Last week, The Opportunities Party was out with Action Station and the New Zealand Union of Students' Association to present a petition to Parliament to reinstate the postgraduate Student Allowance. It was taken away by the National Government in 2013, and during the 2017 election campaign the Labour Party promised to bring it back.
As a party championing research and evidence in policy making, The Opportunities Party knows how important it is to have high-quality research by New Zealanders, for New Zealanders, and postgraduate students are a key part of this.
Student Allowances are also key to keeping our education open to everyone and our educational outcomes equal and across-the-board, not just for some. This is just as important when it comes to postgraduate education as it is for all the education that comes before it. University is already dominated by people from rich families - we don't need to make that worse at post grad level.
One of our core volunteers was there to share her story on the steps of Parliament. Here's what she had to say:
I’m here today as a young woman in research, a postgraduate student, and a passionate advocate of our environment and New Zealand’s future.
I’m also from Christchurch, where we’re learning a thing or two about mental health, wellbeing and recovering from trauma.
I returned to post graduate studies a few years ago. Today, I study sustainable economies and economic transformations.
I’m trying to work out what we need to know to be the future country that New Zealanders, and the best of the world wants, and needs, us to be.
But postgraduate study has also helped me heal.
Several years ago I was staring down the barrel of chronic health battles and the prospect of a lifetime of welfare reliance.
As specialist after specialist told me to ‘do less’ and ‘scale back’ as the only way they could see to allow me to manage my symptoms, I became acutely aware how unemployable I now was.
My mind was sharp, my skills and experience relevant, and my sick-leave requirements untenable.
In an effort to find a pathway out of welfare and benefits I decided to use what I had left - my mind. I saw postgraduate study as something I could do that would meaningfully contribute to my society, and remind me I still had something to offer.
To me, it was a pathway to a much healthier mind, and away from the beneficiary system.
It would open up a research or academic career where no matter what my body did, there could be space for me to contribute to New Zealand’s future through research, and lecturing and academic work with young New Zealanders. I need my PhD to do that.
It won’t come as a surprise to everyone her that, yes, a PhD is hard.
It turns out that what’s harder is being a domestic PhD student in New Zealand. It’s bloody lonely.
Today I have the privilege of actually being a rare species - a domestic PhD student at Lincoln University. That in itself was a hollowing notion to realise.
When did being a New Zealander looking for ways to give New Zealand a better future through academic research become such an oddity?
Why was I having to explain this as an outlier to administrative staff?
Why did academic’s eyes light up simply because I was New Zealand-born and thinking about higher research?
It turns out, the only thing harder than being a PhD student in New Zealand, is being a PhD student with a chronic illness, disability, injury or trauma.
When I spoke to the Ministry of Social Development they told me that if I returned to studying, I would be ineligible for the vast majority of support available to me as an ‘unemployed’ person with illness dispensation.
If I was able enough to study, I was able enough for mainstream employment. This seemed illogical and able-ist in the extreme.
When I talked to StudyLink, they told me that the support available to students domestically cuts out once I try to study past Honours level. I asked one such StudyLink advisor how post graduate students were expected to support themselves.
They are expected to work in addition to their studies, or have savings accumulated. This means they expect post graduate students to be superhuman and work 80 hours a week to survive, or be rich.
Bureaucratic storm clouds loomed. I was going to have to go this alone. So I called my mum.
Today I am a PhD student trying to figure out the future for New Zealand because my mum and I are privileged enough that she can support me.
With her mortgage paid off and her amazing partner Graham on board, I am now living at home in my 30’s. We talk about how them helping me is like their ‘social service’, and it’s the only thing that keeps me able to do what I’m doing.
But it’s a dark joke. What about all the other New Zealanders who families simply can’t support their children like mine does?
What would a postgraduate Student Allowance mean to me?
A student allowance would have allowed me to manage my health and wellbeing symptoms and to do a PhD of the highest possible quality, making a full contribution to New Zealand’s research needs.
Instead, I’m fairly seriously behind schedule, and I’m drawing on family resources.
I have to hope it all turns out in the end. Just don’t talk to me about living in my own home or having a family.
But I’m here today to talk about what a Student Allowance means to New Zealanders who aren’t here and aren’t able to access postgraduate study.
The current system is exclusionary. If you need time and accommodation to manage symptoms, medication side-effects, mental health, any form of chronic illness, it’s economically impossible to be a PhD student.
Your mind may be strong, like mine. But you’re shut out of using it at postgraduate level currently.
If you’re unable to manage your health needs or physical limitation and complete a PhD while also working a 40-hour week, then you’re shut out of pursuing a PhD because you can’t afford to live while doing so.
Instead, how about a system where someone recovering from PTSD can use postgraduate study to understand their own recovery, and unravel unknowns for future sufferers?
