heaven” by the Opposition. 

The MoE said the revamp of Matauranga House, in Bowen Street just up the road from Treasury, will come in $3m under budget and save $27m on accommodation and running costs over the 15 year term of the lease.

But Labour education spokesman Chris Hipkins said the cost was over the top.

“Huge expenditure like this on a gold-plated office will certainly stick in the craw of teachers and student up and down the country. Is this the Stairway to Heaven? It would need to lead to somewhere pretty special for that sort of money,” Hipkins said. 

Gold-plated because it has a stairwell?

An MoE spokeswoman said the staircase was needed because there were only four lifts in the building and eventually it would have 25 per cent more staff than when MBIE occupied it. There would also be an estimated 1000 visitors a month.

It was not “a Stairway to Heaven” but was the cheapest way to handle the extra traffic. The alternative – a fifth lift – would have cost up to $4m.

Choosing a stairwell over a fifth lift is an excellent idea. Not only is it $1.5 million cheaper, but it means staff and visitors can use the stairwell to go between floors, rather than have to use the lifts. So it is good for fitness, and saves money. Plus lifts have notoriously high ongoing maintenance costs.

MoE had been working out of four buildings in Wellington and those leases were due to expire early this year. The revamp had been funded out of existing baselines. The office space was 6000 sq metres less than its previous premises, down from 22,500 square metres to about 16,500.

So what Chris Hipkins is attacking is that the Ministry has reduced the size of its office space by 27% and has a lease and running costs $27 million cheaper over 15 years than previously?

I know the role of the opposition is to attack wasteful spending (as the Taxpayers union does also). But sometimes spending isn’t wasteful, but actually saves money. I think Chris could benefit with better targeting.

Other changes would see phone costs cut by about $330,000 through scrapping traditional desk phones and providing staff with headsets and Skype

Good to see smart use of technology.

Eventually all staff would “hot desk” with only a locker but no desk of their own – a first for a government department or ministry. The design was open plan, and even chief executive Peter Hughes did not have his own office.

Which presumably is how they have managed to reduce their floor size by 6,000 square metres.

Dom Post on costing policies

January 29th, 2016 at 11:00 am by David Farrar

The Dom Post editorial:

The Greens’ idea of an independent agency to cost parties’ new policies is a good one, and the Government should take it up.

I agree.

Prime Minister John Key has been dismissive so far, but he should remember that it is his side of politics that typically claims superiority when it comes to financial literacy.

“Show me the money!” Key famously called to former Labour leader Phil Goff during a 2011 election debate. It was part of a broader charge that Labour had wildly underestimated the costs of its policies during that campaign.

Perhaps he was right and perhaps he wasn’t. But if there had been an independent authority to give its own take, voters needn’t have taken Key’s word for it.

The parties of the left tend to always dramatically under-estimate the cost of their policies. This is why National should support such an agency. It would mean we would have credible estimates of what their policies would cost, and voters would better understand how much more in taxes would be needed to fund them.

The Greens will have mixed motivations for announcing their sober new policy. It would be straightforwardly useful to the party, for one, by handing it more resources to propose feasible ideas.

It is true parties can pay to have their policies costed at the moment but this is not independent. Normally a party hires an ideologically sympathetic economics firm to cost the policies using the most favourable assumptions. Hence they tend to greatly under-estimate the true costs.

If one was to set up such an agency, one could help fund it by reducing the funding for parliamentary parties in recognition of the fact they would no longer have to pay for their own costings.

More sophisticated policy from the small parties would be nothing to lament; consider that at the last election, NZ First promised to wipe GST off all food, which it laughably said was “fully fundable” by cracking down on $7 billion in tax avoidance.

NZ First had such outlandish policies they were in fact impossible to cost. They’re more slogans than policies.

Where the Greens have it wrong is to suggest the agency be a unit of the Treasury. That is no recipe for a truly independent institution; its budget, staffing and priorities might easily be massaged into oblivion by a minister eager to avoid embarrassment, or a bureaucrat happy to help with the same.

It should either be an independent advisory body to Parliament, or else made part of an investigative agency such as Audit New Zealand.

