A round-up of the country’s regional and unitary councils reveals that ratepayers in Wellington, Otago, and Southland are being ripped off by authorities who are forging ahead with rate hikes planned prior to COVID-19.

New Zealand Taxpayers’ Union spokesman Louis Houlbrooke says, “An economic crisis is the worst time to increase tax – and that includes the taxes set by our regional authorities. Unlike income taxes, the level of rates does not reflect a household’s ability to pay, meaning they’re especially unfair on Kiwis who have lost income and livelihoods.”

“Three regional councils in particular need a kick up the arse – Greater Wellington, Otago, and Southland are on track to hike rates by 5%, 9.1%, and 5.9% respectively – in line with plans set prior to the COVID-19 outbreak. Now is not the time for a business-as-usual approach to rates.”

“Other regional councils have revised rate hikes downward in the face of COVID-19, but the real benchmark has been set by those freezing rates entirely. Congratulations to the regional councils of Waikato, Bay of Plenty, Taranaki, Hawke’s Bay, Tasman, and West Coast, who have committed to a zero rate increase. By finding savings and deferring non-essential spending they have done right by struggling ratepayers.”

The Taxpayers’ Union is tracking the rates status of all local councils at www.taxpayers.org.nz/rates_dashboard, and will be releasing region-by-region roundups of local councils as information comes to hand.

The National Party has a new Leader

This afternoon, Bay of Plenty MP Todd Muller successfully challenged Simon Bridges for the National Party Leadership.

While we don't endorse political parties, we watch National very closely as a party of 'limited government'. Even if they fail to take back the Beehive in September, they have the power to force the Government's hand on policies that seriously impact taxpayers.

What would a Prime Minister Muller do?

With the media focused on the politics and personalities of this saga, there has been next to zero coverage given to what matters: the policies Todd Muller would push as Prime Minister.

Any promises made by Simon Bridges are now effectively void, meaning Muller has to answer questions like:

• Does National still pledge to adjust income tax bracket thresholds in line with the cost of living?

• Does National still pledge to repeal the Auckland fuel tax, and to not increase fuel taxes if elected?

• Does National still plan to make NZ Superannuation more affordable by increasing the entitlement age to 67 in 2040?

We're seeking a meeting with Mr Muller next week to get a steer on where he stands on these issues and more.

Coincidentally, we sat down with Todd Muller for a podcast interview just a few days before he announced his leadership bid. He described himself as "broadly socially conservative, and from an economic perspective reasonably liberal".

If you want a measure of the man, I recommend listening to Islay's interview with Muller here.

Revealed: COVID-19 GP funding is race-based

This week we revealed that COVID-19 support funding for general practitioners was allocated significantly on the basis of enrolled patients’ ethnicities.

A response we obtained under the Official Information Act showed that GPs received $4.50 in funding per Māori or Pacific patient with any other ethnicities worth only $1.50 – only a third of the amount.

Elderly and individuals from low socio-economic areas were valued at the increased Māori/Pacific amount. 

So much for the Government’s COVID-19 slogan that ‘we’re all in this together’. Skin colour shouldn’t be the proxy for how much money the Government allocates for healthcare.

COVID-19 doesn’t spread to Māori and Pacific patients more than other patients. In fact, only 8% of cases in NZ involve someone of Māori ethnicity and 5% for patients of Pacific ethnicity. This is around half their respective shares of the population so in fact they are less affected than other ethnicities, yet they get 200% more funding. This is putting wokeness ahead of public health.

Sometimes Māori and Pacific health is targeted because those communities are generally in low socioeconomic circumstances. But for GPs the Government has all of that socioeconomic data, and could have targeted the money on that basis.

Had the Taxpayers’ Union not sought out clarification over how funding was distributed, the information would never have been available to the public.

Rates freeze campaign: “Now is not the time to put up Council taxes”

An economic crisis is the worst time to increase taxes – and that includes council taxes.

On Monday night Jordan spoke to Q&A making the case for rates freezes: unlike income taxes, the level of rates don’t reflect the ability to pay. This means struggling businesses and households who have lost their livelihoods are still hammered.

Has your local council agreed to a rates freeze?

We’re tracking the status of all councils on our rates freeze dashboard, with recent significant victories including Taranaki Regional Council and Nelson City Council.

The message is starting to sink in. So far, 14 councils have agreed to our call for a freeze rates. Another 37 have reduced their planned rate hikes.

A minority of councils are still proceeding with their pre-COVID rate hike plans, but I'm confident we can make them flip.

