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Dear Reader,   
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This week we reflect on the 2013 Budget, our NZCPR Guest Commentator Professor Norman Gemmell, the Chair in Public Finance at Victoria University shares his views, and our poll asks how you rate the Budget.

We are still testing our new NZCPR website and will advise when we are going live - our apologies for any glitches you might encounter. 

Thanks again for your interest and support.


Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

BUDGET 2013
By Dr Muriel Newman


Whether we like it or not politics and politicians have an important influence on our lives. Not only do they shape the social agenda and impose regulations upon us, they control the purse strings to the state sector which represents more than a third of our economy. Their annual Budget reveals how well they are managing the economy.

While many countries around the world are still struggling with the consequences of the global economic crisis, Budget 2013 confirms that New Zealand is now one of the fastest growing economies in the developed world. Although growth is expected to weaken as a result of the drought, it is forecast to rise to a credible 3 percent in the longer term.

When National first took office in 2008, Treasury had forecast ten years of deficits and rising debt. Now, five years later, the 2013 Budget shows that the government is on track to deliver a surplus of $75 million in the 2014-15 year - despite the impact of the global financial crisis and the financial costs and tragedies of the Christchurch earthquakes. Just three budgets ago the deficit was $18.3 billion.

This turnaround has been achieved by not only keeping a tight rein on government spending, but by creating the conditions for businesses to expand and grow.

While the size of the state sector has been reduced down from an excessive 35 percent of the country’s economic activity two years ago, to a projected 31 percent of GDP next year, it is still a long way above the target 29 percent rate recommended by the 2025 Taskforce – the rate it was in 2004-05 before the Labour Government embarked on their reckless spending spree. Holding government spending and reducing waste should remain priorities into the foreseeable future.

Creating the opportunity for business to grow and prosper should also be a prime goal of any government, since the business sector is the nation’s engine room providing employment and creating wealth. The more investment businesses can attract, and the more efficiently they can operate, the more profitable they will become, the faster wages will grow, and the more tax will be paid to the government.

Budget forecasts show the unemployment rate falling to 5.2 percent by 2017, not only as a result of increasing economic activity, but also due to the impact of the next tranche of welfare reforms. The additional $188.6 million allocated to welfare over the next four years is expected to cover the hiring of more case managers for a further 80,000 beneficiaries who are being subjected to work testing requirements. On top of that there are incentive payments for sole parents who return to work earlier than required, and special funding for external providers to work with high-needs beneficiaries who will require intensive help to become work ready.

The benefits of welfare reform cannot be over-stated and is something the NZCPR has long been calling for. Until National embarked on the present reforms under the able leadership of Paula Bennett, welfare had become a soft touch and the favoured playground for socialist politicians. Changes introduced by the Labour Government over the nine years they were in office weakened the barriers to welfare: relatively few beneficiaries were work tested, sanctions for non-compliance were weak, and fraud was rife.

There were endless stories of people abusing the system: workers who had tired of their jobs cruised onto sickness benefits or the dole, and unskilled young women - many still girls at school - all too casually ended up on the Domestic Purposes Benefit instead of in employment.

Thankfully, the reforms have created disincentives, making the transition into taxpayer funded dependency more difficult - but still not difficult enough. Over time welfare should only provide support for those in genuine need – long term security for those who cannot work for a living, and shorter term support for those who are able bodied and looking for a job.

A key aspect of successful welfare reform is a buoyant job market. The Budget contains many items that will generate jobs. Prime amongst these of course is the rebuilding of Christchurch. It is difficult to comprehend the scale of the task ahead, but at a cost of around $40 billion, it is reported to be the largest rebuild undertaken anywhere in the world in modern times.

In addition, on-going job opportunities are being created through the government’s continued investment in infrastructure. This includes the proposed extension to the Northern Motorway, which is a significant investment in creating a modern transport network to open up the North to better economic growth opportunities. As New Zealand’s worst performing region, Northland is in urgent need of economic stimulus.

More growth opportunities will also be created as a result of the government’s privatisation agenda. Most of the $1.7 billion in proceeds from the 49 percent sale of Mighty River Power are being used for the Future Investment Fund: $50 million for the broadband rollout to schools, $94 million for KiwiRail, $80 million for irrigation infrastructure projects, $426 for Christchurch hospitals, and $700 million for “new contingencies” such as new schools, a new justice and emergency services precinct in Christchurch, and support for the city’s tertiary institutions.

The next State Owned Enterprise being put up for sale is Meridian Energy. Meridian is the country’s largest power company, with seven hydro-power stations and four wind farms, generating around a third of the country’s electricity. The partial sale of the company, which was valued in 2011 at $6.5 billion, is expected to provide a further $3.25 billion for the Future Investment Fund. Over the six years, the asset sales programme is expected to raise a total of $6 billion, of which $1 billion is earmarked for spending on schools and $1 billion on hospitals. Treasury has estimated that $780 million in interest costs will be saved as a result of asset sales.      

Budgets give a clear picture of government spending: Crown expenses stand at $72.4 billion, a third of which will be used for social security and welfare, 21 percent for health, 17 percent for education, 6 percent for government services, 5 percent for law and order, 5 percent for finance costs, 3 percent for transport and communications, and 10 percent for conservation, defence, primary industries, and all of the other ministerial votes.

Budgets also show the source of government funding: Core Crown revenue is forecast at $68.4 billion, 41 percent of which comes from personal income tax, 24 percent from GST, 15 percent from company tax, 3 percent from other direct taxes, 8 percent from indirect taxes, 4 percent from interest and dividends, and 5 percent from other revenue.

Over the next three years, Treasury expects income tax to increase by $2.6 billion, GST by $2 billion, and corporate tax by $1.6 billion – these increases will be generated not by raising tax rates, but by an improvement in economic growth, leading to higher business profits, higher incomes and increased household spending.

The Budget shows that of the $27.8 billion in personal taxation collected by the government, the lion’s share is paid by the 15 percent of New Zealanders who pay the top rate of tax on earnings of $70,000 and over. They contribute 57 percent of all income tax collected by the government.  That is, 15 percent of taxpayers pay 57 percent of the tax. The Green-Labour coalition think that’s not enough – they say high income earners are not paying their fair share!

Of all of the changes signalled in the budget, probably the most controversial is those associated with housing. It is no secret that concerns exist over house price inflation and the potential for a serious “housing bubble”. House price inflation is caused when the demand for housing outstrips supply. This is presently the case in the key Auckland market, where only 5,000 or so new housing permits a year have been issued over most of the last decade, when more like 9,000 were needed. As we know, housing inflation could trigger the Reserve Bank to raise interest rates, but in this environment there is a real risk that interest rate increases would push up the value of our dollar (as overseas investors would flock to buy the Kiwi to take advantage of the higher interest rates) to the detriment of exporters and manufacturers.

This is a dilemma the government is attempting to address through two initiatives announced in the Budget. The first is the establishment of Housing Accords in Special Housing Zones where there are major problems with housing affordability. These accords will be used to speed up council consent processes and free up land for housing subdivisions until the Resource Management Act and local government planning reforms are in place. Secondly, the Reserve Bank has been given additional powers to help rein in an over-heated housing market, including by restricting the number of low deposit loans that banks can issue.

This week’s NZCPR Guest Commentator, Professor Norman Gemmell, Victoria University’s Chair in Public Finance, picks up on this theme in his budget analysis, Budget 2013 – Good Policy or Good Luck?

“It is on housing affordability, and the new agreement with the Reserve Bank, where the biggest new initiatives are to be found. Numerous studies in recent years have encouraged the government to do more on the housing supply-side and this Budget offers more specifics on how they intend to speed up, facilitate and extend the supply of new houses.

“But for me, alarm bells ring with both their new demand-side initiatives - a pilot scheme of low/no interest loans to low-income borrowers, and increased rent subsidies. These always sound good as a help for the poorest buyers but are a strange way to discourage house price inflation. Namely, putting more money in the pockets of those trying to rent or buy property. If these schemes are given a wider roll-out, expect to see landlords reap much of the benefit as weekly rents rise in response, and lower-end house prices rise as the newly enabled recipients of the no-interest loans enter the market as house purchasers with greater buying power.”

Policies designed to enable people who cannot afford a deposit to buy their own home are risky at the best of times. It is schemes like this that helped to create the global financial crisis in the first place. One would have hoped that prudent policy-makers would have steered well clear of such ill-advised schemes - in spite of the increasingly loud calls by opposition parties and advocacy groups.

Similarly with Warrant of Fitness checks for rental houses - a policy long advocated by the bureaucracy-lovers of the ‘left’ who haven’t understood that such regulatory interventions achieve little other than an increase in rents - in the end, hurting the very people such misguided policies purport to be helping.

All in all, the 2013 Budget shows that while there is obviously much more to do, National has been a prudent manager of th
e New Zealand economy during some of the most challenging times this country has ever known. What’s more, with the Australian economy turning from a forecast surplus to a A$20 billion deficit, many Kiwis who moved there for greater opportunity, may well find themselves attracted back home - bringing with them the talents and skills that New Zealand will desperately need as we move towards the brighter future that is being signalled.

THIS WEEK’S POLL ASKS: 
On a scale of 1 to 10 (10 being better than 1), how do you rate the government's 2013 Budget? 
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 96% of voters supported the idea of our politicians being guided by Singapore's success
... read the comments HERE

 

NZCPR Guest Commentary: 

BUDGET 2013 - Good Policy or Good Luck?
By Professor Norman Gemmell
 
 


Is Budget 2013 different? At first sight it all sounds very familiar: maintaining fiscal prudence by responsibly managing the government finances, whilst trying to wring every last ounce of efficiency from restricted public spending. The economic headwinds may be abating with forecasts starting to look more optimistic, but this is a government still imposing strict limits on its expenditure growth. Getting the government’s books back into surplus may sound like the proverbial ‘stuck record’, but there can be no doubt that anything else would be a risky strategy in this ‘new world’ where financial markets no longer believe that lending to indebted national governments is a riskless business. ... read the full paper HERE 

 

___________________________________________________
New Zealand Centre for Political Research
PO Box 984 WHANGAREI
Ph: 09-434-3836, Fax: 09 434-4224, Mob: 021-800-111
muriel@nzcpr.com
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Dear Reader,   
                                                                                                            Bookmark and Share

This week we reflect on the country's economic performance ahead of the Budget, our NZCPR Guest Commentator is Dr Henri Ghesquiere, a former IMF Director, who shares with us the secrets of success of Singapore, and our poll asks whether you think NZ can learn from Singapore.

*Last week we suggested that readers concerned about the New Zealand Geographic Board's proposal to change the names of the North and South Islands should send in submissions. Since many people had trouble with the website submission forms, we would like to advise that submissions can be made directly to the Board – either by email to nzgbsubmissions@linz.govt.nz or by post to the Secretary of the New Zealand Geographic Board, PO Box 5501 , Wellington 6145.  In your submissions you should explain whether you are in favour or opposed to the name change proposals and include reasons to support your views.

*
We are still testing our new NZCPR website and will advise when we are going live - our apologies for any glitches you might encounter. 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

LESSONS FROM SINGAPORE
By Dr Muriel Newman


Thursday is budget day, the day when the government outlines their economic plan for the country for the next twelve months. It is also a time of judgement on how well the economy has performed over the last year. In National’s case, recent economic reports show that their belt tightening has started to produce results.

