Budget for top 5%

Any rational discussion of the budget we might have hoped for was drowned out in a self-congratulatory chorus of government ministers and business leaders supported by largely uncritical media commentary.

Ex-National Party candidate and Breakfast Television host Paul Henry made no pretence at journalism when he gushed his congratulations to the Prime Minister for his “inspiring” budget.  Person to person one could almost calculate the size of their personal tax cut by the exuberance of individual reactions to the budget.

Then within 24 hours the government moved from confident to smug with Finance Minister Bill English telling a business lunch the government sees its next big economic policy movement as privatisation of state assets such as Kiwibank following next year’s election. It’s become an Act/National government rather than the other way round.

The consensus among the business, political and media elites is that the budget was a bold move in the right direction for New Zealand. They have bought the line that shifting taxation from incomes to spending will encourage saving and investment rather than consumption and that tightening up property tax somewhat will push this investment to the productive sector rather than fuelling another housing bubble. Finally we are told the cutting of the top tax rate will stop tax avoidance, stimulate economic growth and encourage young New Zealanders to stay here.

A cautionary note should sound to anyone who looks across the Tasman at the robust Australian economy with pay rates at least 30% higher than New Zealand. Like New Zealand they have just completed a major tax review but are doing the opposite to us. They are leaving GST at 10%, keeping the first $16,000 of earnings tax free (we’ve never had this), retaining a top tax rate at 45c in the dollar, significantly increasing tax on mining companies while increasing employer contributions to worker superannuation by 30%.

But none of this seems to bother those who stand to get personal windfalls from the policy. Prime Minister John Key can expect an extra $272 per week and Telecom CEO Paul Reynolds will get an extra $6,640 a week while the vast majority of workers will be lucky to get some loose change after the GST rise and ACC increases announced earlier this year.

The iniquity is obvious. The top 5% of income earners will receive a third of the total value of the cuts. Are the rich overtaxed such that they deserve such a windfall? John Key thinks so. He says the top 10% of income earners pay 44% of income tax. That’s true but only because they get the lion’s share (34% in fact) of the national income. The lower-paid half of wage and salary earners receive just 16% of the country’s income and pay 11% of the tax.

New Zealand is now so unequal that if our top 150 income earners gave up just the increase in their wealth each year we could eliminate child poverty and almost double the incomes of the half a million New Zealanders earning less than $15 an hour.

Despite the overwhelming evidence to the contrary Finance Minister Bill English says the budget will leave the gap between rich and poor “about the same”. Pure delusion. This is a budget of the wealthy, by the wealthy and for the wealthy.

None of the other reasons given for the tax changes in the budget stand scrutiny either.

Dropping the top tax rate will not lead to economic growth if past experience is anything to go by. A US study found that between 1950 and 2002 the periods of strongest growth occurred when the top tax rates were the highest. In 1993 for example the US increased its top tax rate from 31% to 39.9% which preceded a period of rapid growth. The same effects have been experienced here in New Zealand. After Labour reduced both the top tax rates (48c and 66c) to 33c in 1986 we were told to expect economic growth and improved living standards across the board. Instead our economy stagnated while Australia with its progressive taxation forged ahead.

A similar thing happened here in 2000 when the Labour/Alliance government increased the top tax rate to 38c. Economic growth increased despite National claiming it would be a brake on the economy.

The most interesting theory I’ve seen to explain this is that many of the rich are inherently lazy and they work hard only when their share of national income is reduced by taxation. If they have it too easy they spend even more time over long liquid lunches and the like and because they control most of the capital for investment, the economy falters. Remember the awful behaviour and conspicuous consumption which marked the tax cuts of the late 1980s? Expect to see another round after 1 October.


Pulling the plug on Tuhoe

Just what was going through John Key’s head when he pulled the plug on Tuhoe?

His government had spent 18 months negotiating a settlement which would have vested ownership of Urewera National Park with the tribe without any indication from his ministers this would not be possible. On the contrary it seems the paper going to cabinet last Monday would have rubber stamped an “agreement in principle” for this land to return to Tuhoe from whom it was seized.

To bail out just a few hours ahead of the cabinet meeting was a heartless display of power politics. It continues the long history of injustice suffered by Tuhoe at the hands of successive governments.

It seems National had gone as far from its comfort zone as its core supporters could stand. The redneck rumblings at a National Party regional conference appear to have been the trigger for Key to collapse the deal. Apparently National’s core support perceived there were too many concessions to Maori recently after the signing of the United Nations Declaration on Indigenous Rights and the step towards tino rangatiratanga in welfare provision through the launch of the Whanau Ora initiative.

Key figured a third significant move within a month was a step too far for the nervous Remuera blue-rinse brigade. It seems there was a danger some might choke on their cucumber sandwiches at a bridge afternoon or even succumb to a fit of the vapours at the sight of a celebration involving Maori activist Tame Iti with his full-face tattoo.

