In this episode of Taxpayer Talk, Taxpayers' Union Research Officer Islay Aitchison interviews Tauranga City Councillor Kelvin Clout on dysfunctional Council culture and recall elections. They discuss the COVID-19 Government assistance Tauranga Council is hoping to receive for future infrastructure projects.
The following is an op-ed from Taxpayers' Union Campaigns Manager Louis Houlbrooke.
Phil Twyford says he will build light rail in Auckland if Labour wins the next election.
Of course, he promised exactly the same thing at the last election and, after spending two and a half years in discussions and $5 million of taxpayers’ money commissioning reports, nothing has been decided, far less built.
A Minister reaches a low point when he goes for re-election solemnly vowing to implement an old flagship policy ‘for real’ this time around. It was promised previously, it was not delivered. But perhaps it’s for the best: Twyford’s record of expensive policy failures suggests a tram down Dominion Road would terminate in hell.
When elected in 2017, Phil Twyford promised to build 100,000 KiwiBuild homes in 10 years, with an initial investment of $2 billion. More than two years into that period, KiwiBuild has delivered just 548 houses. At the current rate, Twyford’s promise will be fulfilled in a mere 436 years. He’s been stripped of his KiwiBuild responsibilities and the new Minister in charge, Megan Woods, avoids even uttering the policy’s name.
He also promised to build SkyPath – a cycleway across Auckland’s Harbour Bridge – for $67 million. The budget has already blown out to $360 million, with work not yet begun.
Then there was his 2017 promise to make “virtually all” of the Government’s 15,000 vehicles electric by 2025. So far, he’s achieved it for less than one percent.
Not content with a track record that makes David Clark look like Mr Fix-it, Phil Twyford appears determined to one-up himself. In the last month, he has unleashed a new tranche of disappointment and waste.
Twyford said he was a “huge advocate” for a rapid rail, a 60-minute service between Hamilton and Central Auckland, even though it was not a 2020 election pledge. That last part was surprising, considering he had commissioned a business case for his beloved project.
The business case put the cost of rapid rail “between several billion and more than $10 billion.”
The Taxpayers’ Union economist’s reaction was to start sobbing into his well-loved copy of Adam Smith’s ‘The Wealth of Nations’. “What kind of business case is that?” he lamented. “It’s going to be between two billion and more than ten. How do you even start to do a proper cost-benefit analysis when you have no real idea of the cost?”
We told our economist to do his job and find the midpoint of several billion and infinity. His head exploded and the Union is currently looking for a new economist.
Then there are the ongoing blowouts and delays in the Transmission Gully highway project. But according to Phil Twyford, Phil Twyford is not to blame. Apparently, 2020’s pandemic caused the problems of 2019 and 2018. Bad news, Dr Bloomfield: the virus is time-travelling.
Twyford had nine long years in opposition to develop policy, and now three longer years in government to implement it. He has failed at every major hurdle so far and shows no sign of reforming.
So, how has the Prime Minister responded to Twyford’s epic series of failures? She’s promoted him. Now at number four on Labour’s list, Twyford trails behind political powerhouse Kelvin Davis, but is ahead of Chris Hipkins, who runs a third of the Government, and Megan Woods – who seems to run the rest.
The Honourable Phil Twyford’s record this year won him the award for lifetime achievement in government waste. The previous year’s recipient, Sir Tim Shadbolt, troughed away for 35 years to receive that honour. Twyford got there in three. He’s that good at being bad.
The New Zealand Taxpayers’ Union has released a new paper outlining a suite of proposals to lift economic growth and therefore reduce debt as a proportion of GDP.
On current forecasts, government debt is set to reach $150,000 per New Zealand household. There are two ways to slay this debt monster: cut spending, or grow the economy. While we need to do both, our latest paper hones in on the second approach.
