New Zealand Budget 2024: There’s got to be a better way
First published May 2024
PART ONE
This article calls on all New Zealanders to be clear-eyed about the state of social services, particularly health, education, welfare and superannuation, and acknowledge that without major changes the system will inevitably collapse under its own weight.
No government has had the courage to face up to the fundamental structural flaws of our present system. This lack of courage is an abdication of duty. Putting off the necessary measures to avert that collapse is far from compassionate. It is mortgaging our children’s future beyond their ability to repay it. (Our existing unfunded social liabilities for super and health exceed one trillion dollars)
My objective in writing the article is three-fold: Firstly, to warn the public about the coming tsunami of deficits, or tax increases and benefit cuts, as our super and healthcare obligations for the growing number if retirees come due. Secondly to look at the solutions suggested by Treasury and our political parties to these problems and explain why they are insufficient or dangerous. Finally, to provide a workable plan for reform, that will restore New Zealand’s solvency and ensure security for New Zealanders.
Deficits or Tax Increases/Benefit Cuts: (As Welfare Obligations Come Due)
“Pay-As-You-Go financing can be an attractive option for politicians who know that they will retire before the system collapses. As the system matures it reaches a point where the number of beneficiaries grows and the number of workers paying into the system declines, leaving increasing gaps between state income and expenditure.”
– Michael Tanner Cato Institute.
My political journey over the last 50 years
At any number of points in that journey, I have questioned our existing welfare state, especially in the areas of retirement health and superannuation. According to Treasury, those policies are leading New Zealand towards a fiscal deficit of 13.3% of GDP in 2061, which, if it was allowed to get to that, would send the country into bankruptcy. Many New Zealand politicians have known, this outcome was inevitable given the policies they were following, yet they have continued to follow the same course they were on.
1972: My first foray into Retirement Policy
Fifty-Two years ago, I introduced a private members bill into the New Zealand Parliament with the support of the entire Labour party caucus, that would have made a lump sum superannuation policy available to every New Zealand worker. There was a view in caucus that the established Old Age Pension would eventually prove to be inadequate.
1973-1974: The New Zealand Superannuation Scheme
In November 1972, a Labour Government was elected, and in 1974 a compulsory superannuation bill along the lines of my private member’s bill was passed into law. As a result, income in retirement became the joint responsibility of the government and the individual through a compulsory savings scheme.
1975-1984: Introduction of National Superannuation
The National Party repealed the Superannuation legislation very quickly after their election in November 1975. As a result:
- Individual responsibility for super ended, with the government once again taking responsibility for it.
- Eighty percent of New Zealanders retiring in 2024, who would have had a million dollars in investment savings will do so with next to nothing – and depend on the government for their income.
- Unfunded liabilities, started to accumulate once again after 1976 as a result of the National party’s super legislation. Unfunded liabilities which stand today at more than one trillion dollars, are set to become New Zealand’s most serious financial problem over the next 50 years. They will be the main contributor to the large yearly fiscal deficits that New Zealanders will face from now on unless there’s a major change.
1984-1990: The Fourth Labour Government
During my time as Minister of Finance (1984-1988), as you would expect. I had a word or two to say about New Zealand’s social policy framework and the impact it was having on the economy. (See chapter 20 of my book Towards Prosperity: Ends and Means):
Despite Toward Prosperity being published just three months before the 1987 election, it was very open about what Labour still needed to do. The chapter spelt out in some detail the issues I felt the government had to deal with in its second term, including:
- Institutional capture in the areas of health, education and welfare, all too often put institutions ahead of people.
- The rising cost of government social services, which was running well ahead of inflation was another area that needed attention.
These two issues, as we will see, are still at the heart of New Zealand’s economic and social problems. It was these views that David Lange, the Prime Minister at the time, disagreed with, leading to my effective resignation as Finance Minister at the end of 1988.
1994: The formation of ACT
Unhappy with the direction New Zealand was taking in 1993, when National and Labour signed a Superannuation Accord to protect the pay-as-you-go pension scheme, along with the lack of action on the part of all of New Zealand’s existing political parties at the time, I along with Derek Quigley and several other interested New Zealanders formed the Association of Consumers and Taxpayers – ACT.
