The three big fails in the budget

Written By: - Date published: 7:02 am, May 26th, 2017 - 72 comments
Categories: budget 2017, class war, national - Tags: , , , , , , ,

It was National’s best budget. Which means there are only three critical areas of failure.

The first is health. Craig Hoyle at Stuff:

Frustration, disappointment over health funding in Budget 2017

Patients and healthcare workers say they have been left frustrated and disappointed by “inadequate” funding for health in the 2017 Budget.

They said the Government’s announcements on Thursday would not go nearly far enough in addressing concerns about overworked staff, access to new medicines, and access to mental health treatment.

The Government said total health spending would be a record $16.77 billion in 2017/18 – an increase of $879 million, with an overall increase of $3.9b over the next four years.

However, the record claim does not take inflation into account, and sidesteps the fact that almost half the spending will go toward mandated wage increases as part of the pay equity settlement. …

Jenna Lynch at Newshub:

Revealed: Govt shortchanged health system by $250m

Just over a year ago the health sector went cap in hand asking for funding to deal with rising immigration – but the Government shortchanged them to the tune of quarter of a billion dollars.

The shortfall is revealed in a briefing from the Ministry of Health to the Health Minister, which says to deal with immigration, as well as wage and cost increases, it needed an extra $644.8 million.

The information was forced out by the ombudsman, realeased to the yeswecare.nz campaign after a year-long battle with the ministry.

“DHBs face significant pressure in Budget 2016, due to the additional impact of net migration on population growth and aging, and anticipated wage pressure,” it said.

It calculated a $379 million need for population pressure, $190.5 million to cope with wage increases, and $75.3 million to fund rising costs. All up – $644.8 million.

But in Budget 2016, they were given $400 million – a more than $250 million shortfall.

The ministry even warns that without the full funding, access to healthcare is on the line. …

The second major failure is housing. Much of the money that is going into housing is in the form of the accommodation supplement. The supplement is desperately needed because of our insane rental market, but unless we fix the underlying problem of affordable housing the supplement just fuels the fire. Stacey Kirk and Vernon Small on Stuff:

The Government has re-written the rules of the accommodation supplement, creating some big winners

The top rate has been $225 per week and covered only central and northern Auckland. Now, it covers virtually the whole city, as well as property hotspots, Tauranga, Queenstown, Wanaka and Arrowtown, and the maximum payment has risen to $305 a week.

It sounds like a dramatic increase but this is the first time the accommodation supplement has been adjusted since 2008.

The $2b package is a stark admission by the Government that rising house and rent prices have costs beyond the reach of many.

Labour leader Andrew Little said the total package meant it would be the top income earners that would benefit the most. The problem with the Accommodation Supplement was that it tended to be a subsidy to landlords.

“And actually, there’s a pretty good consensus – even amongst National Party MPs – we are going to have to do something about it, because it’s fuelling the wrong kind of response as a solution.” …

Shamubeel Eaqub on The Spinoff:

‘A classic election year budget’

There was more money for the accommodation supplement and emergency housing. Both bottom of cliff stuff. There is no material and aspirational investment in significantly boosting housing supply. …

See also ‘Not enough’ for Auckland house hunters.

The third area of failure is equity. As usual most of the budget largess goes to the already wealthy. OneNews:

‘The One Dollar Bill Budget’ – Andrew Little blasts $1 tax cut for cleaner on minimum wage

It’s the “One Dollar Bill Budget”, says Labour leader Andrew Little who claims a single cleaner on a minimum wage will get just $1 a week extra from tax cuts announced today. …

(The working for that is in a tweet below.) Breanna Barraclough on Newshub:

Political reactions to ‘election bribe’

Kiwis earning more than $52,000 will be in line for an extra $1000 a year with the changes.

But Labour leader Andrew Little has criticised it as an “irresponsible election bribe”, saying the Budget “does nothing to address to shortfalls in health, housing and education, and in fact makes them worse”.

