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Taxpayers' Union launch podcast: Taxpayer Talk

In response to the speed in which the economic and political environment is changing due to COVID-19, we have brought forward the launch of our podcast.  The first interview was last Thursday and Friday with Damian Grant and Michael Ridell who take opposing views on the extent to which the Government should intervene to keep people in their jobs during the crisis.

You can subscribe to Taxpayer Talk via Spotify here (press "follow" after clicking the link). Apple Podcast approval is still in process.

We welcome your feedback / constructive criticism as we master the art of casting the pod from self-isolation!

 

Pandemic response: Campaign for nationwide rates freeze launched

The Taxpayers’ Union has launched a campaign aiming to force New Zealand’s mayors and regional council chairs to commit to a 12-month rates freeze in light of current economic challenges.

While the Government prioritises economic relief for struggling families and employers, most local councils are still planning significant rate hikes in the coming months. Some have plans to hike rates up to nine or ten percent from 1 July.

In the letter to mayors and chairsTaxpayers’ Union Executive Director Jordan Williams says, “The Government is currently prioritising economic relief for businesses and households facing economic calamity. But rate hikes at this time of economic turmoil will serve to exacerbate immediate financial stresses and undermine the Government’s relief strategy. Any economist will tell you that a recession is the most damaging time to hike taxes.”

The letter advises councils to cater for the reduction in expected revenue with cuts to lowest-value spending, rather than borrowing. “Households and businesses are cutting costs and it is only fair that your council does the same — we must all cut our cloth to fit the new economic reality.”

A public petition has also been launched at www.RatesFreeze.nz.

Exclusive: Ministry of Health hasn't asked where staff have traveled

The Ministry of Health has not been asking staff returning from overseas where they traveled, the New Zealand Taxpayers' Union has learned.

An information response from the Director-General's office confirms that "The Ministry has not actively recorded or captured personal travel of staff and Ministry staff have not been required to inform the Ministry of their plans when they take annual leave."

As a result, the Ministry was unable to inform the Taxpayers' Union whether any of its staff had traveled to or via China in the period leading up to 4 March.

We requested this information after receiving a tip-off that a staff member at the Ministry had recently returned from China and attended a social event with colleagues.

Requiring staff to report on their international movements costs nothing. It's a basic precaution that countless businesses up and down New Zealand are taking.

We fund the Ministry of Health to provide leadership for the entire health system. If this is the example being set by our top health bureaucrats, how do they expect other employers to be prudent?

COVID-19 - Government's package a mixed bag

The team have spent yesterday afternoon working through the Government’s COVID-19 response package. A couple of the staff are in self-isolation, so we’ve well and truly rehearsed using the virtual technology in preparing this note and our media commentary.

In summary, the package is not as comprehensive as many economists were expecting. On the eight measures we have been lobbying for, the Government has picked up some of the ideas but left many out. Grant Robertson has signalled more is to come on Budget Day (14 May) or even before then.

Overall, yesterday's package is not as focused on protecting jobs as we were expecting. For example, the wage subsidies to employers are effectively limited to organisations with 20 or fewer staff.

The Government also appears to have used COVID-19 to make some permanent policy changes. For example, while temporary boosts to income for beneficiaries and those most vulnerable are justified, the Government has increased benefits by $25 per week on a permanent basis (that is in addition to the normal annual adjustment for wage inflation). 

The Winter Energy Payment (paid to all on any non-student benefit or NZ Super) is also being doubled to $40.91/week for singles and $63.64/week for couples. But in this case, just for this year.

Summary of Government's response package:

  • $500 million boost for health (the cost is equal to $278/household)

  • $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today ($2,833/household)

  • $126 million in COVID-19 leave and self-isolation support ($70/household)

  • $2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020 ($1,556/household in the first year)

  • $100 million redeployment package ($56/household)

  • $2.8 billion in business tax changes to free up cashflow including a provisional tax threshold lift, the reinstatement of building depreciation, and writing off interest on the late payment of tax ($1,556/household)

  • $600 million initial aviation support package ($333/household).

Our take:

The New Zealand Taxpayers' Union is welcoming the temporary measures to ease pressure on employers contained in yesterday's economic relief package.

