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Budget 2021 is a major shift of the economic dial to the left

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We’re just out of the Budget 2021 lock up, where your humble taxpayer advocates and analysts have spent the morning working through the Budget papers.

I’m afraid to tell you that from a taxpayer perspective there are no redeeming features of this Budget. It represents a major shift of the economic dial to the left by rejigging the tax and transfer system strongly towards those not in employment.

And there’s yet another broken promise. As predicted by the Taxpayers’ Union, Grant Robertson’s ‘no new taxes’ promise is out the window. He’s foreshadowed a new Unemployment Insurance Tax – to operate like ACC, where unemployed will get 80% (that’s not a typo) of their income if they lose their job.

The Government’s spin is that this is the ‘Recovery Budget’ but the sole economic plan is to hike benefits. There is no reference to productivity in the material we’ve seen, and the only help for business is an expansion of an initiative for MBIE bureaucrats to teach businesspeople how to sell things on the internet.

Labour is out of control

Despite significant improvement in the economic and fiscal outlook, Grant Robertson has decided we are now in a permanent emergency.

  • Benefit increases pushed through last year as part of our “Covid Response” have been entrenched and expanded – even while unemployment is forecast to fall. The cost of this amounts to $3.3 billion or $1822.22 per household.

  • The “Covid Recovery Fund” has been raided for all and sundry poor-quality spending. Here’s a small(ish) example: $527 million is being used to expand the rollout of so-called “free school lunches”. Strangely, this measure is not only linked to COVID, it is also justified in the Budget documents as a “job creation” measure for 2000 roles. For those following along, that’s a cost of $263,500 per job (far more than the jobs lost due to the tax taken in the first place!).

  • With the economy running stronger than expected, taxpayers should be picking up less of the tab – but government spending is forecast to run nearly $14 billion ($7,722.22 per household) higher between 2022 and 2025 than forecast in December.

It’s one thing to prop up the economy when we’re all locked inside, but now we’re (mostly) back to normal, isn’t it time to turn off the tap?

Return to 1980s-style social welfare will reduce long term living standards

The benefit hikes announced today will reduce the incentive for Kiwis to work, and result in more intergenerational unemployment poverty.

Economic analysis in the United States over recent weeks suggests that if you increase unemployment benefits too high (as Biden has done) people simply won’t show up to work – one reason why experts have said employment growth there has been so disappointing. With large benefit increases on the way, we risk making the same mistake: why turn up to work, when staying home pays so well?

Unlike President Biden’s relief, our Government is locking in these measures permanently and with their new policy to link benefits to wage growth, the problem doesn’t go away even in a hot economy.

Labour rightly applauded Bill English’s targeted social investment approach – to get people off welfare and into work. Labour’s abandonment of that approach will see higher intergenerational welfare dependency.

Making trains at home

In the 1980s we learned the hard way that making everything at home is an expensive way to live. Forty years later, the Government has decided to rekindle the spirit of Muldoon and begin making KiwiRail’s equipment in Dunedin rather than buying it in from overseas. The total increase in funding for KiwiRail will cost taxpayers $722.22 per household.

Grant Robertson's new unemployment tax

And if that wasn’t enough, we can reveal the Government is doing a deal with the unions to introduce an expensive new unemployment insurance programme. The scheme will cover 80 percent of incomes for those who become unemployed. That sounds generous – and it is – if the scheme follows similar European models, it will mean a new tax.

Health sector sucks up billions more

Health takes the lion’s share of new spending – with more than $4.6 billion allocated to the sector alone through 2025. More than two-thirds of that amount is just allocated to support budget-busting DHBs. But the Government should read our reports on health productivity – unless the sector focuses on becoming more efficient and catching up with other OECD counterparts, our health system will continue to be an unpredictable liability.

Joe Ascroft, our consulting economist who joined us in the lock up, is equally unimpressed:

The Economist’s View

This time last year, the country was staring down economic armageddon. Coronavirus had all-but closed the economy and near-term forecasts for unemployment, debt, and economic growth were extremely dire.