Growing out of it: Five policies to encourage growth and conquer debt makes five recommendations, all funded from the $14 billion set aside in the Government’s COVID-19 Response and Recovery Fund:
• Cut GST from 15% to 10% for the next 12 months
• Permanently cut the $70,000-threshold rate from 33% to 30%
• Permanently cut the $48,000-threshold from 30% to 27%
• 15-month hiring trial periods from October 2020 to end of 2021
• Increase the $100 million overseas investment threshold to $500 million
Targeted tax relief will spur economic activity when we need it most. We propose a temporary GST cut which will incentivise New Zealanders to bring forward planned spending, and we also suggest cuts to marginal income tax rates that will reward productive work.
Traditional tax relief, however, should only be one part of a growth package. Growth can also be encouraged through relief from regulatory taxes. Specifically, we propose temporary but significant relaxation in rules that make employers less willing to hire staff, and foreign businesses less likely to invest in New Zealand.
I’m writing to you from the media and analyst “lock-up” where Treasury just presented its Pre-Election Economic and Fiscal Update.
The Update, which the Public Finance Act requires of Treasury just prior to every election, lays bare the Government’s books and include the latest projections on debt, spending, and the economy. This is the first proper update we’ve had from Treasury since the Budget way back in May.
In short, Treasury is projecting at least 15 years of deficits, unemployment to remain elevated for some time, and our economic recovery to be slower than previously expected.
Mood in the room
Understandably, the room was sombre. Journalists targeted the Minister of Finance Grant Robertson with questions on accelerating house prices and inequality, while analysts in the room noted the substantial increase in projected debt over the next decade.
On debt, the Minister was defensive. He tried to argue that he was unwilling to introduce austerity-style cuts to New Zealand, but didn't present a plan for New Zealand to get out of our looming 15 year debt spiral. More explanation will be needed from Labour if they want to remain credible on the economy.
With economic growth expected to be weaker in the next four years than previously forecast, Treasury is now projecting deficits right out until the end of their projection range in 2033/34. This is a change from its forecasts at the May Budget – when Treasury had expected we would return to surplus by 2027/28.
The result for taxpayers: net crown debt is expected to be $269.3 billion – or $149,600 per household – in 2033/34. That’s up from the $132,700 per household forecast at the Budget in May.
Weaker long-term economic recovery
The latest forecasts indicate unemployment is expected to remain persistently high. While unemployment is not expected to spike as aggressively as Treasury forecast in May, peak unemployment (of 7.8%) is now not expected to arrive until March 2022 – so the economic pain for some households may continue to intensify for the next 18 months. Previously unemployment had been expected to be down at 6% by March 2022.
But worst fears for 2020 avoided
At the Budget in May, the economy had been expected to contract by 24% (on an annualised basis) in the second quarter of this year, but Treasury now expects the contraction to be smaller at 16%. We will find whether that’s accurate tomorrow when Stats NZ release the official numbers. Treasury are attributing this smaller contraction to the Government’s wide-spread (and expensive) wage subsidy scheme and a faster than expected bounce-back from national lockdown.
In the near term that is having an impact on deficits, which are generally not as high as Budget forecasts in May. These better-than-expected near-term forecasts are reflected in the labour market – the fear of unemployment reaching 9.8% in the third quarter of this year hasn’t borne out.
With so much deficit spending, the Taxpayers’ Union's message of fiscal prudence and ensuring quality government spending is more important than ever. Today's numbers provide alarming context to the questionable lolly-scramble announcements being made on the election campaign trail.
You can read Louis’ comments to media here: “Decade of deficits” are a national crisis
Thank you for your support,
New paper reveals how 'job creation' projects destroy jobs
Too often, our politicians fall into the trap of thinking they can create jobs by piling on more and more government taxpayer spending. But if that were true, high-spending countries like Greece and Spain wouldn't be facing a decades-long employment crisis.
The Taxpayers' Union's latest briefing paper reveals how Government spending – including projects intended to create jobs – destroys productivity and employment.
We draw on work from Treasury and New Zealand economists estimating the 'deadweight loss' of our tax system – this is the way taxation motivates people to work less, and spend and invest less, leading to economic distortions. Applying it to some recently announced pet projects is sobering:
Because government spending projects are funded via taxation, we can use what economists call the "deadweight loss" to see how many jobs are killed by handouts such as James Shaw's $11.7 million grant to a "Green School".
