Gordon Campbell: On the trade-offs in the Budget

21 May 2010

Raising the level of GST – which will hit those on low incomes the hardest – and offering in compensation a package of tax cuts that will reward those on high incomes the most, is a very strange definition of fairness. Yet fairness and virtue have been central to the spin on Budget 2010. Finance Minister Bill English has been at pains to present his Budget 2010 package as being all good things to all good people – an elixir that will contain a reward for effort, be motivational to all and fair to everyone.

The new income tax rates that will kick in on 1 October, English explained by way of example, will offer an ‘incentive’ for those who mightn’t otherwise decide to work that extra hour of overtime. (On Planet English, everyone is in work and has the luxury of doing overtime, or not.) Lets put to one side the fact that wages for many are so low that people need to work overtime – when they can get it – to make ends meet. The wider reality is that Budget 2010 will cement in place our existing levels of income inequality, or worse. English explicitly recognised this outcome, but portrayed it in benign, or neutral terms. The income tax cuts, he promised, “will more than offset the rise in GST – and low, middle and high income earners will broadly receive the same proportionate increase in disposable income.”

National government to borrow $40 billion over 3 years

TVNZ Press Release 22 March 2009 Prime Minister John Key has unveiled a new economic initiative to borrow $40 billion to help NZ through the recession and believes we will come out of it “reasonably aggressively” in a year’s time during an interview with Political Editor, Guyon Espiner this morning on TVNZ’s new political show Q+A. Points of interest: - PM said Govt would borrow $40 Billion over next 3 years - PM refused to commit to 2010 & 2011 tax cuts - PM believes NZ will be coming out of recession “reasonably aggressively” in year’s time after 2-3 quarters of negative growth - Treasury estimates tax cuts will mean a 5% reduction in Government revenue See transcription of full interview at http://www.scoop.co.nz/stories/PO0903/S00241.htm See also It’s Time for a New Monetary System for another possibility to government debt.

National moves to cut government spending

The contradiction between all the talk of “economic stimulus” and the realities of declining tax revenue in a recession hits home. Bill English, National's finance minister, is actually preparing to slash government spending – but the rich can have their tax cuts. What will this mean for the provision of education, health and welfare services? How long before the National government is deeply unpopular? And what will the alternative be? And hasn’t gambling the future retirement income of workers on the world’s sharemarkets been a disaster. What remains of the SuperFund should be brought back immediately to NZ and invested in sustainable and socially beneficial enterprises.

Treasury: Effects of recession could last 15 years from TV3 News 25 Feb 2009 Treasury officials believe the current recession could affect us for 15 years. Finance minister Bill English has called for Government department heads to cut spending, and has joined John Key in hinting that the New Zealand superannuation fund may be tampered with to find extra dollars. "Treasury has produced deficits and growing debt for 15 years, and as I have said, that is unacceptable for us," says Mr English. In the last week English summonsed more than 30 Government department heads to the Beehive with the message to cut back and get real. "I want to dispel any notion that CEOs may have had that this will blow over, as some of them said to me," he says. "It won't blow over." The Government needs money, and it is looking at stopping or cutting back the $2 billion it puts away every year into the Superfund to pay for the future costs of national superannuation. Mr English has until now been silent on the issue. Every dollar the Government currently saves in the $12 billion fund is borrowed money, and the fund is losing money big time. "We have to look at whether we're happy to have $5.5 billion of losses," says Mr English. "It actually wipes out two years of contributions." Labour set up the scheme, nicknamed 'the Cullen Fund'. Labour leader Phil Goff is urging National not to touch it. National says entitlements to superannuation won't change, but Labour is sceptical. National is also refusing to put its tax cuts on hold, despite some saying only the rich benefit and it is the poor who need them. "We are committed to going ahead with the April 1 tax cuts," says Mr English. Mr English is a man under pressure, and given the outlook, it won't ease for sometime.

See also:

• Gordon Campbell on "nice guy" Key and National's pitiful response to the global economic crisis
• Building a mass movement for tax justice

Comprehensive plan to eliminate poverty needed -­ Maori Party

Some good ideas from the Maori Party on how to tackle poverty in New Zealand. RAM's demand to remove GST from food has been taken up and they're calling for the first $25,000 of income to be tax free. Combined with their call for other sources of government revenue to be investigated - a capital gains tax and a bank transaction tax - there policies are looking to shift the tax burden off low and middle incomes and on to the rich and corporations.

