The Country Needs ACT Now More Than Ever

Hon Richard Prebble speech to the ACT Annual Conference; Barrycourt Accommodation & Conference Centre, Parnell, Auckland; Saturday, March 12 2011.

At 12:51pm on February 22 2011 an earthquake not only destroyed New Zealand’s second largest city, but set off a political aftershock that is going to have an equally dramatic impact on this year’s general election.

The electorate is realising that the issue of the election is how to pay the cost of the two earthquakes is now estimated at $15 billion by Treasury and $20 billion by Fletcher construction.  Treasury concedes that its estimate does not include the personal costs of the earthquake.  To most of us that is Jo Giles, who was a very popular ACT candidate who was killed in the CTV building collapse.

The news that whole suburbs of 10,000 homes will have to be demolished is giving us an idea of the scale of the disaster and the cost.

I doubt that my relative’s losses are in the Treasury estimate.  In the first earthquake he lost his possessions when he was not allowed to return to the house he rented.  In the second earthquake his new home was destroyed and he lost his most valuable possession - his van.  He has lost his job as a contract cleaner because the central city is closed.  He, and his wife and children, just own the clothes they are wearing and are now living with his mother-in-law in Wellington.  None of his possessions were insured.

His case illustrates what the earthquake means to the nation: a huge loss of wealth.  Assets that had taken 170 years to build are gone.  The payouts by the Earthquake Commission will require the Commission to sell billions of dollars of assets.  Every insurance-holder will be levied to rebuild the Commission’s reserves.

Even insurance is really a group savings scheme with a provision in certain circumstances for a payment.  Insurance companies expect to make a profit.  Insurance premiums will rise as actuaries re calculate the risk and, through significant increased premiums, we are all going to pay the insurance cost of the earthquake.

Then there is the uninsured risk of the Crown’s assets and council infrastructure.

An American friend of mine said he had worked out that, relative to the size of our economies, the Christchurch earthquake is 15 times larger than Hurricane Katrina – America’s costliest natural disaster, and no one thinks New Orleans is America’s second city.  Six years later thousands of residents are still living in temporary accommodation. 

New Orleans is what happens if we get our response wrong.

There is a political consensus that Christchurch must be rebuilt.  There is also a consensus that there is no way the ratepayers of Christchurch can meet these massive bills.  There the consensus ends.

No Party has yet been upfront with the electorate about the magnitude of the cost, or been realistic about how to pay.

We are facing one of the biggest challenges in our nation’s history.  

We formed the Association of Consumers and Taxpayers because the two old Parties would not face reality and put up positive solutions to the problems facing the nation.

Someone has to say that things that were affordable on February 21 are not affordable today.  That someone is us - the ACT Party.

Someone needs to spell out that on the day of the earthquake the Government spent $48,857,142 more than it earned.  Not that the 21st day of February was, in that respect, an unusual day - the National Government has been borrowing $300 million a week all year and plans to continue to borrow until 2014.

Bernard Hickey has calculated that by the time the borrowing programme is complete it will cost $2.4 billion every year just to pay the interest.  This calculation was done before the Christchurch earthquake.

When we add in the private debt to the Government debt, New Zealand has one of the highest levels of per capita debt in the world - right up there with the basket cases Ireland and Greece.

There was a view that we only had to worry about the Government’s debt.  That cherry view was destroyed in a few hours just three years ago when the Australian Banks informed the Government they had $40 billion of short term borrowing and, following the collapse of Lehman Brothers, no lender was willing to roll the loans over without a guarantee from the Government.

Lenders are asking whether countries can ever repay.

When I started writing some notes for this speech I wrote that:

“The risk with the Government’s plan to borrow now and return to surplus later is not only is the global debt crisis not over there is other economic events that could affect our economy. 

“History has taught us that as a small trading nation we are very vulnerable to economic shocks.  These future shocks that will rock our economy can come from anywhere.

“The only thing we can be sure of is that these economic shocks will come from a direction we did not expect.  The next economic shock could come before the next election”.

There have been two major shocks the earthquake and the oil price between my starting drafting this speech and its delivery.

We all know that in our households that we should put money aside for a rainy day.  Government is no different.  We will look back on the last three years and realise what we thought were hard times were actually good. 

Someone needs to say that borrowing $300 million a week is reckless folly when the money is being borrowed to finance Labour’s spending programmes that National, in Opposition, said were wasteful, unaffordable and unnecessary.

The someone who needs to say that is us: the ACT Party.
 
Let me, as an aside, deal with the repeated claim that government spending is needed to sustain the economy.

There is no evidence here or anywhere ever that you can grow your economy by state spending.  If it were true government would be easy.  The Soviet Union would have won the Cold War.  State spending has not boosted the New Zealand economy.  The economy after four years of deficit spending and record export prices is in a technical recession. 

This should be our issue.

We formed our Party because we know neither National or Labour can be trusted not to spend, borrow and hope.  We are the low tax, small government party.

That’s our brand; that’s our purpose.