The policy agenda that ACT ran on when it was first formed (see appendix one for an outline) is, in my opinion, even more important today, than it was back then, as it reflects exactly what has gone wrong with New Zealand over the past 30 years.
What we predicted in 1994 would happen is in fact coming to pass in 2024. It is happening because every political party, including ACT after 2000 decided it was in their best interests to ignore the debt that was accumulating and leave it to their children to pay for the mess they were creating. (An unfunded liability that stands at 1,200 billion dollars today)
1996-2024
Before looking at where New Zealand is in 2024, it’s important to appreciate the role the various political parties played during the years following 1996 in the social policy area.
While National and Labour came to an agreement on superannuation in the mid 1990’s, which they claimed would solve New Zealand’s problems. I said only quality reform would do that and what they had agreed on was not quality change. The facts that follow testify to the correctness of that statement.
The agreement between Labour and National relating to super involved the basic elements of New Zealand’s superannuation system as it is today.
The social contract, relating to super involved:
- Workers paying taxes every year they worked.
- When a worker turned 65 the state agreed to pay a pension and look after their healthcare.
In coming to this agreement, the two big parties ignored the following facts:
- The state already owed New Zealand workers at least three times our gross domestic product (GDP).
- The debt was increasing by around 15 billion dollars a year, today by $40 billion plus.
- There was no backing for the debt that had already been incurred, let alone future debt.
- The super scheme they had agreed on was a pyramid scheme, which would go bust at some time in the future.
Derek Quigley’s and my view was that the scheme was likely to go bust inside 50 years. That is why we set up a new party.
2024
New Zealanders are starting to feel a large sense of unease about their country, and rightly so as they increasingly become aware of the social decay taking place.
Political leaders have reacted in several ways to this situation.
On the left, the major drive has been a supposed caring and compassionate stance, but in reality, their main agenda has been to increase dependency on the state. The left has also sought to deny New Zealanders the opportunity to make their own decisions in areas such as health and education.
On the right, the drive has been for so called fiscal responsibility, while the real agenda has turned out to be preferential treatment for selected groups of New Zealanders.
What they have in common is that, since 2000, the two main parties have polled continuously. They have used the voters’ answers to their questions to help them design their policies. Policies that people want to hear, not policies they need to hear.
PART TWO
New Zealand’s welfare state is unsustainable in its current form. That much is clear from the Treasury’s own forecasts of the state of the government’s finances in 2061 relative to 2021.
Superannuation and health spending alone are expected to go up by 6.4% of GDP. Add education, and the expected increase in government expenditure becomes 8.1% of GDP. With total government expenditure increasing by 12% of GDP, by 2061 we are expected to be running a negative operating balance of 13.3% of GDP. That would make us technically bankrupt.
What is behind the government’s de facto insolvency and the coming explosion in the debt and deficit? Put simply: 30 years of political cowardice finally being confronted by structural trends long obvious to any genuine observer. To understand the origins of the crisis, we must return to its basic design.
At its core, New Zealand’s present welfare state is a monopoly Ponzi scheme. Unfortunately for the sustainability of the Ponzi structure, New Zealand’s population is aging. In 1977, when National introduced national superannuation, the median age of the population was 25, in 2021, it was 37. By 2061, it is expected to be 45, leading to a dramatic increase in the number of pensioners each worker has to support. The rapid increase in the cost of health care, is also driven by the aging population.
Current Problems:
Apart from its long-term unsustainability, the welfare state barely works. Take education for example. The results of New Zealand students in international examinations in mathematics and reading have declined in every year since records began. That is despite a significant increase in per student education spending, adjusted for inflation. Similarly, our health outcomes leave much to be desired. Even our generous universal pension is becoming a less effective guarantee against elder poverty despite its massive cost. This is mainly due to rising rents and falling home ownership.
Treasury’s Ideas:
Treasury’s limited solutions are either a bad idea or insufficient.