A year on and the economic environment is better than all but the most optimistic of forecasts. Yet, even as unemployment sits at 4.7% (forecast to fall further) and economic growth is again firmly positive (expected to peak at 4.4% in 2023) debt is still expected to climb considerably reaching a peak of $184.2 billion in 2024 (46.9% of GDP or $102,333.33 per household).

While that is considerably better than even Treasury’s forecasts in December (debt was then expected to peak at $194.2 billion – or $5,555 more per household than today), the Government has taken advantage of the rosier economic forecasts to spend even more over the forecast period than had been forecast just six months ago. Between 2022 and 2025, government spending is now expected to cumulatively come in $13.9 billion ($7,722.22 per household) higher than in December.

Normally you might expect forecast government spending to come in lower with the economy tracking better (lower unemployment should mean less social spending), but clearly the Government has chosen to take advantage of the moment and press on with some of the more expensive items on their policy wish list.

The Big Picture

It’s now been a decade since New Zealanders last received a tax cut (legislated in Budget 2010, taking effect in 2011) – but main benefits have been increased four times (three times under Labour and once under National). Instead, a new tax is in the pipeline to fund the Government’s planned unemployment insurance scheme.

At some point, something has to give. With the global economy opening up and opportunities to work overseas expanding, many taxpayers will be thinking seriously about moving overseas to earn more and pay less tax. That could be the start of a nasty downward spiral - as high-earning taxpayers move overseas, the burden of Government spending grows with higher taxes or debt required to fund the gap.

Obviously the circuit breaker is stronger growth and higher incomes – but there was no sign of any focus on that problem in today’s budget.

More to come

We’ve spent the last hour talking to journalists who have also just got a hold of the documents. I’m joining Magic Talk at 6:30 tonight, and we’ll keep you in the loop as we continue to work through the detail.

With the new economic figures, our official Government debt clock will also be updated in the next few hours. Keep an eye on www.debtclock.nz – it’s slowed, but only a little…

Thank you for your support.

Our comments to media

Jordan

Jordan_signature.jpg
Jordan Williams
Executive Director
New Zealand Taxpayers’ Union

 

Taxpayer Update: KiwiSaver interference | Boozy dinners | Wailing unions

Government sticks its nose into your KiwiSaver portfolioDavid Clark

Our old friend David Clark is back in the news. Today he rolled up to work 🚴 and announced the Government will force default KiwiSaver providers to boycott fossil fuel investments.

I told the media why this is a terrible idea:

The last thing KiwiSaver members need is for politicians to micromanage our funds. KiwiSaver providers are meant to make independent investment decisions in order to maximise returns. Politicising these decisions will ultimately result in lower rates of return.

Once the Government starts sticking its nose in, where does it stop? Will KiwiSaver providers be barred from investing in, say, meat production? Alcohol? GMOs?

The Government already manages carbon emissions at the macro level – take the Emissions Trading Scheme – which has a flow-on effect on KiwiSaver investment decisions. Diktats on the micro level are unneeded.

This move won’t even affect total carbon emissions. Any move to cut emissions below the cap set by the Emissions Trading Scheme creates a ‘waterbed effect’ which frees up credits to produce emissions elsewhere.

Would you spend $24 on two bottles of water?

We used the Official Information Act to obtain the original receipts from the Film Commission's boozy dinners with Amazon film executives.

We highlight this kind of spending not because it's outrageous, but because public servants are likely to be more sensible with the "company card" if they know there's a chance we'll publish the receipts.

Receipt 1 Receipt 2

Click here and here to view the receipts in high resolution.

These dinners were of course part of a junket set up to facilitate a deal that saw Amazon handed hundreds of millions in taxpayer subsidies for its new Lord of the Rings TV show.

Back-office bureaucrats are exploiting sympathy for frontline workers

Salaries

The Government's proposal to rein in public sector salaries has had a furious reaction from the public sector unions.

They're loudly condemning the idea of wage austerity for heroic frontline nurses, police, and teachers. But that's not what's on the table.

Nurses, police, and teachers are locked into to a step-based pay system. This means they’ll keep climbing up the salary ladder regardless of any salary restrictions announced by politicians. They’re effectively protected from a freeze unless they’re already on the highest possible rung.

