The Greens plan to give $1 billion to companies if they use it for research and development (R&D).
This reminded me of the quip attributed to the U.S. Senator Everett Dirkson, “a billion here, a billion there, pretty soon you’re talking serious money”.
New Zealand is a small country. A billion is serious money all on its own. In fact, each billion of annual government spending adds 4 percentage points to the company tax rate.
The Greens really plan to increase spending by $500 million a year (the billion they boast of is spent over the first three years). This means they would make the company tax rate 2 percentage points higher than it otherwise needs to be. Individual companies would then get their hands on taxes paid by other companies if they can convince Green politicians or their appointed bureaucrats that they are good children and deserve an R&D grant. I foresee some very nice lunches for the “experts” the Greens will appoint to dispense this $1 billion.
Next time the Greens complain about crony capitalism, I hope everyone will enjoy a jolly good laugh, even if they miss out on a jolly good lunch at the taxpayers’ expense.
Avalanche of bad news and the adjournment
As the American writer and wit Mark Twain observed, no man’s life, liberty or property is safe while Congress is in session. This week, the Parliament wrapped up business for the year with most MPs returning to their electorates and regions.
December is also traditionally the month where Ministers release bad news. Ministers bearing bad news are like the wildebeest of the Serengeti in migration - there is safety in numbers when pressing towards Christmas. This is the time when the public are too pre-occupied to be further outraged. And most journalists are filled with the stories of year and working up their end of year retrospective pieces. An added advantage this year has been the death of the iconic Nelson Mandela and the speculation as to whether Mr Minto was more deserving of a place in the Prime Minister’s party to South Africa.
The major event in the Parliamentary calendar (aside from the Press Gallery party) is the adjournment. It is generally a light-hearted debate where MPs do ritual battle and all in sundry are generously thanked. You can see John Banks’ stout defence of both himself and the Partnership Schools in Whangaruru and Whangarei, both of which are being targeted by the nasty PPTA.
Yet another failed IT project
In the pre-Christmas avalanche of bad news was a gem of a story about the New Zealand digital archives project being... well... shelved. The hapless Minister of Internal Affairs, Chris Tremain admitted that he had put the project on hold in February and that, thus far after a spend of $7.4 million, it had not been money well spent. While Labour’s Grant Robinson appeared in the story, what was much more interesting was that it took him 10 months to latch on to it. Any government information technology project should be worth an official information request on a monthly basis from any decent Opposition politician.
A chorus of woe and the ComCom
Finance Minister Bill English announced a kicking-of-the-tires review of the Commerce Commission in the wake of the final determination of the wholesale price of copper over Chorus’ copper wires. As yet the terms of reference for this review and who will actually be doing it is not clear.
The Broadband decision is not the only cause for complaint; another is the effect ComCom speculation (in a press release) about regulating the pay-tv market. This speculation had an immediate impact shareholder value in SkyTV. A further compliant is the effect of regulatory decisions on electricity line companies, particularly those with publicly listed shares and are therefore subject to market disciplines. The general argument goes that the ComCom is not concerned enough about shareholder value and investor confidence in the regulated industries.
This latest announcement is not the only piece of work underway in the regulatory space. Mr English’s review of the ComCom could compliment a wider piece of work commissioned by the Minister of Finance and the then Minister of Regulatory Reform, John Banks from the Productivity Commission on New Zealand’s regulatory systems.
The argument that partially privatised government power companies still face political risk isn’t new – the Opposition parties have been in overdrive to generate this very uncertainty all year. Likewise, argument about the risk to fully privatised ex-state industries that attract further meddling from Ministers. Recently Dr Bryce Wilkinson has helpfully outlined the sorry tale of government meddling in the telecommunications industry for the NZ Initiative.
It is not immediately clear whether Mr English’s kicking-of-the-ComCom-tires will add to, or subtract from the perception of meddling politicians and bureaucrats.
Momentum seeps out of referendum campaign
News that the turnout in the referendum against partial asset sales has reached just over 40 per cent will be disheartening for Labour and the Greens. Turnout figures and the preliminaries show a very minor uptick in the turnout in the last day but the momentum has clearly gone out of the campaign. They won’t hit a 50 per cent (or more) response rate. This citizens initiated referendum was always more about building momentum and political infrastructure than it was about the issue.
