Return to Orewa

Don Brash's speech to the Orewa last night was titled “Return to Orewa”. He covers all the good stuff the Government has done, but also his deep worries. First the good stuff:

  • The economy is out of recession and is growing.
  • At 6.4% of the workforce, unemployment is lower than in most other developed countries.
  • Personal income tax have been cut significantly.
  • The Government has moved to allow employers and employees to agree a 90 day probationary period in employment contracts, bringing us broadly into line with all other developed countries.
  • Steps have been taken to streamline the process of approving building consents for multiple dwellings.
  • A start has been made on reforming the Resource Management Act.
  • The Government has ended the moratorium which has prevented the establishment of new aquaculture areas for the last decade.
  • And to cap it all off, the Government, and the Prime Minister personally, stand high in the polls!

And one can add some more around cutting bureaucracy, better use of the health dollar, tertiary education changes and national standards.

The last bullet point is also rather important. If you lose the goodwill of the people, then you lose the next election. And the problem isn't that some MPs lose their job, but that all the good policy changes you have made, get reversed and worse by a change of Government.

I worry that, despite knowing that the Labour Government's abolition of the youth minimum wage has very substantially increased youth unemployment – by 12,000 according to Canterbury University economics professor – we have taken no action (indeed, we voted against Roger Douglas's Bill to reinstate the youth minimum wage), so that thousands and thousands of young people leave school or training and quickly become demoralized, deprived of the opportunity to support themselves, with all the social and personal harm that that does.

This is a topic I have blogged on often, and do agree with Don on. The abolition of the youth minimum wage has been devastating to the employment prospects of young people.

I know the Government doesn't want to be seen to be “cutting wages”, but what disappoints me is they have not even attempted to have a discussion with the voting public on this issue. And there are compromise options such as freezing the current youth rate in place, and allowing the adult rate to increase over time, so there will be enough of a difference for employers to have an incentive to give that 17 year old their first job.

I worry that, despite telling New Zealanders before the electito on that we should be fast followers and not leaders in the race to reduce carbon emissions, we have introduced an all-sectors Emissions Trading Scheme in a situation where none of our three largest trading partners – Australia, China, and the United States – has yet done so, nor in two of those cases seems likely to do so.

This one I am okay with. Firstly the 2008 manifesto said National supported an all sectors all gases scheme. Secondly I think the scheduled review in 2011 will take pragmatic steps such as agriculture not entering, if there is no sign of a global post-Kyoto agreement.

I worry that, despite being a party which believes in allowing people the maximum freedom to make choices for themselves, we have to date done nothing to allow more freedom for parents to choose the school their children attend.

I'd love to see National campaign in 2011 on school choice, full funding of schools (incl salaries) and performance pay. But that was not the 2008 policy, or indeed the 2005 policy if I recall it.

First, it is absolutely imperative that Government gets its fiscal deficit under control quickly. Bill English knows this of course, and has started the process by putting a much tighter limit in place for new government spending. He's also doing his best to condition opinion by warning that restraint on government spending will be needed for years ahead.

The Government is trying to get rid of the deficit by restricting future spending increases, rather than cutting existing spending. It is pretty finely balanced as to whether they will pull it off. Those with larger deficits like the UK and Ireland have had to actually cut spending. It isn't popular but it is necessary in those countries.

If National had known in mid 2008 what would happen with the global recession, I don't think it would have promised to leave Working for Families and interest free student loans untouched. I am not someone who advocates they should break their word on those policies. But what I do advocate is that National should seriously consider whether they should signal changes in the 2011 election manifesto. I do believe the public understand that you can not spend money you do not have. In the UK, polls have shown that a majority of people support spending cuts to reduce the deficit.

As the 2025 Taskforce argued in its recent report, the argument for privatisation is different today than it was in the eighties. No longer are government trading operations grossly inefficient; nor is our government debt yet at dangerous levels. Rather, the argument for privatisation today is that, by selling SOEs into the private sector, we empower them to respond to the challenges and opportunities of the future in a way which is impossible while they remain in state ownership. Nokia is today one of the world's foremost producers of mobile phones, but it began life as a company producing lumber and electricity. If it had been in government ownership, it would still be producing lumber and electricity.

Interestingly, even Labour have started to edge away from their previous zealotry on this issue. I will do a separate blog on this, but Labour have talked about private ownership stakes in subsidiaries of SOEs. That is progress.

As a Party, we need to be at the forefront of challenging why the state should be:
• The biggest owner of dairy farms in New Zealand;
• The biggest fund managers in New Zealand;
• The 50% owner of a large chain of petrol stations;
• By far the biggest owner of rental properties;
• The dominant generator of electricity;
• The dominant owner of our trains and planes;
• The owner of our most aggressively growing bank.

What frustrates me is when parties freeze the status quo, and have blanket bans on any sales at all. Decisions on ownership should be taken on a case by case basis.

One of the problems in any democratic society is that when left-of-centre parties are in power they tax heavily the high-income minority to win votes from the majority. For at least a time, they can be almost guaranteed of winning if they take $1,000 off one voter and give $200 to each of five voters (after clipping the ticket on the way through of course!). Right-of-centre governments feel obliged to continue that policy, even where it violates their constitution and destroys the country's future. The problem is that, unless those policies are reversed from time to time, we get a steady increase in the size of government, and a steady increase in the tax burden carried by the most productive members of our community. It takes courage, vision and moral purpose to reverse that trend.

I agree, and this must become a goal of the Government – to have a minority, not a majority, dependent on the state for income. When you add up all those on welfare, all those who receive Working for Families, those on national super, and those directly employed by the state, you end up with a lot of people whose personal interests are bettered by having a larger state, even if over time it inevitably means a smaller economy as a whole.

I've embedded Don's speech below, so people can read it in its entirety, rather than just the few quotes that the media take from it. I don't agree with all of it (as one would expect) and think it is important for National to be seen as keeping their word, but the issues Don raises are ones the Government needs to keep at of mind when they start putting together their 2011 manifesto.

Return to Orewa (Final)

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