ACT may well be re-elected because we have a powerful tactical message.  MMP means that National will need a coalition partner.  The Maori Party, even before it started its meltdown, cannot provide stability.  Peter Dunne will go with anyone who will give him one of the new Ministerial BMWs.  ACT is the only Party that can provide a stable coalition partner to National.

Rodney Hide being elected to Epsom could well decide whether National forms the next government, and the voters of Epsom are the most sophisticated in the country.

But, as Rodney has often said: “we do not want to be elected just to make up the numbers”.

I was delighted to see our leader’s statement last week “Reprioritise, Rebuild”.  Rodney Hide set out what should be our manifesto.

Rodney said:

“Our second city is devastated…We are forced to make hard choices, to focus intensely on only the highest priorities – we need to face reality.

“Our starting point is not good.  Our government has been borrowing $300 million a week simply to keep afloat.  That’s almost $200 per week for each and every Kiwi household.  And now we have Christchurch to rebuild.

“The middleclass wants free childcare.  Students want interest-free loans.  Pensioners want …gold cards.

“We could not afford that before the earthquake and we absolutely can not now.
Government must live within a budget as tight as the budget that ordinary households face”

No other Party leader would have made that statement.  Rodney’s statement is why we need ACT.

Our creditors are going to demand that the government balanced the books and this day may come much sooner than anyone thinks.

Spend, borrow and hope is not a sustainable strategy.  As Greece and Ireland have discovered a nation’s creditors can say almost overnight “We will not lend you any more”. 

There are only three ways to balance the books, cut spending or increase taxes or do both.

Labour’s policy solution to every problem is to spend more taxpayers’ money.  Phil Goff says he will finance Labour’s spending promises by taxing the rich.  Labour is somewhat vague as to who is rich knowing that even the rich do not think they are rich.

Anyone who owns their own business, employs someone, gives professional advice, has a trade, they are the “rich” Labour is talking about.  The people who live in Epsom are right in the bull’s-eye of Labour’s target. There is no electorate that has more at stake in this election than Epsom. 

Just electing a National government is not going to protect Epsom taxpayers.

Epsom voters have been wondering “who are these people Phil Goff says have had huge tax cuts”.  National’s tax changes were not designed to reduce the amount of tax raised. The fluctuation in the government revenues are caused by the recession not by tax changes. 

The government is borrowing because under National government spending as a percentage of GDP has increased from 31.2% of GDP under Labour to 34.9 percent today.  A National government has increased government spending as a percentage of GDP by a massive 10 percent.

Even with the income tax rate changes many households in Epsom are paying more tax today than they were three years ago. Epsom voters pay the increased GST.  Owning a rental home is the preferred savings scheme in Epsom.  Rental home owners have been hit hard by National’s tax changes.

Is it only me?  Why should anyone be surprised that there is now shortage of rental accommodation in Auckland? 

National’s change in depreciation rates for which there is no economic justification has resulted in many companies paying more tax this year than they paid under Labour.

Someone needs to say that.  There is no scope to finance the Christchurch rebuild by increasing taxes. 

Someone needs to say taxes do not become good just because the government has changed colour.

That someone is ACT.

There has been a debate in ACT since we started whether we are more influential inside government than out.

The real issue is that ACT must be able to speak out on our issue; the need to balance the books, reduce red tape and lower taxes.

The Free Democrats in Germany are a low tax, smaller government party like ACT.  The Free Democrats are very out spoken on the need to reduce taxes and spending even though they are in government.

So I am delighted to see Rodney speaking out on our issue.

The electorate expects us to set out our program for the next three years. 

We need to say that government must stop spending that does not meet any sort of cost benefit test such as urban rail in Auckland or roads of national significance that just happen to be in marginal seats.

To listen to the left all government spending cuts hit the poor.  If government spending just benefits the poor how come after such a massive increase in government spending people are still poor?  As Rodney pointed out in his statement gold cards for millionaires, interest free loans to the sons and daughters of the rich and free child care to high income earners does not help the poor. Cutting government spending is the way to ensure we all contribute to the rebuilding of Christchurch.

If we return to the level of government spending as a percentage of GDP before Labour took office we can easily rebuild Christchurch without new taxes or new borrowing and balance the budget.  It is that simple.

Someone needs to say that.  That someone is the ACT Party.

There are a lot of things that ACT can say that no one else will.  Having over 50 billion in under performing assets and growing debt is absurd.  The state’s businesses should be privatised not to repay debt but because government is hopeless at business.  The Crown agency that monitors SOEs reports last year under a National government that the state’s businesses earn less than half the returns of the average public company that is a loss of hundreds of millions of dollars a year for taxpayers. 

Some one needs to say we need to privatise the state’s businesses because it will result in low prices, better efficiency, more tax revenue and a wealthier New Zealand.
That someone is ACT.
 
Having taken three years to notice that the civil service is bloated I have little confidence that National will reduce the number of civil servants or tackle the problem that civil service terms and conditions are too generous.  For over a decade government employees’ wages have been rising faster than the private sector.  

Someone needs to say that we not only need fewer bureaucrats but their pay and benefits should not be higher than the pay and benefits in the private sector. That someone is ACT.

