Cut Corporate Welfare

Today we have released our latest report, ‘Socialism for the Rich’, by Jim Rose. The report shows that the annual cost of corporate welfare is now $1.6 billion - or $931 per New Zealand household.

‘Socialism for the Rich’ collates the costs of all the corporate welfare expenditure in Budget 2017. It shows that the company tax rate could be six percentage points lower if these favoured handouts were abolished and spread fairly across all New Zealand businesses.
 
Instead of rewarding profitable businesses with an across the board tax cut, these subsidies pick winners by directing subsidies to businesses that cannot keep afloat on their own.
 
Budget 2017 has allocated $294 million to commercialising science and innovation. In the past, the Government has directed investment at ‘public good’ science - research and development that has low commercial viability. Now, funding is going towards trying to commercialise technologies in the private sector. It’s socialised costs for privatised profits.
 
A further $148 million is going towards subsidising the film industry, $12 million less than the last budget. Since 2008, $997 million of taxpayer funds have been spent trying to attract the glitz and glamour of Hollywood.
 
The largest recipient of taxpayer funded corporate welfare is KiwiRail. The latest budget has allocated $396 million to KiwiRail, a 50% increase on the previous year. KiwiRail has now received more than $4 billion in taxpayer handouts since 2008 despite being valued as a $1.5 billion liability.

Corporate welfare is not only a waste of taxpayer money but also counterproductive. Look at Emirates Team New Zealand. Removing the direct corporate welfare saw Team New Zealand bring home the Auld Mug. Forcing private businesses to compete on their own footing, rather than rely on government handouts, will inspire competition and innovation. On the other hand, corporate welfare slows down the boat.
 
The report's author, Jim Rose, says, “The role of government is to provide essential public goods and social welfare that the market cannot. This Government has significantly overreached this role and actively engaged in picking winners and propping up failing businesses.
 
Key Findings:

• Corporate welfare in Budget 2017 is $1.6 billion, an increase of $203 million on the previous year's budget and the highest since 2008.
• That cost is the equvilent to $931 per household.
• $394 million is going to KiwiRail bailouts (50% more than the last budget).
• KiwiRail has received more than $4 billion in bailouts since 2008.
• $294m is being spent on commercialisations of science and innovation.
• $212m is allocated to Primary Industries (i.e. irrigation), an increase of $103 million since the last budget.
• $148 million is allocated to subsidising the film industry, a $12m decrease from the last budget.

The Taxpayers’ Union is questioning why NZ Aid money, meant to help the world’s poorest, is being used to support countries and governments with their own space programs. The figures (see below) show that since 2010 more than $214 million of taxpayer money has been given to countries rich enough to fund their own space ambitions.

If a foreign government has enough cash to invest in ambitious space programmes, it should not expect to be receiving cash from New Zealand taxpayer which is earmarked for helping the world’s poorest.

Key findings

Total amount of NZ Aid money (since 2010) given to countries with government space programmes: $214,111,149

Indonesia:

• Received $88,753,539 in NZ Aid since 2010.
• According to the World Bank’s open budget, over the same period Indonesia was able to spend $223 million (NZD equivalent) on LAPAN, Indonesia’s aeronautics and space program.
• Last year Australia announced that it would cut its annual Aid of $627 million to Indonesia by 40% to $379 million.

India:

• Received $4,038,956 in NZ Aid since 2010.
• The Indian Space Research Organisation (ISRO) has developed multiple Lunar and Mars bound missions in that time.
• This year alone ISRO will receive $1.2 billion (U.S) from the Indian government.

Nigeria:

• Launched its fifth satellite into orbit last year and announced plans to send an astronaut into space by 2030.
• Kiwi taxpayers have funded $647,053 of Aid to Nigeria since 2010.

Like any spending of taxpayer money, aid funding should be directed to where it is most needed. These figures show MFAT aren’t ensuring that Official Development Assistance is being allocated to those most in need. We should follow Australia’s lead and be redirecting Aid money away from Indonesia and India, and towards those in the Pacific with a much greater need.

Welfare Bums: Adding up the cost of corporate welfare in the 2016 budget

Corporate welfare amounts to more than $800 per New Zealand household, according to a calculation by the Taxpayers’ Union contained in a report released today. The report, entitled Welfare Bums, is authored by economist Jim Rose.

The report updates the previous Taxpayers’ Union reports, Any new kids at the trough?, which scrutinised Budget 2015, and Monopoly Money, published soon after the 2014 Budget.

The key findings in the report are:

• Corporate welfare will cost taxpayers $1.36 billion this year, up from $1.2 billion in the 2015/16 financial year
• The Government will spend the equivalent of $803 per household on corporate welfare, compared to $723 per household spent in 2014/15
• Handouts to the private sector in Science and Innovation have grown to $250 million, co-funding “commercialisations” and start-ups.
• The primary sector and communications are the other main corporate welfare growth areas, with over $375 million being handed out to private providers installing ultra-fast broadband and irrigation.
• Taxpayers continue to throw money at KiwiRail, which since 2008, has been given $3.5 billion worth of subsidies, and has cost the taxpayer a staggering $14.4 billion in asset write-downs.
• Solid Energy makes matters worse, being handed an investment write-off of $60 million.

Over the weekend we revealed more Upper City Council corporate welfare 'economic development' grants amounting to $375,000 of ratepayers’ money. Joining Burger Fuel, grant recipients include Subway, Vogue (a clothing store), Bed Bath and Beyond, and even a hairdresser!

Stuff.co.nz covered our comments here:

"It is economic trickery benefiting only the favoured businesses.

