Media Enquiries: 04 2820302 (24hr)

Lower Taxes, Less Waste,
More Transparency

Championing Value For Money From Every Tax Dollar

Opinion: Healthcare productivity has become an economic illness

This op-ed, written by Taxpayers' Union Economist Joe Ascroft, was originally published on Health Central.

By 2060, Treasury’s Long Term Fiscal Model forecasts that government debt will reach 205.8 percent of GDP – approximately ten times our current debt burden as a proportion of the economy. Just financing that debt will cost 11 percent of GDP – one in every nine dollars in the economy will be used to just meet the interest cost of government debt.

Clearly that is an unsustainable future. When debt gets that high simply meeting the cost of basic public services like education, law and order, transport, and defence becomes extremely difficult – let alone welfare payments and superannuation.

So what’s driving our future of debt?

The two most important factors are superannuation and healthcare spending. While superannuation (expected to increase from 4.8 to 7.9 percent of GDP) routinely receives coverage in the media, healthcare (expected to jump more aggressively from 6.2 to 9.7 percent of GDP) is actually expected to be more of a burden on taxpayers.

Our aging population is one explanation for both factors. As the population distribution skews older, it’s natural that a greater share of resources will be used to fund superannuation and healthcare.

But population aging is not the only factor driving the accelerating cost of healthcare. When the Office of the Auditor General examined Treasury’s Long Term Fiscal Statement they noted that “non-demographic factors raise healthcare costs 35% faster than normal real output growth and 25% faster than normal consumer price growth. These two factors are behind most of the increase in healthcare costs during the 40-year projection period.”

In short, the OAG claims that a majority of the expected increase healthcare costs is attributable to healthcare cost pressures and higher demand for healthcare coverage associated with income growth, rather than an aging population.

So how can we mitigate those cost pressures if they are not related to demography?

Improving healthcare productivity would be a good start.

Productivity is a measure of how much output we get for the inputs we invest. Typically, we expect productivity to grow in response to new technology and capital investment. Productivity growth is the driving factor behind wage growth and prosperity.

Unfortunately, productivity growth in the health sector has been woeful for the last ten to fifteen years. In the period 2004 to 2015, cumulative health productivity growth was close to zero. In the period 1996 to 2017, labour productivity growth in the healthcare sector was half of the rest of the economy.

Put simply, any increase in output in the healthcare sector in the last two decades is largely attributable to more inputs, rather than any improvement in efficiency. It is wholly unsurprising that Treasury expects debt to climb to impoverishing levels, if one of the largest areas of public expenditure is failing to become more efficient in line with the rest of the economy.

Beating the debt apocalypse by taking on healthcare productivity is possible but might require the Government and DHBs to make difficult choices. Abandoning our public-focused healthcare model in favour of American privatisation would be a big mistake – instead we should focus on implementing a series of small reforms to cut costs while improving output.

The Taxpayers’ Union proposes some of these reforms in a series of papers released in the coming weeks: attempting to limit hospitalisations associated with adverse drug reactions (i.e. becoming ill because you have incorrectly taken prescription medicines), cutting down on missed specialist appointments, and minimising large redundancy payments.

DHBs might also want to consider tying remuneration of board members and executives to the financial health of the organisation, in light of the Government having to call in commissioners to Southern and Waikato DHBs. The Government could also consider increasing the proportion of each board appointed by the Minister, rather than elected by the public in notoriously misunderstood, low-turnout elections. Finally, amalgamating some DHBs might help to cut down on administration costs.

Each of these policies will need to be considered on their merits and none of them are a silver bullet, but if the Government implements no reform, taxpayers will be on the line for eye-watering levels of debt. 

The report can be found by linking directly to the PDF here.

Revealed: The mystery of Invercargill City Council's missing Chinese yuan

Mystery graphic

The New Zealand Taxpayers’ Union is calling on the CEO of Invercargill City Council to take responsibility for untraceable cash spending that occurred on a trip to China.

In late 2017, four Invercargill City Councillors visited the sister city of Suqan, China. The CEO withdrew $3,000NZD worth of Chinese yuan for expenses. At the end of the trip, $1,780.45 was returned.

