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Review of the 2017 Budget - TOP

Budget 2017 was a valiant attempt to play catch-up on a bunch of issues that we have refused to deal with for many years now. It was a good try but inevitably it fell short. 

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The Catch-up Budget

With a rosy set of financial forecasts, Steven Joyce could afford to give a little bit of something to everyone. It was the perfect election year lolly scramble Budget, continuing the deft politics that this Government is so good at. However, it did little to deal with Aotearoa New Zealand’s basic long-term issues. Let’s look at a few of the key examples – incomes, growth, public services, infrastructure and the environment.

Incomes & Housing

Around half of the budget surplus over the next few years has gone on changes to tax thresholds (worth $20 per week for anyone earning $52k or more), Accommodation Supplement and Working for Families. It is pretty sensible stuff giving a decent tax cut to middle New Zealand. Much of this is keeping the system up to date with inflation, which erodes benefits and pushes people into higher tax brackets as their income increases.

However, none of this is really dealing with the fundamental unfairness in our tax system. This is pretty easy to see when you compare the size of the Government’s tax changes - $2b per year – with The Opportunities Party changes which amount to $11b. Working people pay too much tax, while those with lots of assets don’t pay enough. We can address this loophole by making sure all assets pay as much tax as a bank deposit does, then we could cut income taxes by one third – that is an 8% pay rise. This policy would also restore housing affordability over time. None of the establishment parties are addressing this issue.

Finally, while the Accommodation Supplement increase will be welcomed by those who receive it, the evidence indicates it is pretty much a subsidy to landlords. Our approach to rental accommodation is in need of complete reform, rather than just incremental change –as we have outlined in our policy. On Morning Report David Slack pointed out that fundamental reform is needed to fix our housing problems. That is exactly what The Opportunities Party (TOP) is proposing.

Investing in Economic Growth

First up, it is great to see the Government talking about investing in predator control as a way to boost economic growth – after all nature, after our people, is our foremost asset. The $250m growth package is largely more of the same from Government – more R&D grants, more trade negotiations, more for the film industry and tourism infrastructure. It is good to see they are committed to growing the economy, but they seem to have run out of ideas and just seem to be responding to specific industries that are baying for more help (which is sometimes valid, sometimes not).

The real problem with the economy is our obsession with investing in housing instead of business. New Zealand has the biggest difference in tax treatment of housing and other investments in the world, and yet we wonder why everyone puts their life savings in housing. None of the establishment parties are prepared to deal with this fundamental issue that’s holding back our growth. Deal with this issue, and business will take care of itself.

Public Services

The investment in public services is welcome, but NZIER points out that it is not enough to deal with recent population increases.

The standout increase here is in healthcare, although most of the extra money is going to cover the landmark Disability Support Workers settlement. While this is great for those workers, the extra money won’t offer much of a boost to frontline services. The Government is giving a nod to greater prevention through bowel screening and mental health, but primary care has missed out. Most importantly, they are doing nothing about the big issues driving the demands on our health system; poor quality housing, poverty, and obesity.

The extra money going into criminal justice really shows the total failure of the current approach; doing more of the same will only lead to having to build more prisons.

Social investment

It is great to see more money going to support vulnerable children, but sadly much of that money will go to bureaucrats employed to tell people how to raise their kids. The evidence tells us that for the vast majority of parents the best thing to do is give them the money, because they will know what their kids need.

The Government has also responded to complaints around mental health. It is hard to know the size of the funding hole that exists in the system; the People’s Mental Health Report didn’t agree on a figure. However, we do know that addiction services alone are around $150m short so it’s unlikely that $50m extra for all mental health will do the trick.

Shamubeel Eaqub hit the nail on the head with his comments:

While the government has talked a lot about its social investment approach, it has allocated more money to building prisons, and subsidies for film-makers than its social investment approach package.

In fact, there is also nothing in this Budget to lift the incomes of the most vulnerable groups in our society. Beneficiaries will not get the benefit of any tax cuts and increases to Working for Families are mostly offset by changesto the rate at which people lose those benefits as their income increases (worsening the poverty trap). 

We know that half of all families with newborn children will  experience at least a year of poverty, 1/4 for 4 or more years. This is why The Opportunities Party (TOP) has targeted this group through $200 per week with children under 3 and free full time high quality early childhood education for 3&4 year olds. 