Or someone battling with cancer able to spend their time in treatment, juggling side effects and specialist appointments using that unique insight into future palliative or regenerative care?
How about someone living with autism or ADHD using their amazing creativity in blue-sky research?
Under all these situations a postgraduate student allowance gives each of these potential students a pathway to contribute to New Zealand’s emerging research, by financially unlocking the feasibility of postgraduate study.
We have options to support someone in prison complete post-graduate study. Yet without a postgraduate student allowance, we don’t have any practical support for someone who carries physical or health limitations to do the same.
Government financial welfare support for people with health care needs is explicitly removed if they choose to study.
Outside of any argument about this being fair or ethical, it’s just plain stifling for New Zealand’s future.
What kind of innovation and social progress are we missing out on by restricting our post graduate study and research to a privileged few - not based on who can think well, but to those who through luck, can afford it?
And what message are we sending to those with illnesses, injury and disability? It is the one I got - that it’s better off if you stay quietly in the welfare system rather than using postgraduate study as a pathway out?
More broadly, by asking postgraduate students to put their PhD and Masters research alongside their working week we’re telling everyone that innovation and research just isn’t a priority.
It’s something that’s a sideline for New Zealand. It’s something you do if you and your family are wealthy, a luxury. Is that what we want to build New Zealand’s future on? Is that what we want to tell our children?
Because I come from Christchurch, I come from a city that is learning a lot about trauma.
We have the humbling challenge of learning how to support people in our community with PTSD, lifelong illness, and injury from earthquakes and massacres.
Our rates of depression, anxiety and mental health disorders are high. Wellbeing can be tough to come by for some in Christchurch.
What might be possible for the people of Christchurch as they rise from these ashes and recover? What if they, too, were able to contribute to solving New Zealand's great research challenges?
What might the rest of New Zealand, and the rest of the world, have to gain by broadening who is able to be part of our research and innovation institutions? This means to those with the unique perspective of illness, jury, disability or trauma - such as those from Christchurch.
While I study, I help run The Opportunities Party because I want to see real change for future New Zealanders so they don’t need to face the same challenges I have.
As a party of evidence-based policy, The Opportunities Party is front and centre of knowing how important it is that New Zealand has the best research and innovation available by New Zealanders, for New Zealanders, to guide us in the directions we want to go.
To me, the postgraduate student allowance is about opportunity. It’s the opportunity to secure the welfare and wellbeing of those who build New Zealand’s research.
It’s opportunity for those want to use unique lived experiences to advance our knowledge and innovation bases to not rely on good fortune as their only opportunity to do so.
What opportunities could New Zealand create if we open up who is able to explore the research to make them possible?
Please, give more than just the luckiest of us the opportunity for postgraduate study, because in the end, this is New Zealand’s opportunity we are reaching for.
The devastating lack of mental health support for vulnerable Mums and their babies has come under the spotlight this week after the Sunday programme looked at the issue in some depth.
Alarmingly, one in four new mothers will experience perinatal disorders as some stage between pregnancy and one year after giving birth, including depression, anxiety, post traumatic stress disorder, obsessive compulsive disorder and psychosis. One in ten fathers will struggle with depression after the birth of their child. Left untreated, these conditions can lead to suicide, which incredibly is the leading cause of death for mothers in the first year of a babies life.
This systematic problem needs addressing for the well being of mothers, their partners, their babies and our society. Poor mental health of parents creates economic and health costs for many years as it impacts an entire family. It simply makes sense to prioritise mental health of new mothers and their partners.
Like most things in healthcare studies repeatedly show that when it comes to the mental health of new parents an ounce of prevention is worth a pound of cure. Yet time and time again we invest in expensive treatment to deal with the issue when it gets serious, rather than nipping it in the bud early.
For decades, successive governments have been putting ambulances at the bottom of the healthcare cliff, trying to catch some of those who fall off, but barely addressing the underlying issues causing health decline in New Zealand. We need to start preventing problems before they happen.
The Opportunities Party realises that investment in mental health is a crucial part of prevention and evidence shows that prevention is best performed in communities in ways that suit that community, rather than through a one-size-fits-all top-down approach from District Health Boards.
In terms of new mothers' healthcare, through our Thriving Families Solution, The Opportunities Party will support families by giving $200 per week to all families with children under three years of age. Rather than telling families how to spend this money, this Unconditional Basic Income (UBI) would empower families to make more choices to support new mothers. Further support will be given to our most vulnerable families under this policy. Our Education policy prioritises the Early Years and is currently being updated with the aim of keeping families together in well supported, community based models.
More broadly, many of our policies will have a big impact on the underlying issues that determine our physical and mental health. We will reduce poverty through our Fair Tax Reform and Thriving Families Solution. Our Climate Action Solution and improvements to tenant rights will also ensure people live in warm, dry homes. Our Real Deal Cannabis Reform and Real Action on Alcohol will reduce harm from both these drugs, as well as investing money in drug and alcohol rehab and improving mental health.