When National was elected into office in November 2008, the country had already fallen into recession. Under the stewardship of a Labour administration, the economy had stalled months ahead of the on-set of the global financial crisis. The new government’s goal was to rebalance the economy – reduce out-of-control government spending, while protecting the most vulnerable New Zealanders from the hard edges of the recession. An important part of that plan was a strong focus on removing the barriers to growth - improving infrastructure and reducing the red tape and bureaucracy that was undermining business confidence and holding back progress.

While the Christchurch earthquakes had a massive impact on the government’s progress, National’s plan does appear to be working. The country is on track for a return to surplus by 2014-15, the tax take is higher than expected, unemployment is lower, there are more jobs, and higher growth.

Treasury reports are positive - our economy grew by 3 percent in 2012, only marginally behind Australia, which, with its mining boom, grew 3.1 percent. Growth in the December quarter was 1.5 percent, the fourth fastest amongst the countries monitored by the OECD, and behind only China, Russia and Luxembourg.

Commodity prices in March had the third-strongest rise on record, driven by dairy prices and forestry, although the drought will have an adverse effect on dairying returns in the future. In addition, manufacturing and services industry indexes have both risen strongly, contradicting the claims by Labour and the Greens that there is a crisis in manufacturing.

A recent New Zealand Institute of Economic Research business opinion survey showed confidence in the March quarter was at a 3-year high, pointing to growth of around 3 percent a year. Our major trading partners - Australia, China, the US, and Japan - have all reported economic data ahead of expectations, and consumer confidence is growing.

The Government’s accounts show that the deficit was $3 billion for the first 8 months of the financial year, $556 million better than forecast in December - reflecting good control of expenditure and rising revenues. The Crown’s operating balance, which records change in the value of all the government’s activities, including its investments, recorded a surplus of $4.3 billion.

In commenting on the performance of the New Zealand economy, Christine Lagarde, the managing director of the International Monetary Fund said, “All I can tell you is the IMF is very supportive of what is being done by the Government …” and “If you look at the numbers, if you look whether it is growth, whether it is employment, whether it is inflation, whether it is debt, overall it is very stable and it is also very promising … it’s certainly a lot better than what we see in other parts of the world.” And she went on to say that the economic policies are supportive of good fundamentals and “policies we believe are sound and solid.”[1]

In comparison, Ms Lagarde described the outlook in Europe as “still very challenging”. Overall EU unemployment has hit a new record with more than 19 million jobless. This includes one in four of the region’s 15 to 24 year olds. In Greece, a staggering 64.2 percent of young people were out of work in February, and, in an attempt to turn this situation around, the monthly minimum wage for under-25s has been slashed by a third. In Portugal, where the economy is predicted to shrink by a further 2.3 percent this year, and where civil service pay and sick leave benefits have just been cut, more and more young people are leaving the country to find employment abroad.

However, there are some success stories in Europe. A special report “The secret of their success” was recently published by the Economist, identifying Sweden, Denmark, Finland, Norway, and Switzerland as the top five countries when assessed on a range of measures including global competitiveness, ease of doing business, global innovation, corruption, human development, and prosperity. Based on league tables produced by the World Bank, the World Economic Forum, and a number of other organisations, New Zealand was ranked a commendable sixth - first equal for a lack of corruption, third for ease of doing business, fifth for human development, thirteenth for global innovation, and 23rd for global competitiveness.[2]

The Nordic countries that are now topping the table can attribute their success largely to the fact that over the years they were forced to reduce government spending and balance their budgets. To do this they lowered taxes, ensured greater flexibility in the workplace, encouraged entrepreneurs, and restricted welfare entitlements, making far greater use of the private sector to deliver social services.

The Economist suggests that other nations could learn from the success of these Nordic countries, and it certainly appears that the National government has adopted a similar strategy through an economic growth programme that includes reducing government spending, balancing the budget, tightening up welfare, and encouraging the private sector.

Another country with wisdom to share is Singapore. In the sixties, Singapore was a very poor tropical island with few natural resources, a rapidly growing population, substandard housing, and on-going conflict between ethnic and religious groups. Thanks to the exceptional leadership of Lee Kuan Yew, the country was able to transform itself in just a generation, so that today it is one of the world’s highest ranked economies.

This week’s NZCPR Guest Commentator is Dr Henri Ghesquiere, a former Director of the International Monetary Fund's Singapore Regional Training Institute - and author of Singapore's Success: Engineering Economic Growth. In his illuminating paper From Third-World to First, Dr Ghesquiere outlines how Singapore achieved its ambitious goal of moving from a third-world to first-world nation in record time. He explains that that a number of factors strongly influenced a young Lee Kuan Yew - as an 18 year old he witnessed the brutality of the Japanese occupying forces against the civilian population during World War II. He experienced the debilitating effects of colonialism and ethnic strife, and he saw the political threat of the communists, who wanted to turn Singapore into an Asian Cuba.

In 1959, at age 35, Lee Kuan Yew - by then a “brilliant Cambridge-educated lawyer” - was elected prime minister of Singapore. His goal was a future of shared prosperity and safety: “I wanted Singapore to be a developed nation in the shortest time possible”. 

Dr Goh Keng Swee, the architect of Singapore’s economic strategy and Lee Kuan Yew’s right hand man, explained, “We must strive continuously to achieve economic growth. We should not be distracted by other goals”. 

Those words “in the shortest time possible” and “single-minded focus” can be attributed as holding the key to Singapore’s success. Their economic and political strategy - and institutions - over the past five decades have been shaped with that singular goal in mind: whatever it would take to succeed. 

Dr Ghesquiere believes a crucial factor is the government’s budgetary discipline - living within their means:   

“In Singapore total revenue in the Government budget is only 19 percent of GDP.  But government expenditure is even lower. Frugality inspires the Government to manage its expenditures rigorously. Singapore’s famous Jurong tropical bird park was created when a finance minister rejected the proposal for a zoo. He persuaded his Cabinet colleagues that feeding birds would be much less expensive than feeding lions. Civil service staffing is lean: the government does not act as employer of first and last resort. Efficiency is paramount: for example, invoicing of services sold by private agents to government entities is all electronic and centralized. Perfect paperless records are available with minimal manpower. Singapore’s budget is not burdened by generalized price subsidies for utilities or energy products.         

“Public enterprises in Singapore tend to be consistently profitable. Many are listed on the stock exchange and are partly in private hands. They do not draw budgetary support for operating losses.  If systematically loss-making they would be liquidated or merged. Singapore Airlines has long been ranked among the most admired companies in the world. At one time, the government threatened to close it down if management and unions failed to cooperate. 

“Financial sector oversight has been consistently alert. This has prevented the socialization of bank losses that has aggravated fiscal deficits and public debt levels elsewhere. Today Singapore’s banks are among the best capitalized in the world. 

“Accordingly, despite relative low taxation, the government budget registers surpluses, not deficits. Consequently, whereas other countries have a public debt ratio in some cases as high as 140 percent of GDP, Singapore has just the opposite: net public assets possibly of a similar magnitude. Heavily indebted governments face steep interest payments on the expenditure side of their budget that pre-empt development outlays. The Singapore government by contrast earns substantial returns on its net assets, (conservatively estimated at perhaps 5 percent of GDP). These resources boost the revenue side of the budget, allowing development expenditure such as for infrastructure and education. The government’s accumulated surpluses have been built the old-fashioned way: over decades thanks to annual saving and the power of compounding. The strong national balance sheet inspires confidence in entrepreneurs and investors.”

In his illuminating appraisal, Dr Ghesquiere explains the importance of incentives in public policy - a low corporate tax rate of 17 percent attracts companies and encourages them to create jobs, and personal income tax with the highest bracket at 20 percent incentivises people to work. 

In comparison, of course, New Zealand’s corporate tax rate is 28 percent and our top personal tax rate is 33 percent. As tax competition forces down tax rates, New Zealand’s corporate tax rate is becoming increasingly uncompetitive – it is above the European average of 20.67 percent, above the EU average of 22.74 percent, above the Asian average of 22.36 percent, above the OECD average of 25.4 percent, and above the global average of 24.08 percent.[3]

Although reducing corporate tax would be a very efficient way of boosting business growth and job creation, the government has ruled out significant tax cuts in the foreseeable future. They have stated that their priority is to reduce debt - from a net 30 per cent of GDP to 20 per cent between 2017 and 2020, before tax cuts can be considered. However, they have explained that they will continue to cut the cost of a wide range of government fees and levies – the recent reduction in the frequency of warrant of fitness tests is apparently just a start.

Thursday’s Budget is not expected to contain any big surprises, but one hopes it has a vision for a better New Zealand based on the roadmap provided by the likes of Singapore.

THIS WEEK’S POLL ASKS: 
Do you think our politicians should be guided by Singapore's model of success? 
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 98% of voters opposed the NZ Geographic Board's proposal to introduce Maori names for the North and South Islands
... read the comments HERE

FOOTNOTES:

1. Herald, IMF praises direction of NZ economy
2. Economist, The secret of their success
3. KPMG, Corporate tax rate table


 

NZCPR Guest Commentary: 

FROM THIRD-WORLD TO FIRST: SINGAPORE'S SUCCESS  
By Dr Henri Ghesquiere
 
 


Gainful employment is the fastest way out of poverty. Prolonged unemployment has major economic, social and psychological costs. Unemployment was a massive problem in 1959. Twelve years later Singapore had full employment and labor scarcities started to emerge.  Voters rewarded the ruling party at election time.     

Quality education prepares tomorrow’s workers. Education for all is heavily subsidized by the state. Singapore students consistently score among the highest in international comparison in particular in science and mathematics. The Singapore math textbooks are now widely used in the United States. Quality vocational schools prepare less academically inclined students to careers in numerous services such as hairdressing or culinary specialties. Skills training and re-training of older workers is heavily emphasized and subsidized. In this way they can continue to contribute in a rapidly evolving economy.

Equal opportunity is given to everyone to learn, to acquire skills and to perform, regardless of whether one is a Malay, Chinese or Indian Singaporean. The discipline inherent in a merit-based system is combined with open access and a level playing field according to one’s talent. This has contributed to social cohesion in Singapore’s multi-ethnic society. 

The city-state has impressive examples of upward social mobility as bright poor children received scholarships that allowed them to realize their full potential. This contrasts with feudal societies where the elite would hold back education from youngsters on their land holdings, lest power be eroded.

Equal opportunity does not mean equal outcomes. Different outcomes are accepted based on different capabilities. Still Singapore’s Ministry of Education helps the poor, disadvantaged, bottom 0.1 percent of pupils who are unable to pass the basic primary school leaving examination. Intensive support includes hands-on vocational training, life-skills and counseling to those with emotional difficulties. Substantial resources are spent to prevent a permanent underclass from building. The idea is to help the weaker runners improve rather than instruct the fast ones to slow down.   

The World Bank ranks Singapore number one in the world for ease of doing business. Access to employment, education, and also to credit creates opportunities for people to start new businesses and participate in economic growth.... read the full paper HERE 

 

___________________________________________________
New Zealand Centre for Political Research
PO Box 984 WHANGAREI
Ph: 09-434-3836, Fax: 09 434-4224, Mob: 021-800-111
muriel@nzcpr.com
www.nzcpr.com

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Dear Reader,   
                                                                                                            Bookmark and Share

This week we draw attention to the fact that the NZ
Geographic Board is now accepting submissions on the North and South Island name change proposals, we discuss the call for more race based seats, and we share an iwi leader's claim that Maori are not the indigenous people. Our NZCPR Guest Commentator is Independent Constitutional Review Chairman David Round on why the Treaty should not be part of a new constitution, and our poll this week asks whether you support introducing Maori names for the North and South Islands?