Infrastructure

The lion’s share of infrastructure investment is going into earthquake repairs. In addition the Government is making a long overdue investment in infrastructure to help the country deal with all the tourists and immigrants that are here. This is welcome, but as NZIER point out this spending is mainly a catch up after years of under-investment in the face of strong population growth. In other words, it is really too little, too late.

New Zealand needs a massive investment in infrastructure. What is holding us back? The Government is obsessed with paying down debt, and the reason for that is because they know huge bills are looming with health and superannuation. If we can get superannuation more sustainable as we are proposing, this would free up huge resources to invest in the infrastructure that we need.

Environment

The environment completely missed out in this Budget. There was nothing for water quality, nothing for climate change. There was some additional money to help manage our fisheries, which will hopefully improve the science around the wider environmental impacts of fisheries. However, some of that money is helping the Ministry of Primary Industries monitor the fishing industry, and you’d have to ask why the industry isn’t paying for that investment.

If there is a loser in the 2017 Budget, it is certainly the environment.

In all there is a lot of good stuff in this Budget. But most of that is an attempt to catch up with almost a decade of not dealing with the basic issues facing our society.

As a country, we have to move from dealing with the obvious issues – putting the ambulance at the bottom of the cliff – and start dealing with the fundamentals. If we dealt with the basics in a cost neutral way like The Opportunities Party (TOP) are proposing, then we could start using this looming budget surplus to do something really innovative, far-reaching and long-lasting. We’ll be talking about some of those ideas in coming weeks.

 

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    • lesley haddon
      commented 2017-06-03 06:49:50 +1200
      Paul Young’s article about Trump pulling out of the Paris Agreement. I have been listening to National Radio the last few days. The optimists say he’s going to be a one team president. Even though millions more Americans voted Hillary she was defeated. The system must be broken. It was also said it is the private sector driving the change for sustainable energy. A sympathetic government would help but politicians don’t want to go there. One analyst thought Trump had bowed to powerful lobbiests representing the status quo. Finally – your photo of Trump says it all. SAD
    • lesley haddon
      commented 2017-06-02 16:29:52 +1200
      Just been rung by a Greenpeace rep. She started to tell me how I could help save the environment. I said I am going to do my bit by voting for Gareth. She said hummmm, then the line went dead. What was that about?
    • Mike Rumrich
      commented 2017-05-31 15:13:46 +1200
      A general comment regarding what Make said below ref to the 4 % or 5 % : I think it s important for now that Kiwis wake up to what s really going down in this country; No we don t have to be afraid of husbands, brothers, children etc being bombed when they go out or being arrested by corrupt police or security forces as in other countries and we don t have a DT in the making anywhere in the political landscape (well ?) BUT : Wasn’t it the complaicency of the voters / population in the last 20 years which ash kept the existing / ruling politicians in place? Having absolutely no vision for a nation which has all potential to be one of the "greatest"in the world (NO not in the DT meaning of words !) and which has "clever"minds everywhere (look at the bicycles they ve put into the new AC 52 in the Americas Cup .. could go on and on. So lets start making a move … even 4 % or 5 % is a lot to initiate a change. And as Lesley has said rightly: It s for our children and grandchildren, not for us (BTW I m 60 years old and could just say “What the heck”)!
    • Mike Rumrich
      commented 2017-05-31 15:02:42 +1200
      Just read the latest article in the Herald about what state our environment is in; not an article written by a “lefty” or a “greeny” but by a commission put in place by the current government which has allocated peanuts in their latest budget to address the environmental issues; a government which ignores the obvious signs and hopes that by 2050 the problems will have gone away (magic !!).

      We should not forget that our environment is a multi million dollar business for many Kiwis, if the situation gets worse a lot of people will either loose their job or have to suffer in other ways.

      And that s the only environment we and our children have !

      NZ Herald:

      Four in five of NZ’s native birds ‘in trouble’, environment watchdog warns in damning report.
    • Paul Elwell-Sutton
      commented 2017-05-31 14:36:07 +1200
      If we don’t re-create an inclusive society we’ll end up with a demagogue like Trump or Hitler as PM, and a fascist state.
    • Mike Rumrich
      commented 2017-05-31 11:18:47 +1200
      Again just reading all of above and the comments makes so much sense, hope the election will show that NZ people have understood what the current political partys in the government are standing for …NOT the people. We need to initiate changes now if we want to ensure that our children, the young and he older ones will have a livable country to raise their children in and can enjoy the country as much as we are doing it at the moment. Once we are gone our children still will be here and will have to deal with what we have handed over to them.
      Change Now !
    • Paul Elwell-Sutton
      commented 2017-05-31 10:50:16 +1200
      Hear, hear!
    • Peter Carey
      commented 2017-05-31 10:48:04 +1200
      If TOP is to be successful this year then attacking the government on environmental issues is fundamental, especially water. This government, like all National governments, is still locked into a 19th century growth model where the downside of intensification is to be sorted at some future time when the public will be asked to stump up for the clean-up (not the polluters!). The downside of our image being ruined by our degraded lakes and rivers doesn’t really seem to worry them but the middle class and wider public will if you motivate them.
    • Lee Winger
      commented 2017-05-29 13:02:24 +1200
      Infrastructure – hell yes!

