Saturday 28 May 2016

Budget 2016: What Bill English Didn’t Say In His Speech.

Fundamental Changes, Incrementally Advanced: Bill English delivers his eighth budget. The Finance Minister understands very well the degree to which Labour’s room for political manoeuvre has been circumscribed by the events of the past 30 years. It is what gives him the confidence to contemplate policies – such as his “social investment” programme – that will alter fundamentally the way the poor and disadvantaged are managed by the New Zealand State.
BILL ENGLISH’S LATEST BUDGET is a masterful exercise in deception. He has done everything he can to mask the effects of the most rapid expansion in New Zealand’s population since the 1970s. The monies allocated to the core centres of state expenditure – Welfare, Health and Education – barely match the rising numbers they are expected to serve. Faced with an intensifying housing crisis, English’s response has been wholly inadequate. Determined to preserve the vital political dividend of rapidly rising Auckland property prices, English and his colleagues have steadfastly refused to address the supply-side of the housing equation. The crash programme of state house construction that would end the crisis must wait for a change of government.
All governments take care to tax and spend with an eye to their re-election. It is a rare political party that will sabotage its own chances of remaining in office by threatening the status and wealth of their core constituencies. In the case of the National Party, self-preservation means doing as much as is politically feasible to advance the interests of farmers, businesspeople, managers and professionals. In the case of the Labour Party, it means looking after public sector workers, low-to-middle-income private sector employees, beneficiaries and those elderly New Zealanders more-or-less reliant on NZ Superannuation.
English has clearly decided that the best way he can help National’s core constituencies is to retire as much public debt as possible and reduce the New Zealand state to approximately three-quarters of its present size. Dismissing these goals as “purely ideological”, while true, largely misses the point. It is simply what must be done to give National’s supporters what they most want from “their” government: lower taxes for themselves, and higher stress levels for everyone else.
This latter goal is a crucial aspect of right-wing politics. Only by consistently reducing the political competency of their electoral rivals’ core supporters can the Right be sure of not only making the gains they seek – but keeping them. Simply maintaining the economic and social status quo is never enough. To keep – let alone advance – the interests of their electoral base, right-wing parties must seize every opportunity to reduce the electoral heft of the Left’s.
This right-wing aggression presents social-democratic parties like Labour with a massive dilemma. To advance the interests of their electoral base it is necessary to advance the interests of New Zealand as a whole. Investing heavily in upgrading the nation’s infrastructure; stimulating employment growth; boosting Health and Education; building thousands of state houses and subsidizing private sector house construction: such measures benefit not only Labour’s voters, but also, thanks to their expansionary economic effects, National’s. The balance of political forces is not materially affected.
The only way for Labour to consolidate and increase its political advantage is by becoming as aggressive as its right-wing opponents. Providing decisive legislative support for the trade unions and intensifying the progressivity of the taxation system are the traditional methods for boosting the power of the lowest socio-economic groups. Unfortunately, any Labour Government attempting to implement such a programme in today’s political environment would instantly be identified as not only a deadly enemy of the National Party and its supporters, but also of the entire capitalist system.
Every weapon in the Right’s extensive arsenal would be deployed against such a government, leaving it with just two choices: submission, or revolution. Our present crop of Labour politicians made that choice a long time ago. Whatever else they may be, Labour’s Caucus are not revolutionaries!
English understands very well the degree to which Labour’s room for political manoeuvre has been circumscribed by the events of the past 30 years. It is what gives him the confidence to contemplate policies – such as his “social investment” programme – that will alter fundamentally the way the poor and disadvantaged are managed by the New Zealand State. That the Finance Minister’s changes are being made incrementally will in no way diminish their long-term impact.
English and his colleagues are also well aware of the impact their policies are having on the lowest socio-economic groups propensity to participate in the electoral process. Slashing and burning the lives of the poor has not, so far, caused them to mobilise politically (let alone electorally). On the contrary, the increasingly desperate character of their existence has made them easy prey for the three “A’s” of social dysfunction: Alienation, Apathy and Anomie.
None of this is acknowledged in English’s Budget Speech, nor, for the most part, in the analyses of the mainstream news media. The Finance Minister’s deception has, once again, proved highly successful. What’s more, his ruthless reduction in the real value of state spending over the past 8 years has, finally, provided him with a series of substantial budget surpluses. These are projected to be of sufficient size for English and Prime Minister Key to offer their core supporters meaningful tax cuts in 2018-19. Any ethical misgivings National’s supporters might be experiencing currently, about the condition of the poor, are unlikely to survive their Finance Minister’s election year munificence.
This essay was originally posted on The Daily Blog of Friday, 27 May 2016.


peteswriteplace said...