RT knew the turnout would be low when we saw the first Electoral Commission advertisements. Being lectured at by an orange stickman doesn’t build interest in the issue nor confidence that it matters.
Of interest will be how the media writes up the result. With almost one third of respondents approving the sale and just over two-thirds against this is a Labour and Greens fail. In fact they got less votes against than National won in favour in the 2011 general election. The story should be about how the campaign lost steam despite large injections of taxpayer money and paid party activists. After all that is what the campaigning Labour/Greens MPs are. The best explanation of a turnout of less than half of all eligible voters is that most New Zealanders had worked out that it was a stunt – it simply didn’t matter to them.
It’s also doubtful whether either Labour or the Greens built much campaign infrastructure from the exercise. Many a leftwing activist will end the year tired and somewhat flat. In politics as in life, one should not mistake activity for productivity.
No law to set the price of broadband over Chorus copper
As RT reported weeks ago, legislation to overturn the Commerce Commission’s decision on the wholesale price of broadband over Chorus’s copper telecommunications network was never likely, for the reasons outlined then. In truth, the Nats were already focused on a contractual fix with Chorus. That said, the media stunt with scheduled press releases from the other political parties gave John Banks the opportunity to express publicly what had been conveyed to the Nats weeks ago in private: that ACT would not support legislation to quash a decision of the independent regulator.
UFB - one bad idea leads to another
As Chorus is discovering, partnering with Government on a technology project is a risk to shareholders. Of course Chorus had little option in the circumstances. The Nats simply announced an election policy that they were building an Ultra fast fibre broadband network. This had the potential to make Chorus’s business worthless if they did not jump into bed with government to access taxpayers’ money. One bad public policy choice resulting from the desire to look visionary in an election campaign, now results in further bad public policy choices.
In other technology news, the next stage of the ebench project to provide near paperless records for the judges in the Courts is on permanent hold. Again no surprise: big-bang technology projects involving government nearly always fail.
Drill baby drill: Greenpeace gives up
The Greenpeace flotilla so ably lead by Co-Skipper McDiamid of the Vega headed back to port and Greenpeace went off to Court in a bid to use the law to stop deep-sea oil prospecting. Getting in close proximity to the prospecting vessel the Noble Bob Douglas had failed to have any effect. Greenpeace is a global corporate - it sets out to get earned media that can then be replayed in the English speaking world over the news cycle. Emotion drives up donations to fund the national campaigns and HQ in Amsterdam. That’s why Greenpeace activists abseil off buildings; occupy structures with oversized signs and enjoy being safely manhandled by authorities; it makes for great television. Young journos love it too. They are sympathetic (who can be against the environment) and they get the footage. Greenpeace needed to stop the prospecting or get an OTT response from the Government. They achieved neither. Turning out activists to stand on beaches simply won’t play globally. And seeking a judicial review in the New Zealand Courts is not as fruitful as being the subject of Russian justice.
Flexi-super is poor policy and misses the point
ACT is not that keen on Peter Dunne’s idea of flexi-super which allows retirees to take a lower payment sooner than 65 or a higher payment if they retire later at 70yrs. ACT thinks the policy misses the point: the current scheme is unsustainable. Geoff Rashbrooke of the Victoria University’s Institute for Governance and Policy Studies has done the numbers in a new working paper. He makes three observations about flexi-super: first there is no individual pot of money, New Zealand superannuation is a generous welfare benefit not an annuity. Second he thinks the discounted rate of payment proposed is about right. However the bonus for late retirement at 70 is too generous. Third he observes that opting for a lower payout earlier through poverty is not much of a choice. He concludes his paper by saying that he was surprised the policy was ever taken seriously.
From hero to zero by word of mouth
Despite the boosting by the editorial writer of the NZ Herald who declared the CCCP to be without taint, the rest of media and other politicians including the PM have been having fun with Colin Craig. There appears to be no end to his willingness to express his views on the broadest range of topics. The CCCP is really all about him.
Watch John Banks on the campaign trail in Christchurch East with ACT candidate Gareth Veale yesterday on the subject of Mr Craig – it is classic.