While it's true that economic stimulus is needed in the era of COVID-19, this needn't come in the form of giant cheques. Leaving this money in the economy via lower tax rates will allow money to circulate in a way that creates jobs passively, without costly perverse incentives.
Taxpayers rorted by Labour MP's electorate office deal
The cozy deal between list MP Ginny Anderson (pictured above with the Debt Monster), the Labour Party, and the NZ Professional Firefighters Union is a rort on taxpayers.
As Stuff explains, Labour gets cheap rent on office space off a local union, sublets the rooms to Andersen, and then bills parliament (i.e. taxpayers) at a markup, pocketing the difference.
Taxpayer funding for offices is meant to cover the costs of being an MP and servicing constituents. Here, Ginny Anderson has abused that trust to line the pockets of her political party.
This sort of union backhander is what we’d expect to see in the corrupt unions of Australia. Here in New Zealand, we expect such favours to be disclosed as donations, so why weren't they?
With the discounted rent not being disclosed as a political donation, we've referred the matter to the Electoral Commission. We're also writing to every other MP to ensure they're not funneling their office funding to political mates or their business interests.
"Green School" handout shows dangerous trend of horse-trading over funds
It's been revealed that James Shaw put billions of dollars in infrastructure funding on the line in order to negotiate his $11.7 million handout for a private "Green School".
This is a perfect example of a worrying trend in the way the Government makes funding decisions. Here's what Jordan had to say:
The spectacle of politicians horse-trading individual funding decisions is something we expect to see in smoke-filled rooms of yesteryear, not a modern day New Zealand with a reputation of being corruption-free.
The Provincial Growth Fund, and now the COVID ‘shovel ready’ fund, are normalising a process of decision making that rewards companies which are politically connected. It is a dangerous path.
Steven Joyce reintroduced the sort of corporate welfare largess not seen in New Zealand since the Muldoon Government. But instead of fixing the problem, the current Government has doubled down and we have now returned to politicians making funding decisions for individual projects and pet causes.
Enough is enough. Now we are seeing the warts and all flaws in the process, New Zealand should return to a transparent process of the politician’s job being limited to setting criteria and objectives, and leaving it to officials to make the individual grant decisions.
State Services Commissioner responds to our complaint regarding the Ardern-Bloomfield ad
Remember the Labour Party's ad featuring Dr Ashley Bloomfield and other public servants? We complained to the State Services Commissioner that it was an improper use of taxpayer-funded staff.
It would not be appropriate for a public servant to agree to feature in party political electoral material in their official capacity where this implies endorsement by the public servant of the political party. To do so would compromise their political neutrality and by implication that of the Public Service as a whole.
Placing footage of Ministers and public servants doing their official work on a political party branded platform could create confusion about the motivations and political neutrality of the public servants concerned. ... In this instance, and having regard to all the circumstances, my judgement is that on balance there is potential for questions to be raised regarding the participation of the public servants in the video.
The Commissioner isn't taking further action (the video has already been removed) but at least he's has sent the message to bureaucrats that it is totally inappropriate for public servants to feature in a party political advert. Taxpayers pay public servants to do their jobs, not to aid their political masters in re-election campaigns.
The Commissioner also said, “I understand that none of the public servants involved were aware that the footage would be used in the way that it was.”
Based on this, it appears there has been a clear breach of the Cabinet Manual, which states ‘Ministers must uphold the political neutrality of the public service and not ask officials to act in any way which would conflict with their obligation of neutrality.’ But enforcement of the integrity of the Manual is ultimately up to the Prime Minister. Some would say that’s a case of the fox guarding the henhouse!
Revealed: Taxpayer-funded ‘wellbeing’ goodie bags during lockdown
Our research team recently revealed that the NZ Super Fund spent over $15,000 on “COVID-19 well-being parcels” from designer supermarket Farro Fresh for its highly-paid staff over lockdown.
