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.

Fire Service Amalgamation Means 40% Increase In Fire Insurance Levy

New Zealanders will have to pay an extra 40% in their insurance fire levy from July despite the key selling point of the Government’s amalgamation of fire services being ‘efficiency’ - according to a new report we've published today.

The Government's reform package will result in an immediate cost increase of $80 million for little or no increase in services, despite claims by Peter Dunne, who has driven the reform, that the amalgamations will save money.

Total fire services costs will shoot up by $80 million per year despite efficiency being the key promise by Mr Dunne of these reforms. What is worse, the Government has increased the economic burden on New Zealanders without any comparable increase in the level of service.

According to the Government's own figures, efficiency gains years down the track will not even recoup 12% of the forecast increase in costs due to the amalgamations.

Despite rhetoric by politicians that these reforms are about saving money, according to official estimates, the emperor has no clothes. The costs are forecast to skyrocket.

The Fire and Emergency New Zealand Bill is in the final stages of passing in Parliament and will centralise both urban and rural fire services under the funding of the insurance levy on 1 July 2017.

Currently, only New Zealand First are blowing the whistle on this issue. The question is, why haven’t the other parties done their homework and held Peter Dunne to account for what appears to be an enormous own goal?  His reform, which he’s sold on the basis of ‘efficiency’ will, in fact, cost New Zealanders’ hundreds of millions over the next few years alone.

New Zealanders currently pay less than a third of the cost of Tasmania - which has a similar fire climate to New Zealand - where rural and urban fire services are centralised. Tasmanians pay $293 per person compared to only $86 in New Zealand. Despite that, the Government is adopting the Tasmanian business model.

Not only are the costs going up, but the reforms will mean insurance holders are unfairly targeted to fund the fire service. For example, foresters, who seldom insure, will now pay 38% less in protection whilst Mum and Dad households are paying 40% higher levies on their insurance.  How is that fair?

The changes do nothing to incentivise self-insurance and actually rewards those who opt out of insurance altogether.

Read (or download) the report below.