I think it should be part of Parliament. It could come under The Parliamentary Service, as the Parliamentary Library does.

An excellent initiative from the Greens

January 27th, 2016 at 10:49 am by David Farrar

Metiria Turei announced:

The Green Party has announced a policy to bring more clarity into the political system today, in Co-leader Metiria Turei’s State of the Nation Speech.

Green Party Co-leader Metiria Turei proposed the formation of the Policy Costings Unit (PCU), which would operate independently to cost the policy of political parties.

“New Zealanders deserve more transparency from their politicians so that they can better engage in the political system,” said Mrs Turei.

“That’s why the Green Party is proposing the establishment of the PCU, to provide independent costings for the policies proposed by political parties.

“The PCU would be an independent unit within the Treasury and available to all parliamentary parties. It would help cut through the noise of political party promises and deliver New Zealanders unbiased information.

This is an excellent idea, and something I have long advocated.

Politicians often release uncosted policies that would require massive take hikes to fund.

It is because of this, that the Taxpayers Union spent a lot of money hiring a top economist to cost the policies of major parties at the last election. We called it a bribe-o-meter. We found that that in 2014 the cost of policies proposed was:

  • National $1.4 billion
  • Labour $5.81 billion
  • Greens $6.54 billion
  • NZ First – impossible o calculate

Since the election I have kept a running total of demands for more spending by politicians, media and lobby groups. Since the 2015 Budget there has been an extra $11.7 billion in new annual spending demanded. This would require a top tax rate pf 87%!

So an agency to cost parties policies is an excellent idea. It would allow parties to get expert advice on the cost of a proposed policy and the public to them understand how much their taxes will have to increase by, to fund those policies.

My only quibble is that I would have the agency attached to one of the parliamentary agencies, so it is like the Congressional Budget Office in the US. Having it in the Treasury may open the Treasury up to (even more) partisan attacks if a party doesn’t like the costing.

I’m staggered National has rejected this proposal. They should be supporting it strongly. It would be a welcome step towards greater fiscal transparency and a better informed voting public.

Government Investments

December 2nd, 2015 at 11:00 am by David Farrar

The Herald reports:

The Government has released detailed reports on the progress of its major investments for the first time, showing which projects are on track and which are at risk of blowing their budget.

The two reports published by the Treasury today are part of a drive to increase transparency in Government procurement and detect any potential cost overruns or delays at an early stage.

One of the reports provided a snapshot of $6.4 billion in Government spending over the next year on 409 projects, including ICT, new schools, defence and construction. These projects had a whole-of-life cost of $74 billion.

The report showed construction projects were the riskiest investments for the Government, while defence investments carried the least risk.

It assessed each project according to a five-level scale from green to red. Of the 409 investments, 237 were given a “green” status (on track), 39 were given an “amber” status (requiring attention) and five were given a “red” status (major problems). The remainder had not yet been assessed.

The projects which were classed as “red” made up 0.1 per cent of the $74 billion investment programme.

This is not sexy stuff, not is important. It is applying greater commercial disciplines to $74 billion of capital spending. Too often large projects only get attention when it it too late. This approach may help prevent another INCIS or Novopay.

UK spending cut predictions did not come true

November 28th, 2015 at 4:00 pm by David Farrar

Fraser Nelson writes in The Telegraph:

George Osborne could disband the Army, fire every diplomat, release every prisoner, discharge every policeman, axe the entire foreign aid budget – and still not be able to balance the books.

In NZ that would save $7.1 billion a year. We now have balanced books but at the height of the GFC and subsequent deficits the deficit hit $20 billion!

Councils certainly weren’t protected: their funding fell by 40 per cent. Many of their leaders predicted one long winter of discontent; the Mayor of Liverpool went so far as to predict riots in the streets. The leader of Birmingham City Council warned of “the end of local government as we know it”. They should have had more faith in their own staff. One of the greatest untold stories of the last few years is how councils have found new ways of delivering better services for far less money. The Local Government Association’s own polling has found that council taxpayers are just as satisfied as they were before the cuts.

Maybe NZ Local Government could learn from the UK.