Here's how the regional and unitary councils are tracking:

Find out how where your local council (and its neighbours) stands on our rates freeze dashboard. Please let us know if you have more up-to-date information on your local council.

What about Auckland Council?

Our sister group, the Auckland Ratepayers’ Alliance, will soon be rolling out its own campaign for a zero rates increase in Auckland. This will include leaflet drops, yard signs, and a dedicated website through which ratepayers can make submissions as part of the Council's 'emergency' consultation.

Next week the Alliance is also unveiling billboards promoting the Auckland Town Hall Rich List. If you haven't already, take 30 seconds to look at www.richlisters.nz.

We’ve got Phil Goff from a 3.5% rate hike down to 2.5%, but we think he can do better.

The Council’s “2.5% or 3.5%” consultation options are designed so that the Mayor can claim Aucklanders support a rate hike when submissions inevitably favour the 2.5% option. We want to achieve a majority of submissions favouring a zero rate hike (or temporary reduction), regardless of the options currently being put forward by Auckland Council.

Government ignores advice – taxpayers now buying 285 pigs everyday!

Seven weeks ago, Ministers learned that, with butchers closed, a surplus of pigs threatened to create animal welfare problems.

Officials suggested allowing retail butchers to open under COVID-19 rules, but the Government dismissed that advice. As a result, taxpayers are now buying 2,000 pigs a week.

The Government’s determination to shut down butchers against official advice hurt those businesses, damaged the pork industry, and made conditions worse for pigs. Even with the taxpayer footing the bill for 2,000 pigs a week, this only covers up to 40% of the weekly surplus. The other 60% will have to be destroyed. What a waste.

Our mascot, Porky the Waste-hater, asked me to include his thoughts in this newsletter:

Everyone knows how the life of a pig on the farm will end. Pigs are smart and sociable creatures and deserve to be treated with respect. When they do make the ultimate sacrifice, it should be for something noble like a bacon sandwich. Instead, 5,000 pigs a week are being killed for nothing. Where's the kindness in that?

Have a great weekend,

Louis Houlbrooke Campaigns Manager New Zealand Taxpayers' Union

 

The New Zealand Taxpayers’ Union can reveal that COVID-19 support funding for general practice clinics was allocated significantly on the basis of enrolled patients’ ethnicities. Information obtained under the Official Information Act 1982 showed that organisations received $4.50 in funding per Māori or Pacific patient with any other ethnicities worth only $1.50 – only a third of the amount.

Elderly and individuals from low socio-economic areas were valued at the increased Māori/Pacific amount. 

So much for the Government’s slogan ‘we’re all in this together’.  Skin colour shouldn’t be the proxy for how much money the Government allocates for healthcare.

Covid-19 doesn’t spread to Māori and Pacific patients more than other patients. In fact, only 8% of cases in NZ involve someone of Maori ethnicity and 5% for patients of Pacific ethnicity. This is around half their share of the population so in fact they are less affected than other ethnicities, yet they get 200% more funding. This is putting wokeness ahead of public health.

Sometimes Māori and Pacific health is targeted because those communities are generally in low socioeconomic circumstances. But for GPs the Government has all of that socioeconomic data, and could have targeted the money on that basis.

There was also an alarming lack of transparency around this funding. In fact David Clark wheeled out the ‘we’re all in this together’ line in announcing the GP funding package. Had the Taxpayers’ Union not sought out clarification over how funding was distributed, this information would not have been available to the public. Increased demands on healthcare due to COVID-19 mean it is more important than ever that resource allocations are subject to public scrutiny.

Information response from the Office of the Director-General of Health:

This morning it was reported that Todd Muller is making a challenge for the National Party Leadership. Prior to these reports, Islay Aitchison sat down with him to hear more about his political philosophy, his goals and his background.

You can subscribe to Taxpayer Talk via Apple Podcasts, Spotify, Google Podcasts, iHeartRadio and all good podcast apps.

Watch Government debt tick up in real time

Following the Budget’s eye-wateringly high debt forecast, the team have been thinking about how to best illustrate what it looks like to borrow $200.8 billion by 2024 (or $109,700 added to the mortgage of every New Zealand household).

A couple of the staff put together a website at www.DebtClock.nz which makes it clear just how quickly the Government is racking up debt.

!! Watch it and weep ‼️

As you watch the debt tick up in real time, remember that you and your children will be forced to pay for it – plus interest.

After COVID-19, paying down debt will become one of our country’s' most important challenges. Here at the Taxpayers' Union we’ll be challenging the politicians to come up with smarter ways to cut government waste so the debt clock stops ticking without the need for painful new taxes.