This is not surprising. What is surprising is that when the Taxpayers’ Union asked for receipts, the Council said that none were collected. It is a core responsibility for any CEO to ensure that expenses are recorded. The fact the CEO was ready to untraceably spend up to $3000 is alarming.

When asked for further details about the trip, Invercargill City Council stated that “Chinese currency was purchased for incidentals” and that “no receipts were received.” When asked further, the Council stated the currency went towards taxis and trains.

Quite frankly, the Council’s explanations can never be satisfactory because ratepayers are forced to take them on their word. It’s standard for ratepayer money to be used on incidentals, including booze and entertainment, but without any receipts it’s left to our imagination just how much fun Councillors had on the ratepayer dime.

Most concerningly, the Council says this is standard practice for its sister city visits. Other Councils collect receipts for all travel expenses. We’re calling on the CEO to take responsibility for this basic failure of accountability, and to introduce better practices. In the meantime, ratepayers are left wondering whether this behaviour reflects a deeper culture of arrogance within the Council.

Attendees of the trip included Crs G Lewis, R Amundsen, L Soper and A Crackett. With them was CEO Richard King and a staff member. Venture Southland and Chamber of Commerce officials also attended but paid their own way.

Report: Productivity in the Health Sector: Issues and Pressures

Report cover

With health spending as a percentage of the economy expected to increase more than 50 percent between now and 2060, the Government needs to put greater focus on efficiency, says the New Zealand Taxpayers’ Union.

Our latest report Productivity in the Health Sector: Issues and Pressures investigates the recent failure to achieve efficiencies in the health sector and offers some possible opportunities for reform. According to Treasury forecasts, debt is expected to hit 205.8% of GDP if we don’t make changes to superannuation or health spending – unsustainable if we want the Government to continue funding public services as current levels.

However, while superannuation receives a lot of attention from politicians, health spending is actually expected to grow at a faster pace – nearly ten cents in every dollar in the economy will be devoted to health spending by 2060. If we can reduce that spending by achieving efficiencies across the sector, public debt will be much more manageable for taxpayers.

Our report argues that the best approach for reform is in line with OECD recommendations: the Government should not up-end the entire sector, or introduce American-style private markets, but instead seek to introduce incremental reforms that deliver better returns for every dollar the taxpayer spends. In each of the next three weeks, we will be releasing an issues paper focusing on wasteful spending at DHBs – eliminating those instances of waste would ensure funding could go to more surgeries and better care for those that need it.

Key figures:

  1. Health spending is expected to grow from 6.2% of GDP in 2016 to 9.7% of GDP by 2060, contributing to debt hitting 205.8% of GDP by 2060.
  2. Between 2004 and 2015, there was zero cumulative growth in healthcare productivity.
  3. Between 1996 and 2017, labour health productivity growth (0.9% per annum) ran at half the rate of the rest of the economy (1.8% per annum).

Further to this report, the Taxpayers’ Union will release three briefing papers containing original research on areas of waste in the health system.

Tuesday 6th: Missed Specialist Appointments
Tuesday 13th: DHB Redundancy Costs
Tuesday 20th: Adverse Drug Reactions

Revealed: The $133,000 pricetag for the glossy Wellbeing Budget

Budget graphic

The New Zealand Taxpayers' Union can reveal that the Government spent $133,530 on producing its ‘Wellbeing Budget’ document, a cost blowout largely driven by spending on graphic design and photography.

The $133,530 price tag compares to $86,268 for the 2017 Budget – an increase of 54.8%.

The Government spent $31,682 on external designers and photographs. These costs were zero for the 2017 Budget, which the Taxpayers’ Union asked about for a comparison.

Even general printing and proofreading costs increased for the Wellbeing Budget compared to 2017.

The Wellbeing Budget was a great gig for the beret-wearing hipsters who designed it, but not so great for taxpayers, who were forced to pay for the PR blitz.

It’s a minor spend in the scheme of things, but it is concerning because this document, prepared by the Finance Minister, sets the fiscal tone for the rest of the Government. If Grant Robertson starts splashing out on glossy design, other departments might think it’s okay to do the same.