Tax cuts for the rich is the aim.

Anonymous said...

Depressingly accurate

Patricia said...

I have decried the emphasis of politics with no policy for a long time but I think now that I just have to give in. Nowadays everybody just says what is in it for me so okay let's just do that. There are many many ways. For instance how about abolishing all student debt with an immediate increase in university funding. That would get many students and their parents to vote. The minimum wage will be increased to the living wage on the day after the election and will be indexed to inflation. All beneficiaries will receive a benefit equivalent to the living wage the day after the election. Research facilities get an immediate increase. Hospitals too. Limit the number of immigrants. Don't argue just repeat and repeat it. Economically it CAN be done but the National Party will say it can't. That is because they are doing their very best to remove all benefits for the people and they are doing that very well. If you don't believe me just think of what New Zealand would be like if their policies were continued for another say 25 years. The people would have nothing.

Anonymous said...

National's inertia and fumbling on the housing issue is part of their strategy to do nothing.

Guerilla Surgeon said...

It's not very often I agree with Winston (apart from the gold card – thanks Winston) but I have to say this budget is totally without imagination and/or vision.

Wayne Mapp said...

It is certainly true that National believes in a smaller state than Labour. From my experience the difference is 5% of the total economy. That is, National prefers the state (central govt only) to be about 30% of GDP, and Labour typically goes for 35%. National would be reluctant to go much less than 30% , that would bee seen as cutting too much away from the social fabric and from state provided services, especially in health and education. After all National is not in the same zone as the US Republicans It is more like the conservative wing of the Democrats, both pragmatically but also by instinct.

Now these are just percentages. What do they mean in practice. Well, 5% is around $10 billion. So currently under National, govt spending is $70 billion. Under Labour it would be $80 billion, maybe as much as $85 billion. You can do a lot with $10 billion. For instance lower tertiary fees, smaller class sizes in schools, more state houses, a bigger DOC budget, etc. But of course you have to get more taxes. I am assuming land tax, a higher top rate, and no threshold adjustments will be a necessary part of Labour's policy mix.

National, philosophically thinks people should keep more of their own money than Labour. Beyond a certain level of govt expenditure (in practice around 30%) National thinks individuals and families will make better choices for themselves than the state can.

Democracy should provide this clear choice. We each get to decide what we want both for ourselves and our country. But of course I also understand the voters don't make their decisions quite so transparently. Personalities, competence, boredom with the status quo, energy of the opposition (or the govt) are also key indicators.

Guerilla Surgeon said...
This comment has been removed by the author.
Anonymous said...

Good piece of work, I am in my late seventy's and I find that many aged immigrants who have never contributed a cent in tax's or rates to the NZ economy get the super benefit and use the health benefits and other social service benefits in full, (go to any hospital in Auckland and have a look at the people waiting).
Most are rich Chinese or Indian people and the gold card is issued to them as if they were longstanding NZ citizens.
Taxpayers are paying for these perks, Those same taxpayers in many cases cannot afford to buy a house in Auckland whilst rich migrants and their families can and do buy multiple home so that they may bring out more family.

Not one political party in New Zealand has a policy about this rich immigrant rort, the budget did not address this issue, no-one in the press has raised the issue, trade union leaders are quiet and seem to suffer from the good life, the blogs are silent on the matter, the long suffering working people are not even given lip-service and are being ignored by our MMP Parliament.
National, Labour, the Greens and NZ First are all stum.
I am all right jack is the culture.
The pox on the lot of them.

Guerilla Surgeon said...

Wayne. If you think people should keep more of their money, what you let poor people keep more of their money by getting rid of GST? Instead of letting rich people keep a lot more of theirs.

Bushbaptist said...

"National, philosophically thinks people should keep more of their own money than Labour. Beyond a certain level of govt expenditure (in practice around 30%) National thinks individuals and families will make better choices for themselves than the state can."