Tariana Turia, Co-leader Media Release 26 May 2008 Michael Cullen’s review of assistance for beneficiaries is just tinkering with the design of the poverty trap, it is not a strategy to eliminate poverty, says Tariana Turia, Co-leader of the Maori Party. “It’s another sign that the government responds to polls, but not to people in distress,” says Mrs Turia. “The situation of people on the lowest incomes, including benefits, is getting worse very quickly. The government was too slow to respond with the budget. Now it¹s talking about a band-aid solution, to stop the bad PR it’s getting.” “The kind of help that Dr Cullen is offering beneficiaries will simply keep people alive in the poverty trap ­ it won't get them out of it.” “What’s needed is a comprehensive strategy, driven by a belief that poverty is unacceptable in the midst of plenty, and it must be eliminated,” said Mrs Turia. “If they don't believe it, then change won’t happen.” “The high price of dairy products means the poor have to go without, while industrial farmers become millionaires. Our food prices are following a global trend. People overseas are starving.” “Our people will starve too, unless we tackle the systemic causes of poverty,” she said. “Poverty is not created by the poor.” The Maori Party says:

• Provide a universal benefit for parents raising children. If families are already well off, recoup the benefit from tax on higher incomes. (Universal benefits reach the neediest families most effectively.)
• Set a baseline for poverty at 60% of the average wage, and a deadline of 2020 to eliminate child poverty.
• Exempt the first $25,000 of income from tax.
• Raise the minimum wage to $15 per hour.
• Remove GST from food. (The government says this would make the tax system too complex, but that argument hasn't stopped them granting all sorts of exemptions from the Emissions Trading Scheme.)
• Investigate other sources of revenue ­ capital gains tax, bank transaction tax.

“It is deeply ingrained in New Zealanders to care about te pani me te rawakore, the poor and vulnerable. But the government is listening to lobbyists for the wealthy elite. A bit more emergency assistance for beneficiaries will not get to the root of the problem.

There has to be a significant change of attitude towards redistribution of wealth through the economic system, and asking what kind of society we want,” said Mrs Turia.

Tax cuts and the Budget - Hone Harawira

"I am surprised that the so-called Labour Party - the so-called party of the working class, the party that is supposed to represent the interests of those in need - could talk about an issue as important as reducing the price of food, and say that the Government is not going to take GST off food simply because it will be an administrative nightmare."

Maori Party MP Hone Harawira speaks his mind in parliament on the Budget and tax cuts. Thursday 22 May.

Kia ora tatou e te Whare.

I do not often support the Employers and Manufacturers Association in this House, but when it comes up with the comment "Was that it?" about these tax cuts, I absolutely support that comment.

The difference is that I am talking on behalf of the poorer people in this country. I am talking on behalf of organisations like the Child Poverty Action Group. I am talking on behalf of the Salvation Army. I am talking on behalf of all of those social service agencies that have been calling for some real, basic relief for people in need.

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Tax cuts and the Budget - Hone Harawira