Yesterday's relief package is a vindication of the long-term fiscal prudence by a generation of finance ministers. Measures like temporary wage subsidies are extremely costly, but can be afforded thanks to successive governments' commitment to low public debt.

We're pleased to see the waiving of interest for late tax payments, and the increase to Winter Energy Payments which will help keep vulnerable older New Zealanders at home. We recommended these changes in our briefing paper released Monday. The lift in the threshold for provisional tax will also be a welcome relief to small businesses.

We’re open to increasing benefits for the duration of the pandemic, but COVID-19 is not an excuse for locking it in. For context, the cost of the benefit hike is around $2.3 billion — almost five times as much as the boost to the health system. Every extra dollar spent here means one fewer for the productive sector and frontline health services.

There are also policy measures such as the changes to depreciation treatments which, although we support them, seem totally unrelated to the immediate threats to business cashflow and New Zealand jobs. It suggests this was very much policy designed to be seen to be doing something, rather than policy targeted at the specific challenges we face now.

Elephant in the room: 1 April minimum wage hike

The big hole in this package is supporting businesses faced with higher costs due to the minimum wage going up on 1 April. The people who get slammed most will be the working poor, earning the minimum wage or close to it, who work for a large employer that doesn't qualify for the wage subsidy package or will only receive limited assistance. 

The obvious measure is to pause the minimum wage hike until economic conditions allow.

More information:

For convenience, we have copied links to the Government’s announcements and factsheets below.

Government's media releases:

Minister's speech to Parliament

Policy factsheets:

COVID-19: Taxpayers’ Union release recommendations for New Zealand’s immediate economic response

Responding to the developing threat of COVID-19 to the New Zealand economy, the New Zealand Taxpayers’ Union has released a paper outlining its recommendations in advance of the Government’s package being announced tomorrow.
 

As fiscal conservatives, it does not come naturally to call for a dramatic expansion of the size of state spending. However, a core role of government, and why we pay taxes, is to protect the citizenry at times of national systematic shock such as war and pandemic.

COVID-19 is the biggest economic event of my lifetime. It is essential that the Government takes all steps to protect lives and livelihoods now, but also our ability to recover quickly once the health crisis is over. It is with that in mind that our economic team has drafted these recommendations for emergency measures.
 
We accordingly urge the Government to adopt the measures outlined below, which are explained in our paper:

  • Provide all New Zealand employees with one month of sick leave in addition to existing rights for the rest of 2020, paid for by the taxpayer;
  • Use buyouts rather than bailouts. Taxpayer funds paid must be in return for the Crown taking a significant/majority or total shareholding;
  • Scrap the 2020 increase to the minimum wage — but if the Government insists on going ahead, have it meet the costs to employers for the next 18 months;
  • Fund unlimited childcare for health workers, aged care workers, and Police staff for the next 18 months;
  • Partner with Progressives, Foodstuffs and Uber to make grocery delivery free;
  • Give lump-sum payments to taxpayers by retrospectively cutting the bottom tax rate from 10.5% to 5% for the 2019/2020 tax year;
  • Expand 'Winter Energy Payments' to begin immediately and continue through winter 2020; and
  • Suspend interest and penalties for late tax payments from employers.

 

Picture of wasteful spending: taxpayers coughing up for arty Italian holiday

The New Zealand Taxpayers' Union can reveal that Creative New Zealand and Museum of New Zealand Te Papa Tongarewa are providing nearly $900,000 in taxpayer money for artists and curators to attend the Venice Art Biennale in 2021.

Showing off to Italian art collectors might be glamorous and good fun, but taxpayers shouldn't be forced to cover the cost of the lucky few who get to do it.

Opening night alone comes with a $100,000 fee. Outrageously, that’s the least of taxpayers’ worries, because another $770,000 is set to be frittered away on flights, freight and hotel rooms.

Not a single expense was spared for the truly needy in our society: artists and gallery curators.
 
With tough economic times coming, this ‘nice to have’ spending needs to be stopped.

Revealed: Former Quitline operators hoard millions in taxpayer funds

Paul Callaghan swandiving

The Taxpayers' Union can reveal that The Quit Group the charity originally commissioned to run Quitline continue to hold $2.8 million in taxpayer funds, despite having lost their government contract in 2015.

The Quit Group promised to hand the funds over to anti-smoking initiatives. They have failed to keep their promise, and the Ministry of Health has failed to hold them to account.