The Opportunities Party is also working on a Mental Health policy in response to the Government Inquiry into Mental Health and Addiction. If you have an interest in mental health, watch this space.
The New Zealand Initiative Report Tomorrow’s Schools: Data and evidence is an excellent piece of research which will bust many parents' myths about which are "good" schools. However, the report concludes with some naive ideas about the way forward for our education system. Our education system fails the poorest 20% of kids, and this is unlikely to change by simply tweaking the school choice model by giving parents better information. If we are serious about reducing inequalities in our education system we either need to spend much more educating children from poor backgrounds, or ensure our schools are as mixed and diverse as our society is.
NZ Initiative Research
The research adjusts school academic performance for the background of the students at that school. It finds that on average high decile schools don't do any better job of educating students than low decile ones. The research suggests there are better and worse performing schools, but they are found everywhere along the decile spectrum. This is what many educators have suspected for decades, but finally they have the data to prove it. The New Zealand Initiative should be congratulated for contributing this finding to the public sphere.
This finding will shatter some myths long held by parents over what is a "good school". In the past the decile system has been used by many parents as an indicator of how good a school is. Higher decile schools have better academic results and so are seen as "good" schools. As a result everyone wants to send their kids there. But of course these schools have richer students going to them who are more likely to get better academic results before they even enter the school gates. What this research shows is that many students would, on average, do just as well if they went to their local school. There is no need for them to travel for an hour across town to the supposedly "good" school populated by rich kids.
In fact the worst performing group of schools were those in middle deciles. Interestingly, when you add parent donations to decile funding the worst funded deciles are 5 and 8.
Of course, this research is predicated on the idea that academic outcomes are the sign of a "good" school. There is growing evidence that this is no longer the case because the skills that are needed for the 21st Century can't be measured in typical academic tests. Nonetheless many parents are still interested in academic outcomes.
Anyway with this big caveat in mind, the research is sound. But things start to get wobbly when it comes to the policy recommendations.
What Does This Mean for School Choice?
The NZ Initiative then leap to the idea that this better information is all that parents need in order to make the existing model of school choice work. If you aren't familiar with the review of Tomorrow's Schools requested by the Labour led Government, then here is a brief recap: New Zealand has some of the most unequal outcomes in the world. This is mostly due to the income gap between rich and poor, but unlike other countries our education system does little to close the achievement gap. This appears to be partly due to the school choice model, which was supposed to reduce the gap between rich and poor but eventually increased it. The problem is that under school choice, all the rich families have flocked to schools in rich areas, leaving poor students in low decile "ghettos". The government funds low decile schools more to help them out, but that is outweighed by the extra resources that richer schools get from the students' parents.
The Tomorrows Schools review suggested that we need to move away from the school choice model by having School Hubs manage and fund schools (rather than getting individual schools to compete). The NZ Initiative reckons they have a better answer. All parents need is better information, and then the school choice model will stop creating school ghettos. Once parents know their local school is actually better than it looks, they will send their children there. There are several flaws to this approach.
Firstly academic outcomes is only one factor that determines school choice. Better information on outcomes could still result in a heavily segregated system.
Secondly there will still be schools that win and schools that lose from this approach. We know from the research that poor families are less likely to change schools in response to information, so we will still see richer families leaving some schools and sending them to other schools. Under the school choice model the poor performing schools lose funding and will find it even tougher to do well. This is the problem with applying business ideas to our schools. What we need to do is help all schools do better.
How Can We Reduce Inequality? The Two Big Choices
The first question we need to ask ourselves as a country is whether we are serious about equality of opportunity. Should the education system help close some of the natural gaps between the rich and poor?
Assuming the answer is yes, we have 2 possible ways forward that we should be debating as a nation:
- The first is to abandon the model of school choice and make our schools look like the society they are preparing students to live in. For starters that will ensure that the resources of richer parents are better shared around. More importantly students learn from each other as well as their teachers. Other students provide role models that impact on their self belief and aspirations, which in turn impacts on their life long learning outcomes. Students have a much better chance of keeping up with their peers if those peers are in the same class. So having classrooms that are a true cross section of society means that all children have a much better chance.
- The only way to reduce inequality under a school choice model is to ensure that we spend much more money on children from poor and troubled backgrounds. The last National Government started to investigate such a scheme (and Labour is continuing this work) but the amount of money that is spent on a child from a disadvantaged background has to be much greater. Basically it involves doubling the amount dedicated to reducing disadvantage in our education system. Where will this money come from? Higher taxes? Or are we going to take it from richer schools? If the New Zealand Initiative and National Party are so keen to keep the school choice model then this is the issue that they need to confront.
