Back to the future with Brash
You have to wonder at the point of having a 2025 Taskforce charged with catching up with Australia if you're just going to ignore the recommendations.
The problem with establishing these sorts of bodies is that the task involved is positively Herculean - and therefore, the proposed solutions tend to be reasonably radical.
Of course, putting Don Brash in charge of such a taskforce kind of pre-determined the outcome for a start. The former "ninth ACT MP'' is a long-time believer in flat tax, much lower government spending, and an end to universal welfare entitlements.
So it's hardly any surprise that the taskforce is recommending a top tax rate of 20-25 per cent, slashing the proportion of government operating spending to GDP from 37 to 29 per cent, wiping interest-free student loans, increasing the age of eligibility for superannuation, and means-testing more benefits.
Brash seems to want to endlessly re-litigate the result of the 2005 election, which while understable for him personally, isn't really going to help anyone.
Hardly surprising, either, that Prime Minister John Key has already come out and rejected any suggestion of implementing any of the proposals before the taskforce's report is even officially presented later today.
Because to put Brash's recommendations in some sort of perspective, reducing operating spending as a proportion of GDP by eight percentage points is, according to my School Certificate maths, cutting roughly $14 billion a year from public spending.
That's around the total amount spent on welfare each year, or a little less than the entire health budget.
Assuming media reports of the findings are correct, the suggestion is ludicrous. The sort of cuts to public spending that would entail would see the government of the day out on their ear at the next election.
Also, Key has already pledged to keep much of the padding in the welfare system implemented by Labour, such as the Working for Families extension which I've previously criticised but is so firmly embedded that it is almost impossible to unpick.
Indeed there are so many social spending initiatives National signed up to that the Government is in a virtual spending straitjacket. This point was essentially echoed by Bill English himself last week, when he told me that virtually all the $1.1 billion new spending money in next year's Budget is already used up paying for existing programmes.
English has been starting to prepare us for December's half-year fiscal update, which apparently has some pretty eye-watering numbers in it. He also appears to be softening the ground for some spending cuts, although I'll bet they will be nothing like those proposed by the Brash report.
There is a theory that the real agenda National has is to pan the Brash report and then introduce more moderate proposals that everyone thinks are entirely reasonable by comparison. It's an old trick, and it may well be what National has in mind here.
I don't think anyone disagrees that we're not going to catch Australia unless we do something relatively radical. But there is irony in suggesting proposals the diametric opposite of what Australia has done in order to catch it up.
After all, the Aussies have higher tax rates than us, and much higher social spending, too.
One of the main reasons salaries there have outstripped ours is that their economy is larger than ours. Another is that they are mineral-rich, and much of the deposits are easy to get to and worth lots of money.
Personally I think we're going to have to get a lot smarter than Australia to catch up with them, and I don't think simply slashing government spending is going to get us there.
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It's worth repeating, for the benefit of those hard-of-understanding for whom tax cuts are the answer to everything "the Aussies have higher tax rates than us." Come on Tories, all together now "the Aussies have higher tax rates than us."
Oh, and we've got all their topsoil.
National should send Brash to a deep mine to look for Uranium. He can come back when he hits pay-dirt. Nice point about the radical/moderate switch, already Key has popped up. He's doing a good job as the smily front man.
Colin, the continual criticism of the past nine years of Labour was all about social issues and that the economic growth, high employment and future planning with Kiwi Saver/Cullen Fund were all just flukes and a reflection of prosperous global times.
The Nacts worked the anti 'nanny state' and 'time for a change' card to the max to get into power. Now they are in control they are proving they have no real new answers for improving social issues let alone the economy.
Tired and failed old theories of trickle down from corporate profits is not what this country needs. Investment in infrastructure, education and health would raise everyones standard of living not just the elite. However I guess any progressive egalitarian and democratic ideas will be labelled as perverse by the rabid ideologues of the right.
So whats new?
Haha.... don't tell me he has proposed an end to his own universal welfare entitlement, namely picking up full National Superannuation while earning above average income from engagement in the workforce ?
And tell me, has he proposed an end to old Douglas galivanting all over the world as part of his remuneration package from years back and using his National Superannuation to buy the odd cup of coffee here and there ?
You know ? It's all about increased productivity, fellows.
What this country needs is "ring fencing" of Wellington, with all its politicians, commentators and bureaucrats that don't deliver anything Lbut red tape and hot air. et all those who want and demand welfare move there as well and the rest of the country can then get on with real life.
"One of the main reasons salaries there have outstripped ours is that their economy is larger than ours."
Now that's utter rubbish. Compare Switzerland, Singapore and Russia. Size has nothing whatever to do with it.
"Another is that they are mineral-rich, and much of the deposits are easy to get to and worth lots of money."
Huh? NZ is ranked second only to Saudi Arabia in natural resources per capita?
Nope. Stupid population corrupted by welfare paid with other people's money. That is the real reason for NZ's increasing poverty.
"I don't think simply slashing government spending is going to get us there."
True, but until we do that we have no money to do anything else.
Someone else being generous to a silly old man ...
When the sham tax cut promises which won National the election were finally cancelled after it was obvious to the entire general populace that they were unaffordable and were not going to be funded by any line-by-line review of government spending, this report is worse than a joke. It was deceitfully stretching truth to say that the global economic crisis was a contingency that gave rise to cancelling the tax cuts, but to now make these proposals is heresy.
We are hearing the death rattle of the neo-liberals.
re: Alan W #7
Too right. The s#!t will hit the fan for NZ Inc when we run out of other people's money, be it from the tax payer or overseas lenders.
Key needs to man up. He had more bite when he was deputy under brash. Seems he's lost his mojo?
Colin, dont you think we should be reducing Gummint spending??? Borrowing $250,000,000 a week to keep the status quo can last for long?
Well, that would be one of the most vacuous posts I have read on this blog, let alone one authored by Alan Wilkinson(#7).
I suppose it is incumbent on me to substantiate my comment, despite considering it a statement of the obvious.
So there are no overheads involved in sovereignty, Alan Wilkinson(#7) - the fact that 4 million people, rather than 40 million, have to fund it has no consequences ?
" NZ ranked second to Saudi Arabia " ? ... well, there would never have been any "credit rating" difficulties, would there ? ... I think your statistic might be based on a lot of estimates, valuations and projections.
"Welfare paid from other people's money" .... the guy getting $7,000.000 per annum for his labour was paid from his own money, was he ? We all only have what the system affords us.
"Until we do that we have no money for anything else .... what say we squeezed the income gap tighter by means of progressive, marginal personal income tax and channelled the reduced consumption spending towards investment spending which enabled productivity gains ?
Any thoughts, any points, any questions ??
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John Key knows that Don Brash is yesterdays man. He is not stupid enough to follow Brash's advice - even if he was stupid enough to ask for it.
Phil Goff may be more interested in what Brash has to say. He is following his Orewa lead for starters. He may even like his economic direction if he thinks it may increase his popularity. However, it didn't end up doing much for Brash!