Revealed: Wellington City Council’s $20,000 bike light investigation

Bike lightsThe New Zealand Taxpayers’ Union has identified an absurd case of mission creep at Wellington City Council: the decision to spend $21,750 on two Consumer NZ investigations into different brands of bike lights.

Information released to the Union reveals that Wellington City Council initially paid Consumer NZ $10,600 for a comparison of bike lights in 2017 and paid the organisation a further $11,150 for an updated version of the report this year, totalling $21,750.

Consumer NZ purchased 61 bike lights and tested their battery run-time, light output, ease of charging, lighting modes, water resistance and fitting.

This sort of spending says the lights are on, but no-one is home. Consumer NZ’s product comparisons are a service to its subscribers, so why should Wellington ratepayers be the ones forking out?

$20,000 might only be a drop in the Council’s budget, but this is a worrying case because it hints at a culture of mission creep. The Council’s decision to get involved in niche consumer matters, that would usually be dealt with privately, only results in more neglect of core services like roads and rubbish.

The Wellington City Council would be wiser to conduct a comparison of the value of its own spending projects, particularly while it’s hiking rates and dealing with unexpected costs from the Town Hall and Library.

Raw information:

Proposal
Email chain

Revealed: New Plymouth District Council’s eye-watering flight expenses

New Plymouth

Update: New Plymouth District Council has corrected information it gave the New Zealand Taxpayers’ Union regarding ratepayer-funded flight expenses in 2017/18.

A Council spokesperson states:

Former Govett-Brewster Art Gallery/Len Lye Centre director’s Simon Rees’ overseas travel was not ratepayer funded.  Supplied information should not have included three overseas trips by Mr Rees, which were funded by the Molly Morpeth Canady Fund. This funds all the director’s travel and associated expenses.

Therefore, the updated total of the Council’s 2017/18 flight spending is $279,355, $23,121 of which was international travel. The Council keeps its place as the country’s fourth-highest spender on air travel for 2017/18.

---

The Taxpayers’ Union can reveal that New Plymouth District Council was the fourth highest-spending council in the country when it game to air travel in the 2017/18 financial year. The Council spent $285,391 on flights, $256,235 of which was domestic, $29,157 international.

Click here to view the Council's information release.

For comparison, that is more than twice Palmerston North City Council’s spend, and even slightly higher than Christchurch City Council.

International destinations included LA, Vancouver, Sydney, and Brisbane.

New Plymouth District Council’s travel habits are eye-wateringly expensive, both in real terms and relative to other Councils.

The Council will argue that it faces higher costs due to its remote location, but that’s also true for Councils like Whangarei who managed to keep costs down. The question ratepayers will be asking is why is so much travel necessary in the first place? Every day spent travelling outside the district is less time focused on local needs.

Flight expenditure is important because it reflects the culture within the Council. How can ratepayers be assured they’re getting value for money on roads and rubbish when staff fail to display frugal attitudes on less important spending like travel?

This information has been collected as part of the Taxpayers’ Union’s annual Ratepayers’ Report, which will be released in full later this year.

Tim Shadbolt’s mayoral expenses revealed

Shadbolt expenses

The Taxpayers’ Union can reveal that Invercargill Mayor Tim Shadbolt has racked up $147,243 in mayoral expenses since late 2016 (the beginning of this term in local office).

Tim Shadbolt has shown considerable fiscal irresponsibility in his latest term of office, spending inordinate amounts of money on frivolous or personal things.

Seven different times, his card was used for ‘accommodation for Mayor Shadbolt and Family’. Ratepayers might be surprised to learn that the Mayor is using their money to take his family on junkets.

Other expenses included spending $19,534 on books and magazines, $8,051 on conference fees, $3,256 on wristbands, $2,662 in donations to private charity, and $1,854 at liquor stores.

Mayor Shadbolt also spent nearly $3,113 on maintenance for his famous ratepayer-bought Chrysler 300C, revealed earlier in the year to be the most expensive mayoral vehicle in the country. It’s no wonder that the Council is reviewing the cost of its fleet if existing vehicles are kicking up so much in maintenance costs.

We sent the same request to other councils Mayor Shadbolt’s indulgence dwarfs that of others.

Ratepayers might be concerned that the Mayor uses so much public money on gifts and personal adventures. Perhaps in the future he could personally pay for his family getaways and bottle shop runs?

