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Wayback Machine

Another Symbolic Victory

Posted on 18 Jun 2009

ACT New Zealand Finance Spokesman Sir Roger Douglas today congratulated Prime Minister John Key for another symbolic victory over Finance Minister Bill English and economic rationalism, with the announcement that the Guardians of the New Zealand Superannuation fund have been directed to invest 40 percent of their fund in New Zealand.

"Madness reigns supreme - by directing the Guardians to invest more in New Zealand, the fund will have lower returns and will be less able to reduce the burden of funding superannuation in the future," Sir Roger Douglas said.

"This only enforces the emerging trend we have seen between Mr Key and Mr English. Mr Key announces a stupid idea - be it a cycleway or forced investment in New Zealand - Mr English realises the idea is stupid, and distances himself from it.

"The Prime Minister then becomes hell-bent on scoring another symbolic victory over the Finance Minister - who backs down and Mr Key gets his way. But these battles are only resulting in pyrrhic victories - neither the cycleway nor forced investment will make New Zealand better long term.

"The trend is towards an obsession with massaging Mr Key's political image, at the expense of New Zealand's long term prospects.

"Who will this help? It won't help future taxpayers, who will be forced to pay more in taxes for others' retirement. It won't help the Guardians with their decisions, since they now have to balance two competing goals. Everyday New Zealander's will be the losers with the only winner being the NZX," Sir Roger said.


Another 20 Years Of Failing Health?

Posted on 04 Jun 2009

The existing system of delivering health services is not achieving its objectives and, in some instances, is failing badly - despite a myriad of different policies having been implemented over the years to enable people to get healthcare when they need it, ACT New Zealand Health Spokesman Sir Roger Douglas said today.

"This is nothing new: successive Governments have thrown money at health problems for years - to no avail."Sir Roger said.

"Health spending is set to rise from $12,395 million to $13,397 million - an increase of eight percent - when inflationary expectations are one percent. This is 7.66 percent of GDP - and that does not include private expenditure on healthcare.

"The fact is that, until we can ensure the health sector works for the consumer, we cannot keep pouring money into health if we cannot be confident of getting value for money. Putting in an additional $x million into health won't make a bit of difference if we don't get $x million of extra assistance going to the people who need it.

"Under the current system, however, we cannot guarantee that any of that assistance reaches the primary healthcare consumer - because too often Government assistance, intended for the benefit of patients, is captured by the providers of the service in salary increases and back pay.

"We can't afford to use a blunderbuss of pay increases to deal with shortages in particular areas. Unless we tackle all the underlying causes of staff shortages, we can expect to face these sorts of salary demands on a regular basis.

"What is disappointing is that this is nothing new - I said these very things in a speech to the Hospital Boards' Association in 1987 but, in the past two decades, nothing has changed. Rather than looking at new solutions, the system is the same as always - and we are left throwing money into a bottomless pit without any genuine improvement in health outcomes.

"It's time we got real about the problems in the health sector and realised that the current system simply doesn't work. As such, I am urging the Government to think outside the square and be prepared to look at new ways of dealing with old problems,"Sir Roger said.

Please read my 1987 speech to the Hospital Boards' Association via the link below:

Budget Low-Lights

Posted on 28 May 2009

Tax Cuts:

The tax cuts for 2010 and 2011 have been shelved. This is despite John Key promising in the Budget Speech last year that 'under National, personal tax cuts are a priority. New Zealanders will be able to believe in our tax cuts, they will be able to trust our tax cuts.'

The tax cuts that have been shelved cost under $1 billion. Government spending in the 09/10 year is over $65 billion. In other words, the Government needed to find just 1.5 percent of waste to deliver their tax cuts. This is against a backdrop where Government spending is, in real terms, $18 billion dollars higher than it was nine years ago.