I’ve never been a particular fan of the treaty negotiation process because the Maori structures created for the exercise mimic the European corporate world and many if not most Maori are disengaged from the process. However it’s the only avenue available for some redress and so one would expect the government to act in good faith. It hasn’t.

Chief Tuhoe negotiator Tamati Kruger summed it up politely saying “the announcement by the prime minister, I think, indicates a loss of courage and nerve by the Government with negotiations with Tuhoe.”

It’s interesting to speculate how different the decision would have been had the announcement on Whanau Ora been delayed till after cabinet decided the Tuhoe claim.

There are plenty of others who will quietly cheer the Prime Minister. New Zealand has never had a shortage of racial intolerance and bigotry which is one reason Maori players were so effortlessly excluded from All Black teams to South Africa from 1928 to 1970. The New Zealand Rugby Union and much of their support base thought more of the racist sensitivities of white South Africans than the rights of Maori New Zealanders to represent their country in our national team.

The apology from the rugby union when it finally came last week was issued via an overnight media release and was made only after serious prodding from South Africa’s Minister of Sport and Recreation Makenkesi Stofile a week earlier.

Stofile said the time was right for an apology from the South African and New Zealand rugby unions to black South Africans for their banning from Springbok teams and to Maori players for their exclusion from All Black teams to tour South Africa.

It’s 50 years since the last all-white All Black team toured South Africa so the apology was a long time coming.

The initial reason for the delay was the Maori Rugby Board saying they wanted to focus on the celebration of 100 years of Maori rugby and look to the future rather than the past. However it became clear later that they didn’t want to be seen to criticize those who made wrong decisions in the past. Rugby union CEO Steve Tew said those decisions wouldn’t be made today with the benefit of hindsight. This doesn’t stack up. The decision to ban George Nepia from the All Black tour to South Africa in 1928 was wrong then just as it would be now.

The apology was welcome but the circumstances in which it was given undermine the generousness which should have been its hallmark. The decision of the union to issue it via a midnight media release rather than “kanohi ki te kanohi” (face to face) as suggested by many within Maori rugby reflects the same prejudices as are evident in John Key’s decision to deny Tuhoe ownership of the land stolen from them.

In each case the rugby union and the government have allowed themselves to be hostages to bigotry rather than principled defenders of the rights of others.


Students pawns of self-serving principals

It should be a profound embarrassment for our school principals that there exists the need for anti-poaching rules in school sport.

One might think schools would practice sportsmanship as a top priority but it seems that too often the reputation of the school takes precedence over practising the values espoused in weekly school assemblies.

In the last week private St Kentigern’s College in east Auckland has had its first XV coach Tai Lavea censured and required to have no match-day contact with the team for five weeks for his part in assisting a top Pacific Island player from Papatoetoe’s decile two Aorere College transfer to St Kent’s. Instead of apologising the school principal Steve Cole made excuses for his coach saying Lavea did not coerce the student to come to the school, did not have a reckless disregard for the anti-poaching bylaws or set out to deliberately flout them.

With his comments Cole puts up straw-man arguments to look good as he knocks them down. He would have done better for everyone had he accepted the decision and apologized.

The ironies of this particular poaching have continued since with a former Aorere College principal, Mike Williams, attacking Close Up presenter Mark Sainsbury who made repeated references on TV to St Kent’s being the “better” school. Making such assumptions is typical of a media who repeatedly refer to private schools as “top” schools. In this case Williams points out that the NCEA pass rates for Year 13 Pacific Island students at Aorere (the poached player was a Year 13 Pacific Island student) was 39.8% compared to 40% at St Kents. At Year 12 the Aorere pass rate was 36.6% while at St Kent’s it was a mere 20%.

In rugby too both schools are in the Auckland 1A competition and last year Aorere finished higher on the points table than St Kent’s. It seems money can buy a lot of prestige but not much of substance.

The practice of poaching players has gone on for decades because rugby has always been the most highly contested battlefield between schools.

The height of my rugby career was making the trials for the third rugby XV at Napier Boys’ High School. I didn’t make the team but enjoyed the local fourth grade competition in my last two years at high school. The first XV was always presented as a cut above the rest. The school never had the Maori culture group perform in the five years I was there but the first XV were regularly paraded. I remember my acute annoyance after taking part in one of those walkathons to raise money for school sports equipment only to find a few weeks later the first XV decked out in new tracksuits and blazers so they’d look the part.

Here in Auckland player poaching took on a new life after the Tomorrow’s Schools reforms where schools were told they were on their own and should be competing with each other.

The first rule for academic, sporting or cultural competition is to start with the best students you can enrol. So schools in high income areas put high achievement as the first priority for enrolment. They also offered scholarships to entice top performers to attend. Students who lived next door to a school were frequently overlooked in favour of students from well outside the local area.