Neither of these options is easy, and both will have a lot of devils hidden in the detail. But that doesn't mean either should be dismissed on the basis of dogma. The "School Hub" model proposed by the Tomorrow's Schools review has been much derided, but it is simply one way to achieve the first aim of making our classrooms more representative of the society they are preparing children for. Perhaps we need to talk about whether that is actually a goal we want to see, before we work out how to achieve it.
Our education system does pretty well overall, but the performance of our poorest kids sticks out like a sore thumb. The best performing education systems overseas tend to do one of the two options above (or both), so these ideas can be made to work. Let's have the conversation.
It is time to declare a truce between farmers and environmentalists over agricultural greenhouse gas emissions. They aren’t as bad as we once thought. Yes they exist, but they should be able to be mitigated without wholesale changes to farming practices. It is time to focus on the real challenges to farming: fresh water and the rise of synthetic meat and milk.
Commissioner Upton’s Report
Commissioner Upton’s report on agricultural greenhouse gases came out last week, you can read a summary of it here. It acknowledged a long held uncomfortable truth that many people have felt around the way we think about agricultural emissions. His analysis suggests that they aren’t as bad as the official data tells us.
The claim that agricultural emissions make up half of our total emissions is based on a whole bunch of assumptions. You could easily tweak those assumptions and cut the number to a quarter or even less. That sort of margin for error should be pretty uncomfortable for anyone setting policy that will affect the way we use our land for the next century. I for one don’t want to see the whole country covered in trees to offset our emissions while not actually solving the real problem: fossil fuel use.
The conclusion of Commissioner Upton’s report is that farmers should be able to mitigate agricultural emissions amongst themselves. In other words they should plant trees, but only to mitigate agricultural emissions. Farmers should plant their low productivity erosion prone land and farm the productive bits. Job done. Federated Farmers should be working out how to operationalise this proposal immediately. The prospect of mitigating one of our biggest environmental challenges and keeping the cash amongst land owners should be incredibly alluring.
Of course not everyone is so happy, and they see this as letting farmers off the hook. This proposal was met with scorn by Greenpeace who claimed that Commissioner Upton was influenced by Big Ag, which is ridiculous. It’s the sort of histrionic crap that gives greenies a bad name.
I think environmentalists need to pick their battles. When it comes to land use we’ve always known that the real challenge is fresh water.
Fresh Water is the Real Challenge
We should seize this opportunity to put agricultural emissions to bed and focus on fresh water. Incredibly, we’ve been debating for some time whether our rivers should be swimmable or simply wadeable. The talkfest continues under this current Government. Whatever regulation they bring in, it will take years to turn our water quality around.
Now the crisis is impacting on our drinking water. The discussion about groundwater on RNZ this week was bleak; thanks to agricultural intensification New Zealanders can no longer trust that their drinking water is safe.
Sure, we can treat the water to take care of E Coli, although even that will be prohibitively expensive in some small sites. An even bigger concern is the growing levels of nitrate in groundwater, especially in Canterbury. Nitrate levels are dangerously close to World Health Organisation limits in many areas. There is also emerging evidence that those limits are probably too high thanks to the link between nitrates and bowel cancer.
Luckily many farmers are now showing that they can be just as profitable by easing off the intensity of farming and returning to being grass farmers. Their milk and meat output may fall but so do their costs so profit doesn’t suffer. In many places it may be possible to improve our environment dramatically without collapsing the farming sector. This change would also prepare us for the rise of synthetic meat and milk.
The Rise of Synthetics
As a young economist I will never forget the berating I got at the hands of preeminent economic historian Brian Easton. “Stop talking bullshit about the UK entering the EU being the start of New Zealand’s economic woes,” he said to me over a drink. “It all started 8 years before that – all because of nylon.”
Of course nylon had been around for a while but in the 60s the uses diversified, including carpets. In 1966 the price of wool dropped by a colossal 40%. Since then there have been many years where it is simply uneconomic to shear sheep, with the exception of the more lucrative merino. Successive governments tried to prop up our ailing sheep industry, almost sending the country bankrupt.
In this context the growth of synthetic meat and milk looks eerily familiar. While our politicians berate our national carrier Air New Zealand for serving the Impossible Burger, the technology marches on. Synthetics are a premium product currently for the environmentally or animal welfare conscious consumer. However the technology is rapidly improving and becoming cheaper to produce.
Sure, people will still want “real” meat and milk but that will become a premium product, with synthetics serving the mass market just as nylon does. The only way forward for our farmers is to move away from volume and focus on value. Part of that value will have to include providing “pasture fed meat and milk”. As we discussed above this will also help us live up to our clean green reputation.
This opportunity could be a win win all round and should be the focus of our agricultural sector and government regulators.
Party Leader Geoff Simmons has accepted the resignation of Dr Morgan from all roles, including the Policy Committee. It seems that politics is too similar to herding cats for his liking, and he can’t wait to sink his claws into his many other interests.
