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May 23, 2014

Budget 2014 ›

Oops - $2 billion mistake in budget appropriations


We’ve spent most of this week immersed in the budget documents and making notes of potentially questionable spending or unusually large increases.

To our great surprise yesterday we noticed that one of the primary growth partnerships (PGPs) that the Government is funding appeared to have undergone a massive growth in spending. We’ve expressed much concern in the past about PGPs and consider them inappropriate corporate welfare and the Government picking favourites.

According to the budget estimates distributed on Budget Day, the New Zealand Sheep Industry Transformation Project (NZSTX) is to receive 644 times more than in 2013/14. As you can see from the scan below, the budget documents show an increase in spending from  $3.3 million to just under $2.4 billion dollars.

For comparison, $2.4 billion is roughly the same amount of appropriations for corrections, courts and customs combined!

We've previously made noise that the hundreds of millions committed to PGP funding is wasteful spending.. So you can imagine our shock when we saw that the Sheep Industry would be receiving close to $2.4 billion of hard earned taxpayer money.

We emailed the Minister of Finance’s office and have been told, to our relief, that the figure is mistakenly 1,000 times more than intended.

We are delighted that the Sheep Industry haven’t had a bank error in their favour of over $500 from every New Zealander. Like anyone else they might want all their Christmases to come at once, but thankfully the New Zealand Merino Company, who runs the programme, won’t get to run off into the sunset with designer sheep bedecked in glittering jewels.

The mistake reminds us of the Westpac couple who went on the run after $10 million was mistakenly deposited in their bank account. Luckily this one is more easily rectified as the money is not yet spent!

Click "continue reading" to view the whole appropriation document in which we found the mistake.

***Correction*** In much the same way Treasury made a mistake, an earlier version of this post referred to 2.4billion equalling roughly the same as the total amount spent on Education in Budget 2014. That was incorrect. The $2.4 billion only relates to output expenses in Vote Education.

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London return for the money written-off on rail since 2008

We’re currently working though the budget announcements and stack of material released last week.  What’s caught our eye are the unbelievable amounts taxpayers are forking out for KiwiRail.  On Budget day the Government announced a further $198 million of funding for KiwiRail’s Turnaround Plan. That brings the total cost to taxpayers of rail to a whopping $12.2 billion dollars since rail was renationalised in 2008.

Worse, Transport Minister Gerry Brownlee has warned that KiwiRail is likely to need more what the Government is calling a 'turn around plan'.

The $12.2 billion taxpayer money written off on KiwiRail is equivalent to over $2,700 per taxpayer - nearly enough buy every Kiwi a return flight to London.

Per household, the amount is $6,900 - enough to buy a good, reliable second hand car.

The $12.2 billion refers to the total Crown investment of $2.4 billion since 2008 and write downs totalling $9.8 billion. 

We've put out a statement calling on the Government to do a U-turn on KiwiRail. At what point will the Government stop throwing good money after bad? Taxpayers should not be burdened with bringing dead rats to life.

It is incredible that for all this money, we still have locomotives with asbestos and ferries that are lemons. We think taxpayers deserve better.

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Dusting off the cheque book to qualify for tax relief

Yesterday we were scathing of Mr English's lack of tax cuts in yesterday's budget.

Nevertheless, we were eager to qualify for the only tax cut that was it - the removal of cheque duty - worth about $1 a year per New Zealander.

Budget lock up

To avoid missing out on the tax cut, earlier today we delivered a cheque to The Treasury to cover the lunch provided at yesterday’s budget lock-up.

Rather than pay for our taxpayer funded lunch with cash, we dusted off our cheque book to make the payment. As only the minority of New Zealanders who still use cheques will qualify for the tax relief, we wanted to make sure we are among them.

Yesterday’s budget forecasts that over the next four years, total surpluses will equal $4,935 per household. Of that, Kiwi taxpayers get back $1 from the only tax cut contained in yesterday's budget. 

We’re calling on the Government to lay out a clear and meaningful program of reducing tax and compliance costs.

Cheque and note to Treasury

The Taxpayers’ Union fights for lower taxes and value for money from every tax dollar. New Zealanders are welcome to donate their tax cut by clicking here (or of course sending a cheque!).

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Post Budget comments from the Taxpayers' Union

Radio LIVE spoke to Jordan Williams and David Farrar of the Taxpayers' Union for their analysis of Budget 2014.

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John Bishop's analysis on Budget 2014

Budgets are essentially political documents, particularly in election year, and this year even more so because the Minister of Finance thinks the Government can have a bit of a spend up while proclaiming the need for restraint and praising themselves for the restraint they have shown.

The spending that has been sanctioned, particularly the family assistance package worth $500 million, goes to the political heartland of the National Party, the middle of the middle class who think they both need and deserve state assistance. There is also a good dollop of dough for sore spots and pet likes Christchurch and schools in North Canterbury, and for some projects of cultural merit like buying the TVNZ Film Archive.

