Thatcher thinks


GST debacle was no accident


Was last week’s attempt to impose GST on KiwiSaver management fees, and hide it from the public an accident? Steven Joyce explains how it couldn’t be:

The suggestion seems to be that the decision to charge GST on KiwiSaver fees slipped into the regular tax bill without the top echelons of government being fully aware of the ramifications of it. And that the failure to mention it in the press release announcing the bill was an unfortunate oversight. Neither explanation stacks up.

I can tell you from personal experience there are many checks and balances in government to ensure everyone is aware of what Cabinet is deciding on each week, and the financial and political implications of those changes.

In the normal course of events, every paper that goes up must be lodged by the middle of the previous week. That gives Treasury, the Prime Minister’s Office, and every other affected government department time to offer their views on it and prime their minister with their concerns.

Each significant paper must be accompanied by a Regulatory Impact Statement, which lays out in detail the impact of a decision on the relevant stakeholders. This was an innovation of the Key government, and its power is that it is written by officials rather than ministers, so it is where you look if you want to find a fish hook glossed over in the main Cabinet paper.

The Regulatory Impact Statement on this proposal was clear in its impact and the risks.

Both Treasury and the Prime Minister’s Office prepare short cheat sheets for their ministers highlighting the key elements of every Cabinet paper. An hour before Cabinet on Monday morning, senior Treasury officials sit down with the Finance Minister and his associates (including in this case David Parker) and discussed the key papers of interest at that day’s Cabinet. At a similar time two floors higher, the Prime Minister’s Office is taking their boss through a similar preview of the papers.

Unless all the officials involved were incompetent, which is highly unlikely, and the Prime Minister and Finance Minister can’t read, also unlikely, there is no way they didn’t understand that the Inland Revenue were lodging a bill to increase the tax take by $200 million and reduce people’s KiwiSaver balances accordingly.

As an added protection Cabinet also has senior ministers who act as sweepers. They are normally alert for things that might carry ramifications others haven’t thought of that either worry their constituency or affect the Government’s broader standing. They serve an important alarm-raising function for the wider Cabinet.

Once the Cabinet decision is made, there are more protections around how the decision is announced. Ministers don’t just dash off press releases themselves for significant economic matters. Any draft announcement involving government finances is shared with the Finance Minister’s Office, and anything political with the ninth floor. It beggars belief that none of the public relations experts in those offices raised concerns with their ministers that the draft contained nothing about the GST hike for KiwiSaver.

So unless there is a total breakdown of the normal decision-making processes within government, which is highly unlikely, this decision and the underhand way it was announced was premeditated. . . 

How could they be so deliberately stupid?

One popular explanation for this state of affairs is the Government has given up and have stopped caring what people think. This theory goes that they know they are on their way out and have stopped trying to politically manage things, content to shovel decisions through and get as much as possible done before they are turfed out. Weak governments can get to that point, but I don’t think we are quite there yet, and no government would damn the torpedoes for the sake of $200 million and the tidy minds at the IRD.

A second one could be political arrogance. There is every sign the Government believes its own BS to an unwarranted degree, so maybe it thought it could spin its way through this issue in the same way as it has so many others. The Prime Minister is certainly adept at arguing black is white and that failure to deliver is the result of aspiration, so there’s plenty of evidence for this theory.

An even more likely possibility is that ministers are getting completely out of touch with the public they serve. There is a very long series of announcements suggesting that is the case. The TVNZ-RNZ merger, the bike bridge, Three Waters, Trevor Mallard’s appointment to Ireland and his pending knighthood, the bank credit changes, immigration policy, and industry pay bargaining are some that leap to mind. They are either completely inexplicable (think GST on KiwiSaver), or clearly designed to serve a part of Labour’s power base to the bemusement or downright hostility of the general public. If you make enough unpopular decisions you can kid yourself that any negative feedback is par for the course.

Whatever the final cause of the Government’s awry political antennae, it appears very likely the die has been cast and the public have made up their minds about this lot, and ministers increasingly know it. . . 

That is why Grant Robertson is making so many personal attacks on Christopher Luxon.

Expect to see much more attacking of the opposition over the next 12 months. Labour’s strategists may not have been able to work out that adding GST to KiwiSaver this way was political poison, but they are aware that the only way to level the playing field for the next election is to drag the alternative government down and create as much doubt about them as there is about Labour. It’s the 2005 and 2008 playbook all over again. And it won’t be pretty.

Cue Margaret Thatcher:

I always cheer up immensely if an attack is particularly wounding because I think, well, if they attack one personally, it means they have not a single political argument left.

Labour has had aspirations and announcements, pronouncements and plans but time and time again they have fallen well short on delivery.