*We are now testing our new NZCPR website - it will be ready to go live soon. Our apologies for any glitches you might encounter. 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

NAME CHANGES AND OTHER CONTROVERSIAL MATTERS
By Dr Muriel Newman


Name Changes

Last month the New Zealand Geographic Board announced that it was opening a public 
consultation process to change the names of 
the North and South Islands of New Zealand. 
If the change goes ahead, the main islands of 
New Zealand could be known by their existing names, their Maori names (Te Ika-a-Māui and 
Te Waipounamu), or both. If the biculturalists 
get their way, the Maori names will become the official names, and no doubt we will be reminded about that every night: “...and the forecast for 
Te Ika-a-Māui is light rain while Te Waipounamu will be cloudy with intermittent showers…”


So who is responsible for such a controversial move? It turns out that a proposal to change the name of the South Island was put forward in 2004 by a single Christchurch resident. The New Zealand Geographic Board thought it was a good idea, and decided to include the North Island also. They justified their decision on the basis that the English names the ‘North Island’ and ‘South Island’ need to be formalised, along with alternative Maori names. This has raised concerns that the Geographic Board is doing more than responding to name-change concerns and is setting the agenda.

The ten members of the Board driving this name change proposal are Dr Don Grant the Surveyor-General and Chairman, Basil Morrison and Jenni Vernon nominated by the Minister for Land Information, Rikirangi Gage and Matanuku Mahuika nominated by the Minister of Maori Affairs, Sir Tipene O'Regan nominated by Ngai Tahu,  Professor Michael Roche nominated by the New Zealand Geographical Society, David Barnes nominated by the New Zealand Federated Mountain Clubs, Garrick Murfitt nominated by Local Government New Zealand, and Adam Greenland a Land Information New Zealand representative.

As an aside, it turns out that seven of these Board members’ terms are expiring and nominations have been called - although this only appears to have been carried by Maori news media. Radio NZ Te Manu Korihi News reported that “Iwi are amongst those being asked to suggest candidates for the New Zealand Geographic Board… nominations are being sought from several parties, including the Minister of Maori Affairs, Te Runanga o Ngai Tahu and Waikato Tainui. Nominations close on 23 May.” And Tangatawhenua.com also reported the call for nominations, stating, “The Minister must appoint: two persons as representatives of Maori who have knowledge of tikanga Maori and te reo Maori and can provide advice in relation to the naming of geographic features and Crown protected areas for which tikanga Maori or te reo Maori is relevant… Please forward the candidates CV; a statement from the candidate as to whether they have financial, professional interests that might create a conflict and a statement as to whether there is anything in their personal history that might make candidacy inappropriate. For any queries, or an electronic version of the CV form, please contact Cameron Munro (04) 460 0592; cmunro@linz.govt.nz.”

To progress their name-change proposal, in 2009 the Geographic Board wrote to iwi throughout the country to seek suggestions for Maori names for the North and South Islands. A range of options were proposed - for the North Island: Aotearoa, Aeheinomouwe, Eahei No Mauwe, Eaheinomauwe, and Te-ahi a Maui; and for the South Island: Te Tumuki, Te Arapaoa, Tovypoenammu, Te Wahi Pounamu, Te Waka-a-Maui, Te Waka o Aoraki, Tau Ihu o te Waka, T’avai Poenammoo, Tavai Poenammoo, and Te Waipounamu.

The Board ruled out Aotearoa for the North Island on the basis that it has been popularised as the name for New Zealand. They (the Board) chose Te Ika-a-Māui and Te Waipounamu.

Consultation on these name changes is now open for public submissions until 5 July 2013 – full details on how to make a submission on the four proposed changes ‘North Island’ and ‘Te Ika-a-Māui’, ‘South Island’ and ‘Te Waipounamu’, can be found on the LINZ website HERE. If the Geographic Board receives opposition to their name change proposals, it will be up to the Minister to make the final determination. The Minister in charge of the Geographic Board is Maurice Williamson.

While the Geographic Board has the jurisdiction to change placenames within New Zealand and the Ross Sea, only Parliament has the power to change the name of our country. However, a campaign appears to be underway to change the name of New Zealand to ‘Aotearoa New Zealand’ by stealth. Public institutions like the Constitutional Advisory Panel have embraced the campaign - if you can shed any light on who is driving it, by challenging official bodies to ask under whose authority they are changing the official name of New Zealand to ‘Aotearoa New Zealand’, please let us know and we will share the information with readers…

More Race-based Seats?

With the Maori Party’s constitutional review well underway, various groups are now calling for more constitutional rights. Just last week the Pacific Island community was calling for dedicated seats in Parliament and on local councils.

This is what Auckland Councillor and former MP (National’s first Pacific Island MP) Arthur Anae has to say: “Those promoting the idea of guaranteed seats in Parliament and Local Bodies, for Pacific People need their heads read. As I said recently on National Radio, who do they think they are? How can one group of people believe they are that superior that they deserve guaranteed seats in the NZ political arena ahead of the close to 200 other Nationalities that call NZ home. And if some equally irresponsible Government supports this, do they then provide seats for the other ethnic groups. We complain now about 120 seats - this would take it to 320 plus seats in Parliament. Not only would the world think we are an easy target for immigration, they’d think we were off the planet.

“The reality is simply this - there are Samoans, Cook Islanders, Niueans, Tongans, Fijians, Tahitians, New Caledonians, Solomon Islanders, Vanuatuans, PNG and a whole lot more as we travel north. So tell me who will represent Pacific seats from this group? The same applies for Asians, Indians, Arabs, etc,etc. Maybe we should expand it further and demand seats for religious groups - Catholics, Presbyterians, Anglicans, Mormons, Muslims, Hindi etc etc. Wow we would have to build a bigger debating chamber in the House and each of our Local Bodies. Get the message - pretty absurd and ludicrous.”

So, here's a thought - if the Pacific Island community believe they have a case for reserved seats around the representation table then perhaps the Dutch community does too! They could seek a name change to Ngati Tulip to strengthen their case – which must be pretty strong anyway given Abel Tasman was the first European to visit our shores and there is a very large sea named in his honour. So perhaps the Dutch should indeed have more rights than the rest of us…

Debates or Indoctrination

The future of the Maori seats in Parliament and in Local Bodies is one of the more controversial aspects of the terms of reference of the constitutional review. Yet there has been little open debate about them - even though most New Zealanders would like to see them abolished. The problem is that the Constitutional Advisory Panel - the body that is driving the constitutional review - has shied away from controversy to such an extent that open public meetings have been replaced by invitation-only functions.

One such series of invitation-only events - funded by the Advisory Panel - was held by YouthLaw to “educate” children as young as 12 about the constitution: “YouthLaw will be hosting workshops for youth between the ages of 12-24 about the constitution. This will be a great chance to meet new people, to learn through games and activities about our systems of government, and to have a say on the changes you’d like to see in the future. Young people can make a submission in any way (e.g. video, spoken word, song, artwork, etc) and share dreams for the future of Aotearoa. Lots of great kai, prizes and a chance to WIN an IPAD!”

Even the so-called debates have mostly been a sham – especially those run by Te Papa and the Victoria University Centre for Public Law. Well known commentators Chris Trotter and Karl du Fresne have said calling them “debates” is absurd. One of the only real debates was hosted by the Maxim Institute last month. Our Independent Constitutional Review Chairman, Canterbury University law lecturer David Round, spoke on the place of the Treaty of Waitangi and its principles in a new constitution for New Zealand - along with Constitutional Advisory Panel member Sir Michael Cullen, and Tai Ahu, an assistant lecturer at Victoria University’s law school.

In his speech, which we are featuring as this week’s NZCPR Guest Commentary, David Round explained that a constitution is an agreement on how people are to be governed. He makes the point that for a constitution to work, there has to be agreement about what is in it, and the fact that there is widespread disagreement over the role of the Treaty is proof in itself that the Treaty and its so-called principles have no place in our constitution. “If Treaty principles appear in a new constitution for New Zealand, it will not be because of agreement; it will be a case of a small vocal minority of the population succeeding, through political machinations, in entrenching its own vested interests in a constitution in the teeth of widespread popular opposition. It would be to hijack our constitution; and that would be disastrous for our country.”

David makes another interesting point in his speech - that there is no principle of justice that requires a small racially defined minority to have privileged representation in New Zealand: “Maori are not ‘indigenous’ ~ they are simply a slightly earlier wave of immigrants, arriving only about four hundred years before Tasman.”

Are Maori Indigenous?

This issue of whether Maori are ‘indigenous’ is a very controversial topic these days, given its use by the Maori sovereignty movement as a key mechanism to extract privilege from the government. However, some Maori leaders are asking questions themselves. In a recent interview in the Christchurch Press, Ngai Tahu leader Sir Mark Solomon is quoted: “Another bugbear is what Solomon describes as a ‘sanitised version of history’ still being taught in schools. For instance, many are still being taught about Maori arrival in New Zealand on board a ‘great fleet’. ‘We need to teach true histories. What is taught in schools about the history of Maori is nonsense’,” Solomon said.[1]

But Ngapuhi leader David Rankin, in an interview in March’s elocal magazine, was much more forthright – I will conclude by quoting the first part of this revealing interview in full:

elocal:
“You recently voiced support for historians who claim that New Zealand was settled much earlier than commonly accepted. Are you merely supporting free speech and political incorrectness, or do you genuinely believe that there were other civilizations here in NZ before the arrival of Kupe circa 1250AD?”

David Rankin: “Let me just start off and say this, Maori are not the indigenous people of Aotearoa New Zealand. There were many other races already living here long before Kupe arrived. I am his direct descendant and I know from our oral history passed down 44 generations. I believe this needs to be investigated further because every Maori community talks about Waitaha, Turehu and Patupaiarehe. This goes hand-in-hand with the other research. As Maori, we have come to a time of maturity where we need to debate these issues. I want to get to a genuine consensus about this issue, although I think academics want it to disappear. If we start talking about it and investigating it, it’s an exciting opportunity to explore. My ancestors like Kupe came to the Hokianga in search of other people. In the Waima ranges, there was a pipi shelter on the mountains, and the kuia used to talk about the fair skinned people up there. A lot of people identify as Paniora (translated as Spaniard), indicating that the Portuguese and Spanish washed up on ancient ships in Northland. In 2002, I went to the Austronesian Leaders Conference in Taiwan and we discussed similarities with Taiwanese Aborigines. We traced our origins and the Maori and Polynesian connection to China. All the leaders such as myself and Matiu Rei, Aborigines, Solomon islanders, Rapa Nui and Hawaiians were all interested in early settlement theories. There is a lot of writing about the whole ancestral link. Really, Maori didn’t navigate here, we came on a tidal drift. Te Tai Tokerau is actually the tidal drift from the Tokelau islands. When my ancestors arrived at the shores of Aotearoa, there were people here to greet them. The question is: who are those people? It goes hand-in- hand with our oral history. There are questions written by Ian Wishart, Noel Hilliam and others that need to be answered.”


elocal: “What do you think the ramifications would be if Maori appeared not to be the indigenous people of New Zealand?”