Pure Ideology. For a business to thrive it needs customers. If people don't have any discretionary income, they don't spend. When that happens, the business owners go broke through not enough buyers. Firstly a Govt. must get the economy right and that doesn't happen when Govt. expenditure is reduced.

The greatest asset any country has is a well educated and healthy population, so it's crassly stupid to reduce Govt. spending in those areas as Billboy has done.

Because Labour has to get it's finance from the same sources as the Nats, it stands to reason that their policies are very similar. Labour has to break away from that and get it's support from the working class again. Until they do they will have a credibility problem with those workers who toil away doing the jobs that thee and me don't want to do but we want them done by some-one else.

The Gnats are reactive not proactive and therein lays their problem.

Patricia said...

With respect Wayne, that might have been true in your day but the free market nonsense has gathered force and as my mother said, judge a person by their actions not their words. Words are cheap and National has used words to totally confuse a country of its free market intentions for this little country.

pat said...


"National, philosophically thinks people should keep more of their own money than Labour. Beyond a certain level of govt expenditure (in practice around 30%) National thinks individuals and families will make better choices for themselves than the state can."

Sounds pretty harmless when you present it like that doesn't Wayne?.....and how sure are you that once that 30% has been achieved (along with the misery it causes) it will be enough for those who already have plenty? If 35% was too much why wouldn't 30 be equally unacceptable?.....and crucially who is to provide that 30% (or less)? it to be the multi nationals sending their profits offshore? or those wealthy who employ tax lawyers to optimise their wealth management? or perhaps those capital gaining property investors?....think we both know the answer to that

Anonymous said...

"National, philosophically thinks people should keep more of their own money than Labour"

Anyone who thinks of it as "their own money" is philosophically illiterate.

AB said...

@Wayne Mapp "National, philosophically thinks people should keep more of their own money than Labour"

It's not their own money - or at least not all their own money.
Wealth is created collectively and appropriated individually, not the other way round.

Olwyn said...

How far does this sort of thing have to go before it amounts to cutting off the branch on which you are sitting? If you are part of the dominant group and do not want to address the needs of society as a whole, so as to avoid letting your competitors gain leverage, you end up damaging the very thing on which you depend, and if it goes far enough, you end up losing the conditions upon which an equilibrium can be re-established without doing further damage.

Grant said...

@Wayne Mapp "National, philosophically thinks people should keep more of their own money than Labour"

Unless we're talking about smokers. In which case National is happy to be just as NANNY STATE / Paternalistic in telling people what they can and can't do as any left wing Govt. (All for their own good of course). So much for personal choice eh Wayne?

Kat said...

National party philosophy on policy release involves spending large amounts of time in the picture framing shop, the picture may be crap but with the right frame they believe it should be a goer.

It's all in the presentation 'sweetie'.

Wayne Mapp said...

Quite a number of comments, which I should at least deal with in a general sense.

Clearly my general point is philosophical, in that National believes in individual autonomy and thus they are the first recipients of their individual endeavors. But obviously National believes in collective effort, not just for the administration of government for all of society (democratic representation, justice and security, core infrastructure such as roads) but also for things better provided collectively rather than individually such as education, health, social security, conservation, etc. Now in a sense all democrats believe in these things, so the issue in practical terms is one of balance.

There is no particular magic in 30% as the most appropriate size of government. But decades of experience of contemporary National politicians says it is around 30%. As I said in my earlier comment, 25%, as is the case in the US, and taking into account military expenditure more like 20%, seems too small. The US state does not provide enough for its citizens, especially in health and welfare. This would be the general view of virtually all National Party activists and MP's.

In essence the next election could/should be about the most appropriate size of government in the sense of what each of us, and by implication the parties we support, think is the right role of government. How much is left to individuals and families, how much is done by government?

The current budget and the debate around it actually sets out that proposition quite nicely. Because there were no dramatic moves, the budget quite clearly spells out National's philosophical view as to where the balance should be struck. It also provides Labour the opportunity to articulate what they believe.

Grant Robertson has done not too bad a job on this. He has clearly said there should be more spending on housing, education and health, not just a few hundred million, but several billion. He also has accepted that means commensurate taxes to fund it. He has not said precisely how, but he has given a general direction of land tax, higher tax rates at the top end, and no loss offsetting from property investments. It can't be fiddling around the edges. After all he has to get about $10 billion extra. It is not an extraordinary shift, it would move the size of govt back to where it was under Helen Clark's govt, especially in its later years.