Dr Morgan started the party in 2016 to contest the 2017 election. His no-nonsense style and innovative, well-researched policy attracted followers from all ages. At the 2017 election, The Opportunities Party secured 2.4% of the party vote.
Party Leader Geoff Simmons explains the way forward for the party:
“The Opportunities Party is now truly a movement and will contest the 2020 election as a broad-based, member-led party. We will always be grateful to Dr. Morgan for the initial momentum he provided. Achieving his vision of a fairer, cleaner and more prosperous New Zealand for all Kiwis was always going to require more than the drive of one person. Some early policies have now moved into the mainstream, largely due to Dr. Morgan’s influence, but there are plenty of thorny issues that need fresh, future thinking.
New Zealand needs The Opportunities Party at the parliamentary table to address the larger, longer-term problems that most career politicians will not address. We want to thank Dr. Morgan for his foresight in creating the party and will honour his legacy by discarding irrelevant, outdated notions of political ideology and focussing on “Not left, not right - just doing what works.”
The Opportunities Party rebooted after the last election and its membership continues to grow - it lists around 4,200 core members and over 30,000 followers on social media. The Opportunities Party’s social media program garnered 5.5 million views within 6 months during the 2017 election.
These changes come at a pivotal moment which marks our transition from a start up political party to a broader based, member-led movement. The Party is now funded by our generous members and staffed by our skilled volunteers. This is how a political party should be - with large numbers of small donors rather than a few large (and potentially foreign) funders. A fundraising campaign is underway and the Board (Geoff Simmons, Donna Pokere Phillips and Matt Isbister) are working on a Campaign Strategy for 2020 which they will present to members in May, prior to the Annual General Meeting in August.
We call upon anyone that recognises that our current political system does not address important issues like the Environment, the New Economy and Fair Taxation to join us and become part of the movement.
The conversation continues at top.org.nz.
Party leader Geoff Simmons is an economist and author with experience in New Zealand Treasury, the UK Civil Service, as a consultant and heading up the think-tank The Morgan Foundation. He was co-Deputy Leader of The Opportunities Party and developed a lot of the policy used during the 2017 Opportunities Party campaign.
The callous murders on Friday 15th March are a national tragedy, and a symbol of many failures. Our hearts are with those dealing with the very human consequences of this inhuman act.
One such failure is our gun law, described in the Arms Act. The government has committed to making a raft of changes to prevent a tragedy of this nature happening again.
At the heart of this is whether people should be able to own semi-automatic firearms, many of which now on the market are based on assault weapons, such as the AR-15 used in Fridays massacre. The calls for an outright ban on semi-automatic firearms is loud, and seems well heard by the government.
Do we need semi-automatics in New Zealand? No.
A semi-automatic rifle was designed as a weapon of war. There is no war here.
Recreational hunters who say that that they are necessary must be pretty crap hunters. Duck hunters too would be affected as semi-automatic shotguns are popular, but do you really need it to enjoy recreational hunting? No. Not at all.
There are a couple of outliers to that – pest management is a good example where a firearm is a tool. But there is a big difference between a semi-automatic .22 used for rabbit control and a 5.56mm semi-automatic rifle originally designed for military purposes.
At the extreme end of the debate, the notion of a ban is the first step to a totalitarian state, from which semi-automatics are viewed as protection. That logic defies the notion that the intent of the firearms for recreational purposes and enhances the need to make sure these weapons are severely restricted, if not removed altogether.
But, as observed both in NZ and overseas, changes to gun laws are not easily achieved. We may well see a set of recommendations that are a tightening, not an outright ban. This would be disappointing at a policy level and devastating at a values level.
In this case, if firearms are tightened but not banned, what are some of the things we need to see to have some assurance that firearms are better restricted??
Closing the MSSA logic black hole. Under the current regime, the classification of a what is functionally an assault rifle is mostly determined by its cosmetic appearance. Make a change to the cosmetics, and what was previously a firearm limited to those that hold an E category license can now be assessed by anyone with a general A-category license. This is nonsensical and needs to be eliminated.
Managing Magazines. The firearm itself is only half the equation. It needs a magazine to function. There are limits to the size of a magazine that a rifle can have to be legal, but there are no restrictions on purchasing bigger magazines. A regime should consider magazines and other accessories that can “up-class” a firearm, and ideally restrict purchases of these accessories to holders of the appropriate class of firearm.
Registration. The current registration system is non-existent. Registration of all firearms needs to happen, regardless of a ban, so that the ownership of firearms is known. A registration should also consider registering ownership of key accessories such as magazines.
Graded licensing. Creating a more functional and risk-management based approach to different firearms types needs to be a cornerstone of any recommendations. A regime needs to be based on what particular class of firearm is functionally capable of, and manage risk accordingly, rather than what a particular rifle looks like.
