Government spending in New Zealand is out of control. Governments can justifiably take money from New Zealanders when there are clear public benefits such as infrastructure, education and healthcare. However, the previous government set the country down a wasteful path of transferring money and services to influence swing voters instead of to provide public benefits. Since 2005, government spending has increased from $29 out of every $100 earned by New Zealanders to $35. This level of taxation and spending discourages productive work and investment, and encourages the mentality that New Zealand can “vote itself rich.”
A classic example of electioneering politicians using public money to win elections was the interest free student loan election bribe. In 1999, Helen Clark successfully campaigned to remove interest from student loans of students while studying. She gave 81,000 students an average break of $18 per week. The $74 million cost to approximately 2 million taxpayers was 74 cents per week, each. More students voted for her to get $18 per week than taxpayers voted against her to save 74 cents. Helen Clark and a small number of students won, the country as a whole lost. We got a policy that taxes all productive behaviour and gives the money to highly qualified people who don’t need it. It was no surprise that she repeated the trick by making student loans interest free for graduates in 2005.
ACT’s spending cap bill would change the politicians’ incentives around spending and vote buying. It is a proposed law that would simply say that total government expenditure could only increase by the rate of population growth and inflation. In order to increase spending beyond the level of inflation and population growth, politicians would have to put the expenditure to a public referendum. Only natural disasters or rises in government spending directly created by unemployment would allow politicians to raise spending above population growth and inflation without a referendum. Electioneering politicians would no longer be able to raid mainstream voters’ pockets to influence swing voters. They would have to live within a budget, just like the people they tax.
In the long run, the Spending Cap bill would reduce the burden of taxation on the productive. It would require electioneering politicians to focus on improving the quality of spending instead of the quantity. This Bill would be a powerful tool for encouraging “making” over “taking.”
In the last Parliamentary term, with ACT’s pressure and support, the Government:
• Introduced the Spending Cap (People’s Veto) Bill to parliament as a government bill.
ACT will continue to push for a Spending Cap Act. A Party Vote for ACT is a vote to:
• Continue the passage of the Spending Cap (People’s Veto) Act into law;
• Continue pushing for innovative policies that will change the behaviour of New Zealand politicians away from vote buying and low quality spending towards lower taxes and higher quality spending;
• Change the political culture in New Zealand from one that always rewards “takers” with election bribes to one that always rewards “makers” with lower taxes;
• Make New Zealand a much wealthier country in the long term.