Light rail "on hold" – so why hike fuel tax?

In a statement quietly released the evening before Budget Day, Transport Minister Phil Twyford confirmed that he's put his troubled Auckland tram proposal "on hold".

Funding this project was a key excuse for annual fuel tax hikes. Now that light rail is on hold, we say July's 4c/L tax hike should be shelved too. This would provide vital economic relief for low-income families and the struggling regional tourism sector.

Since our public advocacy, the National Party has jumped on board with Simon Bridges also pointing to the light rail cancelation as justification for shelving the tax hike.

The question of fuel tax aside, Twyford's decision to defer light rail trams down Dominion Road is the right one. He's walking away from a growing financial headache, and that deserves praise. In fact, he should consider doing the same with the failed KiwiBuild initiative, or perhaps even the City Rail Link. He may find that the COVID-19 crisis gives him cover to make prudent decisions that would otherwise be politically embarrassing.

Tourism talkfests waste time and money

Among the slew of Budget announcements was the formation of yet another working group: a ‘New Zealand Futures Tourism Taskforce’ that will ‘lead the thinking on the future of tourism’. Working group members will presumably be paid by the taxpayer.

Kelvin Davis should already be taking advice from the tourism sector – it’s one of his key duties. Why does he need to set up a working group to spend months producing and consulting on reports?

There’s a risk that the group will be captured by special interests. The Minister has a responsibility to the general taxpayer, and mustn’t allow a select group of tourism operators and bureaucrats to dominate his thinking, especially when it comes to taxpayer-funded handouts.

Then there’s another new committee: the ‘Tourism Recovery Ministers Group’, featuring Davis, Grant Robertson, Nanaia Mahuta, Eugenie Sage, and Fletcher Tabuteau. This one is just baffling. Why does Kelvin Davis need three other Ministers and an Under-Secretary to help him to his job? Don’t his colleagues have enough on their plates?

KiwiRail handout is about politics, not COVID-19

Budget 2020’s $1.2 billion spend on KiwiRail has nothing to do with COVID-19 relief as advertised.

KiwiRail is a state-owned enterprise, and as such is expected to run a profit. However, it’s never paid out a single cent in dividends to the Government.

KiwiRail already got a billion dollars in Budget 2019. At the time, we said that was the equivalent of setting money on fire – that’s basically what Treasury analysis has said for decades. This latest package will cost another $656 per Kiwi household.

There are countless other potential projects with better cost-benefit ratios – and all the jobs ‘created’ by paying for new InterIslander ships will be in South Korean ship yards. The KiwiRail handout is really about satisfying the Greens’ train fetish and assisting NZ First’s quest to move Auckland’s port to Northland. Why not be transparent about it?

You paid someone to write this article (EXPLICIT) 🔞

I'm not making this up: someone was paid with taxpayer money to write a diary of their day in the office wearing a...

*clears throat*. Sorry, I can't finish that sentence.

If you dare, you can view the article here. But seriously, you might not want to. It is certainly not safe for work.

The NZ AIDS Foundation and its 'Ending HIV' website is taxpayer-funded, receiving $4.23 million a year from the Ministry of Health.

Last year a Ministry spokesman said: "The Ministry is committed to continuing its support for NZAF and its Ending HIV campaign."

To be fair to the Foundation, they are entrusted with some very important work around HIV testing. But we're not convinced the Foundation's 'journalism' is an essential use of borrowed money. Call us prudes!

Have a great week,

Louis Houlbrooke Campaigns Manager New Zealand Taxpayers' Union

PS. Our Taxpayer Talk podcast is going strong. Listen to our Budget Day analysis here. We also sat down with National MP Simon O'Connor as part of our "MPs in Depth" series.

To receive our Taxpayer Updates delivered to your inbox, add your details here.

We're giving taxpayers the opportunity to get to know their MPs beyond photo-ops and party-line speeches. In this episode, Islay Aitchison interviews Simon O'Connor MP.

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

Support the show (http://www.taxpayers.org.nz/donate)

The Taxpayers' Union's Consulting Economist Joe Ascroft, and former Treasury (now Taxpayers' Union) Analyst Neil Miller, sits down with Jordan Williams to discuss Budget 2020, the economic and political risks, and what it says about the Government's election strategy.

You can subscribe to Taxpayer Talk via Apple Podcasts, Spotify, Google Podcasts, iHeartRadio and all good podcast apps.