Increase the age of eligibility for Superannuation: Some changes in the age of eligibility are likely to be necessary at some time in the future. For example, we could consider establishing a formula along the following lines, the average time New Zealanders spend on the pension is set at 20 years, once it exceeds 22 years, the age of retirement is lifted by one year.
Index Superannuation to Prices rather than Wages: This change would reduce the pension received by those who retire in 2061 by more than 30%. This policy would mean retiree’s standard of living would decline relative to the rest of the population. This would fall hardest on those who rely solely on government support, and those who do not own their own home.
Increase existing taxes: Treasury identified four possible increases in existing taxes, to help make the existing program more affordable.
- Increase income tax revenue by an increase in all existing personal income tax rates.
- Allow inflation to erode the value of the existing tax thresholds.
- Increase the existing GST rate by at least 1.5%.
- Increase the existing company tax rate.
The government currently spends around 30 billion dollars on the retirees’ pensions and healthcare – this will increase by $268 billion (9 times) to $295 billion a year by 2072.
The idea that higher taxes, whether on personal income or anything else, will be able to cover this massive increase is simply nonsensical.
Bracket creep the hidden tax: Bracket creep increases the tax paid by New Zealanders significantly without the government having to do anything. The left support bracket creep, because it enables them to make lower income earners dependent on the government. ACT supports bracket creep because it enables them to increase the average personal tax rate paid by the poor and give the billion dollars of extra income the government gets to the rich. (See ACT Tax policy)
Create new taxes: Treasury’s next suggestion is to consider taxing new bases, such as capital, land, wealth and inheritance. No consideration is given in Treasury’s proposal to any of these taxes replacing an existing tax.
The fiscal hole we are in:
We cannot increase taxes to the level needed to meet our obligations without destroying economic growth further. Similarly, we cannot reduce benefits without increasing pensioner poverty sharply. Treasury’s suggestions cannot be the answer to our problems. There is no easy way to fix the current pay-as-you-go superannuation system. All Treasury’s suggestions would do is put off the evil day when the system collapses and goes bankrupt as all Ponzi schemes eventually do. We need much deeper reform.
PRINCIPLES:
In order to reform our welfare state to make it more affordable and effective, we need some basic principles to guide us. Principles are crucial to good policy making otherwise politicians will be led astray by the interest groups.
Principle One – Each generation must pay for themselves:
Failure to adhere to this principle over the last 60 years is the reason we are in the mess we are in today. Under the current pay-as-you-go system, it is the young and the yet to be born children who will be asked to pay for New Zealand’s existing workforce in their retirement.
Under our suggested approach to social service delivery, enough money will be put aside each year to meet the needs of New Zealanders when they retire.
Principle Two – Every New Zealander should provide for themselves as far as possible:
By changing the system to give those who can provide for themselves the ability to do so, we can free up the government to focus its attention on those who require support.
Principle Three – Choice and competition:
Competition is a disciplinary force in the private sector. If businesses serve their customers poorly, they generally lose them to someone else who is doing a better job.
Competition should be just as important in the government sector, to improve performance, as it is in markets.
Competition among Government enterprises such as schools, and the private sector, would lift outcomes in a positive way.
Choice links consumers and providers directly, with consequential incentives on hospitals, doctors, nurses, financial advisors, teachers and schools. Choice would put an end to government monopoly provision we have had for the last 80 years in the areas of education, health and pensions and with it the poor outcomes the system has produced as well. Choice is the key to improving performance in social service delivery.
Conclusion:
For too long, we have lived with the fiction that we are doing well, lulled by politicians like John Key into believing we have a ‘Rock Star’ economy, when nothing could be further from the truth. We must start to admit to the problems facing our economy and begin to deal with them, if we want to avoid falling even further behind our OECD partners.
PART THREE
Policy Solutions
The problems associated with funding New Zealand’s social service delivery – especially health, education, welfare and super – fall into two main areas:
- ONE – New Zealand’s poor financial position, as highlighted by Treasury in its Long-Term Fiscal Projections (2021-2061)
- TWO – The poor performance of Government-owned institutions in delivering social services over the past 60 years.