According to NZSF, the parcels included ‘sundry goods’ such as coffee and hot cross buns.
Forty-five of the Super Fund's staff are paid more than $300,000. Pretty much everyone else is paid more than $100,000. As I told the Herald, these people do not need care packages paid for by taxpayers who are going without during COVID-19 lockdown.
The Taxpayers’ Union requested the credit card statements of the NZSF from the 1st of March 2020 – 31 May 2020 under the Official Information Act. In addition to the goodie bags, other interesting payments included:
Inspired Accountants team building trip for corporate strategy team for $1359.90 paid for during Level 3 lockdown.
A canoe hire for $794.00.
Hand sanitiser for $568.80.
Renewal of a practicing certificate with the NZ Psychologists Board for $550.85.
A 10-year anniversary gift for a staff member for $515.
Lunch at White & Wongs for $156 the day it was announced New Zealand would enter Level 4 lockdown.
“Motivation morning tea” before working from home for the investments team, for $107.61.
Have a great week,
The New Zealand Taxpayers’ Union has laid a complaint with the Broadcasting Standards Authority regarding the Labour Party’s first television advertisement for the 2020 election campaign.
In the advertisement, Jacinda Ardern misleadingly claims that her Party will “make apprenticeships free”. In reality, these apprenticeships are not free – they are paid for by taxpayers.
Spreading the myth that there is such a thing as a free lunch – or a free apprenticeship – is wrong. That’s why we’re holding the politicians to account.
Immediately after Labour announced its policy for a new higher tax rate on income over $180,000, Louis sat down with Islay and Joe to record a podcast examining the politics and economics of the tax in more detail.
Labour have just announced a new tax rate of 39% on incomes over $180,000. This is in contrast to Australia that has legislated to cut taxes.
Of course the 39% new tax rate is just the beginning. If they have a Labour/Green Government then they could strike a deal to implement part of the Greens’ tax agenda also.
But even with just what Labour is promising, this will see every New Zealander who earns up to and including $300,000 a year paying more income tax in New Zealand than they would in Australia.
|Income||NZ||Aust||Extra tax NZ|
|$ 10,000||$ 1,050||$ –||$ 1,050|
|$ 20,000||$ 2,520||$ 342||$ 2,178|
|$ 30,000||$ 4,270||$ 2,242||$ 2,028|
|$ 40,000||$ 6,020||$ 4,142||$ 1,878|
|$ 50,000||$ 8,020||$ 6,592||$ 1,428|
|$ 60,000||$ 11,020||$ 9,592||$ 1,428|
|$ 70,000||$ 14,020||$ 12,592||$ 1,428|
|$ 80,000||$ 17,320||$ 15,592||$ 1,728|
|$ 90,000||$ 20,620||$ 18,592||$ 2,028|
|$ 100,000||$ 23,920||$ 21,592||$ 2,328|
|$ 110,000||$ 27,220||$ 24,592||$ 2,628|
|$ 120,000||$ 30,520||$ 27,592||$ 2,928|
|$ 130,000||$ 33,820||$ 30,592||$ 3,228|
|$ 140,000||$ 37,120||$ 33,592||$ 3,528|
|$ 150,000||$ 40,420||$ 36,592||$ 3,828|
|$ 160,000||$ 43,720||$ 39,592||$ 4,128|
|$ 170,000||$ 47,020||$ 42,592||$ 4,428|
|$ 180,000||$ 50,320||$ 45,592||$ 4,728|
|$ 190,000||$ 54,220||$ 48,592||$ 5,628|
|$ 200,000||$ 58,120||$ 51,592||$ 6,528|
|$ 210,000||$ 62,020||$ 56,092||$ 5,928|
|$ 220,000||$ 65,920||$ 60,592||$ 5,328|
|$ 230,000||$ 69,820||$ 65,092||$ 4,728|
|$ 240,000||$ 73,720||$ 69,592||$ 4,128|
|$ 250,000||$ 77,620||$ 74,092||$ 3,528|
|$ 260,000||$ 81,520||$ 78,592||$ 2,928|
|$ 270,000||$ 85,420||$ 83,092||$ 2,328|
|$ 280,000||$ 89,320||$ 87,592||$ 1,728|
|$ 290,000||$ 93,220||$ 92,092||$ 1,128|
|$ 300,000||$ 97,120||$ 96,592||$ 528|
|$ 310,000||$ 101,020||$ 101,092||$ (72)|
A person earning $40,000 a year pays 45% more income tax in NZ than Australia. On $70,000 you are paying 11% more here than Australia and on $200,000 you are paying 13% more here than Australia.