The Public Service Association and the Council of Trade Unions know this perfectly well. But that hasn’t stopped them from exploiting public sympathy for frontline workers to shield the wider public service from salary restraint.

The Public Service Commission’s website holds a wealth of statistics on public sector pay rates, which looks beyond the front line and reveals inflated back-office salaries.

Wage growth

  • The average salary in the public sector is $84,500, compared to $69,000 in the private sector.

  • Last year wage growth in the public sector was 3 percent, compared to just 1.7 percent in the private sector.

  • 15,000 public sector workers are paid salaries higher than $100,000. Few of these will be teachers, nurses, or police.

  • The highest-paying Government department is – wait for it – the Social Wellbeing Agency. That agency’s staff enjoy an average salary of $151,700.

  • Next highest-paying are the Public Service Commission, the Ministry of Defence (not the frontline Defence Force), and the Pike River Recovery Agency, all paying average salaries above $130,000.

Department salariesClick here to view the graph in a separate window.

Clearly, there is room for salary restraint here. You might even say these figures are obscene. The Taxpayers’ Union certainly would.

While a total freeze might be a blunt measure, the basic thrust of the move fairly reflects the sacrifices made by taxpaying businesses and employees in the private sector, who enjoyed a far lower level of income security through the fallout of COVID-19.

It’s also a sensible start to reining in the Government’s debt monster. The New Zealand Government Debt Clock is about to tick over $70,000 for every household in New Zealand – a terrifying figure no matter how many times Grant Robertson says “it’s not as bad as we thought it would be”.

Of course, the Government has now walked back its announcement to the point where it can no longer be called a freeze. The suffering souls at the Social Wellbeing Agency may still yet see salary adjustments in line with the cost of living. Lucky them!

But there is still much to be settled as the Government enters into protracted negotiations with the public sector unions.

Taxpayers should urge the Government to hold strong in the face of the wailing administrative elite. Throw a bone to the bona fide frontline workers who tend to our sick, educate our kids, and protect our communities, but don’t allow their virtue to be hijacked by well-paid Wellington back-office bureaucrats.

It’s time for random comprehensive audits of wage subsidy recipients

This week the Auditor General slammed the Government’s weak 'audits' of recipients of the COVID-19 Wage Subsidy. The audits consisted of a few questions over the phone, without requiring documentation to actually prove that recipients were eligible.

We say the time has come for full audits, substantiated with hard evidence.

The Ministry doesn’t need to shake down every wage subsidy recipient – it just needs to start making examples of wrongful recipients by pursuing tip-offs and conducting random audits. In fact, the Minister could stand up tomorrow and announce an amnesty period for wrongful recipients to return the money before penalties kick in.

$703 million has already been voluntarily returned, which suggests that, with a stronger nudge, hundreds of millions more could come surging back to the taxpayer.

We’ve asked unions like E Tū and First Union how they were eligible for the wage subsidy, considering their revenue comes from regular union dues. We hit a brick wall. It’s time for the Ministry to start asking these questions, and to demand proof of the answers.

"It is unbelievable": Heather Du Plessis Allan on the taxpayer-funded turtle funeral

Last week we exposed the incredible tale of how DOC and Te Papa trucked, shipped, and helicoptered a dead turtle up and down the country just to throw it a highly-catered funeral.

On her prime-time Newstalk ZB Drive show, Heather du Plessis Allan talked through the details:

HDPA clipClick here to listen to the clip.

Even the left-wing Daily Blog picked up on the story

When we can’t feed kids lunch and breakfast at school and can’t lift benefits but can spend $12000 on a turtle funeral, it’s difficult not to feel angry. . . this fiasco is so ridiculous it’s mockable and the power of mockery can destroy any earnest progress in a millisecond.

In case you missed our full investigation, you can read it here.

Simon Bridges joins Taxpayer Talk

You might have heard the news that former National Party leader Simon Bridges is releasing a book.

In a total coincidence, he also joined our Taxpayer Talk podcast to discuss his perspective as a former Party leader, growing intellectual intolerance, and the scourge of tax bracket creep. Click here to listen.