In fact, since 2015 the Quit Group have been using the funds to collect investment income and pay board membership fees to themselves – $72,000 per year, or $18,000 per board member.

To make things worse, the Chair of the Quit Group is Chris Cunningham, who has recently been investigated by Charities Services for running up $128,000 in travel expenses as Chair of the Hepatitis Foundation.

The detail:

In 2016 RNZ reportedThe Ministry of Health called in lawyers for advice and has since reached an agreement with the Trust on using the money to support the government's goal to make New Zealand smoke-free by 2025. Ministry spokesperson Grant Pollard said that any Ministry funding remaining with the Quit Group Trust must be used for the purpose of supporting the 2025 Smokefree goal. He said the specifics of how the funds would be used have yet to be decided and is still being worked through. "The Ministry still has the option of auditing the Trust if an agreement can't be reached on how the funds will be utilised."

In 2017, the Ministry conducted this audit, but was hampered as the group claimed to have archived its records with no IT platform for retrieval. However, based on 'assumptions and estimates', the Ministry concluded that The Quit Group had received a funding surplus of $435,700 between 2007 to 2016.

Moreover, according to The Quit Group’s latest financial statements, it still has assets totalling $2,726,737, down from $3,164,394 in 2016. The Group has no staff, but continues to gain investment income from these assets and has paid out $702,296 in expenses since 2016. These expenses include $72,000 per year in fees for the four board members. The Group's four board members are Chris Cunningham, Janet Pearson, Mary McCulloch, and Annette Milligan.

An information response released to the Taxpayers' Union makes for disturbing reading. The Ministry concedes that it failed to stipulate any timeframe in which the group would have to use its funds. The Ministry does not plan to refer the group to the Charities Commission, and will instead "encourage the Trust to commit to spending the reserves. . .in a timely and appropriate matter."

This beggars belief. The Ministry has already let this group off the hook for four years. All this time, The Quit Group's board members have hoarded three million dollars, eating away at it by paying themselves board fees for doing stuff all. It's an insult to the ailing New Zealanders who desperately need anti-smoking support and other core health services.

The Minister of Health needs to step in to refer The Quit Group to Charities Services, so that the Government can repossess the funds on behalf of taxpayers.

Finally, the gravy train has to end for Chris Cunningham. He should by now be discredited from holding any of his taxpayer-funded positions. These include:

  1. Hepatitis Foundation (board member)
  2. The Quit Group (Chair)
  3. Maori Knowledge and Development Panel (Chair)
  4. Massey University’s Research Centre for Maori Health and Development (Chair)

Just how badly can one man rip off taxpayers?

Exposed: The shocking $6.2m bill to rebrand fire services

Graphic

The $6,254,064 cost of rebranding New Zealand’s fire services is a shocking indictment on the merger of rural and urban services, which was meant to save taxpayer money.

Rebrand breakdown

The spending figures were tabled to select committee this month and can be found on page seven of this document. The expense covers signage and uniforms – not the restructure process itself. The rebrand is ongoing, so figures will increase.

“We have consistently opposed government rebrands, which always suck resources away from core services. But the price of this rebrand has left us stunned – we’ve never seen anything like it. This money could have paid a year’s salary for 145 trainee firefighters.

And the culture of waste within FENZ isn’t limited to rebranding. Delving deeper into the Select Committee report reveals further incredible expenses.

  1. In the previous two years, FENZ spent $31 million and $32 million on external contractors. (p45)
  2. In the previous two years, FENZ spent $1.7 million and $2.1 million on public relations/communications personnel. (p36)
  3. FENZ has spent $122,731 sponsoring TV Three’s “The Block”. (p35)

This absurd level of spending reinforces the findings of our latest research report Cash to Ashes, which found that FENZ expenditure is skyrocketing, as it can spend its insurance levies without Budgetary scrutiny. The funding model for FENZ is simply not fit for purpose. We’re calling on Minister Tracey Martin to scrap the fire levy entirely, and set a reined-in budget for FENZ through the standard Budget process.

Revealed: Chris Hipkins forces school to open with a roll of zero

The New Zealand Taxpayers’ Union can reveal that Tuturumuri School in the Wairarapa is currently open and employing four staff – despite having zero students. The Union tells this story in video form below.