He’s calling it the “One Dollar Bill Budget”.

“For all National’s talk about tax cuts, the reality is that a single cleaner on a minimum wage will get just $1 a week extra,” Mr Little said.

“The big winners of this Budget are the top earners who take home most of the tax benefits.”

His thoughts are echoed by Green Party co-leader James Shaw, who says it’s a “tax cut for the rich in disguise”.

“Those on the highest incomes will get the bulk of the benefit. Families on the highest incomes receive a tax cut of $33.22 while those in the bottom quintile get just $5 a week,” he said.

“This is not what low and middle income earners need.” …

Labour claims that “The 50% of New Zealanders on the lowest incomes get just 20% of the money from National’s Budget tax cuts”.

When Labour had surpluses they built critical infrastructure like KiwiSaver and KiwiBank, and the created major programs like Working for Families. National tries to fool us all that catching up is generosity, and fails to address the biggest issues. Time to change the government.


In other generally luke-warm reaction:
Max Rashbrooke: A Government trying to make up for past neglect
Budget 2017: NZ working hard to stand still
‘Anything extra is a bonus’ but some others say tax relief in Budget is a drop in the bucket


72 comments on “The three big fails in the budget”

  1. Incognito 1

    With billions of Taxpayers’ money spent on warships, infrastructure, and prisons this Budget is not only a cynical and pathetically obvious election bribe but above all it is an inhumane budget that puts people second, the environment third but the economy & voters first.

    • left_forward 1.1

      Don’t agree that it puts the economy first – its the usual hands off, do not intervene, neoliberal style of economic non-management.

    • Nick 1.2

      Everyone. EVERYONE questioned on a little vox-pop on Backbenchers on Wednesday night, opined that they wanted to seem more spent not on things that profited just them or even at all them. Everyone spoke for more money for education, the environment and health. That is the natural province of the Left. I think many of us are beginning to get sick of the old “What’s in it for Me?”

      Some people need more. But smart policies are just as worthwhile as “generous” policies.

      And a bit, QUITE a bit, more appeal to altruism. If we don’t have a massive altruist streak, we have no business calling ourselves Left.

  2. Keith 2

    Unaffordable tax cuts paying for increased rental supplements going straight to housing investors/speculators pockets, yet dishonestly posing as largesse for the less well off.

    Joyce, hang your head in shame, you are an areshole!

    • mpledger 2.1

      And it fuels average rental increases. Landlords can afford to raise rents because people have more money to spend on rents. And if a particular rentor doesn’t have the money to afford an increase then they can be tossed as there are plenty of people waiting in the wings for accommodation.

    • UncookedSelachimorpha 2.2

      Yep, simply throwing more fuel on the housing fire, while doing nothing to fix the regulatory and structural problems causing the crisis.

    • Nick 2.3

      When there is enough housing, there will be no need for accommodation supplements.

      However, in the first instance, as house prices level off, before they start to slide, landlords, with no capital gains in view will first try to jack up rents. Although smart ones might try to sell before prices suffer a real correction. Both will exacerbate the rental situation. It’s going to get worse before it gets better.

      Ironically, and counter-intuitively, a real Province-Based policy for work, infrastructure and housing, will ultimately make prices in our largest city more attainable for the less affluent.

      A focus uniquely on Auckland, were it ever to work, will just attract more Kiwis there and make matters worse.

      It’s like motorways. You build better roads, you get more cars and the roads become even more clogged.

      What is needed is alternatives.

  3. Bearded Git 3

    Joyce on RNZ this morning saying the limited goodies offered to a small portion of the less well off in the budget (while the environment, housing, public transport, education, health etc miss out) could only be achieved now the books were in shape.

    He conveniently forgets the $1 billion plus tax package the Nats gave mostly to the better off when they were elected in 2008 that has cost the state $10 billion so far.

    This was not a time for tax cuts at all; it was a time to increase public spending on the areas listed above.