The Minister of Finance Grant Robertson describes Budget 2020 as a “once in a generation” budget to combat “a 1-in-100-year threat” of the global COVID-19 pandemic. It certainly contains high level of additional spending, headlined by the $50 billion COVID-19 Response and Recovery Fund (of which only about $20 billion is still actually available today).

To put $50 billion in context – the amount of new spending in a normal year’s budget is usually about one to three billion.

This spending will be funded by significant increases in debt as tax revenue will remain steady. There are no new taxes or tax increases announced which will be something of a relief to taxpayers.

However, it is also a “blank cheque” budget. Under the large headline figures, there is often a lack of detail about the spending which makes the quality of many proposals hard to assess. During questions, the Minister indicated that some of the $20 billion will go to Health (including laboratories and contact tracing) but the decisions were yet to be made. We have the bill, but do not know what we are going to be served.

In Defence, over half the new spending – the purchase of Super Hercules planes – is contingent because Cabinet has not considered a business case, far less approved it. That is a $900 million ($491/household) “maybe” even though Defence Minister Ron Mark says it remains his number one priority in Defence. Yes, the Budget was put together quickly under tremendous pressure but COVID-19 can not be blamed for over two years of delays on the planes. Treasury is publishing a summary of initiatives not in the Estimates on the week ending 22 May 2020. Most of this is information that would usually be in the Budget itself.

In any case, how buying more planes resolves a pandemic is unclear.

The Government has locked in high spending, but many of the hard decisions have been deferred until after the election. It is only after the election that New Zealanders will have to face the realities of paying back debt, and new policies from a new Government. Budget 2020 has one eye firmly on the election, hoping the economy can continue a slow recovery, hoping there is no second wave of infections, and hoping the current Government can be returned with a mandate.

If it is, expect a change in policy direction. Questioned about the lack of significant tax reform in the Budget, the Finance Minister confirmed there was none, and none would happen this term. That carefully leaves open the possibility of significant tax reform (including new taxes and tax increases) in the next term if Labour retains the Treasury benches.

In short, buy now, pay later.

There are other worrying trends.

There is evidence of interest group capture resulting in high levels of spending which are hard to justify. This includes funding boosts for certain industries (racing, fishing, arts, sports and more coming soon for media), certain voting blocks (including the $911m Maori COVID-19 package and the Pasifika funding parcel), and certain failing industries (KiwiRail gets a projected boost and NZ Post gets Government support despite being “no longer financially viable”).

The Government is also centralising decision making into new bureaucracies. "Workforce Development Councils" will "strategically plan" for the recovery of industries and jobs, and "Regional Skills Leadership Groups" will "improve information gathering". This is not a small investment – $276 million ($150/household) for a lot of officials, boards, reference groups, and consultation meetings. The Government is also planning to run a bulk food distribution operation called the "New Zealand Food Network" despite a number of companies and organisation already working in this space.

A "Infrastructure Industry Reference Group" is considering 1924 applications for $136 billion of projects. Clearly not all of these will be of high quality or quick to start.  A new road in starting in 2023 is little use to the unemployed in 2020 and 2021.

The increased Government control of the economy mirrors increased Government control of freedoms. Budget 2020 confirms that this is a hands-on Government, even if the details of what it might have its hands on remain sketchy.

The Taxpayers’ Union will continue to provide expert additional analysis as our team has time to consider the details further. One early concern is that the Government’s projections on unemployment remaining under 10% and economic growth returning next year seem very optimistic.

It appropriate to finish by acknowledging the hard work of Treasury officials and Ministerial staff preparing this document. This Budget was not what they planned six months ago or even six weeks ago. The key decisions were signed off on 6 April, very late in the normal Budget cycle. Minister Robertson even mentioned that some of the decisions in today’s papers were made on Monday. However, it is an important Budget and needs to be scrutinised closely to ensure taxpayers are receiving value for their money.

Also: Kiwiblog: Budget Lockup 2020 – A report from the inside

Neil Miller is a former Treasury Analyst, a former Director of Research in Office of the Leader of the Opposition, and is an Analyst at the Taxpayers' Union.

Skyrocketing debt

Unsurprisingly, the Government’s Budget Responsibility Rules (which capped Government spending and debt in coming years) are dead. Net debt is forecast to climb from $57.7 billion ($31,500 per household or 19% of GDP) to $200.8 billion ($109,700 per household or 53.6% of GDP) by 2024. Deficits are expected to average $28 billion ($15,300 per household) per year across 2020 to 2022.

It’s easy to get lost in the numbers – but these are truly eye-watering figures. More than one in every four dollars spent by the taxpayers will be borrowed over the next three years.