"Take the example of Prodigy Hair. There are at least 29 hairdressing firms in Upper Hutt, but the council picks this one out for a handout."

Previously, the council defended its corporate welfare scheme on the basis that it was creating jobs, Williams said.

"Of course the politicians and officials ignore that every cent is drained from the very community they are claiming to help. It is intellectually dishonest. 

"Upper Hutt ratepayers are smart enough to see that this isn't economic development, it's robbing the poor to pay the rich."

To respond, Mayor Wayne Guppy spoke to Newstalk ZB's Larry Williams tonight just prior to the political Huddle with our Executive Director Jordan Williams and Vernon Tava.

Corporate welfare in Budget 2015 will cost the average New Zealand household more than $750.

Any new kids at the trough? a report by Jim Rose launched today, collates all of the corporate welfare in Budget 2015. The report updates our previous report, Monopoly Money: the cost of corporate welfare since 2008.

The new report shows:

• Corporate welfare will cost taxpayers $1.344 billion this year, up from $1.178 billion in Budget 2014

• The amounts are the equivalent to $752 (Budget 2015) and $663 (Budget 2014) per household

• The largest item of corporate welfare is still KiwiRail which has cost taxpayers $13.2 billion (including write downs) since 2008 with still no sign of the ‘turn around’ National promised soon after it was elected to office.

• ‘Economic development’ is the second largest category of corporate welfare, including a $115 million appropriation for NZTE 'international business growth services’ which saw the controversial ‘Agri-hub’ given to a Saudi farmer.

• The fastest growing area of corporate welfare is the ramping up of taxpayer funded grants to agriculture businesses wanting to install irrigation.

Corporate welfare is where politicians try to pick winners and the taxpayers lose. It robs middle class taxpayers to reward the well off and politically connected. For every dollar spent on corporate welfare, there is one less dollar for education, health, or investment by the taxpayer who earned it.

The report includes a forward by Matthew Elliott, Chief Executive of the London-based business group, Business for Britain. Mr Elliott has been in New Zealand as a guest of the Taxpayers’ Union and told media:

Many of the business subsidies and corporate handouts this report exposes are more suited to an EU-style picking business winners regime than a modern open economy. What these reports demonstrate is that lower taxes – not additional government spending – are the best driver of economic growth and prosperity.

The report embedded below (and also available for download). The earlier report, Monopoly Money: the cost of corporate welfare since 2008, is available here. Hard copies are available on request.

You spoke and they listened!

Steven Joyce has announced that no taxpayer money is going to be used to support SkyCity’s convention centre. Instead, SkyCity are going back to the drawing board to come up with a cheaper design. Fantastic.

In just a few days more than fifteen hundred people signed our petition and the message got through to Mr Joyce and SkyCity. This is a win for the little guy.

While there could be devil in the detail - and don't worry we'll be making sure that SkyCity don’t now try to build something a fraction of the size that was promised - today at least taxpayers can breathe a sigh of relief.

A letter to editor published in today's NZ Herald nails the problem with SkyCity trying to strong-arm the Government for a handout for the National Convention Centre.

Corporate parasites cashing in

Commenting on its convention centre proposal, SkyCity says it is “working on a solution with the Government to bridge the funding gap. In resolving this issue, we will ensure that the value of this significant and complex project is not diminished for our shareholders’’.

Is it for real? Does it really believe taxpayers and ratepayers should subsidise its shareholders? We really do live in a country drowning in corporate welfare when people can make statements like this without being castigated by the Government or the Auckland Council.

The only utterances we have heard from them is that a bail-out with public money would be the last resort and not desirable. No flat-out refusal, as there should have been.

Once again, private enterprise is targeting the public trough. New Zealand is a country where profits are always privatised and losses always socialised.

I am sick of overpaid corporate parasites feeding off my endeavours. Chorus is another example. The Commerce Commission has allowed it to once again overcharge for its services, causing internet providers to raise their prices.

Chorus — not the taxpayer or consumer — stuffed up its quotation. So once again, shareholders should not be inconvenienced or short-changed.

Graham Hansen, Howick.

We don't know Graham, but he might be interested to read our report Monopoly Money which tracks the cost of taxpayer funded corporate welfare since 2008. The report is available to view and download here.

Fairfax has picked up our comments on SkyCity's recent comments to prompt taxpayer funding of the controversial convention centre.

Auckland Councillors blast Sky City 'corporate welfare' Stuff 22/12/2014

Auckland ratepayers should not have to pay for a blow-out in the cost of the Sky City National Convention Centre, councillors say.

Steven Joyce has provided a response to Jim Rose's Monopoly Money report - but appears to focus just on R&D tax credits, rather than address the bulk of corporate welfare identified in the report.

Joyce disputes corporate welfare analysis

Economic Development Minister Steven Joyce is disputing the Taxpayers’ Union analysis of corporate welfare under National, saying he disagrees with its characterisation of a subsidy and its estimate of would-be corporate tax rate reductions.

As revealed in National Business Review last Friday, a Taxpayers’ Union report claims that National has handed out an average of $1.18 billion a year in corporate welfare since it came to power in 2008. (See report attached)

In the Monopoly Money report, Jim Rose – a former principal adviser at the Treasury and former senior analyst at the Ministry of Business, Innovation and Employment – concludes that such business subsidies are costing New Zealand households an average of $600-800 a year.

Continue reading on the NBR site ($)

The Waikato Times has picked up our Monopoly Money report and recent comments by Trade Me founder Sam Morgan.