    Also most of the media seem to have missed that the Independent Earner Tax Credit of $520 per annum has been taken away from low earners .

    • millsy 3.1

      He said that only a third eligible were claiming it, but that is a lie — those who dont claim it, get is when they get their tax refund in June this year. And $520 in June is a welcome payment for some. That is pretty much going to be chopped.

      • left_forward 3.1.1

        …which snuffs out the small tax cut for low earners – thus only the high earners benefit.

  4. Bearded Git 4

    Despite the links above I can’t find the “$1 dollar bill” budget workings. Can someone help me here.

  5. Johnr 5

    I would add a further three FAILS.
    NO analysis of what has failed.
    NO plan or future vision to aspire to.
    NO leadership to achieve the plan/vision

    • Nick 5.1

      They have no plan because at heart they neither like plans nor believe in an aspirational future, or not one for which the government has any role.
      It is in their DNA.
      They can’t fake it.

  6. Craig H 6

    Another fun fact: Beneficiaries don’t get the tax cuts because of how the Social Security Act is worded.

    • Nick 6.1

      “Well, they’ve had their $25.00. Don’t know what they’re complaining about.
      They should be licking our hand.

      “Do you know, that’s the first increase they’ve had since……(and it will be the last)”.

  7. Whispering Kate 7

    These supposed goodies are going to happen after the election and Humpty has already given himself an out that they may not happen by saying on the AM Show today that if an unexpected crisis should happen like an earthquake, economic down turn etc then yes, it was possible that they wouldn’t be implemented.

    If this budget is based on trust that its proposed lollie scramble will occur – then pigs might fly as well. I wouldn’t trust these slimy bottom crawlers one second.

    • infused 7.1

      He said pretty much nothing would change this. Except if there was a major event. Nice try.

  8. infused 8

    Well. We will all look forward to Labours alternative budget.

  9. Treetop 9

    What really surprised me regarding the accommodation supplement (AS) was that some in area 4 are now in area 2. In area 1 temporary addition support (TAS) is just going to be reduced with the increase of the AS. Every 13 weeks a person has to reapply for TAS, this needs to be changed to every 26 weeks.

    Can anyone confirm if a single person does not get an increase in the AS, I heard Joyce say 2 or more people?

    To think that people have to wait until April 1 2018 and not July 1 2017 for an increase in AS is stingey, winter heating is not cheap either.

  10. Nick 10

    If you like the headline spends of this budget, you will vote for a party that believes in this kind of thing.

    This is not an especially good or bad National Budget. It is a typical National Budget.

    Like every other budget this government has produced it asks only one question:
    “What is the LEAST we can do to keep the horses calm, and let the party continue?”

    Maybe Joyce has concluded that the horses are getting a bit more restless than usual. But we are still confronted by a work from an administration that clearly does not think the government has any real role in national affairs, dealing with a population that does.

    Hence a minimalist lolly scramble. What more can you expect from a government with neither ideas nor ambition? They have no ideas BECAUSE they have no ambition.

    If you don’t think you can do anything to create a better country, you are likely to achieve your ambition.

    But if you want and can imagine a better outcome, you have to strive to achieve it.

    More money for some families is okay, so far as it goes, but if we want to improve LIVES it is not just about money. It is about opportunity, empowerment and respect.

    Money may be a part of that but ambition, system, orientation, focus and planning are just as important. As is a fundamental respect for those whose lives you hope to improve.

    That isn’t in this National Budget. Because in almost every instance, it is totally absent from the National Psyche and the National Heart.

    • heman 10.1

      agree with all of that.

      Just a thought from there perspective is that they can do all that in the future.
      Now they are about making them hard decisions so they can do all them things in the future.

      • Nick 10.1.1

        Don’t be silly.
        This is the ultimate budget to cling to power. They’ve had 9 years to do stuff in the future.

        This IS the future.

