Spare Room Be our guest…

By Kirk MacGibbon

Not a mother, more like an illegitimate son…

My debut performance on TV3’s ASB Business on Wednesday sent me into a frenzy of thinking about all things Budget. I made a ton of notes and spent around five minutes talking with Michael Wilson and then it was all over. So, with a nod to the need to recycle I thought I would use my notes to provide some thoughts ahead of tomorrow’s Big Bill Budget.

All finance ministers naturally want to use their first budget to ‘make a splash’ and in effect ‘brand themselves’. Ruth Richardson perhaps was the most successful Finance Minister to do that with her ‘Mother Of All Budgets” in 1991. She has gone on to be relatively successful in the business world, but she’s never really escaped her first budget – I mean, her whole persona and brand is built around being tough. I wouldn’t imagine, for example that given what she did to vast swathes of NZers back in 1991, that we would ever expect her to turn up at the Families Commission – but I guess never say never, right?

English has to do something different than the ‘Old Mother Hubbard’ economic theory followed, in the end not nearly as well as we all thought, by Michael Cullen. There has been the leaked announcement about subsidies to private home owners to insulate their homes, something I for one will be taking up as soon as possible. But what else might there be? What has been pretty obvious for some months now, is that English’s hands are pretty much tied. This budget will contain very little in the way of ‘big ticket’ items. It will instead look to spread a little bit of money across a whole heap of things. What we used to refer to as the ‘fairy dust’ approach.

Education and health are apparently the two big priorities for English. But it’s unlikely that there will be too much joy in either of those areas. Certainly it’s unlikely that there will be any structural changes. It will all mainly be ambulance at the bottom of the cliff stuff. Good for those of us not bright enough to see the cliff coming. Useless to the great majority of New Zealanders who were looking where they were going and saw that there might be some trouble ahead. It will sound harsh I guess, but maybe we need to look at improving the quality of the gene pool by letting a few people suffer the consequences of their falls. Particularly when they ignored the signs and barriers in front of the cliff.

New Zealand has very serious structural issues that will have to be dealt with over the coming decade. It would be great if we didn’t have to wait another six years for a Labour government to have to come and make those changes and in much more pressing circumstances than we’ve got now, given the baby boomer time bomb that is ticking increasingly louder.

If Bill had real courage he might think about privatising Kiwisaver accounts and letting people then opt out of receiving a state pension on retirement? Australia has just signalled that it will raise the retirement age to 67. People are dreaming if they think that won’t eventually happen here, although by the time we are forced to address this the retirement age will certainly be lifted to 70. A universal retirement benefit is an anachronism that New Zealand simply will not be able to afford.

Bill’s been Health Minister before. He knows that the current structure is a gaping maw for taxpayers dollars – Labour proved emphatically that throwing vast amounts of money at a system that is flawed won’t deliver better health outcomes. That sector needs a radical overhaul. What other sector rewards its practitioners (doctors and surgeons) for inefficiency by letting them cream off paying customers into their private practices, and then further rewards them in some cases by letting them rent Crown facilities to make their money? Its ridiculous. We need bold thinking – what about letting taxpayers opt out of receiving state provided health services if they choose to take out medical insurance and then adjusting their tax rate to reflect that they are providing for themselves. I believe this is something they do in Britain.

The ‘crisis’ we face is a simple one. New Zealanders have to be re-weaned off nanny State. That is one of the great tragedies of the Fifth Labour Government. They basically turned, through their Family Tax Credit scheme, around a third of the country into beneficiaries.

It seems we’re pretty intent now on turning some of our biggest companies into beneficiaries too. I mean, it is farcical that a company like Fisher & Paykel, a company that has been around for ever, runs into a rocky patch, admittedly a pretty big one, and ends up on a taxpayer benefit. I mean, didn’t they at least have some contingency plans in place around the possibility, no matter how remote, that we might in fact reach the End of the Golden Weather?

We don’t look to ourselves for solutions. We look to the state. When things go wrong we look to the state. We have to take responsibility ourselves. If we leave school at 16 without any qualifications why should the rest of us pay your expenses and support your kids?

We hear a lot of talk about lifting our productivity levels. I think it’s about time we started using concepts that set out the key issue plainly – although I guess the furore around Christine Rankin proves that plain speaking isn’t really appreciated in this country. If we did speak plainly, then lifting productivity simply becomes ‘get off your backside’.

You could give that concept some real meaning by introducing time limits on the length of time the State will pay you an unemployment benefit. I mean, Mike Moore raised this issue 15 years ago. It is unacceptable to have third generation beneficiaries.

Our economy is still dominated by the primary sector, that just won’t change. Dairy is still our largest export earner and yet it’s still operating under the same basic monopoly structures that were put in place a hundred years ago. Bill could at least look at pulling the whole Fonterra security blanket away and letting some of these extremely innovative dairy companies go for it themselves. We can still put frameworks in place around foreign ownership of the industry if that was wanted (and it would be).

But I tell you, a couple of hundred thousand pigs in sow crates wouldn’t compare with 12,000 dairy farmers screaming in terror about the thought of what a bit of healthy competition might mean for them.

It’s not often that I totally agree with Rod Oram. Actually its not often that I ever completely understand Rod Oram, but his article in last weekend’s Sunday Star Times was on the mark. We’ve got the tail wagging the dog here and the Government is in no danger of defaulting on anything but a couple of over-ambitious election promises.

As Rod Oram pointed out, we need to have a debate about what is good and bad spending. I’m not sure that this budget will help to clarify that all that much.

This was Bill English’s opportunity to shine. To acknowledge the concerns of the ratings agencies, while making clear that New Zealand would do what was best for New Zealanders. Maybe the times will be just too hard for him. Anyone can be seen as good during boom times. It’s how we deal with the hard times that will set us on the road to prosperity.

Read more posts by The Outlaw:
Super Cities and Charles Dickens
Giving Credit Where it’s Due
Independent Foreign Policy and Jetpacks
Of CEO Styles and Pedalling Wealth
Being Rankin’d and other tales from the Gulag Archipelago
Of History and Relevance
Humpty Dumpty and putting things back together again
Where’s Our Government?
Of Honeymoons and Little Men