Cuts for you, tax cuts for Brash

Written By: - Date published: 11:40 am, August 11th, 2011 - 55 comments
Categories: national/act government, public services - Tags:

ACT’s Spending Cap Bill is coming to Parliament. It would cap government spending and only let it grow each year by inflation and population growth. At first blush, and assuming that you don’t want the government to do anything it doesn’t do now, this might seem like a way to maintain current services without adding more – which means more tax cuts without losing anything! But reality ain’t that simple.

First of all, sometimes you’re going to want the government to spend money on things it doesn’t spend money on at the moment. Say the unthinkable should happen and there was a global financial crisis and to maintain the integrity of the system the government had to do what every other country had done and guarantee retail deposits to stop a run on the banks and finance companies. That would be illegal under this Act as would any form of stimulus spending. You couldn’t budget more for more mums going on the DPB during a recession unless you cut money from elsewhere either. (there are exceptions for ’emergencies’, which means natural disasters, and the unemployment benefit)

And even in normal times you’ve got trouble. See a lot of costs don’t go up at just the rate of inflation and population growth. Take superannuation, which is 13% of government spending. The cost goes up at the rate of the average after-tax wage and the number of superannuitants. You would hope the average after-tax wage is rising faster than inflation in the long-run, or everyone’s getting poorer. And it’s well known that our aging population means the number of pensioners is increasing at a faster rate than the general population. In fact, while the population will grow 3% in the next 4 years and inflation by 8%, the cost of super will rise 22% by 2015. What happens if there’s a spending cap in place? Super gets slashed or something else does.

Then there’s health, which is 20% of government spending. It’s costs are also growing faster than inflation because of demographic change and higher sector inflation. In fact, restricting the increase to ‘inflation’ in the form of the Consumers Price Index is stupid full stop. The CPI is made up of things like the cost of housing and milk. What’s that got to do with the cost pressures facing a hospital?

Next, consider what we are spending most of our money on when we purchase public services,after you take out super, benefits, and WFF? Wages. 300,000 government employees, most of them nurses, doctors, teachers. If there was a spending cap and the number of these workers increased in line with population growth, then their wages would essentially be restricted to the rate of inflation. Isn’t that a problem for goal of closing the wage gap with Australia – having 15% of our workforce never able to get a real payrise? Especially when these are highly skilled people who are already being attracted to higher wages abroad?

The truth of it is that ACT knows all this. They don’t want to cap government spending, they want to strangle the government and get the public services we all use slashed so that they can get more tax cuts. This is a 2% party trying to force its self-centred ideology on the rest of us.

So why is National letting this stupid law, that could never work without hurting millions of Kiwis, go up as a government bill? And why now? Well, they promised ACT that they would introduce the legislation as part of their coalition agreement. And why now: because it’s too late to pass the legislation before the election.

But make no mistake, if we re-elect a National/ACT government this dangerous, destructive bill will become law. Until it’s repealed by the first government that needs to break the cap, of course.

– Bright Red

55 comments on “Cuts for you, tax cuts for Brash”

  1. Macro 1

    This proposed legislation and the inevitable consequences of reduced social spending is a receipe for the same sort of rioting as we are now seeing England. The gormless greedy fools who propose such stuff are so fixated on their bottom line that they cannot see the misery that they create. If you create a world through advertising and media, where your status and your position in life is determined by your financial success, your car, the clothes you wear, and the electronic toys you possess, and then deny almost 30% of the population* the access to those things, then is it surprising that that they will feel not only disenfranchised, but more than a little resentful as well?

    *to clarify that statement – an unemployment youth rate of 20% UK – 27%NZ essentially denies the emerging population of UK – NZ access to the things it is told it should most desire. So the rioters of England are described by some as the young people who “have nothing better to do”!

  2. queenstfarmer 2

    But spendiing could increase – the power to raise the spending cap would lie with the people. What’s wrong with that?

    • Blighty 2.1

      you can’t organise a budget process around the time it takes to have a referendum. As it is, the budget process takes about 8 months from first documents to the final thing, and you want to add a 8 month approval process on top of that every time the government has to meet cost pressures that are above inflation+population growth?

      ou would end up facing US-style budget crises.