Steady hand on the tiller award
The steady hand on the tiller award of the week goes to Energy Minister Simon Bridges who made sure Greenpeace did not get the video footage they wanted.
Elvis has left the building award
The Elvis has left the building award of the week goes to Colin Craig who is learning that the easy bit of being the NZ Herald’s kingmaker is now over.
Imagine what might happen if there was a centre-left coalition.
They believe we can just pass a law saying all wages have to be paid above a certain amount. Anyone who was working below that amount would get a pay rise.
They believe we can attain real economic growth by simply printing more money.
Everyone could then buy a new house, car and what not.
They believe the Government can spend millions of dollars on all sorts of wonderful programs, without affecting the private sector negatively, as hey, it’s not like taxes come from it.
Unfortunately that is all fantasy.
But according to other political parties, it seems that there is no reason why you cannot legislate your way to prosperity.
ACT thinks differently.
We understand that wages are determined by supply and demand.
We understand that minimum wages price some workers - usually the young and inexperienced - out of the market. The minimum wage diminishes their opportunity for a head start.
We understand that printing money results in inflation - an invisible tax on savings, which is the key to capital formation.
Not only will printing money fail to stimulate economic growth in the long run, it may also cause recessions and the misallocation of resources in our economy due to the distorted price signals.
We understand that welfare programs, implemented with the best of intentions, can have detrimental outcomes: increased dependence on handouts, high marginal tax rates which remove the incentive to work and the occasional abuse of taxpayers’ dollars.
Furthermore, with the recent crisis in Greece, we understand what happens when the Government goes bankrupt.
Governments cannot spend so carelessly. That’s why ACT advocates for smaller government that operates within a disciplined budget and low taxes, which will not crowd out the private sector and prohibit the creation of wealth.
If we look at other issues such as the "manufacturing crisis”- other parties were quick to blame the current Government and their so called "hands off" approach - as if the Government has not dug its hands into our economy deep enough.
It appears that not only do they lack understanding in sound economic theory, but some economic facts too.
Out of its 33 members, the OECD (Organisation for Economic Co-operation and Development) rated New Zealand the second most restrictive in terms of Foreign Direct Investment regulations.
Foreign Direct Investment plays a crucial role in our modern economy. Not only does it contribute to job creation, real income growth and raising our standard of living, but also many other positive externalities such as technology and skilled-labour training.
This is why ACT wants to remove unnecessary regulation and red tape that does nothing except make it harder to do business.
I do not wish to demonise other political parties, because as I mentioned before they do have the good intentions. Unfortunately, as they say, the road to hell is also paved with them.
One of the main insights of economics is that it demonstrates to men how little they really know about what they imagine they can design.
I believe only ACT's policies, founded on sound economic principals, understands this.
Speech by Peter Jiang to 2013 ACT Annual Conference, The Farm, Kaukapakapa, Saturday, February 23 2013.
ACT New Zealand Party President Chris Simmons and ACT MP Hon John Banks today announced the details of ACT’s Confidence and Supply Agreement, highlighting a number of very significant policy ‘wins’ for ACT.
Mr Simmons said the new agreement builds on the two parties’ strong, constructive partnership of the past three years and advances ACT’s core economic and social policy goals.
“In particular ACT wanted to see controls put in place to prevent excessive Government spending and poor quality regulation, improved choice in education, especially in disadvantaged communities, and reform of other key policy areas that are currently holding New Zealand’s economy back,” Mr Simmons said.
Hon John Banks said that the policy programme outlined in the agreement was an excellent platform for ACT in Parliament and a strong base from which to continue building the relationship between the two parties.
“It shows that National is willing to make changes in these key economic and social policy areas to ensure our joint aspirations for a more prosperous New Zealand are met,” Mr Banks said.
Key features of the agreement are:
• Continuation of ACT’s focus during the last term on publicly monitoring progress on improving the country’s economy wide performance using international benchmarks, and building on the work of the 2025 Taskforce, with a requirement for Treasury to report annually on the progress being made to improve the quality of institutions and policies, raise productivity, and reduce the income gap with Australia.