What I said, (while Minister of Finance), in my book Toward Prosperity in 1987 is still relevant: “But something has gone terribly wrong with the system, and the institutions.”
They had gone wrong then and they are in an even worse position today.
Policies required to deal with New Zealand’s poor financial situation:
Step One
Get rid of New Zealand’s pay-as-you-go super and replace it with a saving-based system for all New Zealanders
This is the most important change we can make.
The benefits flowing from such a change would, over time, be spectacular for New Zealanders. Individual savings would be higher for everyone, especially lower income New Zealanders. Income in retirement would increase dramatically, and since the scheme would also cover other social services, better healthcare would be available to all.
A change of this nature would also increase economic growth and the number of jobs available. The Government’s liabilities for healthcare and pensions for the elderly would fall from 1.2 trillion dollars to zero over the next 50 years, with the pool of super fund savings to pay for these future liabilities growing to 8-9 trillion dollars, within 50 years.
Today, 80% of individual New Zealanders retire with zero or close to it in investment savings, but within 50 years, thanks to the impact of compound interest, they would all be retiring with at least 2 to 4 million dollars in their individual savings accounts.
Step Two
Determine what principles will be followed under the new regime of retirement savings
- All New Zealanders would establish their own savings account, to cover their income and health needs in retirement. The starting saving level for year one would be determined by the government and their advisors. (See step four below)
- Decision-making power under the new system, lies with the individual not the government. They decide who they save with, from an approved provider list.
- Every working New Zealander will enjoy personal income tax reductions, at least equal to the suggested yearly saving level required for their super scheme.
- Government expenditure privileges will be removed from wherever they exist, and the money saved used to finance the personal income tax reductions mentioned above.
- The reduction in government expenditure and the massive increase in New Zealand’s yearly savings will ensure New Zealand’s future is both fairer and fiscally sound.
Step Three
Creating the financial room to make the personal tax reductions possible
This step will involve a reduction in current government expenditure, or the different use of some government revenue of 16- 21 billion dollars a year. The savings will be used to lower personal income taxes, thereby enabling all working New Zealanders to save for their retirement.
Examples of where these reductions in government expenditures or use will come from are:
- Income earned from the super fund and Government-owned investments (100 billion dollars), which will earn on average $6 billion a year and be available for tax reductions.
- The removal of privileges, which currently go to affluent New Zealanders will save $4 billion a year (e.g. interest free student loans, power subsidies etc) and be available for tax reductions.
- The removal of privileges that go to business will save $5 billion a year (e.g. government grants, tax breaks, provincial growth fund, and other special allowances) and be available for tax reductions.
- The reform of the Government’s bureaucracy will save $6 billion a year (e.g. staff numbers and salary levels through institutional reform in areas such as healthcare, education, welfare and housing the closure of some unnecessary government departments).
Total savings of around 16-21 billion dollars would provide the financial headroom needed to make the changes required. After the first 10 years consideration could be given to redirecting some of the capital into helping savers.
The abolition of privilege is, in many ways, the essence of reform. Government is not there to protect vested interest groups at the expense of the public good. The Government’s role is to ensure that vested interest groups can only thrive by serving the public effectively.
Step Four
Savings for retirement via personal tax reductions
I settled on tax reductions of $6,000 a year indexed to inflation (health inflation of 4% and pension inflation of 3% – an average of 3.5%).
I then determined how the $6,000 a year could be saved by every working New Zealander aged 18 to 65 (2.75 million workers x $6,000 = $16.5 billion): $16.5 billion is needed to do so. That would leave $4.5 billion for other purposes (reduction in expenditure $21 billion less savings $16.5 billion).
I then decided on the best way for working New Zealanders to save the $6,000 a year was by way of a reduction in personal income taxes. I decided to make the first $52,000 tax free – giving a reduction in income tax of $8,620, $6,000 of which would go into individual New Zealanders’ retirement saving accounts, with the remaining balance of $2,620 being used to buy a catastrophic health insurance policy, with any balance left over used to increase disposable income. The government health vote would as a result be reduced by $6-7 billion dollars a year.