      • queenstfarmer 2.1.1

        you want to add a 8 month approval process

        Absolutely. If a Govt can’t live within a budget even for 8 months, then they certainly need a cap to their incompetence. (note: the bill excludes emergencies)

        Having said that, 8 months is a ridiculous time hold a referendum, even allowing for normal beuracratic incomptence. The Bill allows postal referenda, which speeds things up. Also, remember an entire election can be organised in the space of a few months if need be, so there won’t be any problem fast-tracking things.

        • Macro 2.1.1.1

          Your talking nonsense man! It’s NOT the hold up by the adminstration that would delay! Referenda don’t just fall out of the sky! Anyway what a waste of time and effort for nothing! You and your ilk, can’t see that you are your own worst enemies. Your fixation on “costs” blinds you to the very real costs of the social injustices that result, and the inevitable effect these have on your own well being.

          • queenstfarmer 2.1.1.1.1

            Anyway what a waste of time and effort for nothing

            Giving power to the people is a waste of time and effort for nothing?

            • Macro 2.1.1.1.1.1

              For this sort of crap it is! People have the power to get rid of govenments every three years and to vote in the policies they want or don’t want. Endless referenda is not necessarily an improvement in the democratic process.

              • KJT

                Works well for the Swiss.

                Representation by a few, who constantly work against the best interests of those they, supposedly, represent is not democracy.

                • bbfloyd

                  kjt.. you mean that it works well in a mature, well informed society?

                • Macro

                  KJT – hopefully you will notice my logic – I said
                  “Endless referenda is not NECESSARILY an improvement in the democratic process.”
                  I would also go so far as to say it is neither necessary nor sufficient.
                  What would be a good practical step towards better democratic processes in this country would be for administrations to desist from the cynical use of “Urgency” to push legislation such as this through parliament in the dead of night. Mark my words – If NAct are returned to power after November this abhorrent Bill will not receive public scrutiny in Committee but be “fast-tracked” to avoid public approbation.

            • Lanthanide 2.1.1.1.1.2

              We already have the power to elect the government every 3 years. The government then acts in what it thinks is the best interest of the country.

              I find it a little ironic that you’re saying we should resort to referendums whenever the government needs to overstep the debt limit that’s be imposed, but we don’t need a referendum to put the debt limit into place initially…

              • queenstfarmer

                I’d be fine with having an initial referedum to put in a debt limit. But I wouldn’t be worried if there isn’t one, because the Govt would simply be empowering the people.

                • Macro

                  “I’d be fine with having an initial referedum to put in a debt limit. But I wouldn’t be worried if there isn’t one”
                  So what you are now saying is that this Bill is a waste of time?
                  But it is more than that. By it’s nature it strikes at the very heart of NZ society. Those who support such mean spirited legislation, are in essence striking at the ability of government’s to do their job.

                  • KJT

                    They do not want Governments to do their job. Interferes with stealing our wealth.

                  • queenstfarmer

                    I see, so you think empowering the people is “mean spirited”. Do you think the same about elections?

                    • Macro

                      The mean spirited-ness of this proposed legislation – is NOT in the offer of the possibility of an illusionary referendum – but in the disempowering of elected governments to care for the most vulnerable in society!

            • Puddleglum 2.1.1.1.1.3

              So you would favour holding referenda whenever a government decides to reduce its expenditure? (e.g., in relation to this bill?)

              • Macro

                Nah! they would have to have a referendum on whether or not to hold a referendum! It’s a ridiculous suggestion!

              • queenstfarmer

                No. It’s a spending cap, not a spending floor.

                • mik e

                  brash has 2%support but seems to be able to get plenty of media time but the more time he gets the less support he gets people in this country don’t want Chicago school economics It doesn’t work they know it end of story

              • Macro

                See! I told you Puddlegum! Would need a referendum on that!
                The target is zero spending by govt! Well maybe a few police and tanks outside my door – but you buggas can pay for that!

            • AAMC 2.1.1.1.1.4

              “Giving power to the people is a waste of time and effort for nothing?”