David Rankin: “That would put all our treaty claims in question and our indigenous rights at the UN. It would open up a whole can of worms. I do believe if we start approaching it the right way other Maori would be keen to discuss it. I think there has been a rot been allowed to set in to Maoridom since the Lange government took power in the early 1980’s. In many ways, all the changes that have taken place have taken the basic responsibility away, their mana, from being true Maori, like working for a living, educating themselves and their families, leading strong lives and observing the laws of the land. If you are able to work then work! Help your fellow Maori and Pakehas be successful in life. Being Maori and, let’s face it, you only need to be 32% by government standards, does not mean you need to take the easy way out and have your hand out. I have never taken anything from the government, I am self made, strong and I say stop the funding. Maori need to return to the warriors they once were. It may be hard at first but intergenerational beneficiaries are embarrassing to my culture.”[2]


THIS WEEK’S POLL ASKS: 
Do you support the NZ Geographic Board's proposal to introduce Maori names for the North and South Islands?   
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week only 6% of voters believed the
Labour's plan to make wealth creators less wealthy would improve the economy ... read the comments HERE

FOOTNOTES:

1. The Christchurch Press, The Wisdom of Mark Solomon
2.elocal, Fearless! Maori are not indigenous to Aotearoa New Zealand


 

NZCPR Guest Commentary: 

THE PLACE OF THE TREATY OF WAITANGI IN A NEW CONSTITUTION  
By David Round
 
 


As I mentioned, this whole matter is not one on which there has ever been 
any public debate. The entire Treaty-ification of our country, of which this 
constitutional proposal is the latest manifestation, is conducted without any public input, because the Treatyists know that the public mood always has been, and continues to be, firmly opposed to their attempts to create an apartheid state.


Because that is what this will do. It is amazing that the cry of black people in apartheid South Africa, and in the southern United States with the civil rights movement, was always for integration into the wider community ~ but the Treatyist demand is not for unity, but for separatism ~ and not even ‘separate but equal’, but rather ‘separate and superior’. To have the Treaty mentioned in our constitution would be a major step towards the disintegration of New Zealand .  These people do not want to be part of the same nation as the rest of us.
 
... read the full article HERE
 

 

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This week we look at some of the misconceptions  
surrounding the poverty debate, our NZCPR Guest Commentator Kristian Niemietz from the British -based Institute for Economic Affairs shares his market-based poverty measure, and this week's 
poll asks whether Labour's plan to make wealth creators less wealthy will improve the economy.
  

*The Independent Constitutional Review 
facebook page is very informative and active. 
The link is HERE. Why not check it out and join 
in the debate? 

*
The transition to the new NZCPR website is continuing - our apologies for any glitches you 
might encounter. 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

POLITICISING POVERTY
By Dr Muriel Newman


In her final speech in the House of Commons 
on 22 November 1990, the former Prime Minister 
Margaret Thatcher engaged in one of her more 
memorable exchanges with the Member from 
Southwark and Bermondsey, to explain that 
policies aimed at reducing the gap between rich 
and poor will result in everyone becoming poorer:

Mr. Simon Hughes (Southwark and Bermondsey):
There is no doubt that the Prime Minister, in many ways, has achieved substantial success. There is one statistic, however, that I understand is not challenged, and that is that, during her 11 years as Prime Minister, the gap between the richest 10 per cent and the poorest 10 per cent in this country has widened substantially… Surely she accepts that that is not a record that she or any Prime Minister can be proud of.

The Prime Minister:
People on all levels of income are better off than they were in 1979. The hon. Gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich. That way one will never create the wealth for better social services, as we have. What a policy. Yes, he would rather have the poor poorer, provided that the rich were less rich. That is the Liberal policy.

With those words (you can view the video clip HERE), the late Baroness Margaret Thatcher could have been addressing the New Zealand Labour Party. Labour has long held the belief that the gap between rich and poor can be closed by taxing the rich more. They have never understood that in the long term, policies aimed at making the rich poorer will also make the poor poorer. Steep progressive tax and income redistribution policies are based on the notion that there is only a finite amount of wealth to go around. Proponents believe that governments know best how to carve up that wealth in order to give a greater proportion to lower income earners and make society a “fairer” place.

While most people accept taxation is the necessary means by which their government funds social services and runs the country, there remains no doubt that lower, flatter taxes are the fairest. With lower, flatter taxes, those who earn more pay more - but at rates designed to incentivise the hard work, investment and risk taking that underpin wealth creation. In a free society, where individuals are able to pursue their own hopes and aspirations, a growing economic pie gives everyone at every level of society the opportunity to eventually become better off.

In his iconic book Free to Choose, Nobel Prize winning economist Milton Friedman explained it in this way,
“A free society releases the energies and abilities of people to pursue their own objectives. Freedom means diversity but also mobility. It preserves the opportunity for today’s disadvantaged to become tomorrow’s privileged and, in the process, enables everyone, from top to bottom, to enjoy a fuller and richer life”.

New Zealand has always enjoyed high levels of income mobility. A recent Treasury report on income mobility in New Zealand confirmed that over time the income of families can change substantially, with mobility amongst the lower income groups the greatest.[1] They found that 74 percent of the families found in the bottom 10 percent of family incomes were no longer there seven years later. Similarly, only 46 percent of those in the top decile were still there seven years later.

The study found that the link between low incomes and deprivation was not as strong as might be expected, with only a third of the people who had been on a low income for the whole of the seven year period experiencing any form of deprivation. Deprivation was however, highly prevalent amongst sole parents. In this context, deprivation is officially defined as experiencing three or more of the following: being on welfare, being unemployed for more than a month, feeling cold to save on heating costs, receiving charity, wearing worn-out shoes, buying cheap food or going without fresh fruit and veggies to save money for other things.[2] However, whether those “other things” means living expenses such as power and rent, or consumables such as alcohol and cigarettes, is not clear.

The Treasury report concluded with a number of recommendations including the key point that government policy should be designed with mobility in mind. In other words, given an opportunity to improve their circumstances, most families will do so. What that means is that implementing policies that encourage wealth creation to grow the economic pie is the very best way that governments can improve society and help families to get ahead. Conversely, the worst thing that governments can do is to introduce policies that will stifle growth by crushing freedom, wealth creation and entrepreneurial aspiration.

In a recent speech “A country that works for you” David Shearer signalled that the Labour Party intends to make the gap between rich and poor an election issue: “A small number prosper, the vast majority don’t. I don’t want New Zealand to keep heading in this direction. I want us to become prosperous together and give everyone a fair share.”[3]

In his speech he promoted a Living Wage: “it’s the amount a person needs to earn to provide for themselves and a family”.

According to Living Wage Aotearoa New Zealand (a coalition of trade unions, community organisations and poverty action groups) the living wage rate for New Zealand is $18.40 per hour. This rate is 33 percent higher than the present minimum wage of $13.75 an hour and higher than Labour’s election pledge of a $15 an hour minimum wage. Does this mean that Labour plans to push the minimum wage up to $18.40 an hour if they become the next government? One would hope they are not so economically ignorant that they could possibly overlook the crippling impact such a move would have on small businesses and economic growth. 

In the lead up to the 2011 election, Labour promised a ‘fairer’ tax system: “Labour will rebalance the tax system so that everyone pays their fair share, and build a country where everyone can prosper – not a country divided by the growing gap between rich and poor.” To rebalance the tax system they planned to establish a $5,000 tax-free zone, to introduce a 15 percent Capital Gains Tax, and to increase the top tax rate to 39 percent.[4]

In addition, they wanted to extend Working for Families - an income transfer scheme Helen Clark introduced in 2004 to incentivise families with children to enter the workforce - to include beneficiary families. They also want to spend $150 million to extend Paid Parental Leave for families with a new baby from 14 weeks to 26 weeks (a Labour Party private member’s bill to deliver this policy is presently in front of Parliament).

These sorts of expensive income transfer schemes are usually justified on the basis that they will help to reduce child poverty. However, there are fundamental problems with how poverty is measured, not only in New Zealand, but in many other developed countries as well. 

Poverty was originally measured on the basis of the struggle that people had to acquire the basic necessities of life including food and shelter. This remains the reality of life in many third world countries where the World Bank’s measure of abject poverty, which is based on the number of people living on US$1.25 or less a day, makes sense. However, the situation in most developed countries is quite different – while there may be pockets of such poverty amongst groups like the homeless, it is no longer a major societal problem.

Over the years, in line with the rise in a country’s living standards and the establishment of a universal welfare safety net, real poverty essentially disappears. However, the term ‘poverty’ is such a powerful emotive tool that advocates of income redistribution and progressive taxation were never willingly going to let it fade away. As a result ‘poverty’ has been re-born as a relative measure.

Relative poverty is a political construct based on a country’s income distribution - people are considered poor if they earn less than a benchmark based on the median wage. In New Zealand, families are considered to live in relative poverty if they receive less than 60 percent of median disposable household income after adjusting for housing costs. With the median disposable household income for a New Zealand family of four - after paying the rent or mortgage – being around $1,000 a week, anyone living in a family of four with a weekly household income of $600 or less - after paying their housing costs - is classified as living in poverty.

But there is a problem. Due to the way that poverty is defined, poverty - that is relative poverty - can only be eliminated if everyone has the same or approximately the same level of income. This, of course, ensures that no matter how many anti-poverty programmes a government puts in place, poverty is set to stay.

Kristian Niemietz, a Poverty Research Fellow at the London-based Institute for Economic Affairs has been investigating better options for measuring poverty to avoid this pitfall:

“We should approach poverty measurement from an altogether different angle. Surveys in the UK show that people may wildly disagree on what constitutes poverty when asked in abstract terms, but when asked more specifically which goods constitute ‘necessities’ in our day and age, there is a surprisingly robust consensus. So why not build a poverty indicator around that consensus? One could assemble a consumption basket containing all the goods and services that the majority consider necessities, gather the market prices of these items, add them up, and use the total cost of the basket as a poverty line.”

This approach is similar to the well accepted ‘basket of goods’ approach that is used to calculate the Consumer Price Index. Kristian explains, “This would not just provide a more realistic account of how much poverty there is in developed countries. It would also encourage more sensible policy responses. The policy focus would be less on income redistribution, and more on creating the conditions for competitive product markets. A market structure which makes the basics of life easily affordable, right across the income distribution, can be seen as a safety net of sorts.  And it is a safety net which does not trap people in dependency and inactivity.”

In his article, Kristian makes the point that since housing represents a significant cost for families, then releasing land and encouraging the building of houses in areas where shortages have driven up prices, is an important anti-poverty measure. In other words, getting the free market to work more effectively to provide consumers with a greater choice of essential goods and services at more competitive prices does everyone in society a service. This is a more responsible approach to public policy than the present focus on income redistribution, which not only undermines wealth creation and economic growth, but also increases welfare dependency and deepens the welfare trap.

If we are to advance as a country there needs to be greater honesty in the poverty debate. There needs to be an acknowledgement that, firstly, the measure commonly used in this country is a relative measure of income distribution not poverty, and secondly, that policies that make wealth creators less wealthy will not make the poor less poor.


THIS WEEK’S POLL ASKS: 
Do you believe Labour's plan to make wealth creators less wealthy will improve the economy?  
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 93% of voters believed the
Labour-Green announcement was an act of political sabotage, while 7% thought they were keeping the investment market fully informed.
... read the comments HERE

FOOTNOTES:

1. Treasury, A descriptive analysis of income and deprivation in New Zealand
2. Charles Waldegrave et al, A New Zealand Index of Socio-economic Deprivation for Individuals
3.
David Shearer, A country that works for you
4. Labour Party, Election Manifesto 2011


 

NZCPR Guest Commentary: 

POOR PEOPLE IN RICH COUNTRIES - a new approach to measurement and policy  
By Kristian Niemietz
 
 


Do these considerations have any implications for New Zealand? Probably yes, even though the specifics are hard to diagnose from the other side of the globe. But presumably, as in the case of the UK, a poverty measure based on market prices would place particular emphasis on the housing market. In this sector, New Zealand has experienced a similar cost explosion as the UK. In Auckland and Christchurch, average house prices are now nearly seven times the average annual household income. International evidence shows that such price escalations are usually the result of excessively tight land use regulations which choke residential development. This is a typical example of market distortions which raise the cost of living for the least well-off. A cost-effective anti-poverty strategy should, foremost, consist of identifying these distortions, and removing them.