This revelation is the result of a tip-off from a concerned taxpayer. The school is costing taxpayers $1,300 a day, and the school confirms two full time staff (a teacher and an aide) are required to be on site each day. Two part-timers (a caretaker and cleaner) are also still on the payroll.

After the school’s roll dwindled from seven at the beginning of last year down to two, the board voted to close the school. However, the Minister of Education has stepped in at the last minute to insist on yet another round of consultation (despite the school having gone through a similar process in 2018).

Taxpayers’ Union spokesman Louis Houlbrooke, who visited the school last week, says: “The situation at Tuturumuri is bizarre. Two staff members are forced to show up each day at a ghost school, twiddling their thumbs while they wait for the Minister to make a decision. This is a case of provincial politics overriding common-sense. Clearly, the school has an important place in the region’s history, but now it’s time to turn off the taxpayer-funded life support.”

After contacting the Minister’s office, the Union received the following response:

“After consideration, I agreed to close it two years ago but was lobbied heavily to reconsider, including by National Party MPs, and I am doing that. There is a statutory process that must be followed when consideration is being given to closing a school. While this process is underway, the school remains legally open and the staff remain employed. I received a report on a potential closure from the Ministry of Education at the end of last week. It does not need to go to Cabinet.

The Union has requested further information about costs and the Ministry’s consultation process. We await a response.

Report: Reformed fire service fails to deliver promised savings

The 2017 amalgamation of urban and rural fire services has delivered huge cost increases for taxpayers, finds a new report from the New Zealand Taxpayers’ Union.

Cash to Ashes: The inefficiency of fire service reforms can be read here.

Graph

Key findings:

  1. The merger and centralisation of urban and rural fire services was meant to produce $47.7 million in efficiency savings by 2021/22. In practice, there have been no efficiency savings, and Fire and Emergency NZ (FENZ) has cost taxpayers $338 million more in its first three years than was forecast to Cabinet in 2016.
  2. $163 million of the $205 million increase in forecast expenditure between 2017/18 and 2018/19 was dedicated to ‘Support Services’ – i.e. back office bureaucracy.
  3. FENZ has increased spending by $43 million on ‘communications and computers’ over three years.
  4. FENZ is spending $27.4 million on external consultants over three years.
  5. FENZ is ‘gold plating’ its infrastructure. New stations in Lake Okareka and Wanaka cost $1.9 million and $4 million respectively, far more than comparable volunteer stations in Australia. FENZ has even opened a double-bay station, complete with training space, laundry, and kitchenette, in Tinui, a town of 20 people.
  6. FENZ spent $17 million responding to the Pigeon Valley Forest fire – more than 17 times more than the response to the remarkably similar Hira Forest fire in 1981.
  7. FENZ does not have to justify wasteful spending to Cabinet, as it collects revenue through the fire insurance levy, bypassing the Budget bid process.

Cash to Ashes recommends that FENZ be required to go through the scrutiny of the Budget bid process to secure its funding. The report also proposes abolishing the fire insurance levy entirely, and collecting revenue for FENZ from general taxation.

Former National Rural Fire Officer Murray Dudfield, ONZM, consulted on the report. Reflecting on its findings, he says:

“The annual rural fire costs in 2015/16, to local government rate payers, was $29 million. In addition the 2017 PWC report concluded that the 2015/16 expenditure of $389 million was appropriate for the NZ Fire Service functions and output responsibilities. Following the merger of urban and rural fire services on 1st July 2017, the latest FENZ forecast of expenditure is showing a hefty spend of $617 million in 2020/21. The FENZ Board, in just year four of this merger, are planning an additional $228 million more than the 2015/16 budget. The merger was intended to produce savings and deliver cost effective benefits to all New Zealanders. However these savings and benefits are now disappearing in a puff of smoke unless the Minister gets involved. On behalf of all New Zealanders the Minister of Internal Affairs, Tracey Martin, must take urgent steps to ensure FENZ delivers the savings identified by Government in 2016.”

Mr Dudfield also joined Duncan Garner on The AM Show to discuss the report.

In a foreword to the report, Insurance Council Chief Executive Tim Grafton asks, “Why should those who insure be the ones that fund FENZ? Everyone benefits from FENZ services, not just those who take responsibility to insure themselves.”


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