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Costs of Fire Service about to skyrocket

Fire Service Amalgamation Means 40% Increase In Fire Insurance Levy

Screen_Shot_2017-05-01_at_10.27.44_AM.pngNew Zealanders will have to pay an extra 40% in their insurance fire levy from July despite the key selling point of the Government’s amalgamation of fire services being ‘efficiency’ - according to a new report we've published today.

The Government's reform package will result in an immediate cost increase of $80 million for little or no increase in services, despite claims by Peter Dunne, who has driven the reform, that the amalgamations will save money.

Total fire services costs will shoot up by $80 million per year despite efficiency being the key promise by Mr Dunne of these reforms. What is worse, the Government has increased the economic burden on New Zealanders without any comparable increase in the level of service.

According to the Government's own figures, efficiency gains years down the track will not even recoup 12% of the forecast increase in costs due to the amalgamations.

Despite rhetoric by politicians that these reforms are about saving money, according to official estimates, the emperor has no clothes. The costs are forecast to skyrocket.

The Fire and Emergency New Zealand Bill is in the final stages of passing in Parliament and will centralise both urban and rural fire services under the funding of the insurance levy on 1 July 2017.

download_(3).jpegCurrently, only New Zealand First are blowing the whistle on this issue. The question is, why haven’t the other parties done their homework and held Peter Dunne to account for what appears to be an enormous own goal?  His reform, which he’s sold on the basis of ‘efficiency’ will, in fact, cost New Zealanders’ hundreds of millions over the next few years alone.

New Zealanders currently pay less than a third of the cost of Tasmania - which has a similar fire climate to New Zealand - where rural and urban fire services are centralised. Tasmanians pay $293 per person compared to only $86 in New Zealand. Despite that, the Government is adopting the Tasmanian business model.

Not only are the costs going up, but the reforms will mean insurance holders are unfairly targeted to fund the fire service. For example, foresters, who seldom insure, will now pay 38% less in protection whilst Mum and Dad households are paying 40% higher levies on their insurance.  How is that fair?

The changes do nothing to incentivise self-insurance and actually rewards those who opt out of insurance altogether.

Read (or download) the report below.

OECD Report on income tax

taxing-wages-2017-brochure-COVER.pngA report released last week by the OECD (a group of mostly rich countries), ‘Taxing Wages’, compares the effective tax rates within the OECD club. According to the report, the average earner with no children in New Zealand has the second-lowest effective tax rate in the OECD at 17.9% (behind Chile at 7%) and the lowest rate for one-earner families with 2 children (6.2%)

But after a closer look at the methodology of the report, these rankings may not be all that they seem.

The effective tax rate represents the level of tax paid for every dollar earned (minus welfare benefits). Because the benchmark rate is for an average earner in each country, this does not actually lend itself very well to cross-country comparison. For example, if you took the average New Zealand earner and put them in the Australian tax system on the same income, they would be well below the average earner and pay less tax than the report suggests. The average earner in New Zealand will still be worse-off in real terms than the average earner in Australia, despite a lower effective tax rate.

images_(2).jpegFor some reason the report does not include the ACC levy – which effectively adds another one percentage point to the effective rate. It also ignores Kiwisaver deductions because it is not ‘compulsory’. It is worth noting that Kiwisaver is an opt-out scheme. Opt-out schemes are very close to compulsory in reality as not many people actually bother to opt-out (a well-established fact in behavioural economics). This will make the New Zealand rate look misleadingly low compared to a country such as Australia where the super contribution is compulsory.

The measure does not include local government rates, as they are independent of income. Whereas countries with income-based local / provincial taxes will be included despite both cases resulting in less income in the pocket. It does not include company tax (NZ is fairly average in the OECD) or GST (where NZ is reasonably high due to having no-exemptions). Remember that the tax cuts in 2010 were paid for in large part by a hike in GST.

Lastly, it is worthwhile to point out that all members of the OECD are hardly a benchmark for economic success in recent times. Comparing ourselves with the likes of Greece and Italy is hardly aspirational…

People are still paying the tax - just in a different form  

In terms of the size (and burden) of the state, the OECD's own figures show that total government outlays (local and central) are 39.1% of the economy as a whole.  That is much larger than Australia (36.1%) - despite their multiple tiers of government - Switzerland (33.7%) and even the USA (38.0%).

To read the recent report published by the Taxpayers' Union on options for tax relief click here.

Havelock North water inquiry getting costly

The Taxpayers’ Union can reveal that the the Hastings District Council has almost spent $1 million of ratepayer money on legal and investigation fees in relation to the Havelock North drinking water inquiry.  

The official figures were obtained by the Taxpayers’ Union under the Local Government Official Information and Meetings Act. They reveal that the Hastings District Council had invoiced $739,666 in investigation costs and a further $223,745 in legal fees.