In this sense, poverty alleviation is the natural territory of free-market liberals. They should reclaim it. ... read the full article HERE 

 

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This week we reflect on the damage that Labour and the Greens have caused with their proposal to nationalise the electricity industry, our NZCPR Guest Commentator Professor Roger Bowden examines the global warming debate and the importance of scepticism, and this week's poll asks whether the announcement by Labour and the Greens was deliberate political sabotage.  

*Don't forget, you can sign the Declaration of Equality and make a Submission to the Independent Constitutional Review Panel by visiting www.ConstitutionalReview.org 

*The transition to the new NZCPR website is continuing - our apologies for any glitches that you might encounter 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

SABOTAGE OR OPEN DISCLOSURE?
By Dr Muriel Newman
   

Power_reforms.jpgIrresponsible sabotage or keeping the market fully informed? As anyone who has followed politics closely will know, there is no doubt  that the coincidentally timed announcement by the Labour and Green parties to nationalise the wholesale electricity industry was designed to materially impact on the sale of Mighty River Power shares.

They could have announced the issue some months ago, before the float had commenced. Instead they chose to do so after the offer price range had been set and after applications had opened. Given the materiality of the radical proposals, the government had no choice but to suspend the offer, give those investors who had applied the opportunity to withdraw their share application, and restate the risks associated with the investment. It has in effect, derailed the offer by spooking investors.   

Last week’s policy announcement has also demonstrated just how reckless and selfish Labour and the Greens are. They are prepared to destroy private sector wealth creation and competitive free markets to advance their own political careers. Not only have they diminished the value of power companies, but they have sent a telegram to all overseas investors that New Zealand is a high risk country. Those investors will no doubt adjust upwards their risk return assessments and demand higher returns from any future investments they may make in this country. That may include overseas banks financing domestic mortgages.

Whether one likes foreign investment or not, the fact is that without it, there would be fewer jobs and less economic activity. While that will not hurt well paid politicians in Wellington, it will hurt workers and the families who rely on their incomes.

Mark Warminger, a Portfolio Manager with Milford Asset Management has quantified the potential damage of the Labour-Green proposal:  “...to save $700m per annum from our total electricity bill the direct and indirect costs of such a scheme would be in the order of the following; $2.5bn in additional debt servicing costs, $450m reduction in dividends, $4.5bn asset write-downs from State owned enterprises, $1bn of capital destruction of the listed power companies and a reduction of $100m of dividends per annum to New Zealand shareholders. In addition, there will be highly skilled jobs lost as power companies reduce capital expenditure and development. In the short term this will not be an issue whilst demand catches up with supply but by the time supply and demand are in balance it will be too late to add additional capacity in a timely manner. ”[1]

According to TV3 News, JBWere, a firm which manages $1 billion of client funds in our share market, has signalled that it and other investors will leave the New Zealand stock market if the state intervention signalled by Labour and the Greens becomes a reality: “The steps the Labour/Greens are suggesting, if enacted, are significant enough for JBWere to consider a reduced allocation to the local share market. We doubt we would be alone in making this judgment”.[2]

Labour and the Greens tried to justify their announcement by claiming that the electricity market is not working and that the cause is the failure of the reforms introduced by Max Bradford and the National Government in 1998. The facts, however, tell a different story as the above graph of annual increases in consumer electricity prices show. The latest round of price-rise problems were clearly caused by Labour’s re-regulation of the electricity market in 2002.

For anyone who does not understand just how disastrous it would be if Russell Norman were in charge of the highly complex electricity market, consider what our supermarkets would be like if he ran them too! This is no less illogical than controlling electricity pricing and not outside the realms of possibility given that the former Venezuelan President, the late Hugo Chavez, a hero of the Green Party, nationalised supermarkets in 2010 over accusations of price gauging.

That is not to say there are no problems with the electricity industry and the price of power – of course there are. The New Zealand Centre for Political Research has explored the issue often enough as we have tried to highlight the underlying forces that are driving power price increases. But never in our wildest dreams did we imagine the Labour Party would embrace the wacky ideas of the deeply socialist Green Party as their own on such an important issue. For Labour to do so shows how far they have drifted to the left – not even Helen Clark would have been so reckless. 

Within two days of the Labour-Green announcement, the sharemarket value of Contact Energy, Trust Power and Infratil had fallen by almost $600 million. That loss will be felt by mum and dad investors who have part of their retirement nest-egg squirreled away in such listed companies, as well as the 2 million New Zealanders who have KiwiSaver accounts. In addition, all New Zealanders will suffer a loss via the New Zealand Super Fund and ACC’s investment fund.

All New Zealanders will also lose out because this ill-timed missile will no doubt diminish the issue price of Mighty River Power shares. That means less money for debt repayment, hospitals and schools. In other words, it is sick people and children who will bear the brunt, which says a great deal about Labour and Green MPs.   

Labour and the Greens have justified their state control policy  by claiming they are concerned about the impact that the rising cost of power is having on households. What they of course don’t say is that they are responsible for much of that increase. During the nine years that Labour (supported by the Greens) was in office power prices increased by 72 percent. They have subsequently risen by 20 percent since National has been in office.

Two of the main reasons for the power price increases – as our own research over the last few years has shown – are the government’s energy strategy and the Emissions Trading Scheme.

Although New Zealand is a world leader in the production of electricity from renewable sources, in 2007 the Labour Government (and its Green support partner) launched a new energy strategy which required 90 percent of the country’s electricity to be generated from renewable sources by 2025. In addition, a 10-year moratorium on the building of new fossil fuel base load power generation plants was introduced. As a result, there was a massive switch within the industry towards more expensive ‘renewable’ electricity generation (windmills) which pushed up the cost of power. 

The Emissions Trading Scheme is another  green policy that was introduced the dying days of the Labour administration. Designed to penalise New Zealanders for the production of greenhouse gases, it has also pushed up the price of electricity by introducing a surcharge onto the stationary energy sector in 2010 that was estimated to increase the amount that consumers would pay for power by $400 million. At the same time, an ETS surcharge of 3.5 cents a litre was added to the price of fuel.

These ETS increases, which have worked their way through the whole economy to increase the cost of goods and services across the board, are the worst form of bureaucratic cost impost, since the benefits provided by the ETS are non-existent. The fact that the scheme remains in place is a testament to some misguided political belief that penalising New Zealand consumers and businesses is somehow going to save the planet.

The ETS was, of course, introduced after the Labour Government signed the Kyoto Protocol in 2002 and tied New Zealand to a binding commitment to reduce greenhouse gases to 1990 levels between 2008 and 2012 – even though the whole idea was completely barmy given that almost half of our greenhouses gases are produced by cattle and sheep. Once the Kyoto Protocol expired, at the end of 2012, New Zealand pulled out, but instead of disestablishing the costly ETS, National has left it in place – just like they left in place Labour’s unachievable 90 percent renewable energy generation goal in their Energy Strategy, instead of replacing it with a more sensible option.

Since Kyoto  expired, carbon prices around the world have crashed. In the European Union last week the price hit junk bond status - falling from nearly €30 a tonne in 2008 to €2.47 after the European Parliament voted against propping up the price. In 2011, the Swiss Bank UBS produced a report for investors claiming that the EU’s emissions trading scheme had cost the continent’s consumers €210 billion for “almost zero impact”.[3] Goodness knows what the ETS has really cost New Zealand – not just in the rising cost of power, fuel and all other goods and services (including a new surcharge on rubbish collection now that the waste sector has entered the ETS), but in the loss of jobs through businesses closing and relocating overseas;  such figures are almost impossible to find.  

But the carbon price crash is not the only change. Stalwart supporters of global warming are now starting to question the theory itself given that global temperatures have not risen for over 15 years, in spite of computer models showing that temperatures should be rising in step with carbon dioxide. They are realising that not only are the models wrong, but so too are the scary scenarios which the models generate. Even prestigious publications such as The Economist are starting to question the competency of climate models and the groups that promote alarmist scenarios. Certainly the public are becoming more sceptical, which is heartening, given the steady diet of doom and gloom that is being dished out by many media outlets.

This week’s NZCPR Guest Commentator is Professor Roger Bowden, an economist who has long followed developments in climate change and global warming theory. In his article Climate change and the social importance of scepticism, he explains how ideological intolerance is a major threat to an open society:

“Take global warming… It all looked convincing to me.  But the doubts started to creep in. As a mathematical modeller myself, I was uneasy about the faith being placed in the causal models. Given his outstanding mathematical modelling credentials, it was hard to dismiss the negative assessment of Freeman Dyson, of Princeton University, as out of date or over the hill. And at the outset I was just a little worried by the curve, which appeared to show that global temperatures were leading CO2 rises, not the other way round.  And any unusual weather pattern, it seemed, was grist to the mill for the climate correctness industry.

“Moreover as an economist, the motives for professional capture became progressively more apparent. By that I do not mean just money, consultancy, or at one remove, government funding for me and my team. Scientists enjoy public attention and social importance just as much as the next man, or woman.  But I also became troubled by the intolerance of opposing views that had started to develop. Climate change and its mechanism became a 'done deal' in the media, as though no socially responsible person could possibly think otherwise.”

Professor Bowden concludes his article with a warning - that the suppression of dissenting voices by ideologically-driven bullies does society a real disservice. He also contends  universities in particular have a responsibility to remain open minded to the claims of sceptics, knowing that opposing views lie at the heart of critical thinking.

Without a doubt we should apply this same logic to parliament and politics. Dissenting voices in popular debates should be treated with respect instead of vilification. If we are to nurture an open society then it is crucial that all sides of an argument are encouraged to speak out. Those that do so should not be criticised nor ridiculed for expressing their view – that should be reserved for the bullies that attack them personally instead of addressing the issue!


THIS WEEK’S POLL ASKS: 
Do you believe the Labour-Green announcement was an act of political sabotage or simply keeping the investment market fully informed?  
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 99% of voters believe that the principles of the Treaty of Waitangi should not be included in a New Zealand constitution
... read the comments HERE

FOOTNOTES:
1.Mark Warminger, Rolling blackouts could be our future
2.TV3, JBWere predicts capital flight
3.Australian, Europe's $287bn carbon 'waste': UBS report

 

NZCPR Guest Commentary: 

CLIMATE CHANGE AND THE SOCIAL IMPORTANCE OF SCEPTICISM 
By Prof Roger Bowden
 
 


Early on, small cracks started to appear in the edifice of moral certainty on climate correctness, in the form of controversies about selective data quotation, or even data fudging. The Himalayan glaciers were not all retreating, the Antarctic sea ice was in fact growing, and so on.

But a much larger crack developed as the first C21 decade passed. It became apparent that although CO2 had continued its march upwards, it had left warming behind; since 1997 there has been little or no global warming. Credit for disseminating this finding goes to the UK Daily Mail, who promptly got into hot water for suggesting that the UK Met Office had hidden the light under a bushel. And a few months later, a team from Reading University showed that this had breached the 95% confidence band for the prevailing IPCC model. Or to put it plainly, there was only a 5% chance that the model was right. ... read the full article HERE 

 

___________________________________________________
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PO Box 984 WHANGAREI
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This week we examine what a new study on the constitutional review means for the future, our NZCPR Guest Commentator Professor James Allan explains how major constitutional change should only occur through a binding referendum, and this week's poll asks whether the principles of the Treaty of Waitangi should be included in a New Zealand Constitution. 