The arts budget is down by a third, yet the calibre of theatre, galleries and musical performance in Britain has never been stronger – as the arts pages of this newspaper regularly attest. Government belt-tightening has not damaged British cultural life because so little of our culture depends on the government. The most important factor is the genius and creativity of playwrights, composers, musicians and poets — of which there is, happily, no shortage.

Yet Labour here complain that Radio NZ has not had any funding increase, and that this is crippling the country. They’re damn fortunate compared to their commercial counterparts who have had huge revenue drops.

Perhaps the greatest single surprise has been law and order. The Police Federation warned that the government would “destroy policing in this country for ever”. That was 10 years ago, when the spending boom was in full flow. Under Theresa May, the policing grant has fallen 20 per cent – yet surveyed crime is down by 30 per cent. As it turns out, the size of the police budget does not dictate criminality levels.

Spending and outcomes are not the same thing.

Another billion demanded

November 18th, 2015 at 9:00 am by David Farrar

The Hikoi for Homes has demanded $1 billion a year more for pubic housing.

This brings the total of extra spending demanded by politicians and lobby groups since the May Budget to $9.4 billion per year.

To fund these demands we would either have to move the top tax rate from 33% to 77% or increase GST from 15% to 24%.

And that’s just to cover six months of spending demands from the left.

I’m hoping their demands will exceed $14 billion before 12 months are up, at which stage the top tax rate would need to be 100% to fund their demands.

Five months of spending demands are more than actual increase of six years

October 23rd, 2015 at 7:00 am by David Farrar

I blogged last week how various lobby groups and political parties had made $8.4 billion of spending demands in the five months since the Budget.

Well by coincidence that is just about the level of actual increases over the last six years. So five months of demands (and I probably missed some) are at the same level of actual increases over six years.

2008/09 core crown expenses were $63.7 billion and in 2014/15 they were $72.3 billion.  An increase of $8.65 billion. That is less than just the last two years of Labour which saw spending go up $9.95 billion.

The reasons we are back into surplus is because of six years of fiscal restraint.

A $140,000 TV!

June 19th, 2015 at 12:00 pm by David Farrar

The Herald reports:

A whopping $140,000 has been spent on a new display screen for the reception of the Ministry of Business, Innovation and Employment’s central Wellington building.

The hefty price tag follows controversy over revelations this month that the ministry spent $70,000 of taxpayer money on a stone sign for the building entrance.

MBIE spent $140,747 on the display monitor – a cost Economic Development Minister Steven Joyce was “slacked off” about, Radio New Zealand reported.

Taxpayers would not be happy about the spend, he told the broadcaster.

“No, I don’t think they’ll be happy about this one, in the same way they weren’t happy about the sign, and, frankly, I’m not happy either, but I would like to verify the information before I make any further comment on it.”

Staggering – $140,000 for a large monitor. How can anyone think that was a good idea?

A $70,000 stone

June 4th, 2015 at 2:00 pm by David Farrar

Stuff reports:

The Government’s business super ministry has admitted its controversial sign outside its headquarters cost almost $70,000, about 50 per cent more than it previously claimed.

The culture in MBIE is obviously not right, if no one involved in the project of moving offices flagged that this was a wasteful idea.

On Tuesday, MBIE said the sign was designed to be in character with the historic building it uses for its headquarters.

Many cheaper ways to do that.

A spokeswoman said the sign “was a one-off cost in a relocation programme projected to achieve around $40 million-$50 million in public sector savings over 20 years”.

The savings come from a cut in the amount of office space used by the ministry.

It’s good money was saved elsewhere, but a saving in one area doesn’t justify extravagance in another.

Labour blames Govt for an NGO’s expenditure problems

May 19th, 2015 at 7:00 am by David Farrar

Grant Robertson has exclaimed:

The National Government has big questions to answer about how a provider of services to thousands of vulnerable New Zealanders is set to fold, Labour’s Finance spokesperson Grant Robertson says.

Relationships Aotearoa which provides support and counselling to families, individuals and survivors of domestic violence is set to shut its doors, minus any last minute intervention.