Government expenditure is on the rise. Core Crown Expenditure in the 2007/2008 was 31.8 percent of GDP. Under National it will surge to 37.3 percent of GDP in 2010/2011. Even by 2012/2013, it is 36.3 percent.

The cost of spending to the private sector is not just the value that the dollar would have had in the private sector. It is the cost of raising that dollar of revenue – and that is estimated to be $1.20. In other words Government is costing us far more than we even realise.

Health spending in nominal terms is set to increase by over eight percent. Nothing is being done about the incentives in the system, which under Labour saw spending increase by 50 percent, but productivity for doctors and nurses dive 15 and 11 percent respectively.

Moreover, National is emphasising that the annual operating allowance has decreased from $1.75 billion to $1.45 billion. While this is true, the inflationary expectations have dropped significantly from forecasts in previous budgets. In other words, reductions in nominal terms cannot be a test of fiscal prudence.


The current level of Government deficit is one third what it was in 1984. Back in 1984, we managed to get the books back into the black within 3 years. Today, with a deficit one third of the size it was then, it is going to take 11 years to get back to surplus.

Any deficit today has to be repaid with interest by future generations. The deficit is not huge, but its existence shows the unwillingness to make modest cuts to return to surplus quickly.


The budget claims to put productivity first on the Government's agenda. The most important thing that the Government could do to deliver productivity gains is to reduce taxes and reform the public sector. They've given up on the tax cuts, and they've set out no agenda for public sector reform.

Budget Never Fails To Disappoint

Posted on 28 May 2009

The Budget claims to put productivity first on the Government’s agenda - if that were true, Finance Minister Bill English would have cut taxes and taken steps to reform the public sector, ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

"Reforming the public sector and reducing taxes are the two most important things the Government could do to deliver productivity and revive our flagging economy," Sir Roger said.

"Instead, Mr English has given up and shelved the promised tax cuts for 2010 and 2011 - completely flying in the face of Prime Minister John Key's promise last year that: ‘under National, personal tax cuts are a priority. New Zealanders will be able to believe in our tax cuts, they will be able to trust our tax cuts'."

"The fact is that delivering the tax cuts would have cost $1 billion, requiring the Government to cut only 1.5 percent of waste. Yet National's spending is projected to exceed $65 billion over the 2009/10 financial year - against a backdrop where Government spending is $18 billion dollars in real terms higher than it was nine years ago. And it will continue to worsen: Core Crown Expenditure in the 2007/08 was 31.8 percent of GDP; under National it will surge to 37.3 percent of GDP in 2010/11.

"Government spending must be brought under control - especially given the fact that it costs the Government around $1.20 to raise just $1 of revenue. This means that Government is costing us even more than we realise.

"National must understand that any deficit we create today will have to be repaid with interest by our future generations. The Government's unwillingness to make modest cuts today will make paupers of our children’s children tomorrow," Sir Roger said.


Budget of Broken Promises

Posted on 28 May 2009

Sir Roger Douglas speech to Budget 2009; Parliament
May 28 2009

This is the budget of deficits. A deficit of spending, a deficit of the current account, a deficit of courage, but most importantly, a deficit of imagination.

Why do I say a deficit of imagination? Because Prime Minister John Key and Finance Minister Bill English, like all people who lack the guts to do what's right, have taken the soft option. They have decided to borrow and hope.

The best thing I can say about this Budget is that it’s as good as any of the nine that Labour’s Michael Cullen delivered. Then again, that’s hardly the standard any decent Finance Minister should hold themselves to.

After all, during Cullen's term, total Government spending increased in real terms by over $5,500 for every person in New Zealand. That’s how much could have been left in your pocket every year had he not ramped up Government spending. For a family of four that’s $400 a week.

And what did you get for Cullen's spending?

Some of it was wasted on the bureaucratic health, education, and welfare empires.

Some of it was taken off you and then used to turn most New Zealand families into welfare beneficiaries under the Working for Families programme.

Bill English has continued in this vein, increasing health spending by over a billion dollars – an increase of around 6 percent.