Benefits of this Approach
YEAR ONE:
Government spending on pensions and healthcare for the retired would be reduced in year one by the savings that retirees will make to their own retirement pensions and healthcare – around $200 million (60,000 x $3,250).
Savings of $16.5 billion + interest of $0.5 billion for year one would be around $17 billion.
This would result in a large net improvement in the country’s fiscal position over what it would be under the current ‘pay as you go’ system.
In terms of savings and fiscal outcomes, the position outlined above for year one would improve every year for the next 50 years, as the cost to government of pensions and healthcare for the retired drops year on year, until it reached the following position in year 50.
YEAR FIFTY:
Individual working New Zealanders would on average retire with around three million dollars in their retirement savings account (couples five to six million dollars) – more than enough to be able to look after themselves in retirement. Today 80% of New Zealanders retire with nothing much at all in the way of investment savings.
Total savings held by New Zealanders for future expenditure in retirement would exceed eight thousand billion dollars.
Government expenditure on the healthcare and pensions of the retired would be around 300 billion dollars lower than it will be if we keep a pay-as-you-go scheme going.
As a result of this $300 billion dollar reduction in government expenditure, personal income tax, company income tax and the goods and services tax would all be lower at a rate of 12.5% or less.
New Zealand Government-owned social service institutions
Most politicians are tribal, they support their political party right or wrong, often in the hope of getting a ministerial job down the line. I never fitted into that category of politicians. For me, policy always came first – that is policy I believed to be in the best interests of New Zealand.
I got sacked from the Labour Party front bench in the early 1980’s for writing an alternative budget.
Today, I still find it impossible to stay silent and always support the party I generally vote for – for example ACT’s tax policy as explained by David Seymour leaves me both annoyed and cold.
I make this point, because the policy I lay out in the rest of this paper, will be opposed by every existing political party in New Zealand. However, I believe very strongly, that the policy points I will make in the rest of this paper and the papers to follow need to be made, in order to get those policy ideas discussed, and there-by give New Zealand a chance to move forward in a positive way.
In this part of the paper, I look at the 17% of GDP (57 billion dollars) the government currently spends on healthcare, education, welfare, and superannuation (NZS), which Treasury estimates in ‘their historical trends scenario’, will cost 24.7% of GDP (365 billion dollars) by 2061.
Before looking at why this expenditure is sending New Zealand broke, and what we can do about it – including introducing a far better tax policy to start with – I will outline what I had to say about the issue of the poor performance of government institutions in 1987, while I was still Minister of Finance (see Towards Prosperity Chapter 20 pages 241-245):
“Fifty years ago (1937) we recognized that there were people amongst us who needed extra help and we made a decision, as a nation, that those needs should be met. Even if we have a perfect economic system, there would still be some who fall out of it for a variety of reasons and for varying periods of time.
“At the end of the 1930’s we established a welfare system to act as a safety net and a base from which people could re-enter productive society. Part of that system was a number of institutions whose role was to act as conduits for aid given by the community, through the government, to those who were to receive it.
“But something has gone terribly wrong with the system, and the institutions, as society has changed around them”.
What in my opinion had gone terribly wrong? I quote again from Toward Prosperity:
“Over the last 10-12 years there has been close to a four-fold increase in government spending on social services – health, education and social welfare. By and large that increase in funding seems to have done little to deliver better services or better access to services.
“A large part of the growth in funding has not gone directly to benefit pupils, parents or other consumers, but rather, much of that extra money has gone to benefit the providers of social services.
“The present system puts institutions ahead of people far too much.
“We have to turn that around, we have to put people ahead of institutions, rather than leaving the institutions to take on a life of their own, quite independent of the needs and wishes of those they are meant to serve. The system was not designed with that result in mind and what worked in the past does not automatically work in the future.
