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.

On One News, they found someone to complain that they won’t be getting a free $1,000 KiwiSaver contribution from the taxpayer. She claimed that the contribution “kind of feels stolen” from her.

Her name is Alexa Rae Johnson. The same one who only moved to NZ this month to start a job here. Has been here working just one month, and already complaining that we’re not giving her a free $1,000.

Consider that the contribution was scrapped to fund the child poverty package. Now is Miss Johnson in poverty? Well, on her travel blog, she boasts of having traveled to 39 countries in the last couple of years.

Now this post is not a criticism of Alexa Rae. If a Government is silly enough to offer free $1,000 handouts to people who have just moved here, who wouldn’t want one. I’ve taken one. You’re a bit of an idiot if you don’t take one.

But the issue is whether the $1,000 hand out was a good use of taxpayer money. I’m not sure we need to help someone who has travelled to 39 countries save money.

Stuff reports some interesting data:

While 2.5 million people have signed up to KiwiSaver 38 per cent are making no contributions to it.

Many of those members are likely to be children whose parents signed them up to take advantage of the now-removed $1000 kick-start.

So middle class families with smart accountants have all rushed in to get the $1,000 handout for their kids, but it doesn’t actually lead to them saving money. They just take the $1,000 and leave it there.

In fact the overall change in savings behaviour has been very limited:

KiwiSaver has cost the taxpayer more than $6 billion and its success in helping people who really need a boost in their retirement savings has been described as “marginal, at best” in a report released by the Inland Revenue Department.

Think what else we could have done with that $6 billion?

Of those who are saving 56 per cent have money taken from their salary and wages and of those 58 per cent contribute at the minimum 3 per cent rate.
But just one third of the income saved was estimated to be additional savings.

So of the 2.5 million in KiwiSaver just 62% are making contributions. That’s 1,550,000 people. And of those 1.55 million just 56% are contributing from their wages. That’s 868,000.

And of that 868,000 only a third are doing additional savings, which is 290,000.

So we’ve spent $6 billion and it has led to just 290,000 people actually saving more money. That’s a cost of almost $21,000 per net saver. Now these are ballpark numbers and not entirely accurate, but the overall picture is clear that it is a hugely expensive scheme that has had a modest impact at best on savings.

IRD concluded:

A costs and benefit analysis shows that for the period 2007/08 to 2013/13, the additional savings amongst the estimated target group for each $ of government spending ranged from $0.20 to $0.38 as the level of government contributions dropped with fewer new enrolments and policy changes. 

So 20c saved for every $1 spent.

25% of the Crown subsidies were paid to the highest income quartile.

Middle class welfare.

David Farrar is a cofounder of the Taxpayers' Union and blogs at Kiwiblog.