• Continuation of ACT’s work during the last term to reduce the regulatory burden on businesses and individuals through taking the Regulatory Standards Bill through to the new Parliament, with an agreement to pass a mutually agreed Bill based on Treasury’s preferred option (option 5) within 12 months.
• Continuation of ACT’s work during the last term on the Spending Cap (People’s Veto) Bill with an agreement to incorporate a legislated spending cap through a mutually agreed amendment to the Public Finance Act.
• Reform of the Resource Management Act, including simplifying legislation to ensure there is only one plan (a “unitary” plan) for each district.
• The provision to set up a trial charter school system - under sections 155 (Kura Kaupapa Maori) and 156 (designated character schools) of the Education Act – for disadvantaged communities, specifically in areas such as South Auckland and parts of Christchurch where educational underachievement is most entrenched. A private sector-chaired implementation group will be established to develop the proposal for implementation in this parliamentary term.
• The establishment of a taskforce to produce a comprehensive report on governance issues relating to state policy towards state, integrated and independent schools.
• The implementation in this parliamentary term of the Welfare Working Group recommendations 27: Parenting obligations, 28: Support for at-risk families, 30: Income management and budgeting support, and 34: Employment services.
• To introduce competition to ACC’s Work Account.
• To support National’s Post-Election Action Plan.
• The appointment of Hon John Banks to the positions of Minister for Small Business, Minister for Regulatory Reform, Associate Minister of Education and Associate Minister of Commerce.
Mr Banks said New Zealand is facing very challenging times.
“This agreement is a significant achievement for ACT, addressing not just economic issues but key social issues as well, in particular those that are currently contributing to our very high rates of unemployed, undereducated and socially marginalised young people.
“I intend over the next three years to advocate for further advances in these areas as well as in the areas of government spending and regulation, labour market reform, and other policies to reduce the burden on businesses and boost productivity and economic growth.
“I would like to thank former ACT MP and Parliamentary Leader John Boscawen for the lead work he has done over the past week to finalise the terms of the agreement. His advice and ACT Party experience has been invaluable and stands us in good stead to reinvigorate and strengthen the Party over the next three years.
“ACT looks forward to working with National, and Prime Minister John Key, to put in place policies to strengthen our country and put us on a path to prosperity,” Mr Banks concludes.
ACT New Zealand Economic Development Spokesman John Boscawen today welcomed the announcement by the Australia and New Zealand Banking Group (ANZ) that it had reached a record $45 million settlement with the Commerce Commission over losses suffered by investors in ING’s Regular Income Fund (RIF) and Diversified Yield Fund (DYF).
"This settlement follows a two year investigation by the Commission into ING’s alleged breaches of the Fair Trading Act. On average it represents a further seven cents in the dollar on top of earlier payouts of either 60c or 62c per dollar for each of the funds’ investors," Mr Boscawen said.
"While many investors will feel that a more substantial settlement should have been given, I feel happy for those ING investors who will receive additional compensation.
"The consistency of investors’ stories was impressive and I repeatedly heard from those that suffered losses that they had acted on the advice of ANZ, who said that investment in ING’s funds was as safe as a bank. Since being elected to Parliament I have fought for the rights of those investors who suffered losses from this bad advice.
"I congratulate the Commission on its investigation and the result it achieved. I particularly pay tribute to those members from the Frozen Funds Group who campaigned up and down the country for proper compensation from ANZ/ING.
"I doubt if such a substantial settlement would have been achieved, let alone such a thorough investigation completed, if it has not been for the publicity the Frozen Funds Group managed to generate," Mr Boscawen said.
Investors awaiting the outcome of the Commerce Commission’s investigation into the failed ANZ/ING funds will be now forced to wait even longer following Chairman Mark Berry’s admission today that the review has been delayed until mid April, ACT New Zealand Commerce Spokesman John Boscawen said today.
“Thousands of people have lost money in this collapse and all were expecting an answer next week. If it weren’t for my question to Mr Berry today, investors would not have been aware of the delay. This is not acceptable,” Mr Boscawen said.
“Investors’ funds were frozen in March 2008 and the case has dragged on ever since. Investors have been left in limbo – with some passing away without ever seeing the outcome.
“I urge the Commerce Commission to give this issue priority to ensure there are no further delays. Investors have waited long enough,” Mr Boscawen said.