“There is one more reason for change in the social welfare system which is much more subtle. The system itself, over the years, has had an effect on society: it has changed people’s attitudes, partly because it tended to create poverty traps. The institutions were set up originally to free people, and move them away from dependence. Now they actually make many of those who use them more dependent. The means took away some of the chances of achieving the ends – the social objectives. The benefit system should support without taking away the incentive to work from those capable of it.”
I finished on page 245 of my book “Toward Prosperity” in this way:
“What we have to concentrate on as we move into the 1990’s are the fundamental social objectives. What we have to decide, as a nation, is how to achieve them. What we did in that respect is not important. What we do now, for the future, is. We are going to have to make those choices in difficult economic circumstances which cannot be ignored and which we will have to attend to simultaneously. It is a balancing act which will require a continued determination to put the country before politics. If we do, I believe success is within our reach and the rewards will be immensely satisfying. This is our time, and we must provide answers to those problems that are right for it. The objectives are to promote and protect both the freedoms and welfare of all New Zealand citizens. I believe that with courage and an open mind we can achieve them.”
Unfortunately, David Lange egged on by Helen Clark, Michael Cullen and some of his staff led by Margaret Pope, would not have a bar, of any major social welfare policy changes to education, healthcare or welfare. I was simply unable to convince David, that constructive personal choice was basic to human dignity, and further, that the removal of dependency within the welfare system would be a huge step in the right direction.
With Lange opposed to any major changes to the social services area of the economy, nothing meaningful was done to it between 1987 and 1990, nor I might add in the years since then.
So, 34 years later, in 2024 New Zealand’s performance in social services is far worse than it was in 1987 – bad as it was then, when I wrote my book “Towards Prosperity”.
Why do we find ourselves in this dreadful situation in 2024?
Answer: Because both National and Labour, during the periods they have been in office during the last 36 years, have, at the end of the day, done nothing of great significance to change the system.
NATIONAL 1991-1999:
Improved efficiency within the government health and education sectors to some extent, but not in a way that would withstand the advent of a socialist-led Clark government. National essentially left the health and education sectors as they were in terms of the big issues of incentives, organizational structure, and a lack of competition within the sectors.
LABOUR 2000-2008:
Immediately undid any good work National had done in the areas of health and education. Their policies lowered productivity in the health sector (dramatically) and the education sector (significantly). In particular, they allowed special interest groups like the teachers’ unions to rob taxpayers and consumers blind, hence in return teachers overwhelmingly support Labour.
The Labour Party’s superannuation policy during this period Illustrates very clearly the changes that took place in the 1990’s as a result of a change in leader from Mike Moore to Helen Clark. Mike Moore was a keen advocate of individual superannuation for everyone. Helen Clark and Michael Cullen on the other hand were opposed to it. They wanted a centralized monopoly super fund that they could control, instead of individual superannuation accounts in the names of individual New Zealanders.
This was a major change in the Labour Party’s policy approach to superannuation.
In 1972 when I introduced my Private Members Superannuation Bill to the House, every Labour Party caucus member supported it. Why? Because they wanted their voters to have what Members of Parliament had – a superannuation account in their own name. They were aspirational for their voters.
Clark and Cullen on the other hand wanted a centralized fund which they could control, and there-by make as many voters as possible dependent upon them.
How do I know that? Michael Cullen told me so, when I asked him at an ACT caucus meeting, why he did not have individual accounts instead of the one huge centralized fund he was proposing.
NATIONAL 2008-2017:
John Key’s largely do-as-little-as-possible government, driven by polling, aimed at telling him, what voters wanted to hear, rather than what they should hear.
LABOUR 2017-2023:
The worst government, with the worst Prime Minister and Minister of Finance New Zealand has had in 100 years. I say no more.
Institutional Reform: by way of Competition and Choice
Fundamental to the reform of the New Zealand Government’s social service institutions is the introduction of competition to all social service areas including education, healthcare, welfare and housing.
Competition is just as important in government as it is in private sector markets. The lack of competition, over the past 80 years in government-owned social service institutions, is why they are doing so badly today, when compared to say Singapore’s institutions.