And as part of our 'MPs in Depth' series, I sat down with new Labour MP Tangi Utikere. Tangi was the Deputy Mayor of Palmerston North before jumping ship to Parliament when Iain Lees-Galloway decided not to stand again. Click here to listen.

You can subscribe to Taxpayer Talk via Apple PodcastsSpotify, Google Podcasts, iHeart Radio and all good podcast apps.

Donate

Have a great weekend,

Louis circle


Louis Houlbrooke
Campaigns Manager
New Zealand Taxpayers' Union

Media coverage:

The Weekend Sun  
Deep freeze for turtles and servants

Star News  Cost of Crusaders partnership with ChristchurchNZ still unknown

Newstalk ZB  Heather du Plessis Allan on the flying turtle

The Daily Blog  The danger of the $12000 flying turtle funeral

RNZ  Bryce Edwards: The public sector worker backlash against Labour

Auckland’s light rail issues can be easily, quickly, and cheaply solved

The New Zealand Herald has rightly argued that the Labour Government's Auckland light rail plan is facing huge hurdles to get back on track. It notes that the cost of light rail has soared from $2.3b to up to $15b.

 

Since being elected on a promise of light rail, Labour has already spent $35m of taxpayer money producing absolutely no results. In response, the Government changed the Minister in charge, and has gone back to the drawing board. It has set up an establishment unit to decide the mode, route, and cost estimates for an indicative business case for Cabinet within six months. In other words, everything. They are literally starting again from scratch. That is $35m that taxpayers will never get back.

 

There is little faith outside of Cabinet that the Light Rail v2.0 will go any better. Priding itself on being a caring organisation, the New Zealand Taxpayers’ Union has stepped in with a bold plan.

 

We commit to delivering exactly the same outcomes on Auckland Light Rail for the price of a sausage roll.

 

Here are the key points of the plan developed by our sausage roll loving analyst Neil Miller:

  • We will deliver 0.00mm of light rail track, easily matching the last three years record.
  • Construction costs will be eliminated because there will be no construction.
  • Valuable resources will be freed up to actually fix Queen Street.
    Consultation, which produced more problems than it solved last time, will not be necessary.
  • Equally, consultants will not be required. PWC partners may have to downgrade their new yachts.
  • There will be no legal expenses because: No Taxpayer Money = No Lawyers.
    Vast numbers of New Zealand Transport Agency staff will be freed up to work on projects which build transport things.

 

Our economist has costed this plan at between $1.70 (Big Ben Sausage Roll) and $6.60 (I Love Pies Sausage Roll).Transport Minister Michael Wood, you are most welcome.

Op-ed: Back-office bureaucrats are exploiting sympathy for frontline workers

Louis HoulbrookeThe Government’s bombshell announcement that it will rein in public sector salaries has been applauded by unionists – specifically, the Taxpayers’ Union.
 
Union co-founder, blogger, and cheeky fellow David Farrar proclaimed Grant Robertson and Chris Hipkins honorary members of the Taxpayers’ Union for their fiscal restraint during a pandemic. It is hard to think of any accolade that would annoy those Ministers more.
 
Meanwhile, public sector unions reacted with fury, loudly condemning the idea of wage austerity for heroic frontline nurses, police, and teachers.
 
But this nasty prospect is a false one. Nurses, police, and teachers are locked into to a step-based pay system. This means they’ll keep climbing up the salary ladder regardless of any salary restrictions announced by politicians. They’re effectively protected from a freeze unless they’re already on the highest possible rung.
 
The Public Service Association and the Council of Trade Unions know this perfectly well. But that hasn’t stopped them from exploiting public sympathy for frontline workers to shield the wider public service from a pay freeze.
 
The Public Service Commission’s website holds a wealth of statistics on public sector pay rates, which looks beyond the front line and reveals inflated back-office salaries.

•  The average salary in the public sector is $84,500, compared to $69,000 in the private sector.

•  Last year wage growth in the public sector was 3 percent, compared to just 1.7 percent in the private sector.

•  15,000 public sector workers are paid salaries higher than $100,000. Few of these will be teachers, nurses, or police.

•  The highest-paying Government department is – wait for it – the Social Wellbeing Agency. That agency’s staff enjoy an average salary of $151,700.