*To sign the Declaration of Equality and make a Submission to the Independent Constitutional Review Panel, please visit www.ConstitutionalReview.org 

*The transition to the new NZCPR website is continuing - our apologies for any glitches that you might encounter 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

WELCOME TO THE FUTURE
By Dr Muriel Newman
   

One only needs look at the present to see what
New
Zealand will be like in the future. The North 
Island will be known as Te Ika a Maui, the South Island as Te Waipounamu, and New Zealand as Aotearoa. Those who use water for commercial 
purposes will be charged “storage” because lakes and rivers will be known as vessels owned by iwi. Helicopter pilots hovering over mountains will be prosecuted for “offending” the sacred ancestors 
of Maori. Cultural groups will be flown around 
the world at taxpayers’ expense to accompany dignitaries. New immigrants will be required to undergo Treaty of Waitangi “awareness” training 
as a condition of their settlement. Treaty “education” in schools and the workplace will be mandatory. And there will be preferential race-based treatment for health, education, and all social services…

If a Treaty-based constitution becomes law this will be future New Zealand. Every law and every regulation will be tested to ensure preference is given to Maori. The outcome will be predictable – a two-tier society divided by race: a tribal ruling class dictating across-the-board race-based preference, with all other New Zealanders relegated to second class citizenship status. By all counts it will be an apartheid society.

This could never happen, you might be saying as you dismiss these comments as scaremongering. Yet a study published by Research New Zealand earlier this month shows just how close we are to this new reality.[1] The study, which was based on a telephone poll of 500 people between March 19 and March 26, asked whether Treaty of Waitangi principles should be incorporated in the New Zealand Constitution. 58 percent of respondents said “Yes”. Only 35 percent disagreed with the proposition. That is enough to change the future direction of New Zealand - and give strength to the Maori radicals who are intent on reclaiming New Zealand from the ‘colonialists’.  The poll had a margin of error of 4.7 percent.

You may well ask how it is possible that 58 percent of the population would want a Treaty based constitution? Two reasons. Firstly, the question was leading. It asked, “It is likely that a New Zealand Constitution would incorporate the principles embodied in the Treaty of Waitangi. In your view should the principles of the Waitangi Treaty be included in a New Zealand Constitution?” Had the first sentence of the question been omitted the result might have been quite different.

Secondly, in the absence of a full and proper debate on the issue, it is likely that many of those answering the question would have had no idea of the ramifications of a Treaty-based constitution.

The breakdown of the poll responses in the report shows that of the total 58 percent of respondents who voted in favour of a Treaty of Waitangi constitution:

- 61% were female and 55% male;
- 67% were 18-34 year-olds, 58% were 35-54 year-olds, and 51% were aged 55 & over;
- 57% were “NZ European/Pakeha”, 67% were “Maori/Pacific”, and 57% were “Other”;
- 60% earned under $40,000, 54% earned $40-$80,000, and 60% earned $80,000 or more
- 61% lived in the upper North Island, 51% in the lower North Island, and 59% in the South Island

This poll reveals how close minority interests are to changing race relations in New Zealand. Let’s not forget this agenda is being led by a minor Maori sovereignty political party that gained only 1.4 percent of the party vote in the 2011 General Election – 31,982 votes. A condition of the Maori Party entering into a coalition deal with National was a review of the constitution with a view to giving ‘effect’ to the Treaty of Waitangi.  The Maori Party’s goal was clear - a new constitution based on the Treaty of Waitangi as supreme law.

The Maori Party’s constitutional review was launched with the appointment of a Constitutional Advisory Panel in August 2011. Members of the panel were racially selected – a Pacific Island and an Asian representative, five Maori and five non-Maori. This significant over-representation of Maori on the panel is consistent with the move by Maori supremacists to ensure that the Maori voice or vote on official bodies is equal to that of non-Maori. That this creates a bias in official affairs, including those of the Constitutional Advisory Panel – a jack up in plain words - appears to be of no consequence to this government.

The panel’s public consultation and submission process, which started at the end of February, is scheduled to last until the end of June. That means an official consultation period of only 4 months out of the more than 2 years that they will have been in existence and being paid by taxpayers. No public meetings of the “town hall” variety are being held, only hosted meetings run by private organisations. Maori-only meetings are scheduled but non-Maori are not invited.

It is a low key approach designed to ensure the review “flies under the radar”. As a result, few New Zealanders are even aware of the review - as was confirmed by the Research New Zealand poll, which showed that two thirds of the respondents had not even heard that a constitutional review was underway. And of the minority that are aware of the constitutional review, few are likely to realise it is the brainchild of Maori radicals.

The truth is that there is no widespread public demand for a new constitution - a full Parliamentary Select Committee Inquiry in 2005 found that there was no constitutional crisis in New Zealand that needed to be fixed.

The Constitutional Advisory Panel has a new website and is calling for submissions. Nowhere on that website is there any explanation of what it would actually mean for New Zealand if the Treaty of Waitangi was inserted into a new written constitution. The best explanation to date remains the article, A Treaty of Waitangi Constitution, written by Canterbury University law lecturer and Independent Constitutional Review Chairman David Round for the NZCPR in which he outlines the implications of a Treaty-based constitution – see HERE.

This is how our constitution is described on the advisory panel’s website:

New Zealand has a constitution – it’s just not all written down in a single document. Our constitutional rules include legislation such as the New Zealand Bill of Rights Act 1990 and the Constitution Act 1986, foundational documents such as the Treaty of Waitangi signed in 1840 and established constitutional principles.

The submission questions then ask:

1. Do you think our constitution should be written in a single document? Why?
2. Do you think our constitution should have a higher legal status than other laws (supreme law)? Why?
3. Who should have the power to decide whether legislation is consistent with the constitution: Parliament or the Courts? Why?

Regarding the Treaty of Waitangi, the website states:

The Treaty of Waitangi is an agreement made between the British Crown and Māori chiefs in 1840. It enabled the British to establish a government in New Zealand and confirmed to Māori the right to continue to exercise rangatiratanga. The Treaty is generally regarded as New Zealand’s founding document and influences the relationships between the Crown and Māori. The Treaty is one of the factors that may be taken into account in law-making and public decision-making.

The questions then ask:

1. Thinking of the future, what role do you think the Treaty of Waitangi could have in our constitution?
2. Do you think that the Treaty should be made a formal part of the constitution? Why?


We have compiled a full list of the submission information and questions from the website HERE. We hope it will assist anyone who intends making a submission to focus on the matters that are of greatest concern to them.

Until the Research New Zealand poll was published, anybody who understood what a Treaty of Waitangi constitution would mean for New Zealand might have thought that there would be little public support since the consequences for the future would be so disastrous. As David Round puts it in his December article, “The Treaty could be used in every single situation we can think of as an argument as to why the law should grant special privileges to members of the ‘Maori race’, and why any law that does not do so is defective… A Treaty clause is an invitation to endless litigation, and a guarantee of eternal uncertainty and racial bitterness.” 

However, this poll highlights how trusting New Zealanders are and how naive they would be if they actually believe that their government would not introduce such fundamental changes to our democracy – if it meant staying in power. The public appear happy enough to go along with the idea that they might be helping to overcome “Maori disadvantage” - even though past grievances have been settled multiple times, and despite Maori tribes now being amongst the wealthiest institutions in our society (and now well resourced to further pursue their sovereignty agenda).

Do not despair – of course we are fighting back, but all we have is the truth behind us and the power of words. We have launched the Declaration of Equality as an alternative vision of the future – one based on equal rights with no special treatment based on race. Some 42,000 people have signed the Declaration, but to make a real difference we need many more. If you can help to spread the word and encourage more people to sign, then please do so.

One heartening result from the Research New Zealand poll was the fact that almost 80 percent of respondents believe it should not be up to the government to make constitutional changes – they believe that right belongs to the public. When asked “If a document called the ‘New Zealand Constitution’ emerges from the review, Parliament alone could decide whether or not to adopt it or a referendum could be held. Which of these would you prefer?” 79% said the decision should be made through a referendum, and only 13 percent thought it should be made by Parliament alone.

This week’s NZCPR Guest Commentator is Professor James Allan of Queensland University, a constitutional law expert and member of our Independent Constitutional Review Panel, who is a staunch advocate of the use of referenda as the main democratic means of bringing about constitutional change. In his article Changing an Unwritten Constitution, he
picks up on a recent statement by the Prime Minister, “So when Mr. Key muses, as he recently did, that you couldn’t just change from a 3 year electoral cycle to a 4 year one on the basis of a 75 percent of MPs vote – that this less fundamental shift needed a binding referendum – it surely follows that the even more important and central issue of our constitutional arrangements themselves also need a binding referendum before there can be change.”

He continues, “
So here is an out-and-out challenge to Mr. Key.  Be straight with the voters.  Announce that there will be no changes to the unwritten constitution that has served New Zealand so well without there first being a binding referendum.  Say it now; say it clearly; and stop people from fretting that some illegitimate process might be employed.” 

Until now, many of you who regularly read these newsletters will have been thinking to yourself that you don’t need to do anything because the Maori Party will never succeed with their plan for a Treaty based constitution that puts their personal ambitions above those of the nation. Well, I hope this poll has stirred you out of your complacency. Politics and democracy can deliver the best we can hope for as citizens, but it can also deliver the worst.

New Zealand is at a tipping point, brought about by MMP. The public now has two options – complacency… allowing themselves to be manipulated by a radical minority, or standing up for what they believe to be right. At the NZCPR we are doing all we can to stand up for equality and stronger democracy. We hope you will do so too.

For more information please visit www.ConstitutionalReview.org to sign the Declaration of Equality, put in a submission, volunteer to help, or donate to the cause
.

*If you too are fed up with more and more race-based preference being thrust onto the country, then join us in saying you have No Confidence in establishment politics - click HERE for details.

THIS WEEK’S POLL ASKS: 
Should the principles of the Waitangi Treaty be included in a New Zealand Constitution?  
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 98% of voters believe that business activities carried out by charities that are unrelated to their charitable purpose should be taxed
... read the comments HERE

FOOTNOTES:
1.Research New Zealand, Review of the New Zealand Constitution 

NZCPR Guest Commentary: 

CHANGING AN UNWRITTEN CONSTITUTION 
By Prof James Allan
 
 


What is not respectable is to change New Zealand’s constitutional structures without giving New Zealand voters a say.  If some sort of written constitution were proposed, maybe one with the Treaty entrenched within it, then before that sort of outcome could have even a scintilla of legitimacy the question ought to be put to all of you...

If any change to New Zealand’s unwritten constitution were to proceed without a binding referendum, my sense and indeed my hope is that the National Party would be obliterated as a political force in New Zealand.  ... read the full article HERE 

 

___________________________________________________
New Zealand Centre for Political Research
PO Box 984 WHANGAREI
Ph: 09-434-3836, Fax: 09 434-4224, Mob: 021-800-111
muriel@nzcpr.com
www.nzcpr.com

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This week we look at the charitable sector, our NZCPR Guest Commentator Dr Michael Gousmett outlines some of the changes that need to be made, and our poll asks whether charities should be required to pay tax on business activities that are unrelated to their charitable purpose.

Our migration to the new NZCPR website is continuing as planned - we are hoping for a smooth transition but our apologies in advance if you experience any glitches! 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

CHARITIES UNDER REVIEW
By Dr Muriel Newman
   

According to a survey carried out in 2010, New
Zealand ranked first equal with Australia as the
world’s most charitable nation.[1] The World Giving
Index
, published by the Charities Aid Foundation
used a Gallup survey of 195,000 people in 153
nations to assess the extent of charitable activities.
It showed that 68 percent of New Zealanders had
given money to charity during the last month, 41
percent had volunteered time, and 63 percent had
helped a stranger. While the latest 2012 survey
shows that New Zealand is now ranked 4th, behind Australia, Ireland and Canada, our charitable record is still impressive.