Maori Party MP Hone Harawira speaks his mind in parliament on the Budget and tax cuts. Thursday 22 May. Kia ora tatou e te Whare. I do not often support the Employers and Manufacturers Association in this House, but when it comes up with the comment "Was that it?" about these tax cuts, I absolutely support that comment. The difference is that I am talking on behalf of the poorer people in this country. I am talking on behalf of organisations like the Child Poverty Action Group. I am talking on behalf of the Salvation Army. I am talking on behalf of all of those social service agencies that have been calling for some real, basic relief for people in need. The fact that both ends of the scale can be screaming out for assistance and getting nothing suggests that this Budget is going nowhere for anyone. I am talking about food, for example, and the call for GST to be taken off food. The response of the Prime Minister is that it would be an administrative nightmare. Hello - an administrative nightmare? We would be happier to have people starve than to bother to do the paperwork to take GST off food. That is insulting to the population of this country. I am surprised that the so-called Labour Party - the so-called party of the working class, the party that is supposed to represent the interests of those in need - could talk about an issue as important as reducing the price of food, and say that the Government is not going to take GST off food simply because it will be an administrative nightmare. Then on top of that we find out that Australia has done it - it is not too hard for Australia. Canada has done it - it is not too hard for Canada. Why can we not do it? At a time when this Government admits that there is not a lot else that it can do for the poor, a simple step would have been to take GST off food. Sure, there are all kinds of arguments that we should be looking at non-processed food etc., etc., but let us get there eventually. But the simple call to take GST off food would have lifted a weight off the families in greatest need in this country. This Government had the opportunity to do it in this Budget, and it chose not to because it would have meant more paperwork. For anybody to assume we cannot do it because of too much paperwork is an insult to the people who have voted Labour for so long, an insult to the people most in need in this country, and an insult to the intelligence of New Zealanders. I am not a great fan of Labour, but I saw something from John Tamihere, a former Minister, apparently. He made a comment in the paper that if the Government wanted to connect with the voter, it could start with something as simple as saying that people's first $5,000 would be tax-free. The Maori Party thinks it should actually be $10,000, but $5,000 is a start - the first $10,000 tax-free would be great. That does not mean anything to people in Parliament. I am probably the lowest-paid guy in Parliament and I am getting $125,000. That is bucket loads of money where I come from. That is more money than I could ever contemplate making; it is more than twice as much money as I ever made before. Taking the tax off the first $10,000 is kind of meaningless to me. But to a family whose total income is $15,000 it is a hell of a change. It is a huge change. It is an opportunity for them to actually do things for their kids at school, to buy their children a pair of pants instead of having their children come to the school - I have seen this - wearing pants that they must have had handed down to them from their granddad. It is really saddening when that child stops coming to school. When we track down that child's parents we find out that the reason the child cannot come is that he or she loves doing kapa haka but cannot afford to go away on the kapa haka trip, and the parents are embarrassed about it so they do not let their child go to school. It is simple stuff; it is not rocket science. If we take tax off the first $10,000 earned by every New Zealander we will create the opportunity for everybody to benefit, and most of all those in most need - those at the bottom of the ladder. At the moment those at the bottom of the ladder are in desperate need, not because I am saying so or because the Maori Party is saying so but because everybody is saying so. Every economic commentator in the country is talking about how dear the basics of life are, and, for example, how costly milk is. I do the shopping in my family, and I have watched it rocket up. When I came into Parliament, milk cost $2.05 at our local Pak 'N Save; now it is $4.15. It has gone up by more than 100 percent. Those are the basics of life that we should have been trying to address in this Budget, but they have been completely ignored. What happens to the people at the bottom? They will get $12 in their hands. Well, that is two litres of milk, a little tub of butter, and one loaf of bread. That will make a difference at the end of the week - not! This Government had the opportunity to signal that even in times of genuine stress for the whole country it would make a genuine commitment to those at the bottom, but it has chosen not to do so. I congratulate the Green Party on winning that fifty million dollar retrofit for all of the State houses. I know that heaps and heaps of my whanau will benefit from that, and I congratulate the Greens on pushing that and on the fact that it has come up in the Budget. I also thank Labour for going ahead with that. That is a really cool one. I would also like to thank Labour for putting up that twelve million dollars for the Maori nurses. I think that is amazing. That is awesome. That is fantastic. I was also going to congratulate Labour on putting seventeen million dollars into Maori wardens, until I did a bit of a check and found out that it stole seven million dollars from Te Puni Kokiri to pay for it. The other ten million ain't coming next year; it is spread out over the next four years. Folks, Budgets should be based only on one year. We can have a projection, but let us be honest: will this Government be around to spend the rest of it? No, it will not. It is $2.5 million, and that is all it will be - that is all that the Maori wardens will get. When I talk about kohanga, I am talking about Maori-specific money here. How much will kohanga get? Nothing. How much will kura kaupapa get? Nothing. How much will wharekura get? Nothing. How much will wananga get? Nothing. I am a member of the Maori Party. It is our role to defend Maori rights and advance Maori interests for the benefit of the whole nation. This Budget destroys all of the things that we have wanted to achieve over a period of I do not know how many years. There is not a heck of a lot going on. We support absolutely a bottom-line philosophy of ending child poverty. We had the opportunity here to do it. This Labour Government had the opportunity here to do it. It chose not to do so, and at a time when it has been running surpluses of more than $6 billion for the last five or so years. The total tax cut is $1.5 billion. We could have done a lot better than that. This Labour Government has chosen not to do so, and I think this will rebound on it in the polls, when Maori people start looking at those issues. Maori wardens received only 2.5 million, nurses received three million, kura kaupapa received nothing, kohanga received nothing, wharekura received nothing, wananga received nothing - Maori have received nothing. We are disgusted with what is being presented here, and we will be taking this back to our people, because we do not accept that this Government, at any time - neither this Government nor the next one - should ever again be allowed to treat Maori so badly. Tena koe.