“There are thousands of vulnerable people and families who rely on Relationships Aotearoa for critical services. The government cannot leave them in the lurch.

“Like other non-governmental organisations, Relationships Aotearoa has been seriously underfunded in recent years. It has been asked to do more with less and the strain has clearly started to tell.

This is typical Labour. If an NGO has financial issues, then the answer is the taxpayer must throw more money at them. In the same breath they expect us to believe they would ever have lowered the deficit.

Let’s take a look at the latest accounts for this NGO:

  • Income of $9.8 million – mainly from the Government
  • Expenditure of $10.3 million
  • Central expenditure has doubled in one year from $984k to $1,957k
  • Equity of $1.5 million
  • Cash in bank of $3 million
  • Central salaries doubled from $551k to $1,065k

So the obvious conclusion from all this is it is all the fault of the Government – yeah right.

Does Labour ever find an issue, where the answer isn’t tax people more and spend more.

Why not stop funding all music videos?

March 16th, 2015 at 6:59 am by David Farrar

The Herald reports:

A researcher is calling for curbs on taxpayer funding of music videos that contain violence after his group found “high levels” of violence in the music videos shown on TV.

I don’t think the Government should choose which music videos are worthy of funding, or not funding.

Instead I don’t think taxpayers should fund any music videos at all.

IMF on expenditure rules

March 3rd, 2015 at 3:00 pm by David Farrar

An IMF paper looks at expenditure rules:

Our findings suggest that expenditure rules are associated with spending control, counter-cyclical fiscal policy, and improved fiscal discipline. We find that fiscal performance is better in countries where an expenditure rule exists. This appears to be related to the properties of expenditure rules as compliance rates are generally higher than with other types of rules (on the budget balance or debt, for example). In particular, we find that compliance with expenditure rules is higher if the expenditure target is directly under the control of the government and if the rule is not a mere political commitment, but enshrined in law or in a coalition agreement. 

So the most effective type of fiscal rule is a binding expenditure rule.

Evidence of adverse side effects is mixed. The introduction of expenditure rules is associated with a decrease in public investment only in emerging economies. A possible explanation is that any adverse effects on public investment could be mitigated in advanced economies by welldesigned budgetary frameworks and procedures. Instead, the empirical analysis points to two positive side effects. First, expenditure rules reduce the volatility of expenditure, thus imparting a degree of predictability to fiscal policy and making it less destabilizing. Second, expenditure rules are associated with higher public investment efficiency.

I’d love NZ to have an expenditure rule, such as restricting core crown expenditure to 25% of GDP over say a three year cycle or restricting the growth in expenditure to say 1% after taking account of population growth and inflation.

Expenditure rules are currently in place in 23 countries (11 in advanced and 12 in emerging economies)

So we would not be alone if we did this.


Another IT blow out

March 3rd, 2015 at 11:00 am by David Farrar

The Herald reports:

The cost of implementing a new child support system has rocketed to $163 million – a blowout that dwarfs the bill for fixing the controversial Novopay school payroll system.

The new figure has been described as “gobsmacking” by a former top Government executive who was in office when the cost was originally put at $30 million.

The child support reform affects 134,000 paying parents and 138,000 receiving parents. The $30 million estimate was issued in 2011.

But implementation has been delayed until April 1 this year, to allow Inland Revenue time to change its computer system.

Further amendments to the 2013 enabling legislation were introduced to Parliament last week to make more changes. These, if passed, will take the cost to $163 million – $133 million more than first budgeted.

Robin Oliver, former Deputy Commissioner of Inland Revenue, says this is “gobsmacking”.

“I baulked at the $30 million, so $163 million on IT costs and administrative costs for simply changing little bits of the [child support] formula around is an enormous sum of money to be spending.”

Staggering amounts.

Taxpayers’ Union director Jordan Williams said the child support blowout was the biggest since his group was formed in 2013.

“This dwarfs Novopay,” he said. “$163 million is an extraordinary cost, more than $100 for every New Zealand household.” The changes in the formula are in fact the biggest since the current child support system was created in 1991.


A formula change should not cost that much to implement.

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.


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.

$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.

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!

$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.

Regional spending

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



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.

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.