        They are overtly declaring that they have absolutely no ambition but to stay in power.

        You want a party that actually think things can, and should, be better than they are, for the local environment, struggling families, out international contribution, our kids, sick people, future generations here and overseas…..?

        Two seconds’ thought Herman, will tell you both who are worth voting for and who are NOT worth voting for.

  11. DH 11

    This is classic National self serving. They’re cementing in place most of the recent housing inflation by raising the accommodation supplement which even the productivity commission agree underpins rents and investment yields. No way are those bastards giving up their capital gains.

    I don’t know all the rules here but my initial observation is the accommodation supplement is cynically designed to snare people in the rental trap. I tried the calculator and discovered if a single person has $9000 in cash or non-cash assets they don’t qualify for the accommodation supplement. A couple fails with $17,000. So it appears you can’t save a house deposit because if you do you lose the supplement.

    Here’s the reply I got from the calculator, interesting to see it’s already updated with the new rates;

    Calculator here;
    https://www.workingforfamilies.govt.nz/calculator/index.jsp
    ________________________________________

    Accommodation Supplement estimate today

    You may not qualify as your combined cash and non-cash assets of $17,000.00 are over the limit.

    (Cash assets and non-cash assets assets do not include personal items, motor vehicle for private use, or the home you live in.)

    Accommodation Supplement estimate from 1 April 2018

    You may not qualify as your combined cash and non-cash assets of $17,000.00 are over the limit.
    __________________________________________

    (That was trying as a couple with 1 child earning a combined $700 weekly and paying $450 per week in rent. What a joke)

    I wonder if Kiwisaver counts as cash or non-cash assets.

  12. indiana 12

    “Labour claims that “The 50% of New Zealanders on the lowest incomes get just 20% of the money from National’s Budget tax cuts”.

    They again prove that they don’t know how to explain the tax system effectively…this is better example to use:
    https://danieljmitchell.wordpress.com/2012/03/18/the-tax-system-explained-in-beer/

    • Craig H 12.1

      The problem with simplified examples like that one is that macroeconomics doesn’t work that way, and also that we have massive net migration, so the risk of 10% of the tax base disappearing is negligible.

      • indiana 12.1.1

        Is the issue that the example is simplified, or that Labour cannot understand how the tax system works by trying to say that the low income earners get an unfair portion of the tax cut. Are the facts in the example not clear enough? If you earn a low wage you will be taxed less than person that earns a high wage. When tax cuts come, purely based on the proportion of tax paid, low income earners will not get the same as high income earners. That’s the problem with the meme that is being pushed.

        • mordecai 12.1.1.1

          Labour don’t understand much at all.

          “Someone on $20,000 a year has their tax drop from $2,520 to $2,100 – a 17% decrease. Someone on $100,000 a year has their tax drop from $23,920 to $22,860 – a 4% decrease.”

          This budget disproportionately favours low income earners. And rightly so.

          • indiana 12.1.1.1.1

            Agree 100% but commentators here see it this way, the 17% decrease only amounts to $420 less tax, where as the 4% decrease amounts to $1060. And that’s not fair…boo hoo! that National government’s budget favours the rich! Little will be brought down by his economic keyboard warriors.

            • greywarshark 12.1.1.1.1.1

              The difference between you Gnashional supporters and Labour is that Labour is looking at the matter from a distribution point of view, now a mathematical equation. A flat percentage of as base will always result in less money from a low base, and more money from a high base.

              It is a matter of relieving poverty and relieving low income people from tax that reduces money needed for basic living costs. For better off people part or most of their tax will come from their discretionary money, their living costs are intact and they feel taxation limiting their holiday spending, their choice of car, their wish for new chattels instead of secondhand.