The Charities Commission prepared a snapshot of New Zealand’s charities sector in 2011.[2] It showed there were 25,785 registered charities spread right across the country that provide a wide range of services in all areas of community activity. 

The total income received by the charities sector has increased substantially over the last few years from $6.1 billion in 2009 to $14.2 billion in 2011. The increase is driven by the growth in government grants and in the provision of services, with grants growing from $1.8 billion to $4.8 billion and service provision growing from $2.1 billion to $5.5 billion. Donations also grew from $0.6 billion to $1.05 billion, no doubt as a result of tax changes. Prior to 1 April 2008, the maximum refund available to individuals donating to charity was $630, which meant that only the first $1,890 of a donation received any income tax relief. However, that limit has been abolished so that all charitable and public benefit gifts up to the value of a person's taxable income now qualify for a tax credit.

The number of small charities with an income of less than $20,000 grew substantially between 2009 and 2010, from 5,014 to 8,781. Those with incomes between $20,000 and $100,000 grew from 3,442 to 6,066; those with incomes between $100,000 and $1 million grew from 2,950 to 5,173; those with incomes from $1 million to $20 million doubled from 718 to 1,430; and the number of charities with incomes of over $20 million, jumped from 37 in 2009 to 83 in 2010.

The sectors that received the greatest amount of charitable funding in 2011 were education, training and research, which received $4.5 billion, followed by health with $3.4 billion, religious activities with $1.3 billion, and social services with $680 million.

In 2011 New Zealand charities employed a total of 180,972 staff. Charities in the education sector employed 44,163 staff, those engaged in religious activities employed 38,729 staff, and those in the health sector 36,802 staff. In comparison, 448,295 volunteers worked in the charitable sector in 2011, with 110,762 volunteering in health, 109,246 in religious activities, and 36,403 in education. This shows the enormous contribution to community wellbeing that is made by volunteers.

The Charities Commission identified Auckland University as the largest charity in New Zealand in 2011 with combined income and assets of $2.3 billion. Tainui Group Holdings was placed tenth with $328 million. The Roman Catholic Diocese of Auckland Group is listed as the top charity registered as a group with income and assets valued at $793 million. The Ngai Tahu Charitable Group is listed in second place with a value of $762 million.

While the charitable sector makes an invaluable contribution to New Zealand’s social infrastructure, the sector is not without controversy. This is understandable given the taxpayer subsidies and benefits that organisations stand to receive if they are successful in gaining charitable status.

For some, the controversy is over whether their so-called charitable purpose is of genuine public benefit. The environmental activist movement Greenpeace is a case in point - it has been trying to gain charitable status since its application was declined by the Charities Commission in 2010. The reasons given for the rejection is that not only were they involved in illegal activities, but that two of their main objectives – promoting ‘peace’ and ‘disarmament’ – are political not charitable. Greenpeace appealed the decision to the High Court, which upheld the view of the Commission, but the Court of Appeal has now ruled that the Charities Registration Board should reconsider their application.

However, a co-founder of the Greenpeace movement, the Canadian ecologist Patrick Moore, responded by strongly opposing their attempts to seek charitable status: “I find Greenpeace’s latest attempt to seek charitable status in New Zealand via the Charities Registration Board to be ironic. My view is that the organization I helped found and lead during the 70s and 80s is anything but charitable today. Since I left Greenpeace, its members, and the majority of the movement, have adopted policy after policy that reflects their anti-human bias, illustrates their rejection of science and technology, and actually increases the risk of harm to people and the environment. Greenpeace has a zero tolerance for genetically modified food crops, even though this technology reduces pesticide use and improves nutrition for people who suffer from malnutrition. They are opposed nuclear energy, even though it is the best technology to replace fossil fuels and reduce greenhouse gas emissions while meeting growing electricity demand. Greenpeace also campaigns against hydroelectric projects despite the fact hydro is by far the most abundant renewable source of electricity. And the organization supports the misguided campaign against salmon farming, an industry that produces more than a million tons of affordable heart-friendly food every year. Greenpeace lost its battle in Canadian courts to hold on to its charitable status in 1999 when Revenue Canada found that the organization provided ‘no public benefit’. There’s no reason to reward Greenpeace’s misinformation campaigns with a subsidy from New Zealand taxpayers."[3]

The lack of information in the financial reports of many registered charities is another cause of controversy. The Environmental Defence Society, a professional activist group that pro-actively opposes development through the RMA and local authority planning process, is a case in point. In their 2012 financial statements they show that more than half of their $843,797 income is spent on contracted consultants, yet the only comment about exactly who received the $463,365, is a note to the accounts: “Payments have been made to Firm Ground Ltd (Raewyn Peart is a director), Taylor Partnership (Gary Taylor is a partner), Driven Events Ltd (Fiona Driver is a director), for services rendered to the society. Each are officers of the society. Payments were made on invoices supplied. Contracts were entered into by the board or delegated members with the contracting officers abstaining from voting. The premises are leased from Driven Events Limited which is a company owned by Fiona Driver, an officer of the society. The lease is on normal commercial terms. The three trustees of The Environment Trust; Gary Taylor, Fiona Driver, and Raewyn Peart are also officers of the Environmental Defence Society.”[4]

Dr Michael Gousmett, an independent researcher with an extensive background in the charity and non-profit sector, is this week’s NZCPR Guest Commentator. In his article
Tax-Payer Subsidised Charities And Their Business Activities – Time For Change, Dr Gousmett reveals details of a number of the country’s major charities, arguing that there should be far greater accountability and transparency in the sector. In particular, he proposes that charities that operate commercial activities that are not related to their charitable purpose should be required to pay income tax, and those that fail to distribute their income should be required to pay an excess surpluses retention tax - along the lines of rules that apply in Australia and the US.  

With regards to Ngai Tahu, he states: “What of the South Island based Te Runanga o Ngai Tahu (TRONT) and its Ngai Tahu Charitable Trust? To understand their financial activity, reference must be made to both the Charities Register and Ngai Tahu’s website. The Charities Register carries the combined group financial statements for the Ngai Tahu Charitable Trust, a group comprised of the Trust, Ngai Tahu Holdings Corporations and its subsidiaries and trusts.  This structure contains 38 limited liability companies, three trusts including the Ngai Tahu Charitable Trust, and a scholarship fund. There is also another set of financial statements on Ngai Tahu’s website which reports the summary group financial statements comprised of TRONT and the Ngai Tahu Charitable Trust, which is “extracted” from the audited full group financial Statements. For 2012, these financial statements reported revenue and other income from trading operations of $209 million, and a profit of $69 million before Maori authority and Australian taxation of $427,000. Distributions relating to tribal, runanga and whanau amount to $16.6 million, or 8 per cent of revenue, from an asset base of $658 million, yet the report by the chair and chief executive claims that distributions to TRONT totalled $26.26 million.  It is difficult to see where in the financial statements this figure can be found. Why also the need for two sets of financial statements?  By extrapolation between the two sets of financial statements, it appears that TRONT earned revenue of $8.2 million, not $26.26 million as claimed, and spent $10.8 million on what was described as tribal, runanga and whanau distribution ‘expenses’. Why then, with these levels of funding, are there reports of housing and poverty issues amongst Maori in Canterbury? 

“The TRONT report also discloses levels of remuneration in bands of $100,000. In 2012 there were 67 employees who earned $100,000 or more, at a total cost of $12.8 million, an 18.5 per cent increase on 2011 at a cost of $10.8 million. How then is it possible for an organisation which argues that it is a charity can pay its top three earners between $1.76 and $1.79 million, or 14 per cent of the remuneration paid to the 67 employees, with the top earner receiving between $680,000 and $689,999? In 2011 there were 61 employees who earned in excess of $100,000, with the top of the remuneration band being $499,999.  This suggests that the top earner received an increase in remuneration of 38 per cent, or a maximum of $190,000 in 2012. The simple question is, why? Excesses in remuneration are not unique to the for-profit corporate sector, as such figures now show.” The full article with many other revelations can be read HERE.

Last year the government launched a review of the charities sector with a view to improving financial reporting standards.
[5] Research had identified many instances of poor quality financial reporting that was resulting in meaningless financial statements, a lack of transparency and accountability, as well as a number of questionable practices, such as not including donated assets, excluding donations from the income statement, and intentionally using obscure and confusing terminology to limit the effective use of the financial statements.

Some accountants working for larger registered charities were found to be pro-actively lowering charities’ assets or incomes to make them look poorer than they actually are, as well as keeping assets off balance sheets and not disclosing revenue – using such means as establishing an incorporated society to ‘run’ the charity and a separate charitable trust to keep assets and surpluses, excluding all fixed assets from the balance sheet, moving bank account balances off balance sheet when they get too large, and maintaining a separate grants spreadsheet.

They indicated that such practices might be at risk under section 260 of the Crimes Act 1961, which relates to false accounting.

As a result of their investigation, changes are being proposed whereby larger charities will need to have their accounts audited, with medium-sized charities required to have a review or an audit. The government is inviting feedback on the proposals, with submissions closing on May 17 – details can be found
HERE

Added to concerns over the reliability of financial information is the fact that a BDO Not-For-Profit Fraud Survey 2012 found 86 percent of respondents agreed fraud is a problem for the sector, with 46 percent indicating that even a small fraud would have a major impact on their organisation.[6] It is clear that reform is called for.

Without a doubt, retaining public confidence in the charities sector is important. With that in mind, a tightening of the financial reporting rules to bring greater transparency and accountability appears to be a step in the right direction. That should include greater disclosure of disbursements, a clearer indication of the percentage of total income that is being used to fulfil the charitable purpose - and crucially, how that purpose is being met - and the imposition of a tax on all business activities carried out by the charities that are unrelated to their charitable purpose.

THIS WEEK’S POLL ASKS: 
Do you support the call for all business activities carried out by a charity, that are unrelated to their charitable purpose, being taxed?   
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 24% of voters agree that bank deposits should be guaranteed by taxpayers, while 76% were opposed
... read the comments HERE

FOOTNOTES:
1.Charities Aid Foundation, World Giving Index 2010
2.Charities Commission, A Snapshot of New Zealand’s Charitable Sector 2011
3.Patrick Moore, Greenpeace is not charitable – co-founder
4.Charities Register, EDS Annual Return
5.Ministry Economic Development, Auditing and Assurance for Larger Registered Charities
6.Charities Commission, Fraud Workshops


NZCPR Guest Commentary: 

TAX-PAYER SUBSIDISED CHARITIES AND THEIR BUSINESS ACTIVITIES 
time for change 
By Dr Michael Gousmett
 
 


The problem with the charitable purposes exemption from income tax in New Zealand is that charities do not have to justify, in their annual reports or returns to the Department of Internal Affairs, what it is that they actually do for that privilege.  The income tax exemption is considered by the IRD to be a subsidy, a point with which many charities vehemently disagree.  As a consequence of the Charities Act 2006, charities in England and Wales now have to provide a written report to the Charity Commission, which is also made available to the public on the Commission’s website, of what it is that the charity does that provides a benefit to the public through their activities.  There is no such requirement in New Zealand, yet our charities should also be required to explain what it is that they do, with their tax-payer subsidised income, that is of benefit to the public.  Even religious institutions are required to do so in England and Wales.  Charities might object to this requirement as yet another bureaucratic burden, but that is a small price that charities should be required to pay in return for the privilege of being exempt from income tax. It also forces trustees to take notice of the organisation’s charitable purposes as described in the trust deed or constitution, and ensures that they work within those objects and not drift off into other ventures.  It is called accountability and transparency, which is why we have the Charities Act 2005.  ... read the full article HERE 

 

___________________________________________________
New Zealand Centre for Political Research
PO Box 984 WHANGAREI
Ph: 09-434-3836, Fax: 09 434-4224, Mob: 021-800-111
muriel@nzcpr.com
www.nzcpr.com

To unsubscribe from the NZCPR mailing list, send this email - but don't forget to reply to the confirmation message. 
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This week, we look at the lessons for New Zealand from the banking crisis in Cyprus, our NZCPR Guest Commentator Dr Don Brash outlines the Reserve Bank's Open Bank Resolution scheme, and our poll asks whether taxpayers should guarantee bank deposits. 

