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Dr Muriel Newman

Selling sensation

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SmelterWe all know that in the media business, sensation sells. Advocacy groups like Greenpeace have long taken advantage of this by peddling scare stories – the world is running out of oil or food or trees, polar bears are dying out, the earth is becoming overpopulated, or melting glaciers are flooding the planet. Regrettably not enough people understand the need for scepticism over such reports.

Politicians are not averse to scaremongering either.  As the influential American writer H.L. Mencken noted, “The whole aim of practical politics is to keep the populace alarmed – and hence clamorous to be led to safety – by menacing it with an endless series of hobgoblins, all of them imaginary.”

Members of Parliament know that publicity is vital for their success. Being in the news raises their profile, lifts their polling, and elevates their chances of winning more voter support at the next election. Their allegations are often sensationalised, in order to attract more media interest and get reported. But problems arise if exaggerated political claims are published unchallenged, since unbalanced accounts leave those New Zealanders who are uninformed about public policy issues, extremely vulnerable to political hype and spin.

Informed thinking is what drives the work of the New Zealand Centre for Political Research. As a grass roots think tank, the NZCPR publishes in-depth analysis and expert commentary through our newsletters, website, and social media platforms. We believe that informed citizens are at the heart of a well-functioning democracy and that the best way we can contribute to improving public understanding of complex policy issues is by providing our material as a free service to as many New Zealanders as possible. But doing this only works if the people who support our objectives are prepared to chip in. 

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While making harebrained political pronouncements is not uncommon in the hurly burly of election year, some politicians appear to have started early. Such outrageous claims were made by Labour’s new leader David Cunliffe at the party’s conference over the weekend that they simply cannot be left unchallenged.

Prime amongst them was the claim that the National Government is responsible for the country’s economic downturn and the housing shortage in Christchurch. The fact is that New Zealand went into a recession almost 6 months before the onset of the global financial crisis. It began during the dying days of Helen Clark’s Labour administration. Faced with the inevitability of an election defeat, her government compounded their mismanagement by embarking on a massive spending spree that essentially brought the country to its knees. Add in the immense difficulties caused by the global financial crisis and it is little wonder that the path back to economic health and a surplus has been a slow and tortuous one. And as far as the housing shortage in Christchurch is concerned, it seems incredible that Mr Cunliffe is blaming the government instead of the earthquakes!

During the conference Labour’s leader claimed that the rich in New Zealand don’t pay their ‘fair share’, and that the gap between the rich and poor is widening. The people that Mr Cunliffe likes to malign are the country’s top movers and shakers – the people who create the wealth and generate the jobs that keep our country going. Instead of encouraging their efforts, he attacks them using the rhetoric of envy and greed: “We are confronted by a government clearly ruling in the interests of a few at the expense of the many, and creating two New Zealands. One for the rich and powerful, who don’t pay their fair share of tax… And there’s the other New Zealand… families who pay tax on every dollar they earn…”[1]

The problem for Mr Cunliffe is that the facts tell quite a different story.

The Minister of Finance recently told Parliament that the latest Ministry of Social Development report on household income shows that the gap between rich and poor is not widening: between July 2011 and 2012, household incomes rose for all of the lower 9 deciles, but fell 8 percent for the top decile.[2]

When it comes to income tax, 6 percent of New Zealand taxpayers who earn over $100,000 a year pay 37 percent of total income tax – up from 29 percent three years ago.[3]

And when all household income is considered – including government support payments – the 12 percent of households that earn over $150,000 pay 76 percent of net income tax. In comparison, households earning under $60,000 pay only 11 percent.

In other words, it is the top 12 percent of households in New Zealand, who earn the highest incomes that pay over three-quarters of all the country’s income tax. Looking at it a different way, the half of all households that take home less than $60,000, pay a total of $2.7 billion in income tax, but receive $8.1 billion in transfer payments from the government – making them net beneficiaries.

Mr Cunliffe has also made claims about what he calls crony capitalism, accusing National of doing sweet deals with the aluminium manufacturer Rio Tinto and the film maker Warner Brothers, among others. But what he has failed to point out is that Labour Governments were the first to propose such sweetheart deals – with successive governments simply carrying on similar arrangements.

