RAM BACKGROUNDER FOR SELECT COMMITTEE

29 July 2009 Questionnaire for petitioner 1. What remedy are you seeking? "Remove GST tax from all our food" 2. Advise if you have approached the relevant Minister or Prime Minister (where the petition results from Government or departmental practices). What was the outcome of such an approach? The petition was presented to Parliament on October 3, 2008. The then Prime Minister, Helen Clark, had earlier responded through the media stating that removing GST from food would be "too complicated". The Finance Minister, Michael Cullen, declared via the NZ Herald that, "the Government will not change the GST system". And Revenue Minister Peter Dunne likewise opposed calls to scrap the tax on food and defended the "universal application" of the current GST system in the media. Peter Dunne, of course, remains Revenue Minister in the new government. He has publicly reiterated his opposition to removing GST from food several times this year. The current Finance Minister, Bill English, has also ruled out removing GST from food through the media, as has Prime Minister John Key. The only party represented in the current Parliament to support this remedy has been the Maori Party. Given the public consensus among the "relevant ministers", what would be gained by private approaches to them? Among the tens of thousands of grassroots people spoken to by petition collectors, there was understandably a strong sense that "we don't count", "we are invisible" to the "corporate politicians". Better to have a discussion of the petition in a public forum, such as this select committee, where an independent-minded MP might reach their own conclusions. 3. Outline why you are petitioning Parliament. Identify any relevant responsible statutory bodies that may have been approached in relation to your petition. Include results and/or any reviews supplied by these bodies. "Rising food prices" were headline news in early 2008. It was a global phenomenon. Dozens of countries saw food riots, price controls on food or both. Here in New Zealand, "food basket to the world", the phenomenon was experienced as increased hardship and worsening public health for grassroots New Zealanders. These are the reasons why, in February 2008, RAM – Residents Action Movement decided to initiate the petition to remove GST tax from all our food. This remedy is a simple step that the government could take quickly to give relief to struggling families. For the year to December 2007, Statistics NZ reported that food prices rose by 5.4 percent – well ahead of inflation. The strain on household budgets was reflected in the media. The number of references to "food prices" in New Zealand based on-line news sources catalogued by Google, for instance, rose steadily over the 12 months from February 2007 to reach a level ten times higher by February 2008. In the 2008 calendar year, food prices rose even faster – 9.1 percent, according to Statistics NZ. These official figures for overall food prices, however, under-estimate the impact on the grocery bill for grassroots people. The NZ Herald surveys the cost of a trolley of basic supermarket foods. In April 2008, it found the price was 25 percent higher than a year earlier. Some staples like butter, cheese and some varieties of bread had more than doubled in price. These facts were behind the news headlines about "pain at the checkout". And they are one reason why we are petitioning Parliament. The other reason is the impact on public health. Changes in the health of a population – like climate change – are gradual. In the short term, they can be hard to detect. But like climate change, once under way they are hard to reverse and potentially catastrophic. Early signs of changing dietary patterns and nutritional status of the New Zealand public were reported by researchers at Otago and Massey Universities in August last year. John Birkbeck, Professor of Human Nutrition at Massey University, said the increasing costs were forcing people to choice between good food and other basics such as fuel and rent. Professor Jim Mann of Otago University said the rising food prices show it is time the Government looked seriously at removing the GST on food to make healthy choices more affordable. The Public Health Association and the National Heart Foundation both called for GST to be removed from the nutritious basics of the New Zealand diet – fruit, vegetables, milk. More than a year after the petition launch, its relevance is greater than ever. Earlier this month, the University of Otago Nutrition Department published its annual survey on the cost of a weekly grocery shop in the five main cities. "This year the survey found the rise was at least double that of other years", reported the Sunday Star Times. Associate Professor Winsome Parnell "said the high price of food, coupled with the recession, could have long-term impacts on public health". The bodies we chose to approach in relation to this petition are those most closely involved with the well-being of grassroots people. The result was active support from a wide range of organisations, from the Maori Party to Grey Power Associations, local body politicians to Salvation Army churches and Christian social service organisations, trade unions to residents coalitions. Views expressed by these bodies are too numerous to include in this questionnaire. A number of bodies and public figures, however, have spoken out against the petition. Among these opponents, a handful of common objections have been raised. Some of these will no doubt be discussed by the select committee. 1. Removing GST from food would be "too complicated". This objection was answered in a press release by Maori Party co-leader Tariana Turia on 29 April 2008: “The Maori Party has welcomed the call for a wider debate about removing GST on food, sparked off by the latest grim report from the Child Poverty Action Group, 'Left Behind'. "Desperate times call for bold responses – and that is what the public is wanting – not policy cowardice" said Mrs Turia. "We need to be looking at the big picture – about how we can improve the health and well-being of our most vulnerable citizens, now". "And yet what we get from Labour and National is that they have ruled out even talking about dropping GST from food with the excuse that it may be too 'complex' or 'difficult to implement'". "What utter rubbish" said Mrs Turia. "Since when have good ideas been squashed because they may involve a bit of tricky policy thinking?". 