And what happened to Bill English’s line by line review, which was meant to cut Government waste?

Well, he managed to find $301 million. Let’s put that in context. $301 million is just 0.4 percent of total Government spending. Was that seriously all he was able to find after Cullen increased Government spending by $18 billion?

National missed an opportunity to cut Government waste by scrapping some Government departments completely. The Families Commission, the Ministry of Economic Development, and the Charities Commission are obvious candidates for immediate abolition.

But what has Labour's response been to modest cutbacks? Outrage.

To Labour, every area of Government is underfunded.
Having spent up large for nine years, it believes it can always find new projects to waste money on. I worry that Labour might be right.

When Labour say it would not cut spending, what it’s really saying is it wants higher taxes.

Over nine years Labour tried to tax the nation to prosperity. The only effect was to slash productivity growth, helping us slip further behind the other nations on the OECD ladder.

Our productivity growth under Labour was a third of what it was after the reforms implemented by the fourth Labour Government.

The difference to the average New Zealander is that they receive 25 percent lower wages today than they would have if productivity growth had been maintained.

After nine years of tax abuse are National much better?

Let’s look at their deficits. The annual deficit, in real terms, is a third what we were running back in 1984. Back then, the Government managed to create a surplus within three years.

But that’s too hard for Bill English. Although the deficit is a third what it was then, it’s taking us 11 years to get back to surplus.

The reality is that National did not have to go down the debt path. National had choices.

One choice was to do what National has always done - that is to take all Labour’s policies as a given, tinker at the edges, and hope to manage the system better. It could be the conservative Party it has always been.

The other choice was to look to the future. The Party that looks to the future always sets the real political agenda.

When Labour looks to the future, it sees a larger state, higher taxes, and more control for meddling politicians in Wellington – so that's what we've ended up with.

When National looks to the future it sees itself administering Labour's programmes more efficiently. It is bereft of vision. National suffer from a deficit of courage, and a imagination.

If it wanted a vision, National could have looked towards a future of low taxes, personal responsibility, personal freedom, and prosperity.

Instead, it has chosen high taxes, Government ownership and delivery of social services, and more power for politicians and bureaucrats.

National has continued the trend since 1993 for Governments to take the soft option deciding once again to borrow and hope.

National promised that it wouldn’t touch health, education, and welfare. But those areas make up 66 percent of the Government’s budget.

Saying that it will not even look at ways to open these areas to competition and other reforms is to give up on fiscal prudence and to sentence New Zealand to low productivity growth.

Making cuts to Government spending does not mean denying anyone access to health education and welfare. All it does is change the way we go about offering help to those who need it.

One way to help is to shovel money into the bureaucracy, and hope like hell that it eventually reaches people in the form of decent education, quality healthcare, and welfare that helps rather than harms the poor.

But as we have seen through Labour’s health spending, not all of it goes towards those who need it. There was a 15 percent decline in doctor productivity, and 11 percent decline in nurse productivity. In fact, the only increase in hospital productivity was for orderlies and cleaning staff, and they were outsourced to the private sector!

The other way is to give the money back to those who earned it, and encourage them to purchase their own education, their own health coverage, and their own insurance against risks like job loss, accidents, and sickness.

The most obvious difference between these two systems is who has the power.

In the status quo, the bureaucrat is all powerful. It decides where your child gets educated, it decides whether your medical treatment will go ahead, it decides what level of income assistance you require.

The recipients of handouts – be they parents, patients, or welfare recipients – are treated as children to be managed by a bureaucrat who knows very little about them, and cares even less.

Is it surprising that within this environment, more money does not deliver better outcomes?

The only way yet discovered of improving outcomes while keeping costs down is to restore control to the individual.

Unfortunately for us all, National suffer from the tyranny of the status quo. The only thing they know is to spend and if spending means borrowing, then they will continue to borrow and hope.