•  Next highest-paying are the Public Service Commission, the Ministry of Defence (not the frontline Defence Force), and the Pike River Recovery agency, all paying average salaries above $130,000.

Department salaries

Click here to view the graph in high resolution.

Clearly, there is room for salary restraint here. You might even say these figures are obscene. The Taxpayers’ Union certainly would.

While a total freeze might be a blunt measure, the basic thrust of the move fairly reflects the sacrifices made by taxpaying businesses and employees in the private sector, who enjoyed a far lower level of income security through the fallout of COVID-19.

It’s also a sensible start to reining in the Government’s debt monster, soon set to reach $100,000 for every household in New Zealand – a terrifying figure no matter how many times Grant Robertson says “it’s not as bad as we thought it would be”.

Of course, the Government has now walked back its announcement to the point where it can no longer be called a freeze. The suffering souls at the Social Wellbeing Agency may still yet see salary adjustments in line with the cost of living.

But there is still much to be settled as the Government enters into protracted negotiation with the public sector unions.

Taxpayers should urge the Government to hold strong in the face of the wailing administrative elite. Throw a bone to the bona fide frontline workers who tend to our sick, educate our kids, and protect our communities, but don’t allow their virtue to be hijacked by back-office bureaucrats.

Louis Houlbrooke is the Campaigns Manager of the New Zealand Taxpayers' Union.

Petition Launched: Public sector pay freeze should extend to local councils

The Taxpayers’ Union has launched a petition to extend the recently announced public sector pay freeze to local councils.

Click here to sign the petition.

The Government’s public sector pay freeze was a prudent measure that reflects the sacrifices made by businesses and employees in the wake of COVID-19. However, the freeze should go one step further. The case for pay restraint at councils is even stronger than for central government. Local councils aren't just experiencing growth in debt, they're also pushing for massive rate hikes across the country. 

All councils should adopt the Government’s pay freeze for highly-paid staff. We’re asking the Minister of Local Government to signal that this is her expectation, and that if councils don’t restrain pay, she can introduce legislation to force them.

At minimum, councils should freeze their total spend on payroll. That way any increases in pay will need to be from attrition or efficiencies in other roles.

MPs in Depth: Tangi Utikere


Entering parliament as an MP was not how Tangi Utikere imagined 2020 would end at the beginning of that year. However circumstance conspired and Utikere is now the MP for Palmerston North and a member of the Labour Party. In this episode of MPs in Depth, Tangi and Louis discuss politics, running for office, and of course, Tax.

You can subscribe to Taxpayer Talk via Apple PodcastsSpotify, Google Podcasts, iHeart Radio and all good podcast apps.

There and back again: taxpayers shell out for epic turtle journey

Turtle image

Taxpayers shelled out thousands of dollars transporting a dead turtle from Banks Peninsula to Wellington, storing it in a freezer for 21 months, then sending it back down to where it washed up for a high-powered and fully-catered powhiri, complete with a helicopter ride and a handmade coffin constructed by public servants. No scientific research was performed at any stage.

Based on responses to several Official Information Act requests, plus earlier media reports, the Taxpayers' Union can set out the timeline:

  • In March 2019, a dead leatherback turtle is found on the shore in Banks Peninsula. He is never named though he is known at the Taxpayers' Union as Michelangelo.
  • DOC advises Te Papa that the local Banks Peninsula marae, Koukourārata, has provided approval for Te Papa to receive the turtle.
  • A DOC ranger uses a tractor to transfer the turtle to the back of his ute, then commissions a truck belonging to a pet food company to keep the turtle chilled. The ranger warns that transporting the turtle to Wellington will be a "logistical nightmare". The ranger's wage costs are $200.
  • The turtle is collected by Te Papa from the Department of Conservation office in Christchurch and driven up to Wellington in Te Papa’s Toyota Hilux, at a reported cost of $475.75.
  • The turtle arrives at Te Papa's Tory Street facility, where staff plan to perform a necropsy, check its gut for plastic, gather biological information for "the global turtle research community", and ultimately skeletonise the corpse.
  • In an apparent change of heart from the local iwi, Ngāi Tahu representative Matui Payne tells media of "a sense of grief and sadness that we didn't have the opportunity to grieve for our kaitiaki, for our tipuna." Te Papa cites "issues relating to consultation and support" and enters into discussion with Koukourārata "regarding the return and repatriation of the honu [turtle]."
  • The late turtle spends 21 months in Te Papa's freezer.
  • No scientific research is conducted. Te Papa explains, "To enable scientific research to be undertaken, the turtle would have had to be skeletonised (i.e. processes undertaken to reduce the turtle remains to a skeleton). In conjunction with tikanga, it is usually important that all parts of the taonga or specimen (in this case, the turtle) should be buried, if possible. . .In terms of science objectives, Te Papa has not conducted any research on the turtle during its time at Te Papa so has not gained any research insights."
  • At some point, Te Papa staff build a "te honu crate" or turtle coffin, with materials costing $580.85.
  • On 11 December 2020, Te Papa staff are joined by a contingent from Koukourārata for a karakia (prayer) in Wellington.
  • DOC transports the turtle from Wellington back to Bank Peninsula in a refrigerated truck. The three-day journey includes reported costs of $940 in mileage, $448 for the Cook Strait ferry crossing, and $500 in wage costs. A Koukourārata representative accompanies the turtle during this journey.
  • Eight Te Papa staff, including members of the Board and the senior leadership team, fly to Canterbury for the deceased turtle's powhiri.
    • Domestic travel, car rental and accommodation: $4,327.77
    • Powhiri and kai for 40 people: $880.00
  • At the powhiri, the eight Te Papa staff are joined by seven DOC staff.
    • Four of the DOC staff are paid by the hour, for a total cost of $600.
    • DOC pays a $200 koha to Koukourārata.
    • DOC spends $130 on mileage.
  • The turtle arrives at its powhiri, is removed from its coffin, placed on an altar to thaw while speeches are given, and eventually strapped to a crate and flown via helicopter to its burial site: a hilltop on a nearby island. DOC pays $1600 for the helicopter service. Video and photographs from the day capture these events.
  • Two DOC staff conduct an archeological survey of the burial site, and three staff dig the hole. Reported wage costs for these activities are $900.

Union spokesperson Louis Houlbrooke says, "The total cost to taxpayers for Michelangelo's eventful afterlife is difficult to quantify, but we would place it in the tens of thousands. Te Papa and DOC's total reported expenses were $11,742.31, but that excludes the time cost for high-level salaried staff."

"Te Papa was prepared to obtain this turtle for research on a rare species. That is valid. Koukourārata, who had expressed no interest when the turtle first washed up, suddenly wanted it back and intact. The result was a truly bizarre odyssey that saw a dead turtle travel by land, sea, and air, before ultimately being buried by public servants on a hilltop."

"After thousands of dollars and 21 months of fuss, the turtle ends up right back where it started, providing no scientific insights. In fact, Te Papa told us over the phone that they couldn't even verify whether the turtle was male or female. What a waste. Such a majestic creature deserved far better than to wait 21 months in a freezer while bureaucrats negotiated a protracted repatriation mission that would make the Ministry of Foreign Affairs blush."

"We have to give some credit to Te Papa and DOC for their thorough answers to our questions. We get the sense they're proud of the enormous time, attention, and staff hours they've devoted to Michelangelo's odyssey. Unfortunately, they've tarnished the turtle's legacy with this epic saga of government waste."

Documents:

Te Papa information response 1

Te Papa information response 2

DOC information response

Turtle1Primary school children in Banks Peninsula observe the turtle. One appears to be holding her nose. (Source: Stuff)

Turtle3Te Papa receives the plastic-wrapped turtle.

CoffinAn image of the turtle coffin, built by Te Papa staff (Source: Te Papa)

Turtle4
The turtle is placed on an altar upon its return to Bank Peninsula (Source: Facebook)

Turtle5
Mourners from Koukourārata and Te Papa eulogise the turtle while a helicopter approaches.

Turtle6
The turtle is flown to its hilltop burial site.

Turtle7
The turtle is buried high above its preferred habitat.


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