When asked for an example of how to stream line the bureaucracy the Prime Minister suggested amalgamating the departments of agriculture, forestry and fishing.  When in business has the merge of three inefficient businesses resulted in one efficient slim business?  The fact that the state unions think the merge has merit should be a warning sign. 

Someone needs to speak out and say that the only effective way to reduce the size of government is for the government to stop doing things.

That someone is ACT.

Having taken three years to notice there are 300,000 able bodied people on welfare gives me little confidence that a re elected National government will tackle Welfare reform.  John Key says it makes him feel squeamish.   Someone needs to say that one of the most important principles of good government is “Do not pay for the things you do not want more of”.
That someone is ACT.

I think a re elected National government will decide it is easier to raise taxes than cutting spending.|

You can just see National having accepted the myth that rental home owners somehow got a tax break will next decide we need to increase taxes to be “fair”. 

The Conservatives in Britain are taxing bankers in the name of fairness.  There is no economic logic that says people in banking should pay a higher rate of tax just as there was no logic in saying rental businesses should pay taxes that other businesses do not pay.   

Someone needs to be saying that the real solution is to grow the economy.  Someone has to say that it is entrepreneurs that create jobs.  If we want more new jobs then we need to tax the job creators less.

It is that simple.

Someone needs to say it. 

That someone is us, the ACT Party. 

We formed this party because no other party will say we need low flat tax.

I believe we can be rightly proud of our party and our MPs.

The reorganisation of Auckland is the biggest single reorganisation in our nation’s history, local or central.  It has been accomplished in two years. It is the most remarkable achievement of the Key government.  

Let me tell you something else that no MP will say.   The reason the MPs hate Rodney is because Rodney Hide has ended the payment of parliamentarians by perks.

When Rodney first spoke out against MPs travel perk I said to him “Rodney you do realise that perks is how MPs are paid.  The day will come when you are a minister and will need to go overseas.  You are not paid enough to pay your own way.  Be careful never to say that you will not use the travel privilege”.

Rodney promised me that he would never make such a statement.  The media and the Opposition have been through every statement Rodney as ever made and they can not find a statement from Rodney saying he would not use the travel entitlement.  If he had they would have told you again and again.

What killed the perks was a personal decision by Rodney not to accept the parliamentary travel entitlement and to repay the taxpayer for travel he was legally entitled to.

I have to confess as a retired MP when I saw Rodney had decided to take his stand I said “Dam, Rodney has just killed my travel perk.  The parliamentary travel entitlement can’t last now one MP is paying it back”.

John Key may have signed the death certificate but Rodney Hide killed the travel perk.  Much as it hurts me I am very proud of Rodney.

Just as I am proud of John Boscawen who was voted by the press gallery the most effective backbencher and is now being an effective minister.  I am an open fan of Heather Roy.  I have not forgotten David Garrett.  He achieved more in two years than most MPs achieve in their total careers.  His final achievement may be his greatest getting Hillary Calvert into parliament; she is going to be a future star.

Our MPs have spoken out on the issues ACT campaigned on; ETS, the anti smacking bill, three strikes and one law for all. 

Which brings me to Sir Roger; Roger your output is amazing.

When I first visited Europe and saw the youth unemployment I said to myself: “How can any nation tolerate a system that results in a third of all young people being unemployed?  At least in New Zealand young people can get jobs”.

We now have one of the highest rates of youth unemployment in the OECD.  If we include the young people doing training courses because they can not find work we have the highest youth unemployment of any developed country - 62,100 young people between the age of 18 and 24 are unemployed.  For those of you from out of town you travelled through Mangere to get here - 62,100 is more people, man woman and children that live in Mangere.  It is a wicked waste of young lives.

Our young people are better educated than ever and more unemployed than any time since the great depression.

There is no shortage of work.  There is just a shortage of jobs where employers can afford to hire an inexperienced, immature, young person with no work experience.

In some regions of New Zealand over half of all young Maori are unemployed because it is illegal to offer young people a job at what they are worth.  

When I graduated with two degrees as a lawyer I had to find a barrister who would agree to take me as his pupil for no fee.  It was a good deal for me to work for no pay because as anyone will tell you, I learnt more on the job than I ever did at university.

Who speaks out in parliament on the importance of young Maori getting that all important first job experience?  Not the Maori Party.  Not the Labour Party.  The Greens want the minimum wage for an illiterate, innumerate, inexperienced and immature 18-year-old who was expelled from school lifted even further.

The man who has introduced a private members bill to let young people get that all important first job is parliament’s oldest MP Sir Roger Douglas. We are so proud of him. 

They all deserve to be re elected.

As a nation we do not want to look back in six years like the people of New Orleans and say what went wrong?  How did we drive our skilled people to Australia with high taxes?  How did we borrow so much we have lost our credit rating?  How did we put our grandchildren into debt?  Why are thousands in Christchurch still in temporary accommodation?  

It is vital ACT MPs are re elected.

I believe our best days are still ahead. 

The consumers and taxpayers of New Zealand need an ACT party to speak for them now more than ever.

ENDS