Protest for privileged

People are planning to march up Queen Street today in support of wealthy beneficiaries and foreign banks.

They’re not saying that. They think they’re opposing Budget announcements:

Groups opposed to the Government’s planned changes to KiwiSaver, family tax credits and public services and state asset sales, announced in last week’s Budget, will march along Auckland’s Queen Street . . .

If the changes to family tax credits can be criticised for anything it’s not going far enough. Giving public money to high income earners, regardless of how big their families are, is not what the welfare state was designed to do.

People in Kiwisaver will still get $1,000when they join and any further subsidy from the government is generous, even if it isn’t quite as generous as it’s been.

Changes to public services are designed to shift costs from the backroom to the front line. How can anyone protest about that?

The alternative  to the partial sale of state assets is to cut spending  severely or add to already heavy borrowing from overseas banks which would add to our already precarious financial situation.

Given the parlous state of the nation’s books the government could have been forgiven for a slash and burn Budget. Instead it went for what Rob Hosking described as a trim and singe.

Today’s protest is for the privileged and will say a lot more about the politics of the participants than the Budget which delivered moderate measures to solve some very serious problems.

No surprises Budget

Jane Clifton wrote in her column in The Listener:

“It has been a couple of decades since any Budget truly surprised anyone. All the measures are carefully explained in advance – as they should be – and only the fiscal details, again, containing few surprises are kept secret .  . . by Budget day, there are only two questions of any real novelty: what colour tie will the Finance Minister wear and will there be sausage rolls?”

She got it right. Today’s  Budget held few surprises – increased spending for education and health, necessary support for Canterbury earthquake recovery, much needed, but pretty restrained, changes to Kiwisaver, student loans and Working for Families, some partial sale of assets . . .

There was no sign of the usual election-year lolly scramble but there was good news. The Budget will return to surplus in 2014/15 – a year sooner than forecast in December.

This is a significant achievement given the impact of February’s earthquake since the forecast was made. We’ll all benefit from the reduced need for Government borrowing and the lift in national savings.

We’ll also benefit from the escape from a credit rating downgrade:

Standard&Poor’s has made no change to New Zealand’s credit rating and says the Government must achieve its fiscal targets for its external position to improve.

Last November the credit rating company placed the outlook for New Zealand’s AA plus rating on a negative outlook.

Today it said that the contents of the Government’s 2012 budget were “consistent with the assumptions that feed into our sovereign ratings on New Zealand”.

Finance Minister Bill English said:

Budget 2011 builds a strong platform for jobs and growth, sets a credible path back to surplus by 2014/15 and helps increase national savings . . .

“This is a responsible and balanced budget for the times,” Mr English says. “It ensures New Zealand will build faster growth based on savings and exports, so New Zealanders have the jobs and higher incomes they deserve.”

It will not surprise regular readers that I agree with that.

As for the tie – I couldn’t see it on the radio and I don’t know whether there were sausage  rolls.

No broken promises

Labour has been trying to say that National will be breaking the promises it made about Kiwisaver, student loans and Working for Families.

Those promises applied to this term.

John Key’s pre-Budget speech makes it clear any changes will not take place until after the election.  People will be able to take the proposed changes into account when deciding whether or not they give National a second term.

Mr Key said the Budget will contain changes to KiwiSaver, Working for Families and interest-free student loans – programmes which collectively cost almost $5 billion a year.

“These programmes were introduced during a debt and consumption-driven economic bubble, and it is clear that they are unaffordable,” Mr Key said.

“None of the changes we will be making will affect people before the election so New Zealanders will be voting with all the information they need and can make their own choices.”

The Government intends to reduce the amount of money it has to borrow from overseas to put into KiwiSaver, and increase the amount of genuine savings from the private sector.

It makes no sense for the government to borrow to help other people save nor to help those who could and should be looking after themselves.

Mr Key said Working for Families will also be better targeted at lower-income families, who have a much greater need for assistance, and a little less generous to families higher up the Working for Families scale.

“We will do this gradually, in a way that minimises the impact on families,” Mr Key said.

The student loan scheme will also be adjusted but will remain interest-free.

“The changes we are making in the Budget will make all of these programmes more affordable and ensure they survive into the future,” Mr Key said.

WFF should never have been given to upper income families. A three year repayment holiday on student loans for people who go overseas was also far too generous.

There was no justification for welfare for wealthy people when the government’s books were in surplus and there is even less for it now they’re in deficit.

It will be very interesting to see how opposition parties react to this. It won’t be easy to convince people that borrowing to give money to wealthy families and people who’ve left the country is a good idea.

The full speech is here.

Super sense

The ODT editorial makes a sensible contribution to discussions on superannuation.

Of the Superannuation Fund it says:

Its principal weakness was its potential impact on future Budgets and future superannuation payments in times of economic gloom, for the first decision in any future Budget for the next 25 years will be the call on superannuation funds, not less than $2 billion every time, and such a burden will inevitably have an impact on other spending plans.

It has not taken long for negative circumstances to arise or for a government to have to face the unpalatable.

. . . The Treasurer’s decision to suspend contributions is correct because it makes no sense to continue with borrowed money. The Cullen scheme was designed only to soak up surpluses – to keep the “savings” in the bank, so to speak.

Borrowing to invest isn’t sensible for individuals, it makes even less sense for governments.

The editorial goes on to say there has been an encouraging response towards saving more from young people with good incomes but older people with little earning time left before they retire and people with little disposable income to save don’t have this option.

The editorial then canvases the idea of increasing the age of eligibility.

But, as a correspondent to our letters column noted, not everyone makes their income sitting at a computer desk; many spend their lives in hard, physical work, and the prospect of still having to do that at 68 to even 70 before being eligible for superannuation is, at the very least, disheartening.

