Last week the National and Labour Party leaders gave their State of the Nation addresses. Squaring off in the first bout of the contest that will end on election night, it was disturbing to see that neither dwelt on the urgent need to dramatically reduce government spending. In spite of the government now having to borrow $300 million a week to cover its spending commitments both leaders focused mainly on their plans to raise extra cash. For Labour it was tax increases for the rich. For National it was asset sales.
Essentially, it was the massive expansion of expensive government programmes, introduced by Labour during their last three years in office – and left largely unchecked by National – that are now dragging the country down. As the latest 2025 Taskforce report explained, it is this rapid increase in government spending that poses the biggest threat to New Zealand’s future prosperity: “Between 2004 and 2009, nominal GDP increased by $42 billion (30 percent), while core Crown expenses increased by $30 billion (56 percent). As we have already noted, core Crown operating expenses rose from around 29 percent of GDP in 2004 and 2005 to a projected 34 percent this financial year. These rates of increase in public spending are the fastest experienced in New Zealand since the late 1970s and early 1980s.”
In Britain, the new Conservative government inherited a similar situation when they took office last year, where unaffordable spending programmes had been put in place by the outgoing Labour Government. But unlike poll-driven John Key, British Prime Minister David Cameron appears committed to a range of spending cuts to ensure his government lives within its means.
His plan includes a “bonfire of quangos”. ‘Quangos’ are quasi-autonomous non-governmental organisations that act at arm’s-length to the government but are funded by them. Employing thousands of people and costing millions a year to run, they include advisory bodies, consumer watchdogs, and other organisations deemed important by the politicians of the day. The problem is that once established, quangos often take on a life of their own, even though their primary purpose may have long since disappeared. As President Ronal Reagan once said, The nearest thing to eternal life we will ever see on this earth is a government program!
The Conservatives believe that every quango should be required to not only justify its existence but also its reliance on taxpayers’ money. As a result, hundreds are being scrapped, merged or substantially reformed.
New Zealand’s version of a quango bonfire took place in 1985, when then Attorney General, Sir Geoffrey Palmer, launched the ‘great quango hunt’, threatening to strangle the useless ones. According to political reporter Jane Clifton, “Geoffrey got so excited about this, it was all staff could do to persuade him not to wear a pith helmet and safari suit to the press conference. Geoffrey had counted up hundreds, nay thousands of quangos – rabbit boards being among the most emblematic – wasting money. He was going to grub them out, root and branch. He was positively kittenish in his excitement. And what happened? The little buggers multiplied.”1
In 2003, Finance Minister Michael Cullen played with the idea of axing some of the 3,000 taxpayer funded jobs in over 400 quangos, that cost taxpayers millions of dollars each year – including six-figure salaries and meeting fees of almost $1,000 a day. However, he failed to follow through.
Even Prime Minister John Key has stated that New Zealand’s government is too big for the size of the country. The state sector consists of 41 departments and ministries, 84 statutory Crown entities, 11 Crown entity companies, 31 tertiary education institutions, 17 state owned enterprises, and numerous Public Finance Act schedule 4 organisations, including the New Zealand Lotteries Grants Board, Crown Fibre Holdings, Leadership Development Centre Trust, 12 Fish and Game Councils, and 29 Reserve Boards. In addition there are over 2,500 Boards of Trustees.2
According to the Estimates of Appropriations, the cost of running this massive government bureaucracy is $79,283,039,000 a year. On the revenue side of the ledger, the government expects to collect $23 billion in income tax, $9b from company tax, $2b from withholding tax, $20b from GST, $2b from excise tax on things like tobacco, alcohol and fuel, $4b from other indirect taxes like road user charges, giving a total tax take of $60 billion. In addition the government receives $7 billion from non-tax revenues such as dividends from SOEs, leases, and royalties, and $2b from capital receipts such as from asset sales. Altogether, this gives a government that is spending $79 billion a year, an estimated $69 billion in income – the shortfall being made up by that borrowing of $300 million a week.