              At least you wear your Fascism on your sleeve.

    • mik e 2.2

      just like the US that why standard & poors downgraded

  3. Macro 3

    Yeah Right!
    The procedure to do that would require a referendum! The referendum must occur in the same year, would take 6 to 8 months to organise, and therefore in practice would never happen!
    Idiot!

  4. The Tea Party.  Sponsored by the richest most greedy corporations in the world and coming to a Country near you.

  5. tc 5

    Already here MS standing behind the hollowmen who in turn stand behind NACT.

  6. JonL 6

    “Giving power to the people is a waste of time and effort for nothing?”
    What power to the people! Another inane statement that, on the surface, looks good, but in reality is a crock of shit – a device to scare, obscure and obfuscate policy into the hands of a few and totally hamstring any effective government FOR the people!

  7. Adrian 7

    They have referenda in the States for local taxes and iniatives and of course, people vote them down. Why? Well first off, Yanks are stupid, and of course nobody wants to pay more. So what have you, California as broke as Greece and some counties in the Mid-West who are down to 2 cops when there used to be 25 or so. Hence all they do is sign off for the insurance claims because they are too busy to even go and look at the scene of the crime. The US is next for Brit type rioting.

    • Vicky32 7.1

      The US is next for Brit type rioting.

      IMO they should have been first for it, but to judge by ATS, they’re all too scared, and therefore too conformist – they drag each other down for fear of attracting notice… 
      Kind of like New Zealand come to think of it…

  8. Tom Gould 8

    It is an outrage that Brash wants to legislate through the back door to slash the pension. What a hypocrite. Come clean, Don. I guess he has enough money to get by without the pension, but untold thousands of Kiwis do not.

  9. Jenny Michie 9

    Adrian’s right. The most infamous example of this sort of legislation is in Colarado and TABOR – the Taxpayers Bill of Rights. Because no one ever votes to increase taxes the state has been starved. They sold off police helicopters on EBay. Neighbourhoods chip in to pay for street lighting and forget roads and higher education. This is what Rodney Hide was trying to achieve in the Local Government Amendment Bill, with his Fiscal Envelope.

    • Macro 9.1

      Exactly! But you try telling NAct and their followers that! As I said above – it’s nothing more than a mechanism to drive down spending to the point where administrations become powerless to do the job the citizens require of them. The people who support such legislation are their own worst enemies. They will be the first to bleat when the riots begin, the infrastructure falls apart, and their “wealth” disappears in ever-increasing personal costs, but the seeds of discontent are sown by them, with mean spirited policies such as this.

      • mik e 9.1.1

        Its the cheap nasty version of government the Lada version if they applied the same logic to their life style they would all be driving suzuki altos.We have had this version before from 1984 till 2000 take the armed forces for example .The right who are allegedly big on defense cut defense to the bone it wasn’t till Timor that the rationalists bought some new radios for the army was the only new piece of new equipment they bought . Goff had to replace virtually every major defense force equipment. the same applied across the board.This sort of thinking applied to a business would mean no businesses would grow

      • queenstfarmer 9.1.2

        it’s nothing more than a mechanism to drive down spending

        Wrong. The Bill automatically INCREASES the spending cap in line with inflation.

        If the Govt wants to increase it beyond that, the people have the say.

        • felix 9.1.2.1

          Increase?

          If you scroll up to the top of the page you’ll find a few paragraphs of text explaining why this is not actually the case.

          • queenstfarmer 9.1.2.1.1

            Yes – increase. That is a fact. The story at the top simply claims that won’t be enough.

            • RedLogix 9.1.2.1.1.1

              Oh dear…an increase in nominal terms the same as inflation is equal to zero change in real terms.

              And in fact because many critical govt areas of expenditure have costs increasing at a rate somewhat greater than the CPI…then it will actually mean reductions in real terms.

              I’m kind of embarrassed to have to explain this to you.

              • felix

                Awkward alright. Especially when it’s all explained so clearly in the post.

              • queenstfarmer

                Don’t be, you didn’t – I know what it says, see the very comment you replied to. The spending cap increases. And as I said, the story at the top simply claims that won’t be enough.