The full spreadsheet of expenses, obtained under the Local Government Official Information and Meetings Act, is available here.

Councils must reject the “Nanny’s Charter”

The New Zealand Taxpayers’ Union has started a petition calling on councils across the country to reject the Childcare Allowance just introduced by the Remuneration Authority, which allows councillors and local board members to claim up to $6,000 per year from ratepayers for childcare.

“Ratepayers should not be forced to pay for local politicians’ nannies and housekeepers,” says Jordan Williams of the Taxpayers' Union.

"In very few jobs does the employer stump up for childcare. Why should politicians receive ratepayer funded benefits very few ratepayers are afforded?"

"Where does it stop? What about councillors with elderly dependents, or councillors without a partner to split household bills? Many politicians have costly personal circumstances, but we expect them to manage these costs privately.”

"I was brought by a single Mum on the District Council before I was even school aged.  The idea that ratepayers would be responsible for hiring a nanny is entitled nonsense."

Porirua’s Canadian art exchange typifies wasteful travel

Porirua graphic

The New Zealand Taxpayers’ Union is questioning Porirua City Council’s decision to spend $9,218 on flights to Canada for an ‘indigenous art exchange’.

The spending details have been released as part of a Taxpayers’ Union investigation into 2017/18 travel expenses at councils across the country.

It’s ridiculous for Porirua City Council to spend money this way when its average residential rates are 28% above the national average. Many ratepayers will be appalled that their money isn’t being used to improve the council’s financial position or maintain basic services.

Instead, ratepayers forked out for artists and Council staff to enjoy a junket to Winnipeg, for an ‘indigenous art exchange’ involving ‘demonstrations of how digital media can be used to empower indigenous communities’. This all sounds fascinating, but it is entirely unclear how it delivered value for Porirua ratepayers. In fact, the only clear beneficiaries of the spending were the two artists who got a profile boost, and the two Pātaka museum staff who even received $70 per-day spending allowances for the 14 day trip.

We understand that the Council is currently being lobbied to declare a ‘climate emergency’. If it does this, it should show it’s serious by swearing off unnecessary, feel-good junkets and air travel.

The Canada flights were purchased on top of a significant $38,950 spend on domestic flights, meaning the Council spent a total of $48,168 on air travel in 2017/18.

Despite “climate emergency”, Dunedin City Council is third-highest spender on air travel

Using figures obtained under the Local Government Information Act, the New Zealand Taxpayers’ Union can reveal that Dunedin City Council was the country’s third-highest spending council in terms of air travel in the last financial year.

The Council spent $347,885 on air travel in 2017/18 – $214,067 of which was domestic, $133,818 of which was international.

“This is incredible hypocrisy,” says Taxpayers’ Union spokesman Louis Houlbrooke. “You have to wonder how Councillors who voted for the ‘climate emergency’ did so with a straight face. On one hand they’re telling ratepayers to expect major lifestyle changes and sacrifices, on the other hand they and their staff are burning jet fuel at a rate that would make NASA proud.”

“We would love to know how or why the Council racked up this eye-watering expenditure, but the Council has refused to release the destinations of its flights, despite multiple requests. Almost every other council in the country has been able to provide this information, so why is Dunedin City Council refusing to be transparent? Is it ashamed of the extravagance of its ratepayer-funded, emissions-spewing junkets?”

“What we can say is that we see Dave Cull in the fashionable cafés of Wellington every other week. Perhaps Mayor Cull has passed on the jet-setting culture of Local Government New Zealand to his local Council, at the expense of Dunedin ratepayers.”

The first and second-highest spending Councils were Auckland and Wellington, which spent $1,221,571 and $591,310 respectively.

The Taxpayers' Union will be contacting the Ombudsman regarding Dunedin City Council's failure to release information on flight destinations.


Join Us

Joining the Taxpayers' Union costs only $25 and entitles you to attend our annual conference, AGM and other events.

Donate

With your support we can make the Taxpayers' Union a strong voice exposing waste and standing up for Kiwi taxpayers.

Tip Line

Often the best information comes from those inside the public service or local government. We guarantee your anonymity and your privacy.