Competition between government-owned schools, and between government-owned hospitals, and private sector organizations in those sectors, would help to promote efficiency, and as a result economic prosperity, thereby increasing New Zealanders’ wealth.
In the private sector competition is a disciplinary force that requires businesses to compete for the loyalty of their customers. Government-owned social service institutions need to get better in this regard. Competition provides consumers with protection against poor service, high prices, and poor products. The need for competition is generally not recognized in New Zealand’s public sector areas, such as education and healthcare. In fact, the opposition to competition within the public sector, particularly in the education sector, is already very strong. You can see this in the teacher unions’ reaction to charter schools – a minor incursion into their existing monopoly position.
The reality is that performance will be enhanced if private firms were permitted to compete on a level playing field with government enterprises. Competition would improve performance, reduce costs, and introduce new innovations. As a result, consumers and taxpayers would get more for their money.
Competition is the force that encourages providers to operate efficiently and cater for their customers’ needs – as well as to improve products they produce on a continuous basis.
Footnote: First Step to Institutional Reform
Prior to moving ahead with any reform program, we would need to appoint advisory committees in at least the following areas, education, health, welfare, housing, immigration and taxation.
These committees would be similar to the Advisory Committees the 1984 Labour Government set up before they reformed the government state owned business sector.
The committees would be small, they would advise the government on how competition, choice and the private sector could best be introduced into the social services areas they are advising the government on.
The government, as a guide, would advise the various committees on their thinking on each issue. It would be made clear that this advice was not intended in any way limit the thinking and recommendations the Advisory Committees might provide.
First published on the New Zealand Centre for Political Research website:
Article One – direct URL link:
https://www.nzcpr.com/budget-2024-policy-solutions-to-new-zealands-funding-problems/
Article Two – direct URL link:
https://www.nzcpr.com/new-zealand-budget-may-2024-theres-got-to-be-a-better-way/
Appendix One – Extracts from what I said at the ACT launch in 1994 about social welfare
“The question of money is particularly important at the moment. In the immediate future we are threatened with the largest debt in our history- a debt that hasn’t reached the public’s consciousness in any serious way. It is a debt that the state owes to us, its citizens, for all our retirement pensions and our health in retirement. Essentially the deal is this, we’re paying taxes into the system to fulfil our half of the social contract between us and the government. We pay taxes and when we are sick the contract says the government will look after us. When we’re old the state will look after us.
“We who pay tax have kept our part of the deal. But when we are sick, does the state do its part? There are77,000 people on hospital waiting lists who would say “NOT REALLY” NO.
When it comes to our retirement, are we going to get the care, the support, that our parents knew in post-war days.
“And the reason they say that is this. The amount owing to workers in New Zealand is so large- and there is so little backing for the debt-that no government, no matter how well the economy does on its present rate of growth, can possibly pay for it.
“The figure, including net public debt as of today is nearly 300 billion dollars. The largest single financial number in the country’s economy. Three times our gross national product.
This is a number so large that no current political thinking can accommodate it.
“In ACT we believe we can. We have found a way to reorganize our superannuation arrangement painlessly so that a more generous pension can be paid to all New Zealanders now and into the future.
“But we need a circuit breaker to get us out of the dangerous spiral we’re in. And in doing this, a number of wholly beneficial results would happen for all New Zealanders.
- An education system that responds to the individual needs of students, rather than having a one-size-fits-all approach.
- The elimination of hospital waiting lists.
- A solution to the issue of poverty in New Zealand.
- A way of getting on top of New Zealand’s monumental debt.
- The lowest rate of personal income tax in the developed world.
“It’s a new way of thinking, a new way of looking at the relationship between the state and individuals, the state and families.
“It’s a way that will make all New Zealanders of whatever income bracket, racial origin or educational background—all of us better off.
“These ideas are essentially common sense. They will suit New Zealand very well.
“Of course, we can’t do it by ourselves, we can only do it together. And we believe that is something we all want to do, because suddenly we have a chance to return New Zealand to the sense of wealth and well being we knew in our glory days when we had the third highest standard of living in the world.”