Two of our staff would be affronted by the suggestion they’d be too old for physical work at 68 or 70.

One came to do three days tractor work for us in 1989 and never left. He turned 79 a couple of months ago, still works fulltime and has no intention of retiring soon.

Another is 77 and dags thousands of sheep a week, though he doesn’t work fulltime – he takes Wednesday afternoon off to play bridge.

A prudent person, perhaps now in their 20s or 30s, should realise there is a high probability universal state superannuation is unsustainable in its present form; that it is a false mindset to assume because people have paid their taxes they will get state superannuation; that superannuation will inevitably be means tested and the retirement age extended. It is a sobering but realistic prospect.

Another option for making superannuation more secure is to follow the suggestion made by Gareth Morgan to wind up the Superfund and pay it in to individual KiwiSaver accounts.

That might not be easy to do, but it would take the politics out of the issue because no politician would suggest meddling with individuals’ retirement savings.

The economic plan

National’s economic plan includes:

* a boost for superannuation. John Key said:

“Because superannuation is calculated on the average wage, our economic package and our commitment to maintain superannuation rates at 66% of the average wage will see a subsequent rise in the incomes of retired New Zealanders receiving superannuation.”

* enduring and affordable Kiwi Saver.

National Party Finance spokesman Bill English says changes announced to the KiwiSaver scheme are designed to ensure it is fair and affordable for New Zealand now and in the years ahead.

 

“National’s KiwiSaver package strikes the right balance between savings and supporting economic activity in today’s environment.

 

“National will ensure that KiwiSaver is accessible, and contains incentives, to enrol and retain as many New Zealanders as possible.

* no added borrowing and no service cuts:

National’s Finance spokesman Bill English says the party’s economic management plan begins to improve the Crown’s financial position and the longer-term productivity of the economy through careful revenue and spending initiatives.

“National will not slash spending at a time when people are looking to the government for a sense of security. In developing our economic management plan, we have concentrated on the fundamentals of the economy, and particularly on laying the foundations for a future increase in productivity.

“We are also beginning to peg back the operating deficits revealed in the pre-election fiscal update.

“New operating allowances will be the same for National over the next three years as they would be under Labour. National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.”

* a tax package  for the times. John Key said:

“Taxes affect decisions to work, save, spend, or invest, so tax can have a big impact on economic growth and future prosperity.

“Our tax policy is one of responsible reform. People want to know that valued public services will be protected and that effort will be rewarded. Business wants to know that competitiveness will be maintained and that consumer confidence will be supported.”

Mr Key has reiterated that the package announced today requires no additional borrowing, or cuts to frontline services to fund it.

“There is, in fact, a small saving to be made, of $283 million, which will be used to begin reducing the operating deficit.

* discipline, growth and security

National Party Leader John Key says the challenges facing the New Zealand economy require a focus on disciplined government spending and a plan for future growth.

. . . “The surest way out of the red ink is for the New Zealand economy to grow faster. I am absolutely committed to ensuring that happens, and today I am announcing tax and fiscal policies which demonstrate my intent.

“New Zealand’s economic recovery must be built on improved productivity and a better environment for investment in jobs and growth. To ensure this happens, New Zealand needs a government with a strong economic management plan.

“Our economic management plan will provide the needed fiscal stimulus while strengthening New Zealand’s position in the longer term by boosting economic growth.”

National’s plan has five essential components:

1. Improving productivity across the public sector by ensuring a strong focus on the provision of frontline services.
2. Stopping the massive rise in head office bureaucracy that Labour has encouraged, and we will deal with the regulatory and compliance issues that smother Kiwi businesses.
3. A programme of ongoing tax reduction. We will pass these tax changes into law before Christmas.
4. A step-up in infrastructural investment in vital national assets like roads and an ultra-fast broadband network.
5. An unwavering focus on lifting education standards. New Zealand simply can’t afford to tolerate the long tail of underachievement in our schools.

“I have always believed that given the opportunity to choose a path to a more successful, enterprising, and prosperous nation, New Zealanders would sign up to policies that would bring a brighter future. But with the current world economic situation, the choices have become starker.

“The Treasury forecasts released earlier this week paint a very bleak picture of the future, for a long way ahead, if we remain on our current course, if we keep our current policies, if we keep our current government.

“My colleagues and I are offering a very different way forward. It involves some clear choices. It requires us, as a nation, to be prepared to back ourselves. That is what the package that I have put before you today is about.”

Voters have been offered a clear choice – stick with Labour which got us into this mess, or opt for National which has a plan to get us out of it.

In commenting on National’s plan, Keeping Stock says:

Key’s comments on us, “as a nation, to be prepared to back ourselves” are excellent, and provide a strong contrast with Labour’s strategy – to go away and think about the situation some more – known in some circles as “paralysis by analysis”.

The choice is clear – the party of procrastination or the one of action.

IRD Doesn’t Trust Labour with EFA

Oh dear – even the IRD is wary  of Labour contravening the EFA.

Inland Revenue canned a KiwiSaver brochure because of fears it would be used for electioneering, despite at the time saying it was pulled for commercial reasons.

 National Party deputy leader Bill English tabled in Parliament today IRD emails that showed the brochures were pulled because they were deemed to be to political.

“I remain concerned that in the current environment it (the KiwiSaver brochure) leans too far towards the promotional,” one IRD adviser said in an email.

The emails show that officials were concerned about the possibility of politicians using IRD material for electioneering.

In response to questions from the media, IRD decided to say it was producing material as usual and to not reveal the reasons it had canned the brochure.

To add to Labour’s woes, the Electoral Commission is being asked whether press releases on the Beehive website contravene the EFA.

As No Minister  says: But what fun that such a dogs breakfast of an act is biting most the very people responsible for it!