This week we are moving to the next stage of our migration to our new NZCPR website. We are hoping things will go smoothly, but our apologies in advance if you experience any glitches! 

Thanks again for your interest and support.

Kindest regards,

Dr Muriel Newman
NZCPR Founder and Director

 


What’s new on our Breaking Views blog…

 

NZCPR Weekly:

PROTECTING THE BANKING SECTOR
By Dr Muriel Newman
   

The banking crisis in Cyprus came as a sharp reminder to savers around the world that banks 
are not necessarily the safe havens they like to imagine. The plan to impose a 6.75 percent tax 
on savings up to €100,000 (NZ$153,000) and a 9.9 percent tax on savings above that was proposed 
by the Cyprus government as a way of raising the €5.8 billion they needed to find to qualify for a €10 billion International Monetary Fund bailout. 

However, politicians swiftly backed away from their plan to tax savings once they saw the depth of public fury.  

Under the deal finally agreed with the IMF, Cyprus’s second largest bank, the Laiki, will be closed. The Laiki Bank is 84 percent owned by the Cypriot government following a €1.8 billion bailout last year, with the balance held by private and institutional investors, including bank staff. All deposits of up to €100,000 will be transferred to the country’s biggest bank, the Bank of Cyprus, while €4.2 billion worth of deposits over €100,000 will be placed in a “bad bank” along with shareholder and bondholder funds, and will probably all be wiped out.[1]

The Bank of Cyprus will also undergo a massive restructuring to return it to a healthy state. Thousands of staff will lose their jobs. Shareholders and bondholders are likely to lose their investments and all depositors with funds of over €100,000 are expected to face losses of around 30 percent.  

Overseas divisions of these banks are said to have some protection – those that are incorporated in other countries are effectively separate entities and as subsidiaries operate under a different set of rules. Even those that are run as “branches” appear to have some measure of autonomy.

The biggest losers from the Cyprus banking crisis are undoubtedly Russian nationals. They are estimated to own over €20 billion of the €68 billion deposited in Cypriot banks, with many holding deposits of over €100,000. But with Cyprus having been widely recognised as an offshore finance centre and tax haven, the cost of having to rebuild their economy from the ruins of their banking system, will fall heavily on all citizens. The economy has effectively been crushed with debt levels already standing at 143 percent of GDP. Once capital controls are lifted, more money will flee the system and the economy will continue to spiral down.

The Cyprus crisis has served to focus world attention on banking systems and governments. Most people still regard banks as large safe deposit boxes, with little concern for the security of their funds. However, the reality is that bank deposits are risk investments – investors lend their saving to banks, who lend them on to those with inadequate savings.

But what the Cyprus government has also revealed is that when pressured by the terms of a bailout, cash strapped governments are not above dipping into the savings accounts of citizens for the purpose of gathering taxes. This incident is a sharp reminder – and a warning - of the extraordinary power of governments.

In Cyprus – and all European Union countries - bank deposits of up to €100,000 are safeguarded by a retail deposit scheme, which protects small depositors in the event of a banking collapse. That’s why savings of up to €100,000 have been exempted from the bank restructuring changes that were announced in Cyprus. Such schemes however, cannot protect depositors from government taxation; as Cypriots demonstrated, only strong public opposition can do that!

So what are the lessons for New Zealand from the banking crisis in Cyprus?

First and foremost the events in Cyprus have highlighted the importance of having a strong economy and a strong banking sector. While we could always wish for more rapid economic growth, on a global scale New Zealand is not doing too badly, and our banking sector is amongst the most highly rated in the world.

Secondly, it demonstrates the importance of having provisions in place to enable a country to cope with a banking crisis as swiftly as possible and in a way that minimises collateral damage.

Fortunately the Reserve Bank has been working on just such a scheme – Open Bank Resolution - which is almost ready for implementation. I asked Dr Don Brash, the former Governor of the Reserve Bank and this week’s NZCPR Guest Commentator, if he could provide some background information for readers. In his article Open Bank Resolution – better than bank closure or government bailout, Dr Brash explains:

“The reality is that while no bank is too big to fail, some banks are too big to close.  Why?  It’s not just that very large banks hold a huge portfolio of loans which keep the economy ticking over, and a huge volume of deposits, but mainly that all banks are closely linked through the electronic payments system.  Pull one of the major components of that payments system out and the whole system stops.  The damage which would be done to the whole economy would be absolutely massive.”

Dr Brash continues, “For
more for than a decade the Reserve Bank has been working on how a distressed bank could be failed without being closed.  As I understand current thinking, if a systemically important bank were to get into serious trouble, its shareholders would lose all their money, its board and senior management would get fired, and bank creditors (including depositors) would have a small proportion of the money owed to them by the bank frozen – but with the bank continuing to operate under statutory management.” You can read Dr Brash’s full explanation HERE; more details on the scheme can be found on the Reserve Bank website HERE.

While any freeze on savings would be undesirable, it is important to look at the options. If a failing bank was allowed to close, depositors would almost certainly lose most of their savings - not to mention the huge damage a bank failure would inflict on the economy. Freezing savings - with a view to eventually repaying the deposits in full - is therefore seen as the lesser of two evils.

Other options, of course, involve government bailouts - but the cost can be crippling. Ireland’s government debt was only 25 percent of GDP before the Global Financial Crisis. It is now over 100 percent, largely as a result of bank bailouts. Deposit Insurance Schemes, of the sort that protected Cypriot depositors with savings of up to €100,000, are another variation, but New Zealanders have already experienced first hand the problems associated with such schemes.  

The Labour Government introduced a Retail Deposit Guarantee Scheme as a temporary measure on October 12th2008 during the dying days of their administration. Since Australia had just introduced deposit guarantees, it was seen as a necessary step to maintain depositor confidence in New Zealand’s financial institutions during the worst of the Global Financial Crisis. A Wholesale Guarantee Facility was introduced a few weeks later on November 1st to ensure banks had access to international funding markets. While the wholesale guarantee facility was closed down in April 2010, having issued 24 guarantee certificates covering $10.3 billion - and netting the government $290 million in fees - the retail deposit guarantee scheme was extended until December 2011.

According to the Auditor General, a total of ninety-six institutions were accepted into the Scheme - 60 non-bank deposit takers such as finance companies and credit unions, 12 banks, and 24 collective investment schemes. No banks accepted into the Scheme failed, and there was no run on the money in banks. No building societies or credit unions accepted into the Scheme failed.[2]

However, of the 30 finance companies accepted into the Scheme, nine failed, triggering taxpayer bail-outs. Some $2 billion was paid out to more than 42,000 depositors - the lion’s share being to investors in South Canterbury Finance, which had 35,000 investors and debts of $1.6 billion.

When issuing its Regulatory Impact Statement in September 2009 on extending the retail deposit guarantee scheme, Treasury noted that the scheme was having a perverse effect on institutional behaviour, creating distortions in financial and capital markets. These included “encouraging guaranteed depositors and deposit taking institutions to make riskier investment decisions since the gains from these riskier decisions will be accrued by the depositors and deposit taking institutions, while potential losses to depositors (of up to $1 million per depositor per institution) will be borne by the taxpayer”.[3]

Treasury goes on to define this as a “moral hazard” problem, and explains that as a result of the guarantee, “finance companies (which tend to be involved in higher-risk and higher-return lending) have grown their deposit books by approximately $880 million (19%) since the guarantee was introduced in October 2008. Before the guarantee, the deposit books of many finance companies were shrinking. In some cases, finance companies have used retail funding to replace their bank funding lines.”

The major failure was undoubtedly South Canterbury Finance (SCF), a finance company that grew far too quickly, and invested far too much of its funds in the risky property development sector. With the company reputed to have been in trouble as early as mid 2008, there are legitimate questions as to not only how it was able to gain approval for acceptance into the scheme in the first place, but also why it was able to enter the extended scheme on 1st January 2010.

In an article in the Herald in September 2010, investment analyst Brian Gaynor outlined how, instead of using the Deposit Insurance Scheme in a prudent way to consolidate and reduce its exposure to risk, SCF took advantage of the scheme and the government guarantees to expand its speculative activities. It increased borrowings between 2008 and 2009 by $418 million to a record $2.1 billion, and increased its loans by $308 million to a record $1.7 billion. Meanwhile cash reserves, which stood at $322 million in December 2008, had plunged to $22 million by December 2009. Most investors wanted to pull out their investments before the end of the government guarantee period, with a massive 99.2 percent of the total borrowings worth $1.877 billion due to be repaid over the following 12 month period.[4]

In effect, New Zealand’s experience of retail deposit guarantee schemes gave new meaning to the expression ‘privatising profits and socialising losses’. Courtesy of taxpayers, investors in failing finance companies not only got their money back if the institution defaulted, but they also received the full interest due to them - even though they were being paid higher interest rates than normal to cover the higher risk they took when investing in finance companies rather than banks. Taxpayers were forced to bear the full costs of bad management practices by these companies.

In light of this experience, when deciding how to best prepare for a bank failure, the Reserve Bank explained that “The New Zealand Government has looked hard at deposit insurance schemes and concluded that they blunt the incentives for investors and banks to properly manage risks, and may even increase the chance of bank failure.”[5] The open bank resolution plan has been designed to avoid such pitfalls.

THIS WEEK’S POLL ASKS: 
Should bank deposits be guaranteed by taxpayers?   
Click HERE to vote
                      

*Read this week's poll comments daily HERE                           

*Last week 95% of voters supported the appointment of Dame Susan Devoy as the new Race Relations Commissioner
... read the comments HERE

FOOTNOTES:
1.Economist, A better deal but still painful
2.Auditor General, Treasury: Implementing & managing Crown Retail Deposit Guarantee Scheme
3.Treasury, Regulatory Impact Statement – extending the retail deposit guarantee scheme
4.Brian Gaynor, South Canterbury and inevitable train wreck
5.Reserve Bank, Open Bank Resolution


NZCPR Guest Commentary: 

OPEN BANK RESOLUTION - better than bank closure or government bailout 
By Dr Don Brash
 


What is important is that banks cannot trade on the assumption that the government will bail them out if they make risky decisions, and that the costs of failure rest where they should – first and foremost on bank shareholders and their directors and senior managers, and secondly on those who chose to lend them money.

It’s worth remembering that, apart from the short period during which the government guaranteed all banks, finance companies and credit unions during the Global Financial Crisis, and the extended period during which the government guaranteed all the trustee savings banks (until 1988), banks have never been guaranteed by the government in New Zealand.  That’s one reason why the Reserve Bank requires all banks to make available easy-to-understand and up-to-date financial information on their operations.
 ... read the full article HERE 

 

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