      Re the accommodation supplement: do away with it, bit by bit, over 5 years. Give tenants the right to pay the equivalent of their supplement less on their rents without being considered a default on the rent, in combination with deleting negative gearing. Sit back and watch property prices drop. Kill two birds. If(when!) the landlords and banks kick up a stink, the correct response is “tough s**t!!!”
    • Oliver Krollmann
      followed this page 2017-05-29 12:27:50 +1200
    • Paul Elwell-Sutton
      commented 2017-05-29 11:18:46 +1200
      Spot on assessment of the budget. Underwhelming and formulaic were the words
      which came to my mind. And nothing for the environment and
      conservation, which underpin our economy, demonstrates the governments
      alarming detachment from reality. A budget giving just enough to
      influence the swing vote in the government’s favour, while not scaring
      off National’s key supporters; the business and farming sectors. Of
      course, conservationists and environmentalists don’t vote National
      anyway….
    • Greg Mann
      commented 2017-05-27 12:42:26 +1200
      Agreed, tinkering around the edges (addressing tax bracket creep, fine, but is that the extent of your thinking?), nothing bold around treatment of income from labour vs capital; how we can earn our living without further environmental degradation, the “war on drugs” approach is deeply flawed, etc. Sorry, I am beginning to rave here.

      Labour still seems focused on fighting the battles of last (or even the 19th) century and can’t bring themselves to acknowledge (maybe they don’t realize??) that (for example) the nature of work has fundamentally changed. They seem to be doomed.
    • Tristan Penman
      followed this page 2017-05-26 18:23:19 +1200
    • lesley haddon
      commented 2017-05-26 17:55:33 +1200
      If Gareth does nothing else than getting people talking about the issues then it’s got to be good. Don’t give up hope there has to be change. Not for me but for my beautiful grandchildren.
    • Mark James
      commented 2017-05-26 17:41:39 +1200
      Just that Gareth doesnt want to be a politician. Do TOP candidates? There doent seem to be a course of action. Like for example if TOP gets 4% what will become of it? 5% whats the plan or preferences. Gareth has a distain for Winston so what will happen there? Gareths says hes happy if National or Labour adopt his policies but there doesnt look like theres a chance of that.

      Maybe all will become clearer closer to election but currently I feel as though theres something missing.
    • lesley haddon
      commented 2017-05-26 17:29:59 +1200
      What do you mean by lack of enthusiasm. Please explain.
    • Mark James
      commented 2017-05-26 16:35:51 +1200
      We have record immigration the Christchurch rebuild and massive growth in debt both public and private.All this and only small amount of real growth. Auckland house prices have doubled and traffic there is now heavily congested.

      There was no innovation or direction from this national government in their first budget with money to spend. Its just keep bringing in more people mainly into the overcrowded Auckland and the rest we will fix as we go.

      The sad thing is Labour arent offering anything wildly different or nothing that really separates them form National.

      The TOP party does have exciting new policies but nothing has led me to believe that theyll reach 5% and the lack of enthusiasm from Gareth in particular has left me feeling a bit sad about the coming election.

      We need an economic revolution not $20 a week!!!
    • lesley haddon
      commented 2017-05-26 15:59:02 +1200
      Once again National has turned its back on global warming. Nothing else matters in the long run. The old boys have got to go.
    • Mike Rumrich
      commented 2017-05-26 15:26:52 +1200
      Excellent article, down to the point of what s really wrong, naming the issues and offering solutions.
    • Katharine Moody
      commented 2017-05-26 13:18:57 +1200
      Couldn’t agree more. Does TOP support tax brackets being automatically inflation-adjusted? It seems to me not only more equitable/fair – but it would also end this ridiculous ruse about election-year “sweeteners” (which to my mind they are nothing of the sort, rather they are more: ’We’ll now pass on what you rightfully deserved years ago, only without back pay’).