In practice, this could be a specific class of license for semi-automatic firearms, subject to a higher degree of scrutiny. This graded classification model could also look to manage the number of firearms that can be legally possessed or traded
Exemptions for certain types of firearm could be managed through this, for example .22 semi-automatics – firearms that have a viable use case for things like pest control may remain available to A-class holders.
Ammunition. A firearm control regime needs to consider the procurement of ammunition. One of the major risks is illegally procured or owned firearms, which under any licensing regime would be undeclared by an owner. So, the regime needs to consider ammunition, and ensure that people are only buying ammunition for calibre of firearm they are known to own. That would be an immediate red flag to the police – this person has only registered that they own a .22, so why are they buying 5.56mm ammunition??
Gun Clubs. The role of gun clubs seems to have not been well understood by the broader community. A regime needs to consider the culture, environment and membership of these clubs on a more overt basis. Gun clubs are key to ensuring that license holders are acting as responsible owners of good character – we need to be sure that this responsibility is being met.
Again, a general ban on semi-automatics is the best overall response. This would be ideal but may not be politically possible for a government. The gun lobby in NZ is vocal, powerful, and for some reason or another, has been reasonably successful in the past at limiting the scope of change. That’s not to say it is impossible – Australia has previously implemented such a ban. But if 50 deaths are not enough to force change, then one must seriously question the mindset of those opposed to change.
What we do not want to see is a situation such as in the USA where any attempts to tighten gun laws fail and get caught in a partisan all-or-nothing proposition. We want change and we don’t want to see another tragedy unfold because we didn’t act.
The Tax Working Group Report: The Good, The Bad and the Predictable
Let’s start with the good stuff, and there is a bit of that, mainly around the environmental tax proposals. The Tax Working Group has acknowledged that the notion of a ‘circular economy’ has informed their recommendations.
The proposed changes to the Emissions Trading Scheme (to reduce carbon emissions) and congestion charging all seem positive. If done well they could help shift us to a sustainable economy by making polluters pay, and rewarding sustainable businesses. However, the devil will be in the detail. For example the revenue from the Waste Levy seems to have been poorly spent in the past, so we have to think carefully before we raise it further.
Congestion charging hasn’t been used yet, but is a much better alternative to petrol taxes to raise the money required for transport projects. By charging for congestion we can ensure that those using infrastructure under pressure pay more, encouraging people to change where and when they drive and help raise money for that infrastructure to be upgraded.
The concept of putting a price (not a tax) on water use and pollution is sound but has been previously ruled out by NZ First. This is bizarre when we are simultaneously talking about how to allocate a scarce resource and looking for funding to clean up our waterways. Surely water bottling companies, irrigators and electricity companies should be paying for the water they use. Similarly, polluters should be paying for the pollution they cause.
The one exception to the generally good environmental tax suggestions is the proposal of a fertiliser tax. This is a blunt tool. The issue of nitrogen is vastly different in different catchments. As the report notes, instruments based on outcomes are a superior approach.
With that comes a lot of bad stuff, particularly around the Capital Gains Tax. Top of that list has to be the impact on business. Apart from inequality and rising house prices, the key problem with our economy is that there is a strong incentive to invest in property speculation rather than productive businesses that create jobs and grow our incomes.
Unfortunately this proposed Capital Gains Tax will apply to business as well as property. The extra tax burden and compliance costs for business means that there is no more incentive to invest in business over housing.
Given these downsides to business, the least damaging option would be to apply this Capital Gains Tax (CGT) only to the treatment of land based assets (including farms). NZ First seems set to rule out including farms, leaving us with a CGT only on investor property. You have to ask if this is worth the bother.
The biggest concern in this scenario would be that it hurts the poor. Modelling suggests that house prices would fall a bit as some landlords sell up to first home buyers. The downside is that the rental market would shrink, and given that rentals have higher occupancy rates than “family homes” we could see rents rise significantly. Such a narrow tax will probably not raise enough revenue to compensate the poor for higher rents, so they would be worse off.
Some other problems from the CGT are likely to include:
- Exemptions for the family home, the family farm, rollover relief, reliance on valuations and deductions for improvements make for a complex system that will be costly to administer and provide gainful employment for accountants and lawyers.
- The revenue for government will be unpredictable, and could even turn negative in a downturn.
- Taxing on realisation (sale of the asset) provides an incentive to not sell the asset (business or house) which is bad for the economy. The concerns around cash flow motivating this approach are not consistent with other parts of the tax system (e.g. foreign shares and rates). We will talk more about this in coming blogs.
The Achilles Heel of this review has always been the Terms of Reference with the Labour led Government excluding the family home. Ultimately that will hamstring the effectiveness of any change.