The Government today announced that the drinking water inquiry will be extended for another 9 months. 

The Council are putting ratepayers in hot water, with the $1 million spending beginning to look like the tip of the iceberg.

While it is absolutely essential for the causes of the water contamination to be identified, we are concerned that the Hastings District Council is spending so much on lawyers and communication strategies, when this should really be about science and getting to the bottom the matter.

The real winner here is the Mayor, who is standing for Parliament, and therefore benefits the most in having the Government inquiry pushed back until after the election. Unfortunately, that probably means ratepayers will be up for millions more in fees for little, or no gain.

New report: 5 Options for Tax Relief in 2017

5_Options_cover.pngThe Government’s failure to index tax brackets to inflation since 2010 now costs the average Kiwi income earner almost $500 each year according to a new report released today by the Taxpayers’ Union. The report, "5 Options for Tax Relief in 2017", models five options to deliver meaningful tax relief packages which could be part of Budget 2017 with fiscal implications of $3 billion or less.

The National Government likes to talk the talk on lower taxes, but this report shows very clearly that they are simply not walking the walk.  Because tax thresholds have not been adjusted with inflation, the average Kiwi worker is now paying $483 more per year in tax than in 2010. 

By 2020, Government surpluses expected to be $8.5 billion per year.  With Bill English having pumped $10.36 billion into new spending, and only $415 million allocated for tax relief in that time, if now isn’t time for meaningful tax relief it never will be.

Budget_allocations_infographic.pngIn addition to modeling various options for tax relief to compensate New Zealand families who are paying more, the report calls for tax thresholds indexed to inflation going forward.  That would prevent Wellington increasing the average tax rate paid by New Zealanders every year, raising extra revenue for the Government, in real terms, without the transparency of actually raising taxes.

If we instead indexed thresholds to the growth in average earnings, dating back to 2010, the average earner would save $1,350 each year, or $26 each week.

With the Government set to make a decision on Budget 2017 and its tax relief package in the coming weeks, we hope this report gives taxpayers assistance in understanding what is realistic for Budget 2017.

Living Wage policies: The best of intentions but the worst of results

Seventeen parking wardens contracted by Wellington City Council were not rehired in-house, with further job losses inevitable under the Council’s living wage policy, according to a new report we've released today authored by our Research Fellow Jim Rose.

The report's key findings are:

  • Seventeen Wellington City Council employees lost their jobs after being under the skill level required for the living wage.
  • Councils hire on merit, so candidates under the skill level commensurate with the living wage will be crowded out by higher-skilled candidates.
  • There is no consensus or scientific basis for the calculation of a living wage. Any calculations arepolitically subjective.
  • Any living wage in New Zealand will be abated by up to 40% by decreases in government transfers and increased income tax obligations.
  • Living wages shift the burden from means-tested taxpayers to ratepayers and business owners.
  • Below-living-wage employment allows for in-work training, where employees tradeoff lower wages for the opportunity to learn skills that increase their future earning potential.

Unknown-1.pngLiving Wage Aotearoa New Zealand nobly want to alleviate poverty and reduce unemployment with their activism for a living wage, but the evidence to date shows they are achieving the exact opposite. This report shows that a living wage will only make it harder for low wage earners to find work.

Contrary to intentions, living wage policies actually hurt the very people they seek to help. For the first time, we reveal that seventeen parking wardens lost their jobs at the Wellington City Council as a result of its living wage policy.

Living wage policies mean higher-skilled candidates apply for jobs previously occupied by lower-skilled candidates. Of course councils will hire on merit and shortlist the candidates who previously would never have applied for the lower, pre-living wage role. That's exactly what happened when Wellington City Council brought its parking services in-house.

Minimum wage applicants do not get a shot against better-qualified candidates attracted by the higher wages. So much for the poverty alleviation and reduced unemployment.

The economic theory is clear that living wages do more harm than good, but the job losses in Wellington is the proof in the pudding. Councils should stop implementing these living wage policies which achieve so little but cost ratepayers who can ill afford it.

Living wage policies mean ratepayers pay more for less and achieve none of the intended poverty relief.

Jim's full paper (which the above summary is based on) can be viewed here.

Yule set to cost ratepayers $100k if elected to Parliament

Taxpayers are on the hook for between $90,000 and $100,000 in by-election costs in the case of Lawrence Yule being selected as the National Party's Tuki Tuki candidate and subsequently elected in this year's general election. This figure was revealed after we asked the council for its calculation of the anticipated costs of such an election.

While no price can be put on democracy, the figure puts into perspective the promises to not make a tilt at Parliament that Mr Yule made when seeking to be re-elected last year as mayor of Hastings.  It's obvious that Mr Yule should have been upfront at the time, given the huge costs that are now likely to fall on ratepayers.