              • mordecai

                “The difference between you Gnashional supporters and Labour is that Labour is looking at the matter from a distribution point of view, now a mathematical equation. ”
                Bollocks. Labour’s 2008 tax cuts “gave someone on $20,000 an $1,130 tax cut and someone on $100,000 would have got $2,870. Yes Labour’s 2008 tax cuts package would have given a three times larger tax cut to someone on $100,000 than National’s 2017 package does.”
                (Credit to David Farrar).

  13. Kevin 13

    The fact that we have things like Accommodation Supplements and Working For Families shows what a failure our society has become.

    • Craig H 13.1

      Winston’s point that a minimum wage increase of $3 an hour with appropriate support for businesses would have achieved all of the same goals while costing the government bugger all extra speaks volumes.

  14. Keith 14

    Grant Robertson reaction to the budget worry’s me, yet again. To me he was criticising it because, well, he has to. There was no real analysis, no thought and definitely no passion to his line.

    Listening to his interview on RNZ the question I was left asking was why bother voting Labour? He thinks the housing supplement rise is a good thing, not the bleeding obvious reality that has missed Grant that it will simply inflate rent and make no difference to those struggling.

    He was similarly in agreement with an number of other initiatives. He took this crock at its National Party intended face value.

    No arguing that a tax cut was wrong or unaffordable which it is, simply it was poorly targeted.

    Then his argument as to why the budget is not so good is purely semantics, dancing around of a pin. Nothing I heard from him said to me Labour would do that much different, just a bit different.

    Very uninspiring stuff Grant! It was like saying driving a red car is more sensible than driving a blue car. You do not present an alternative to me, just the same old shit.

    • Craig H 14.1

      Well, building 100,000 houses and a stack of state houses will be a different way of approaching the Accommodation Supplement. Maybe he should have said that, but core Labour policy is already there.

  15. Wayne 15

    Health has gone up 5.5% in just the next year, so way above inflation.

    Anyway Labour says they would have spent everything on health, education and housing, maybe infrastructure as well. that is their major difference to National.

    But that also means they can’t seriously complain about the inadequacy of the tax threshold and WFF package, when their alternative on these things is zero.

    In any event the Greens and NZF have voted for the tax threshold and WFF package, so it is locked in for next year. Where does Labour go when their alternative budget has been already been negated by their potential coalition partners?

    In addition the Labour/Green Budget Responsibility Rules essentially bind them to a budget with total spending more or less the size of the current budget.

    These latter two points mean the budget is a resounding success for National. The election now gets fought on their terms.

    It is virtually impossible for Labour to argue the budget is for the rich. That simply sounds and indeed is ridiculous.

    So if there is a change of government, it won’t be as a result of the budget.” Time for a change” also looks a bit lame when Labour looks bereft of fresh ideas.

  16. “Time for a change” also looks a bit lame…” – Wayne

    Sounds like a powerful rallying cry to me!

    • mordecai 16.1

      Not when we have one of the strongest performing economies on the planet.

      • Robert Guyton 16.1.1

        And one of the most threatened environments on the planet, mordecai. “Strongest economy” = most rapidly collapsing environments.

        Hurrah! Eh?

        • mordecai 16.1.1.1

          Are you seriously arguing the NZ environment is “one of the most threatened environments on the planet”?
          Have you ever been outside of NZ?

  17. newsense 18

    More Michael Wood marking Paula Bennett please

  18. Jeremy 19

    Surely any tax cut that does anything apart from move the lowest threshold up, or reduce the lowest threshold rate will favour higher income earners.

    If Labour and the Greens aren’t prepared to state that this is the only way in which they’d entertain tax cuts, then I think they should keep their powder dry for when National looks to align all the top rates at 28%, or drop the company tax rate, etc. They risk being the parties that cried wolf too often otherwise.

    • RedLogix 19.1

      Precisely. Why is it that none of the Opposition parties seem to be able to clearly articulate the fact that in terms of total taxation New Zealand is already one of the most lightly taxed nations in the OECD? From memory only Mexico rates lower.

  19. Lara 20

    I’m paying close to 50% of my income on tax. Most weeks I put more aside for tax than I am able to save for myself.