A typical example from my experience in the 1990s was an outstanding rugby player at a middle decile school being visited by the deputy principal from a wealthy state school and induced to transfer schools with the cost of uniform, schools fees and daily transport covered in the deal.

These poaching schools complained loudly when Labour changed the zoning rules a decade ago to give all students the right to attend their local school and require a supervised ballot for any additional places. So how could a school find a way around that? It wasn’t as difficult as it sounds. Simply screw the scrum by holding two ballots. The first ballot takes place and those who miss out go away and enrol elsewhere. But some students who miss out are quietly asked to leave their names in. The school holds back some places on the grounds it can’t be sure if there might be an unexpected influx of students into the home zone at the last minute which they’d be required to take. Sounds reasonable but it’s all smoke and mirrors. When the possible influx doesn’t materialise the second ballot is held and suddenly the school’s sporting prospects look that much better.

The controversy in Australian rugby league over the breaching of the salary cap rules by the Melbourne Storm two weeks ago is being played out here in school sport every year. Winning at all costs is the name of the game with students used as pawns in promoting a school’s image and the careers of self-serving principals.


Booze barons abuse advertising freedom

Last Thursday morning I was driving through Otahuhu in South Auckland and came across a huge billboard for a new RTD (ready-to-drink) of bourbon and cola with the message “Would you prefer to walk in on your parents or have them walk in on you?”

If this isn’t an alcohol promotion aimed at teenagers by the booze industry using cynical advertising then tell me what is. This particular RTD is made by Dominion Breweries but all the industry players are hard at it – pushing alcohol onto teenagers with subtle and not-so-subtle messages which make a mockery of the voluntary advertising code they are supposed to follow. RTDs are the drink choice of young New Zealanders – young women in particular – and they are at the heart of our booze drinking culture.

On their website DB make the claim they are “Inspiring Good Times – responsibly” – pure bull dust.

A couple of days earlier the Law Commission released its long –awaited report on alcohol and I was hoping there would be emphatic recommendations to halt this kind of advertising which targets teenagers.

It was good to see the Commission’s media release in which Geoffrey Palmer singled out RTDs in particular:

“A can of beer or an RTD can be bought for one or two dollars in many retail outlets. This is less than we pay for bottled water. One of the consequences of alcohol being promoted and sold at pocket-money prices is that we risk losing sight of its status as a legal drug, capable of causing serious harm to others.”

Causing serious harm to others is an understatement. The Commission favours phasing out advertising which targets teen drinkers but it would be five years before it would have much effect. That’s just too long.

Several years back I was a teacher helping run a “keeping safe in the holidays” session for Form six students a day or so before they left for the Christmas break. Rather than a lecture it was conducted with a “post-box” exercise where students wrote anonymous comments in response to statements put up around the room covering issues such as drinking, driving, unwanted sex, swimming, melanoma etc

Groups of students then collated the statements and reported back to everyone.

What surprised me at the time was the large number of students, mainly girls, who reported unwanted sexual advances associated with alcohol. It shouldn’t have been surprising but there’s a difference between knowing something intuitively and hearing the reality.

From there each aspect of keeping safe was discussed which ended up as students talking quite animatedly to other students about their experiences and the best strategies to identify and avoid unsafe situations. It’s the best kind of teaching a school can provide in areas like this but good work which families and schools are doing is undermined every day by advertisers on big salaries with diminished social responsibility.

The early signs of government commitment to act on the report are not promising. Shortly after its release Justice Minister Simon Power said the government would not be implementing one of the key recommendations which was an increase in tax to bring a 10% increase in retail prices.

The government has so far not responded to the recommendations to phase out alcohol advertising.

The advertisers opposed to government regulation talk about freedom of choice for consumers and teaching individual responsibility. They believe their freedom to act irresponsibly is more important than the right of young people to grow up free of their malicious, manipulative influence.

The government did much better with cigarettes last week although nowhere near as far as Australia. Here the government is increasing the price of all tobacco products by 10% immediately and over 30% by 2012 while the Australians are increasing the price by 25% in one hit.

Maori Party MP Hone Harawira can claim the credit here. He has led the charge against an industry which promotes its products to young kiwis so it has a regular supply of addicts to maintain its profits. The effects on Maori are predictable. 40 % of Maori adults smoke compared to around 26% of the New Zealanders overall. This is directly related to socio-economic status. So much so that ACT MP Roger Douglas called the tax increase an “attack on the poor.” Excuse me while I puke.

Harawira has previously proposed nationalising the manufacture, distribution and sale of cigarettes. It’s a good approach. They should be available to nicotine addicts on a doctor’s prescription rather than sold uncontrolled at the dairy.

For most nicotine addicts the question of free choice is as illusory as the social responsibility of advertisers.