With regards to Rio Tinto, Walter Nash’s Labour Government did the first special deal with the aluminium producer back in 1960. At the time, the world’s biggest reserves of bauxite – the raw material from which aluminium is made – had just been discovered in Australia by New Zealand geologist Harry Evans, and the search was on by his company  Consolidated Zinc Proprietary Ltd (later Comalco) for a cheap source of power for the extraction process. Manapouri had already been identified in the early 1900s for its remarkable hydro-generation potential due to the 178-metre drop from the lake to the Tasman Sea at Doubtful Sound, but its remote location had proved problematic. However, that didn’t stop Labour and Comalco from doing a deal: “In 1960, the Labour government and Comalco signed a contract for the company to build both a smelter and a power station. In return, Comalco received exclusive rights to the waters of both Lake Manapouri and Te Anau for 99 years.”[4]

While things didn’t go according to plan – in the end, it was the Holyoake Government that built the underground Manapouri power station in 1963, agreeing to sell electricity to Comalco at bargain- basement prices – nevertheless, it was a Labour Government that got the ball rolling on sweet deals for the smelter. All John Key has done is to carry on doing what every other Prime Minister since 1960 has done to protect jobs and the economy, with the smelter directly and indirectly responsible for 3,200 jobs and $1.6 billion a year to the Southland region.

When it comes to special deals for the film industry, back in 1999 it was a National government that closed down tax advantages for movie makers, through the Taxation (Remedial Matters) Bill, but a Labour Government reinstated them just a few years later through the establishment of the Large Budget Screen Production Grant. The grant “is an on-demand, uncapped, financial incentive established in 2003 to support the production of large budget film and television productions in New Zealand. The grant provides a 15 per cent rebate on qualifying New Zealand production expenditure for projects which reach prescribed thresholds.”[5]

The Ministry of Business, Innovation and Employment reports that while film-makers received $267 million of subsidies between 2004 and 2011 (around a half of that given out by Labour), they spent more than $1.9 billion in New Zealand – on wages, catering, flights and hotel accommodation.

In supporting overseas film-makers, John Key is simply following in the footsteps of Helen Clark’s Labour government, and David Cunliffe should acknowledge that.

During the conference, no doubt mindful of the fact that the Green Party has seriously eroded Labour’s voter support, both Party President Moira Coatsworth and the Party Leader mentioned climate change. TVNZ reported, “Ms Coatsworth also strayed into the policy area by calling on Labour members to rise up to the challenge of sustainability and climate change. Ms Coatsworth described sustainability as the greatest threat to the country. She said a Labour government was needed to ensure New Zealand had a prosperous low carbon economy.”[5]

Mr Cunliffe picked up the theme in his speech, “We recognise climate change is a fact, not a philosophy. We will restore an effective emissions trading scheme. We will not walk away from our responsibilities to the planet, its climate or future generations. We want a high value, low carbon, renewable energy, smart, clean tech future.”

This week’s Guest Contributor is Matt Ridley, the former science editor for the Economist and an acclaimed author, who was recently elected to the House of Lords. In his article, The net benefits of climate change till 2080, Lord Ridley argues that while climate change itself has done more good than harm for mankind, climate change policy has been enormously damaging.

“Climate policy is already doing harm. Building wind turbines, growing biofuels and substituting wood for coal in power stations — all policies designed explicitly to fight climate change — have had negligible effects on carbon dioxide emissions. But they have driven people into fuel poverty, made industries uncompetitive, driven up food prices, accelerated the destruction of forests, killed rare birds of prey, and divided communities. Globally nearly 200,000 people are dying every year, because we are turning 5 per cent of the world’s grain crop into motor fuel instead of food: that pushes people into malnutrition and death.”

Lord Ridley points out the massive cost of climate change policies: the European Union is expected to pay more than $300 billion for its current climate policies each and every year for the next 87 years, and in Britain the cost of climate policies is expected to be $3.5 trillion over the course of this century – all to lower air temperature by an undetectable amount.

He ends his article with a warning: “So we are doing real harm now to impede a change that will produce net benefits for 70 years. That’s like having radiotherapy because you are feeling too well. I just don’t share the certainty of so many in the green establishment that it’s worth it. It may be, but it may not.”

The Emissions Trading Scheme, which was introduced by the Labour Government in 2008 and carried on by National, has been at the forefront of taxpayer expenditure on climate change in this country.  David Cunliffe’s promise to the conference that a Labour Government will “restore an effective emissions trading scheme” no doubt signals that he intends to remove existing subsidies and include farming in the scheme. The result will be an escalation of costs for households – not just through increases in the price of power and fuel, but of all goods and services in the economy.

This means that any claims by Labour that they will boost household incomes if they become the government in 2014, will be just weasel words if they implement such ETS changes. We can only hope that next year voters are well enough informed to see through the persuasive rhetoric and realise when they are being conned.

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1. David Cunliffe, Building a Future for All
2. MSD, 2013 Household Incomes Report – Key Findings
3. Bill English, Tax System Changes – Impact on Income Tax
4. Murray Horton, Comalco’s Power Play
5. Film NZ, Large Budget Screen Production Grants
6. TVNZ, Labour softens stance on retirement age