|
Skip to comments |
Skip to comment form |
 Skip
to this weeks poll |
Send to friend
18 March
07
Old
Problems, New Solutions
Printer
friendly version (PDF) 
View >>>
 A
new report by the Centre for Independent Studies, New
Zealand’s Spending Binge by Phil Rennie, highlights the
fact that core government spending is now almost $20 billion
higher than it was in 2000. In spite of that, the social
benefits being delivered “have shown negligible
improvements”.
Part
of the reason he gives is the “churning” or loss of value
that occurs when taxes are taken off people in order to be
recycled back in the form of social subsidies for health,
education, welfare, and pensions. A significant percentage of
the tax taken is ‘wasted’ on the bureaucracy as it churns
its way through the IRD and a maze of other government
departments.
Phil
suggests that, “If this extra $20 billion spending was
allocated to tax cuts, nearly all income tax could be
abolished. All the remaining public services could be solely
funded by GST and a low corporate tax rate”. (To read the
full report click
here >>>)
The
notion that taxes in New Zealand are too high and that the
country would do far better if they were significantly lowered
is now widely supported. What is not so clear, however, is how
much public support there is for better ways of funding and
delivering social services.
This
year the government will spend a total of $54 billion, with
nearly three quarters going into social services: health,
education, welfare, and superannuation.
Health
consumes 21% of all government spending, yet the system
remains in crisis – there is widespread industrial unrest, a
chronic shortage of specialists, and sick and dying patients
struggle to even get onto hospital waiting lists.
In
Switzerland, a country with low taxes, everyone is given a
private health insurance. There are no hospital waiting lists
and citizens are assured of excellent health care when they
need it. Germany and France have compulsory health insurance
systems, including a mix of private insurance and social
insurance. In Singapore, health insurance is part of a broader
compulsory savings program, which has delivered high standards
of health care at a very low cost.
So,
if France, Germany, Switzerland and Singapore – as well as
many other countries - can give citizens a health insurance
that eliminates hospital waiting lists and provides efficient
and cost-effective health care, then why can’t we?
Education
consumes 17% of government spending, yet student achievement lags behind our trading partners,
and truancy rates are up to 45,000 a week.
If we look more closely at the way
education funding operates in New Zealand, we see that there
are two different systems. The preschool and tertiary sectors
use a voucher system: parents
and students choose a provider from an approved range, and the
funding then follows to that provider of choice. In
comparison, primary and secondary schools operate largely as
state monopolies, with parents having little choice of where
they can send their child - unless they are able to pay for a
private education.
Countries like the Netherlands and Sweden,
which have very high educational standards, operate a voucher
system like our pre-school and tertiary sectors: parents are
given a voucher and they are free to decide which is the best
school for their child. The state monopoly in education in
Holland ended in 1917, creating a vibrant private school
sector, and Sweden now has a thirty-year track record of
school choice.
If
vouchers produce dynamic and flexible systems that have made
education in Sweden and Holland so successful, then surely it
would make sense to extend our pre-school and tertiary voucher
system to cover primary and secondary schools as well?
When
we look at state welfare, which now consumes 21% of all
government spending, we see that as well as funding social
welfare benefits, the largest proportion of the budget is now
spent on ‘middle-class welfare’: working for families,
paid parental leave, the accommodation supplement, child
support, and the like. Surely, if taxes were lower and
families kept more of what they earned, the need for
supplementary payments would fall?
The
cost of superannuation, presently at 13% of government
expenditure, is set to explode. Within thirty years the number
of retirees will rise from fewer than 500,000 to more than 1
million. There are dire predictions about the country’s
ability to pay.
Faced
with the rising cost of an aging population, and a desire to
ensure that the elderly retire in comfort and dignity, many
countries are now introducing personal superannuation schemes,
which allow
workers to privately invest their social security taxes into
their own retirement savings accounts.
In Galveston, Texas, where such a scheme has been in
place for some 20 years, the annual returns have fluctuated
from 50 to 200 percent higher than the national pension
system.
Singapore,
of course, has been the torchbearer in this area. They
established the Central Provident Fund, based on private
individually owned social security accounts, in 1955.
As a result of these accounts, Singapore has the
highest rate of personalised savings in the world.
When
Dr Cullen established the new Super Fund, it was done in such
a way that it could be divided into personal savings accounts.
This
week’s NZCPD guest commentator, Professor Peter Saunders,
the Social Research Director of the Centre for Independent
Studies, looks at the potential to use that fund to establish
personal savings accounts in an article entitled The future of the welfare state in New Zealand
(click
to read >>>).
In
his article he suggests: “As
a starting point, personal savings accounts could be created
for every New Zealander using the money the government is
currently hoarding in its Superannuation Fund.
This money has been collected from New Zealand
taxpayers. If it were redistributed back to the population,
every adult and child in the country would get about $3000 to
start their own personal savings fund.
They could then supplement this over time with regular
contributions from earnings”.
[If
you are interesting in learning more, Peter Saunders, along
with special guest, Sir Roger Douglas, will be holding a free
seminar in Wellington on
Wednesday 28th February. Details can be found by clicking
here >>>.]
If
research shows that social service delivery in New Zealand is
not improving in spite of significant funding increases,
surely it is time to investigate alternative ways of providing
social services. Maybe we need a new set of goals: to ensure
citizens have excellent health care by providing a universal
health insurance similar to the one in Switzerland; to lift
educational standards and increase school choice by extending
our voucher system to include the primary and secondary
sectors; and to ensure comfort and dignity in retirement by
divvying up the Cullen fund to create personal super savings
accounts. What is your view?
The
poll this week asks do you agree that the delivery of
social services in New Zealanders needs to improve? If so, do
you support the concept of a universal health insurance,
education vouchers, and personal super savings accounts?
Take
part in poll >>>
Printer
friendly version (PDF)
View >>>
Skip to top |
Skip to comment form |
Skip
to this weeks poll |
Send to friend
Your
Comments:
Reader's
comments will be posted on the NZCPD Forum page click
to view >>>.
|