                I’m kind of embarrased to have to explain a one line post to you.

              • queenstfarmer

                I just realised I missed one thing that makes me even more right and your comment even more wrong: The Bill increases spending in line with inflation, and also in line with population growth.

                • Colonial Viper

                  The Bill is stupid. Pass the bill in early 2010, Sept 2010 and Feb 2011 Christchurch earthquakes hit, NZ govt goes, hey Christchurch the only we can help you is if we cut off NZ Super and fire all the defence forces. OK?

                  Actually, the Bill isn’t stupid, ACT is. And since you support their Bill, what does that make you again?

                  • queenstfarmer

                    The Bill excludes spending for emergencies. There is no limit on that.

                    So perhaps it’s not as stupid as one who doesn’t read it…

        • mik e 9.1.2.2

          The mechanism works really well in the US yeah right. It wouldn’t work here because it seems to me it would stop the National Party in its tracks. As there past record shows they have had higher debts by along way more than any previous Labour govt

        • mik e 9.1.2.3

          So if the economy grows faster than inflation and the population grows as well it means we won’t be able to invest in areas the private sector won’t, like education r&d we’ll have to make cuts .The economic rationalists no country thats followed this agenda has managed to sustain growth find one and i’ll be amazed.

        • mik e 9.1.2.4

          So if the economy grows faster than inflation and the population grows as well it means we won’t be able to invest in areas the private sector won’t, like education r&d we’ll have to make cuts .The economic rationalists no country thats followed this agenda has managed to sustain growth find one and i’ll be amazed.These rationalists claim they can do this keep spending down run the economy like a bushiness they have plenty of home spun truths propaganda! when push comes to shove they run their economies worse than any one else Roger Douglas inherited an economy with $16 billion worth of govt debt after 8 years in office he had amassed $100billion of govt debt, Berlusconi Bushes Reagan Thatcher there as bad as the communists say one thing do another.Wreck the country under the guise of a failed ideology

        • Macro 9.1.2.5

          Having worked in the Dept of Statistics on the CPI, I would like to know what relevance this measure has to the costs for the provision of Public Services. Having also represented Defence at Cabinet Economic Committee meetings for the aquisition of new equipment, I would like to know how these major purchases also fit into this ridiculous straight jacket. Those who promote this nonsense have no idea of what they are about.

          • Colonial Viper 9.1.2.5.1

            And as I pointed out, what happens when a Christchurch earthquake comes along? You just have CERA ignore the bill? What use is it then in “constraining spending”?

            • queenstfarmer 9.1.2.5.1.1

              The bill doesn’t apply to emergency spending. Perhaps try reading it?

    • Nick K 9.2

      Adrian’s right. The most infamous example of this sort of legislation is in Colarado and TABOR – the Taxpayers Bill of Rights. Because no one ever votes to increase taxes the state has been starved. They sold off police helicopters on EBay. Neighbourhoods chip in to pay for street lighting and forget roads and higher education. This is what Rodney Hide was trying to achieve in the Local Government Amendment Bill, with his Fiscal Envelope.

      Yes, next he’ll be introducing the “Eat babies at birth Bill”. If he hasn’t already drafted it.

  10. randal 10

    so who bought the helicopters?

  11. randal 11

    so who got the choppers then?

  12. Vicky32 12

    The truth of it is that ACT knows all this. They don’t want to cap government spending, they want to strangle the government and get the public services we all use slashed so that they can get more tax cuts.

    And also, I believe, so as to get the chance to set up private businesses to do what Government used to do.
    I well remember my discovery that Douglas Rogered the health system because he wanted New Zealanders to have a reason to need health insurance.. The private rehab clinic (set up, AFAIK in the very premises where a Goverment one used to be) Capri, has been advertising hard out on t’Telly  since Amy Winehouse dropped off the twig..

  13. randal 13

    presumably don brash has enough dough already so why does he want more?

  14. mik e 14

    Randal these type of people would be classified as having OCD IF it wasn’t money we were talking about.Hoarding they can’t help themselves

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