We can see the likely effect of this tax overseas. Australia is second to last ahead of New Zealand in terms of housing affordability. Australia has a CGT excluding the family home. This is not even a second best policy, it is a second to last policy.
Excluding the family home excludes 3/4 of the value of our housing stock. A 33% tax on 24% of the market is an 8% tax. This may slow the rise in property prices slightly, but certainly not stop it. If anything there will be an increased incentive to invest in owner occupied housing because of its tax free status. This is called the "Mansion Effect", which we have seen in Australia.
As a result a Capital Gains Tax may slow the increase in inequality (depending on what happens with rents), but certainly won't stop it. Remember that housing - house price and rent rises - is the main driver of increased inequality in the last 20 years.
The Opportunities Party Fair Tax Reform provides an alternative that would reduce income taxes substantially (making 80% of people better off), kill off property speculation and encourage Kiwis to invest in businesses that actually grow our incomes. The key to achieving that is to tax all assets equally – including the family home.
We don’t need to tax capital gain, we need to end it.
Simon Bridges has hit out at the Green Party for their lack of progress on environmental issues, claiming National made more progress in Government. But they have also hit out at the recommendations of the Tax Working Group report's proposed new environmental taxes. This begs the question of exactly how National plans to tackle environmental issues without making polluters pay?
Was the Last Government Really Better Than This One on Environmental Issues?
National is trying to buff up its own environmental credentials by rewriting the history books of their last term in Government. To do this they are picking on the one area where they did better than the current lot are - the marine space. While he may be right on that count, the fact is that across the other big environmental areas - climate, fresh water, conservation and waste - National were behind the 8 ball. The Blue Green arm of the party have released a new discussion document but there are few concrete ideas in there as yet to claim they have real environmental credentials.
Of course he does have a point about the Green Party. This term has shown the problem of being shackled to the side of Labour. They have no bargaining power compared to NZ First, and so are unable to get any real wins. As a result we have seen little progress on substantive environmental issues other than those that were already in Labour's election manifesto.
Polluters Should Pay
What is more worrying is that National have come out swinging against the environmental taxes proposed in the Tax Working Group report.
Now there is plenty to debate in the detail of these proposals. Ideally they shouldn't be taxes, but rather 'prices' on our scarce resources. Where water or the right to pollute is scarce, we should use prices to decide how those scarce resources are allocated. This is basic economics that National shouldn't disagree with, except of course that it applies to their farming voter base.
There are also big questions over where the money goes. Ideally it should be used to repair the environment and reward businesses that are acting in an environmentally friendly way. That way the money raised stays in the industry and region. Environmentally friendlier businesses will also have higher profits to show for their efforts. These are "corrective taxes" or prices, and again they are pretty standard economic theory that National shouldn't be able to disagree with.
Those are all things to debate. However what we can't do is pretend that we can improve the environment without someone paying. Under the previous National Government it was the taxpayer that picked up the bill. The Opportunities Party believes that it is the polluter that should pay.
All environmental issues involve activities that impose costs on others. Unless we take account of those costs then we will have too many of those activities than is ideal. So the basic question is who is going to pay for these costs? If the polluter pays, then they have an incentive to reduce the activities that create the costs in the first place. Ideally they can do those activities in another way that creates fewer costs.
If the polluter doesn't pay, someone else has to. That someone else usually ends up being the taxpayer, or the environment. This is a worse outcome because there is no incentive to do things better.
Many other OECD countries have much higher levels of environmental taxes. They have shown that they can have successful economies by making polluters pay. If it is done well it encourages innovation, and that innovation can ultimately be sold and profited from. In short we have nothing to fear from making polluters pay.
It is a real shame that the debate about the Tax Working Group has focussed on the problematic Capital Gains Tax. The environmental proposals are worth looking at in a lot more detail.
There has been a lot of negativity from politicians about school children taking time off school to protest inaction on the climate change. Here are five reasons why The Opportunities Party is 100% behind it.
1. It is their future
The school children of today are the adults of tomorrow. They will be the ones that have to deal with the consequences of our actions (or inaction) today. They should rightly be concerned about the world we are leaving them. According to the World Economic Forum all the biggest risks the world is facing are directly linked to climate change.
2. They have no other voice
What other way do young people have of voicing their concerns? They have no vote, no other way of having their voice heard.
Many young people I know are immensely distressed with the problems that the world is facing. What point is there of studying and working hard when the world as we know it may end?
If there was ever a good reason to lower the voting age, climate change would be it.
3. We aren't actually doing anything about it yet
Prime Minister Jacinda Ardern claimed that there is less concern for protest here.
Sure, this Government has a plan to make a plan. That is better than the last National Government did - they only really started planning in their last term when Paula Bennett took over as Minister.
The trouble is that we haven't really done anything yet. And even getting a plan to make a plan has been painfully slow going.