There is one glaring exception to the lack of delivery, but as Matthew Hooton points out, it’s not one any government would want to claim:

…This Government has managed to “deliver” the biggest cut for at least 30 years in the real wages of the middle and working class — those a “Labour” Party supposedly represents. It is paying for it in the polls (see graph).

Since inflation was tamed after Labour’s Reserve Bank Act 1989 and National’s Fiscal Responsibility Act 1994, wages have risen faster than prices in almost every quarter, under National and Labour, with unemployment remaining relatively low.

It took this Government’s special idiocy to decide that which wasn’t broken should be fixed, by moving the Reserve Bank away from its laser-like focus on inflation, approving the appointment of Adrian Orr as Governor and signing the so-called dual mandate in March 2018.

Meanwhile, it accelerated increases to the minimum wage and began putting greater shackles around the labour market, including abolishing automatic 90-day trial periods, and restricting access to foreign labour and preparing the ground for 1970s-style national payment awards for workers.

After all this — and most likely because of it — real wages rose by just 1.5 per cent in Ardern’s first three years, before any effect from Covid.

That anaemic real wage growth was well down from the 2.2 per cent and 2.3 per cent over the second and the third terms of the Key-English Government. . . 

Labour governments can do many things and survive. Enriching property owners while slashing workers’ real wages isn’t one.

Can we trust the government that got us into this mess to get us out of it?

Given its failure to deliver on so little positive and do so much damage in the process, not least to the real value of wages, no.

Bereft of ideas that will work, all that’s left is personal attacks on National and its leader, both of which are looking much more like a government in waiting while Labour is looking more and more like a government losing.

Thatcher thinks


Thatcher thinks


Saturday soapbox


Saturday’s soapbox is yours to use as you will – within the bounds of decency and absence of defamation. You’re welcome to look back or forward, discuss issues of the moment, to pontificate, ponder or point us to something of interest, to educate, elucidate or entertain, amuse, bemuse or simply muse, but not abuse.

What the honorable [Parliament] member is saying is that he would rather that the poor were poorer, provided that the rich were less rich. So long as the gap is smaller, they would rather have the poor poorer. You do no create wealth and opportunity that way.– Margaret Thatcher

Thatcher thinks


Thatcher thinks


Thatcher thinks


Thatcher thinks


Saturday soapbox


Saturday’s soapbox is yours to use as you will – within the bounds of decency and absence of defamation. You’re welcome to look back or forward, discuss issues of the moment, to pontificate, ponder or point us to something of interest, to educate, elucidate or entertain, amuse, bemuse or simply muse, but not abuse.

Inflation is the parent of unemployment and the unseen robber of those who have saved. – Margaret Thatcher

Thatcher thinks


West dropped big stick


Theodore Roosevelt’s foreign policy was to talk softly and carry a big stick.

Margaret Thatcher and Ronald Reagan may or may not have talked softly but they carried big sticks – the means and the will to out-muscle the Soviet Union.

That’s what ended the Cold War.

In recent years the Western powers have not only dropped their big stick, they’ve played into Russia’s hands by focusing on the wrong threat.

Jacinda Ardern declared addressing climate change her generation’s nuclear moment but as Bjorn Lomborg explains it’s not climate change but nuclear war we should fear:

Weeks before thermobaric rockets rained down on Ukraine, the chattering classes at the World Economic Forum declared “climate action failure” the biggest global risk for the coming decade. On the eve of war, U.S. climate envoy John Kerry fretted about the “massive emissions consequences” of Russian invasion and worried that the world might forget about the risks of climate change if fighting broke out. Amid the conflict and the many other challenges facing the globe right now, like inflation and food price hikes, the global elite has an unhealthy obsession with climate change.

Yesterday we got another forecast of doom:

After a contentious approval session where scientists and government officials went through the report line by line, the UN’s Intergovernmental Panel on Climate Change (IPCC) has now published its guidance on what the world can do to avoid an extremely dangerous future.

First, the bad news – even if all the policies to cut carbon that governments had put in place by the end of 2020 were fully implemented, the world will still warm by 3.2C this century. . . 

Back to Lomborg:

This fixation has had three important consequences. First, it has distracted the Western world from real geopolitical threats. Russia’s invasion should be a wake-up call that war is still a serious danger that requires democratic nations’ attention. But a month into the war in Ukraine, United Nations Secretary-General António Guterres—whose organization’s main purpose is ensuring world peace—was focused instead on “climate catastrophe,” warning that fossil-fuel addiction will bring “mutually assured destruction.” His comments come at a time when nuclear weapons are posing the biggest risk of literal mutually assured destruction in half a century.