With sitting councillors likely to contest the Mayoralty, ratepayers could be hit a second time round too, in the event a second by-election is required to fill a Council seat.  It could be a double whammy.

The correspondence can be viewed here.



Lack of oversight by Greater Wellington Regional Council 'scary'

A Greater Wellington Regional Council guarantee to cover $150 million of debt in the event of default by CentrePort has raised serious concerns as the New Zealand Taxpayers’ Union reveals correspondence that shows the Council has received no documentation whatsoever about CentrePort's insurance cover, or any information about the impairment of the Port's assets.

This is a terrifying show of failure of the most basic risk management and governance. The Council has only verbal assurances from the Port about its insurance arrangements, and despite owning 76% of the Port and being the guarantor of its debt, has required no reports whatsoever about the impairment of assets due to damage resulting from the November earthquakes.

No private company director in the country would be so casual about risk. It is worse than incompetence by those who sit on the Council.

While everyone assumed, as stewards of our money and managers of our community owned assets, Regional Councillors would have more information than the public about just how badly the Port is damaged, they simply don’t.
What audit committee would allow a $150 million debt guarantee related to property developments without having in place precise disclosure and agreements about insurance?  This is a potential liability that could cripple the Regional Council, while they keep their heads in the sand.

Would you give your own money to the Clinton Foundation?

Following on from our blowing the whistle on the Government earmarking another $5.5 million of NZ Aid money to be given to the Clinton Foundation over the next few years, we’re sorry to report that the Government is refusing to veto the extra spend.

Last week it was reported that the Clinton Global Initiative would be shutting its doors. Nevertheless, Kiwi taxpayers are still on the hook to fund the separate (albeit affiliated) Clinton Health Access Initiative.  The $5.5 million is in addition to the $7.7 million already spent.

So here at the Taxpayers’ Union, we thought we’d gauge public opinion on what people in the street think about millions of their taxpayer money being used to fund the Clinton Foundation’s charities.

We asked Wellingtonians whether they’d be willing to park with their own money and donate to the Clinton Foundation.

We spent a day asking people for their views and to donate.  We couldn’t find a single person was willing to give their own money to the Clinton Foundation, or its charities.  Only about one in twenty thought it was a suitable use of taxpayer money.

It’s time to send a message to politicians like Minister McCully that our money isn’t a political play thing.

Sign the petition calling on Murray McCully to veto the extra funding for the Clinton Foundation affiliate.

Council-owned art: half a billion collecting dust

The Taxpayers’ Union can reveal that local councils across New Zealand have accrued more than half a billion dollars of artwork – at least $560 million – with 93% of the collections collecting dust or otherwise not on public display.

nobody_here_but_us_small.jpgA Taxpayers’ Union briefing paper on research looking at the public accessibility of municipal artworks is available below.
While we expected local authorities to own significant portfolios of art, such as where councils run galleries or museums, we were amazed to find that the vast majority of works publicly owned are in fact hidden from the public.

We found that many of the most expensive items are in mayoral offices or collecting dust in storage.

Much of the artwork has been donated or bequeathed to the local authorities so that the public can enjoy it.  But that's not happening.  In addition, many larger councils designate an amount to be spent each year on new artwork despite only a tiny fraction of their collections being accessible to the public.

At a time where most councils are imposing average rates increases multiple times the rate of inflation, this research suggests local officials should reconsider where their priorities lie. Is it really worth holding onto such large portfolios when most are in storage gathering dust?

Among the key findings of the research are:

  • Territorial authority councils (district, city, and unitary) own at least $568,393,020 of artwork, made up from at least 173,269 pieces;
  • The amount of artwork on public display is only 7%;
  • Auckland Council has the most valuable collection of artwork, making up almost half of the country’s collection at $276,981,903; and
  • Whakatane District Council has the least amount of works on public display, with only 0.2% of their $8.75 million collection on display for the public to enjoy

The most perplexing leaving gift ever?

As regular readers will know, the Taxpayers' Union operate a tip-line for insiders and members of the public to report government waste.  In December we received a tip off that former Wellington Mayor Celia Wade-Brown asked officials for a ratepayer-funded tattoo as her departure gift as Mayor of the City.

We found it difficult to believe that an elected official would ask for a tattoo, which we were told was to be on the former Mayor’s ankle, so (as is our practise to verify tip-offs) we made a request under freedom of information laws to the Wellington City Council.

To our astonishment last week we received confirmation from Wellington City Council that the tip was correct!  Fortunately, the Council refused to grant an unusual request by former Wellington. 

Ratepayer-funded body-art is perhaps the most unusual spending request we have ever come across.  Well done to the person in the Council who had the nous to say no!

Below is a copy of the Council’s response to the Taxpayers’ Union request for information.


*** Update ***; the NZ Herald; and even international media have now picked up the story: 

They've also found pictures of the tattoo: a Gecko.

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