Getting government spending back under control and reducing it to the level it was in 2005 – when it was at the more reasonable level of 29 percent of GDP – should be the priority of any government that wants to see the country prosper. Not only does that mean reversing some of the Labour’s irresponsible policies – like their interest-free student loan policy, which has not only led to excessive levels of student indebtedness but has also enticed people into tertiary education who would have been better off choosing other career options – but also reducing the massive government bureaucracy.
This week’s NZCPR Guest Commentator is businessman and Mayor of the Far North District Council, Wayne Brown. In his article “Here is one government department we can do without”, Wayne explains why we don’t need a Race Relations Conciliator:
“I received a call from the press the other day asking me if I had any comment on the announcement from the Race Relations Conciliator that they were taking no further action on the complaint against me. My comment was ‘How do you know all this?’ Especially when I was not aware that there was a complaint in the first place, nor who was it from, nor what had they alleged that I had done!
“If I announce that I have found no evidence that the Race Relations Conciliator is a p..dophile (which is true as I haven’t looked for any evidence and there probably is none), then at least ten percent of the population will think he is one! That’s the sort of useless rubbish we get from wasting taxes on dickhead departments like the Race Relations Conciliator. Better to just shut them down and let us all learn to get on without help from urban liberals who don’t live in mixed society like we all do up here in the Far North where the coastline that the government is giving away is.”
Taxpayers pay the Race Relations Conciliator an annual salary of $205,695 a year. His office is part of the Human Rights Commission. The chief Commissioner, former trade unionist Roslyn Noonan, earns $277,670 a year, and the Commission itself costs $10.3 million a year to run.3
It is outrageous that excesses of this type have persisted for decades. The Race Relations Commissioner has actually nothing to show for the money, except a history of racial bias – as he bends over backwards to promote minority rights – and a track record of controversy. A classic case being the inconsistency he demonstrated last year when he aggressively demanded the dismissal of TVNZ presenter Paul Henry, while excusing Hone Harawira’s “white mother…” racist slur as “just Hone speaking his mind”.
In fact, the former Labour Government was “somewhat unwise” to have not dissolved his office – and the Commission for that matter – in 2002, when he exposed the bias that underpins his work by comparing New Zealand’s colonial settlers to the Taleban:
“The Government has ticked off new Race Relations Commissioner Joris de Bres, saying he was ‘somewhat unwise’ to compare New Zealand’s colonial settlers to the Taleban. As furious Opposition parties demanded Mr de Bres be sacked, Deputy Prime Minister Michael Cullen also said the commissioner’s comments were unnecessarily provocative to many New Zealanders. But Dr Cullen told Parliament that Mr de Bres, who has held the post for only two months, would keep his job.
“In his dawn speech yesterday marking the beginning of the United Nations Day for Cultural Heritage, Mr de Bres called the colonisation of New Zealand ‘a sorry litany of cultural vandalism’. He referred to the Taleban’s destruction of the giant Bamiyan Buddhas in Afghanistan, and said New Zealanders should learn from what happened at that sacred site. He said the colonising governments of New Zealand, ‘egged on by land-hungry settlers’, vandalised Maori culture and the environment.” 4
If Labour had deemed back then that there were better uses for the taxpayers’ money that funds the Race Relations Conciliator and the Human rights Commission – knowing that any statutory duties could be picked up by the Justice Department – then the tens of millions of dollars that would have been saved could have been used on other essential needs like funding 1,000 hip replacements year, for example.
Unfortunately the Human Rights Commission is not the only quango that needs to be quashed. From what I saw during my 9 years in Parliament non-essential organisations are endemic throughout the central – and local – government sectors, providing cushy positions that cost the public dearly.
Any government worth electing should be prepared to deal to these state sector excesses. Their repeated failure to do so is a sad indictment – it seems the principle that people in public office should treat taxpayers’ money with the same respect they would treat their own money, has been well and truly lost from current generation of MPs.
And given what we have heard from our political masters, there is a substantial risk that election year will be more about smiley faces and false promises than issues of real substance.
On a lighter note, following on from the State of the Nation addresses by Labour and National, and the State of the Planet address by the Greens, one of our NZCPR Breaking Views bloggers has delivered his own State of the Universe speech – you can see it HERE.