Second, the narrow focus on immediate climate objectives undermines future prosperity. The world currently shells out more than half a trillion dollars annually in private and public funds on climate policies, while spending from the governments of countries in the Organization for Economic Cooperation and Development on innovation that underpins growth in areas such as healthcare, space, defense, agriculture and science has been declining as a percentage of gross domestic product over recent decades.

Education performance in developed nations is stagnant or declining, and real income growth among OECD countries has almost stalled this century. By contrast, in China, where innovation-related spending is up 50% from where it was in 2000 and education is rapidly improving, average incomes have increased fivefold since the start of the 21st century.

Third, in the world’s poorest countries, the international community’s focus on putting up solar panels coexists with a woeful underinvestment in solutions to massive existing problems. Infectious diseases like tuberculosis and malaria kill millions; malnutrition afflicts almost a billion people; more than three billion lack access to reliable energy.

These and other issues plaguing the developing world are solvable, but get far less funding from wealthy countries than climate change. Giving the developing world affordable access to consistently available energy—which often requires fossil fuels—is the key to lifting most of the world out of poverty. Yet before the invasion of Ukraine, the developed world was racing to make fossil fuel energy more expensive and less accessible for the world’s poorest.

It’s making fossil fuel energy too expensive in developed countries too.

What underpins this climate fixation? The false and irresponsible idea that global warming poses an immediate existential risk for the world. Climate change is real and man-made; have no doubt about that. But the best economic estimates used by the Obama and Biden administrations, as well as those created by the only climate economist to ever win the Nobel Prize in economics, all show that the total impact of unmitigated climate change—not just on the economy but overall—would be equivalent to less than a 4% hit to global GDP annually by the end of the century.

The U.N. estimates that the average person in 2100 will be 450% as rich as today. If climate change continues unabated, the average person will be “only” 434% as rich—a far from catastrophic outcome.

A world scared witless doesn’t make smart decisions—so it should be no surprise it hasn’t managed to make a dent in climate change. Globally, last year saw the most CO2 emissions ever, despite $5 trillion spent over the past decade on climate policies. The U.N. admitted in 2019 that there has been “no real change in the global emissions pathway in the last decade” despite the global Paris agreement.

One reason for that is that the tax more and do less policies that climate alarmists promote are politically unpalatable.

The European Union has tried to shift to renewables but still gets more than 70% of its energy from fossil fuels. Much of the rest is generated by burning wood chips from trees chopped down in America and transported on diesel ships. Solar and wind produce only 3% of the European Union’s energy, and the technology is unreliable, often requiring backup from gas when the sun doesn’t shine or the wind doesn’t blow. Europe’s refusal to embrace shale gas—which can be found throughout the Continent but remains untapped—has left it at the mercy of Russian gas. The past two months show how dangerous this is.

Well-meaning politicians across the world have been proposing policies to reach net-zero emissions in coming decades. According to McKinsey, the policies will cost $9.2 trillion every year until net zero is supposed to be achieved in 2050. This is equivalent to half the global tax take. Such extremely costly policies are unlikely to be enacted by emerging economies such as India or Africa, whose emissions will skyrocket as their populations and economies grow. Net zero is also likely to fail in the developed world, where its high costs will erode prosperity and thus political support. Achieving net zero would cost every American family $19,300 a year, according to the McKinsey study.

To respond to climate change effectively, the world needs to spend more on green-energy innovation and develop renewables that are reliable and cost-effective. To address their immediate energy problems, Europe and America need to embrace fracking—despite Russian-funded propaganda discrediting it—and help the rest of the world access the oil and gas it needs. There are many serious threats in the world today, but most won’t get the attention they deserve until the political classes drop their hyperbole about climate change and treat it like what it actually is—only one of the many problems to be solved in the 21st century.

And like every other problem the solutions will come from research not crying the sky is falling when it isn’t nor with the political and bureaucratic policies, unsupported by science, that are being promoted to solve the problem, and are failing to do so.

Thatcher thinks


Thatcher thinks


Sunday soapbox


Sunday’s soapbox is yours to use as you will – within the bounds of decency and absence of defamation. You’re welcome to look back or forward, discuss issues of the moment, to pontificate, ponder or point us to something of interest, to educate, elucidate or entertain, amuse, bemuse or simply muse, but not abuse.

Let us never forget this fundamental truth: The state has no source of money other than money which people earn themselves. If the state wishes to spend more it cad do so only by borrowing you savings or by taxing you more. It is not good thinking that someone else will pay – that someone else is YOU. – Margaret Thatcher

Thatcher thinks


Thatcher thinks


Thatcher thinks


Thatcher thinks


Thatcher thinks


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