I appreciate that there are some on this blog who would prefer a much larger central govt, say 40% of GDP, as exists in some European states. Obviously in such situations the state does a lot more than New Zealand, such as free tertiary education, much more generous welfare, and generally a much larger public sector in transport, public science, aid etc. The Greens certainly believe this. But I don't think they will convince enough New Zealanders that this is the direction that New Zealand should go.

As a footnote I should add that local govt spends around 5% of GDP, so under National, total govt both central and local, is actually 35% of GDP.

Patricia said...

Now Wayne, to me, your last para is an example of words that are intended to deceive because you have not added the local Government to all your other percentages whether they be New Zealand or European. And yes I do want more Government involvement in New Zealand and it does not have to mean higher income tax although I, for one, would lower the income tax for all under $100,000 and increase it dramatically for that part of an income that is over $100,000.00 but that would be for inequality/equality purposes not for raising revenue. There are many many ways to raise revenue for a Government but income tax with all its exemptions is one of the most inefficient ways to run a country that man could devise. To not remedy the current situation is, in my view, another form of a perverse ideology and that applies to Labour as well as National.

Grant said...

@ Wayne "...National believes in individual autonomy"

Except for smokers, who have to be saved from themselves, eh Wayne?? Isn't that what Right Wingers would call Nanny State-ism if a left wing Govt was doing it?

Peters is right about this issue. If you really think tobacco smoking should be banned, at least have the courage of your convictions and legislate to prohibit it. Why this mealy-mouthed business of de-facto pricing it off the market for all but the very well off?

Anonymous said...

nothing for families struggling with horrific rents, nothing for those living in cars
nothing for those living on the streets, nothing for those with nothing. A totally unethical budget, aimed at the rich and rich immigrants, shame on National. A total I'm alright sir, you can get knotted. And they want to push the poor out of Auckland rather than helping them. May John Key lose his fortune. Karma.

Guerilla Surgeon said...

Again "Wayne. If you think people should keep more of their money, what you let poor people keep more of their money by getting rid of GST? Instead of letting rich people keep a lot more of theirs."

Guerilla Surgeon said...

I guess Wayne is not going to answer my question. I suppose I've offended you Wayne by pointing out your rather silly statements about Afghanistan and Iraq. But Jesus Christ, you should have known something like that was going to come back and bite you in the arse – especially if you have any inkling about furrin parts. Plus you should also know that while I sort of think it's good that you pop in here and chat with (some) of us mere mortals, you should have figured out that you're not going to be able to run away from your previous answers as you might do in a less restricted situation. :)

Unknown said...

Poor @ Wayne responding to a torrent.
Here's another.
Isn't it a shame that the "debate" is limited to whether the central goverment should be 30 or 35% of GDP rather than voting for the best candidates as should happen in a democracy.
Does National really stand for individual freedom or is it really just a case of "Big Government" (labour green) controlling people's lives or "Big Corporations" (National) controlling people's lives.
As people become disenfranchised and refuse to vote the answer is to force them rather than address the reasons why the general public holds all politcians in utter contempt.
Individual Freedom - Yeah Right.

Guerilla Surgeon said...

The story has been going the rounds for a couple of days. I wonder if those people who have promoted neoliberalism since 1984 will fall on their swords now? Not holding m' breath

Nick J said...

Wayne, this notional $10billion and the 30-35% thing seem to map (excuse the unintentional pun) to a concensual political economy. I have no doubt that the number could be driven to diverge by either party which tends to ignore real issues for the state of expenditure.
The foremost issue I have is the rent seeking of the wealthy: privatised utilities such as power and telecommunications that have failed to deliver any benefit to consumers or the productive sectors. Then there are banks who privatise profits and socialise risk, and industry sectors who also seek rent such as the transport sector with discounted roading costs and farmers taking water at public cost to clean up the mess.

I would contend that we need another Douglas event to put the market where it should be and as it should be, and a renationalisation of all areas that attract rent seeking monopolism. The investment NZ struggles with would then be forced into productive sectors rather than seeking parasitic safe rents.