    I’m leaving NZ as soon as possible. So that during my most productive years I can save and get ahead.

    • RedLogix 20.1

      Given the top tax rate on PAYE income over $70,000 is only 33% … I call bullshit on your assertion as you laid it out.

      The problem with New Zealand is the low incomes, not the high tax rates.

    • Jeremy 20.2

      Are you including GST, petrol taxes, duties, etc?

      I don’t think anyone would be paying much above 40% when everything is factored in.

      • RedLogix 20.2.1

        Take a look at this page:

        https://taxfoundation.org/comparison-tax-burden-labor-oecd-2016/

        Total tax burden in New Zealand (especially when you include provision for retirement income) is right at the bottom of the OECD.

      • Nick 20.2.2

        GST is not your money in the first place.
        We account it, but it is considered outside the normal financial transactions.

        Sure, it feels onerous, but you should account your income on the net profit of your business, not on the fiscal ebb and flow of payments. Beyond that, you are only paying a total of about 18% over the first $48,000, so either your corporate income is massive, or you are still way below 50% in direct taxes.

        BTW it is impossible to get to 50%, but maybe it shouldn’t be for the top earners.

        The only way to get people out of the poverty trap is not just to pay them more (payments which are too easily absorbed in rising rates), but to make more of the things we HAVE to spend money on free, or at least much cheaper. Lunch for all in schools or free doctor and dentist visits for all, could be a couple of examples. And to make many things they might wish to take part in, in an attractive society, available without an impossible financial barrier. Public tennis courts and enhanced access to our National Parks as examples.

        The idea is to maximise the amount of discretionary money in each pocket. And to make those provisions universal to save on admin, then to pay for it with more progressive tax structures as used to be the case on more egalitarian times.

        • Lara 20.2.2.1

          Oh FFS, I bloody well know what my tax rate is. And my accountant minimises it, but there’s a limit to what I can legally do.

          Yeah, my income is very good. Still leaving.

          Trying to get ahead after divorce, retraining and starting a business… watching property prices rocket ahead and not being able to buy without a massive mortgage….

          Say whatever you like Kiwi’s. I’m off ASAP.

    • red-blooded 20.3

      Well, you make your own decisions, Lara. It seems to me that if you’re paying that much tax you must be earning pretty damn well, though – already “ahead”, so to speak. I’m not sure it’s even possible to pay that much when the top tax bracket (which only applies to earnings over about $70 000) is 33%. And the rates for business are even lower, so the “almost 50%” claim seems a bit of a stretch.

      As for your reply about GST, petrol taxes etc, I assume that you use the NZ roads, the subsidised primary healthcare and free hospital systems, accept the protection of the NZ police force…? Did you think these things were actually free to provide? Who (if not you) did you expect to pay for them?

      And of course the problem is that many people with your approach then return in their less productive years, and – having opted out of contributing to the NZ state through taxes as earners – then cost the rest of us for their care and support in their old age. They may “save and get ahead”, but they are still happy to accept support in terms of healthcare and home services in their later years, forgetting that the money they accumulated in their savings accounts has left a hole that others have had to fill.

      • Lara 20.3.1

        You’ve made some unacknowledged assumptions in your comment.

        First, yeah, I’m earning a lot ATM, but you’re assuming I’m “ahead”. Income at any one point in time does not necessarily mean I’m “ahead” nor does it mean it will continue on a stable nor upwards trajectory.

        You also appear to be assuming I’ll be absent for my “most productive” years. Yet you have zero idea of how old I am, nor how many years I’ve already contributed to NZ.

        Your assumptions are wrong. And I have no interest in correcting you.

  20. Muttonbird 21

    National just spent $6B on a sticking plaster because they found, through internal polling, that their own voters were getting restless about rising inequality in this country.

    National = no vision.

  21. Treetop 22

    Thank you for the info, I have printed out the new changes.

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