The international Climate Action Tracker still rates New Zealand's actions as insufficient. We have nothing to be smug about, successive governments have done no more than fiddle at the edges.
4. We haven't even started talking about how to adapt
Aside from action to reduce our emissions, we have another massive challenge we haven't even started facing yet.
Regardless of emissions reductions taken here, our climate will continue to change. By how much depends on how quickly the rest of the world acts. Let's be frank - right now restricting warming to even 2 degrees looks unlikely.
We need to start planning for a changing climate. We need to be more self sufficient for energy. We need to reforest erosion prone land to protect it from extreme storms. We need to plan for rising sea levels. We need to work out what we will do when boats or planes of refugees appear on our shores. We need to start doing all that now, rather than leaving all these issues for younger generations to deal with.
5. They will learn something...
The concern from many politicians is that these students won't learn anything from a day off school.
I disagree. They will learn plenty about how democracy works: if you don't stand up and make your voice heard, you don't get anywhere. During my time in South America last year their culture of activism was evident. I even witnessed one school block off the roads for an hour to protest climate change on World Environment Day. I bet those students will remember that experience.
If nothing else, after this action the students involved will certainly value their vote when they get it. That alone has to make it worthwhile.
Let's stop treating them like kids. When it comes to future issues like climate change it wouldn't surprise me if many of them know more than the politicians.
There sure have been a lot of squeals from landlords lately. New rental regulations and the prospect of a Capital Gains Tax – both years away from implementation – have led to claims on the right that rents will go up to compensate. Of course this has led to retorts on the left that landlords make enough money and should be more worried about their tenants. As usual, both positions are glossing over the real point
A Capital Gains Tax – thanks to the exclusion of the “family home” will likely see some landlords sell up. House prices might drop a bit, before continuing their inevitable march higher – the Tax Working Group predicts increases of 3% per year. This drop will see a few more owner occupiers enter the market than would otherwise, but it will come at the expense of fewer rentals. Rents will rise as a result – helping the remaining landlords look to maintain the return on their asset they are losing through the tax.
All in all, the CGT would be a small bonus for first home buyers, but this comes at the expense of the worst off in society – those locked into renting. Given that renters tend to squeeze more people in the same property than owner occupiers do, the pressure on accommodation could also rise. A CGT would not be a win for the poor.
On the other hand tougher rental regulations are clearly a good idea. The toll of our cold, damp housing on the health of our growing children is massive. We know that insulation improves kid’s health and is worth the extra investment.
Of course the real long term solution here is our building code. We are quite simply building crap quality houses and we need to do better. This is the one hope of Kiwibuild – it won’t add much to the housing stock but if it can increase the benchmark for building standards that would be one positive thing.
The argument against improving the building code is the same as the argument against better rental standards: cost. But we already know that the long term cost in terms of energy bills and hospital visits easily justifies the short term extra cost of building (or retrofitting) decent places to live.
So what gives? Why are we so obsessed with cost? Isn’t there enough money around to give renters a decent house? Of course many landlords are able to afford to improve their properties. However, that won’t stop rents rising in the longer term.
The fact is that the biggest increase in the cost of both building new houses and providing rental accommodation is the price of the land underneath the house. Land is the one asset that has continually grown in value in recent decades – often without any improvement at all. It has proved to be the one of the best investments anyone investor can make.
Landlords have the right to make a decent return on the value of their investment. They are providing a service – they are a housing provider – and as long as they provide a decent service they deserve to be rewarded for that. If they can’t make a decent return – including the expenses and risk they face – they will sell up and invest in something else. As noted above that will push up rents anyway.
As land prices have risen year on year, it has been harder and harder for landlords to get a decent return through rent. Gross returns on rental properties have been usually around 3% - that is before expenses. Of course landlords have stayed in the game for capital gain from the higher land prices, but this isn’t sustainable. The more property prices rise, the greater the pressure to push up rents in turn order to make a decent return from rent.
The obvious solution here is to kill off the growth in land prices once and for all. Then landlords can focus on investing in their property in order to increase their returns. Instead of bidding up the value of land, new home builders could afford to invest in building better quality homes.
How do we do that? This growth in the price of land has happened largely because of our tax system. Land owners have benefitted from investing in land compared to other assets. This has pushed prices up in a neverending spiral.
A Capital Gains Tax as proposed won’t stop that spiral, largely because the family home is exempted. People will continue to landbank, but they will have an incentive to have their “family home” on that landbank.
The Opportunities Party proposes to drop income taxes by 30% and encourage people to invest in productive businesses, rather than speculating on land prices. We would do this by ensuring all assets – including land – pay as much tax as a bank deposit. The tax benefit of investing in land that has driven land prices higher and higher will disappear.
Under the status quo rents will go up. But don’t blame landlords. Blame our national obsession with making money off the value of land going up and up.