 "Being administratively challenging is not a good enough excuse to avoid being socially responsible" said Mrs Turia. "If there is a will, there is a way". 

 "National and Labour need to stop thinking up reasons why not and get to grips with the urgent crisis facing this nation – how the social and income inequalities are damaging our children". 

 "We are not interested in playing a game of political point-scoring, heaping blame on the policy failings of the 80s and 90s – our focus is about investing in the future of this nation" said Mrs Turia. "If we are serious about eliminating poverty, and caring for the well-being of our children, we must listen to the good ideas of the people and be prepared to do something about it". 

 "If it is so difficult, perhaps officials could talk to their counterparts in Australia or Britain to see how they have been able to achieve the goal of removing GST from food" ended Mrs Turia. 2. Sellers wouldn't pass on GST cuts as lower food prices if the tax was removed. While sellers have a degree of flexibility in regard to managing their profit margins, they are not a law unto themselves. Customers ultimately dictate the course of a business, and New Zealand has a very competitive retail environment. If GST-off-food became a reality, Kiwis would not tolerate retailers or their suppliers not removing the 12.5% tax on their food items. There would be a mass exodus to sellers who didn't hike their prices, forcing the others to retreat. 3. Removing GST from food would deliver a one-off benefit which would be quickly eaten up by rising prices. Removing GST from food provides a permanent benefit. Prices will always be cheaper by the amount of the GST than it would otherwise be if this 12.5 percent tax remained. In fact, as food prices rose over time in line with general inflationary trends, the amount of the benefit of removing GST would grow in value. 4. There are other options the government should consider to deal with rising food prices, like raising wages, benefits and pensions so people have more in their pocket. Why is this a reason not to remove GST from food? For those who support these options (including RAM), wouldn't it be better to have GST off food as well? 5. Lost GST revenue would impact on the government's ability to fund public services and welfare payments, and/or credit-worthiness during the current economic crisis. The cost of removing GST from food was estimated at "around $2 billion" by respected NZ Herald political correspondent John Armstrong. This is substantially less than the $3.3 billion in personal tax cuts (which benefit the wealthy more than the rest) made by Labour and National in October 2008 and April 2009. Although the Budget deferred tax cuts scheduled for 2010 and 2011, the Finance Minister has since said there could be room for further tax cuts in the medium term. But rather than further reducing the top tax rate, New Zealand should move away from the GST flat tax, since it is so unfair to low-to-modest income Kiwis. The poorest person in the land pays exactly the same amount of GST on a litre of milk as the richest person. GST is the product of Rogernomics and the whole Business Roundtable agenda. We need to return to progressive tax systems where the rich pay a fairer share. RAM, as the initiators of the petition, simultaneously promoted to petition signers the idea of a Financial Transactions Tax to make up lost revenue and capture greedy speculators in the tax net which they now escape under GST. Given the role of speculation in the financial sector in destabilising the economy and creating the current crisis, this idea has even more merit today. I look forward to hearing the results of your deliberations. Grant Brookes Chair, RAM – Residents Action Movement grant.brookes@ram.org.nz