The amount of revenue this will bring in is trivial compared to the amount of extra spending and debt Labour is incurring. So beyond doubt, if re-elected, they’ll then say they need to increases tax even more.
National on the other hand says it is unfair that inflation pushes you into a higher tax bracket even when your disposable income remains constant, so National will inflation adjust tax brackets to stop inflation pushing up your tax bill every year.
David Farrar is a Cofounder of the Taxpayers' Uion. This post originally appears on Kiwiblog.co.nz
Documents released to the New Zealand Taxpayers’ Union under the Official Information Act revealed that during lockdown, almost 40% of callers to the non-emergency 105 police number abandoned calls rather than wait for an answer. Further, the average wait-time appeared to increase significantly during this period.
For the period of 1-17 April:
• 38.28% of callers abandoned calls.
• Average wait time was 6 minutes 11 seconds.*
• Ten callers waited longer than 45 minutes, with the longest wait being 53 minutes.
It is a concern if frustrated callers were opting to not report crime or breaches of the COVID-19 level 4 lockdown rules.
The police spent $1.22 million on an advertising campaign to promote the 105 number. The callers who spend more than 45 minutes waiting for the police to pick up would probably have preferred some of that money was used on the frontline service.
While the average waiting time, is reported in 2019 was 56-73 seconds, during COVID-19 lockdown that extended to more than six minutes.
Many government departments found themselves with nothing to do during lockdown. Smart all-of-government thinking would have seen under-utilised human resources reallocated away from non-essential departments to frontline services such as police communication.
*Police were unable to provide us with the average estimated waiting time given to callers at the beginning of calls.
The New Zealand Taxpayers' Union can reveal that the $11.7 million payment to the Green School will result in 25 fewer jobs in the private sector.
This calculation was made based on a new briefing paper, The jobs cost of taxpayer-funded projects, released by the Union today.
Union spokesman Louis Houlbrooke says, "Our latest research examines work by the Treasury and New Zealand economists estimating the 'deadweight loss' of our tax system – this is the measure of the cost of taxation that is not the amount of money taken from the private sector, but the way the taxation motivates people to work less, and spend and invest less, leading to economic distortions."
"Because government spending is funded via taxation, we can examine the deadweight loss of handouts such as that announced by James Shaw last week."
"Research from local economists leads us to a conservative estimate that the deadweight loss of tax (or the spending it funds) is about 15%. That means the Green School handout didn't just take $11.7 million from taxpayers; it cost the economy an additional $1,755,000."
"So how many jobs did this eliminate? Based on the government's own job creation estimates, a job can be created for around $70,000. That means the deadweight loss of the Green School handout cost the economy 25 jobs."
"Too often, our politicians fall into the trap of thinking they can create employment with increased spending. But if that were true, high-spending countries like Greece and Spain wouldn't be facing employment crises. While it's true that economic stimulus is needed in the era of COVID-19, this needn't come in the form of giant cheques. Leaving this money in the economy via lower tax rates will allow money to circulate in a way that creates jobs passively, without costly perverse incentives."
Spending items singled out as examples in the briefing paper include:
• The $72.5 million support package for the racing industry generated $10.9 million of deadweight loss and cost the economy 155 jobs.
• The $1 billion annual allocation for the Provincial Growth Fund over the last three years has generated $150 million of deadweight loss per year and cost the economy 2140 jobs per year.