Luckily for the Government (and taxpayers) borrowing costs are expected to remain low – in no small part due to the Reserve Bank’s quantitative easing (freshly-printed cash used to purchase Government debt) programme, which yesterday was doubled from $30 billion to $60 billion. If the Reserve Bank hadn’t embarked on this programme, financial markets might have struggled to digest forecast debt in coming years.

To put that in context, $60 billion amounts to more than half what the Government plans to spend in the next year. To say the least, the Reserve Bank is doing a lot of heavy lifting to enable the Government's spending programme.

The big risk? If there is any inflationary pressure in the coming years, the Reserve Bank will have to pull back on printing money and push up interest rates. In that world, Government debt would become a problem very quickly. 

Unemployment climbs

Treasury predicts unemployment to climb to 8.3% in 2020 and – with the aid of the Government’s $50 billion recovery fund – fall to 4.2% by 2022. However, if the fund fails in its goal to stimulate the economy (perhaps because the spending is poorly targeted, politically manipulated, or poorly managed) then unemployment will remain higher for longer. The main forecast (excluding the recovery fund) assumes unemployment will remain at 5.7% in 2022.  

The $50 billion fund

The Budget centre-piece is a $50 billion ($27,332 per household) ‘Covid-19 Recovery Fund’ to be spent over five years.

Today the Government has announced $15.9 billion ($8688 per household) of new initiatives to be packaged under the ‘Recovery Fund’ including:

• an extension of the wage subsidy scheme for businesses who have suffered at least a 50% fall in revenue ($3.2 billion or $1750 per household); and,

• a jobs package split across a variety of sectors including $1.6 billion ($874 per household) for trades and apprenticeships and $1 billion ($546 per household) for ‘environmental’ jobs.

$10.7 billion ($5,847 per household) of this fund has already been allocated through to April. 

The Rest?

The sector allocations Budget (at least in fiscal terms) pale in comparison to the sheer size of the recovery fund, but still deserve mentions:

• $1.2 billion ($655 per household) more has been wasted on KiwiRail – despite a decade of Treasury advice that rail is not worth the cost.

• $1.77 billion ($967 per household) has been allocated for defence – of which about half is for new aircraft.

• A $3 billion ($1640 per household) infrastructure investment fund.

• A $55.6 million increase in foreign aid.

• $280 million ($153 per household) for NZ Post (old-fashioned snail mail, not couriers).

Joe Ascroft is the Consulting Economist for the Taxpayers' Union

As I write this, Grant Robertson is unveiling Budget 2020 in Parliament.

Two members of our team have just emerged from the pre-Budget briefing. Below, our Consulting Economist Joe Ascroft summarises the contents of the Budget and what it will mean for you, the taxpayer.

We've also had Neil Miller – a former Treasury Analyst and Director of Research for the Leader of the Opposition – in the room. He's written for David's Kiwiblog and well as a separate piece on the political ramifications of today's announcements (see below).

Overall impression: The Blank Cheque Budget – big set up for election announcements to come

The economic landscape in New Zealand has fundamentally changed in recent months and if anyone had forgotten that fact, Budget 2020 is a wake-up call. Debt is expected to skyrocket, economic growth is projected to collapse, and unemployment is forecast to climb higher than during the GFC.

The total size of the Government’s fiscal response is simply enormous. The Budget centre-piece is a $50 billion ($27,332 per household) ‘Covid-19 Recovery Fund’ to be spent over five years, which includes a (more focused) extension of the wage subsidy schemes among other policies.

The Budget was clearly rushed and it showed. Much of the announcements are simply big numbers with no actual allocation. Think Shane Jones's Provincial Growth Fund on steroids. All of the "Wellbeing" focus from last year has been unceremoniously canned. Unlike in recent years, none of the Associate Finance Ministers were anywhere to be seen and the Secretary of the Treasury did not speak to the room or make herself available to take questions.

About half of the recovery fund has still been left available to be spent across the forecast period as required. More spending announcements should be expected in the coming months to be funded from this allocated balance.

And yet despite the severe recession we now find ourselves in, the Government has still wasted plenty of taxpayers’ money. KiwiRail, our foreign aid budget, and NZ Post all receive big cheques.

This Budget (and the election campaign to come) is going to need a lot of scrutiny if we are to avoid a 1970s-style 'big government' economic paralysis. We'll be burning the midnight oil over the next few days as we wade through the detail and pick out what the politicians don't want you to know...

Read our economic and political analyses of Budget 2020:

Budget 2020: The Economic View - Joe Ascroft

Budget 2020: The Politics - Neil Miller