  • Total new spending is $5.7 billion (including $16 billion of reallocation) which takes total spending to $70.3 billion in the current year which represents 30.3% of GDP, almost the same as previously years, but a drop from 34.44% in 2008/09.
  • There is a $372 million surplus forecast, not very big this year but it is forecast to increase to $3.5 billion in 2017/18.
  • Taxation is unchanged except for cheque duty being abolished which will save users about $4m a year, about a dollar per Kiwi, and that is the sum total of tax reform.
  • Spending on households with families increases, with extra money for paid parental leave, family tax credits, doctors’ visits for under 13 year olds, early childhood education, and for vulnerable children, a family assistance package worth $493 million over four years.
  • The economy grew 3.1% in 2013, the fifth highest in the OECD, and growth is forecast to continue at between 2% and 4% over the next four years.

The Minister of Finance also neatly frames the expected debate over election promises. His budget speech states that Treasury advice is that additional spending over the $1.5 billion the current government has allowed itself will boost interest rates. Our prediction is that National will use this to bash Labour and other parties if those promises (spending and revenue reductions) go over the Treasury determined figure. That is consistent with National’s narrative that the country cannot afford a Labour/Greens government.

Our criticisms and quibbles:

  • The ACC levy cuts dangled as a prospect in 2015 could have come earlier or at least been made more definite.
  • The abolition of cheque duty – while welcome – should only be the start not the end of a programme of cutting compliance costs.
  • There is a suggestion of a commitment to further welfare reform. Mr English says in the budget speech:

    “The future cost to taxpayers of people who received welfare in 2012/13 will be $76 B by the time they exit welfare or retire. About three quarters of that cost is due to people who first received a benefit under the age of 20.” 

    This describes the cost of welfare for those for whom it becomes a way of life. So what is the government doing about it? The budget offers nothing: no commitment to developing a policy framework to address a very complex matter, and no practical steps. There is $100 million to help people transition from welfare to work but that is not a long-term answer to the problem of preventing people from becoming welfare dependant in the first place.

So is this a good budget for the country? It’s certainly a well-calculated action plan to get the National government re-elected, but there’s little prospect of reduced government spending, substantial tax cuts or significant reform of spending.

To convince this Government that government is too big in New Zealand and the tax burden should be reduced, we must continue to pressure our politicians to share the benefits of the improved economy with all taxpayers. 

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Budget in surplus but little else for taxpayers to crow about

 Budget 2014 is now public. The Taxpayers' Union had two people in the budget 'lock-up' crunching the numbers before the embargo was lifted at 2pm.

Overall we give the budget a score of six and a half out of ten.

We're disappointed that Finance Minister Bill English has failed to commit to giving New Zealanders meaningful tax relief.

Points for getting the books back into black, but deductions for not addressing the long term fiscal issues facing New Zealand.”\

While there’s a little bit of fat trimming here and there, overall its more of the same tax and spend. To fix our long term problems of an excessive tax burden, Bill English needed to wield an axe to superfluous spending. He’s failed to do so.

Compare this Government’s approach to Australia. Despite Australia’s dire fiscal outlook, its Government is reforming things such as the retirement age to make the public sector sustainable.

Over the next four years, the New Zealand Treasury forecast $7.6 billion in fiscal surpluses and this year, just $15.5 million is allocated to tax relief.

That represents $4,935 per household of over taxation. Instead of committing to giving that money back, the only tax cut in this budget is to cheque duty. That’s a tax cut of one dollar a year per New Zealander.

In answering a question from the florr during the lock-up, Mr English told journalists and analysts that he has the balance about right. We don’t agree. What’s needed is an early and clear commitment to a program of reducing tax and compliance costs.

Of $4,935, Kiwi taxpayers get back $1 per year. And that’s only if you still use cheques!

No wonder John Key has hinted at tax cuts during the election campaign. This is a tax cut that benefits only the one per cent who still use cheques.  What’s next, removing excise tax on fountain pens?

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Pre-budget analysis from the Taxpayers' Union: What we're looking for.

This morning our Executive Director, Jordan Williams was interviewed on TV3's Firstline on what we hope to see in today's budget.

Click below for video on demand.

Caution needed after surplus - Tax Union 3News - 15/05/2014

The Government is being urged to keep a tight lid on new spending as it delivers its first surplus in six years.
With a wafer thin surplus set to be announced today, Taxpayers Union executive director Jordan Williams says National should focus on paying back debt.

"There should be some prioritisation before politicians create new ways to spend our money," he says.

"When there is a surplus that should be used to pay back Government debt and give back money to the Kiwis that earned it."

The Government should also put an end to "unfair" corporate welfare, Mr Williams says.

"One of the things the Taxpayers Union is really focussed on is Government welfare – millions of dollars picking winners in the commercial sector – we say that's unfair to New Zealanders to divvy out money to the selected few."

Putting an end to corporate "subsidies" would help get the Government books back to pre-Global Financial Crisis levels, says Mr Williams.

"When we entered the GFC the books were in good shape.  What we now need to focus on – especially after Christchurch – is getting the books back into good shape in case we hit some more turbulence." 

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