Table of Contents
According to the American economist and social philosopher, Thomas Sowell, a senior fellow at the Hoover Institute, “The most fundamental fact about the ideas of the political left is that they do not work. Therefore we should not be surprised to find the left concentrated in institutions where ideas do not have to work in order to survive.”
Recent experience in New Zealand can testify to the truth of that quote.
After six years in office inflicting their flawed ideology onto the country, Labour failed in virtually everything they touched.
As the new coalition government struggles to pick up the pieces, the two politicians largely responsible for the carnage – former Prime Minister Jacinda Ardern and former Deputy PM and Minister of Finance Grant Robertson – have moved into positions “where ideas do not have to work in order to survive”.
Dame Jacinda Ardern is now leading a field fellowship to “rehumanise leadership” and “bring more hope and optimism into politics” at the Washington-based Center for American Progress Action Fund.
And Grant Robertson is now the Vice Chancellor of Otago University.
Both will no doubt be spreading their Marxist ideas onto those organisations, poisoning rational thought with the failed ideology of socialism.
As this week’s NZCPR guest commentator, former judge and law lecturer Anthony Willy explains, under Labour the foundational values which underpin our society were dangerously eroded:
The ‘Enlightenment’ and ‘reason’ as exists in today’s world are increasingly assailed by the winds of dogma, ignorance and deliberate misinformation. This is an insidious phenomenon which has become widely evident around the Western world, and thanks to the concerted efforts of the previous Labour government lead by an avowed Marxist it is alive and well in New Zealand.
At the heart of this assault on our way of life is the substitution of socialist values for the social norms which we have long taken for granted. The attack has been against every institution which comprises the pillars of our democratic freedoms. The desired outcome is to replace our free and open market-oriented society with increasing state control, and to eliminate any freedoms currently enjoyed which are incompatible with that end.
These are the hallmarks of every communist and quasi communist government the world over but are rarely openly stated as government policy. They must be accomplished by subterfuge and policies of welfare for all, the accompanying need for ever more taxation, and erosion of the economy by printing more and more money which has less and less value. In the realm of ideas and objective truths it is necessary that these historic benefits be subverted by ‘beliefs’ which have no factual basis, but which will be found to be welcome by some isolated sections of the community.
From the start of her regime, Jacinda Ardern imposed her destructive ideology onto New Zealand behind a mask of ‘kindness’ and ‘compassion’.
Nothing was sacred.
Her ‘government knows best’ approach crushed businesses – even industries – as the oil and gas sector can testify.
And her ‘bigger is better’ ideology created chaos through botched centralisations, which inflicted Labour’s unmandated He Puapua agenda for tribal co-governance onto public institutions.
The restructure of health was undertaken in the middle of the Covid pandemic. Community-based district health boards were abolished without warning and merged into a vast Wellington bureaucracy, co-governed by tribal leaders. It took no time at all for an apartheid regime to emerge, as healthcare was prioritised on the basis of race instead of clinical need.
While the Māori Health Authority has now been scrapped by the coalition, Labour’s upheaval seriously disrupted the health system, with an estimated 250,000 Kiwis now unable to find a GP, acute shortages of frontline staff, and ever-lengthening hospital waiting lists.
The polytech centralisation fared no better as the country’s 16 polytechs and institutes of technology were merged into a tribally influenced behemoth, resulting in escalating deficits, increasing staff shortages and plummeting student enrolments.
Water services were to be the next target for centralisation with an audacious plan to combine ratepayer-owned infrastructure – confiscated from local councils – into mega authorities co-governed by tribal leaders. While more than $1 billion was spent on the disastrous Three Waters reform, it was stymied by the change in government, before more damage could be done.
This blind pursuit of ideology has had a devastating effect. Labour’s failed centralisations created bloated bureaucracies that not only ruined service provision, but pushing He Puapua goals across the state sector had a destabilising effect on everything, from the economy, to education, law and order, justice, infrastructure, even local government.
And while fixing the carnage Labour created is no easy matter, many of the serious problems that are now emerging are systemic – band-aid solutions will help, but only comprehensive reform can save New Zealand from becoming yet another failing nation.
Underpinning many of those systemic problems is our changing demographic. Treasury outlined the pressure our aging population is putting on health services and superannuation in particular in their 2021 Long Term Fiscal Projections. They showed that unless significant changes are made to policy settings, the country will go bankrupt by 2060.
Essentially that means that unless real reform is underway by 2040, the country will enter a downward spiral from which recovery will be virtually impossible.
Retirees currently number around 800,000, but by 2060 they are expected to approach two million. At that time, the number of workers per pensioner, will fall from around four to one today, to just two to one.
While Treasury indicated suggested ‘solutions’ included raising the retirement age, increasing taxes, or reducing spending, the Inland Revenue Department plans to look into the problem themselves.
Under the Public Service Act 2020, every government department is required to produce a ‘long-term insights’ briefing every three years. These briefings are designed to ensure the Public Service is thinking about some of the more complex long-running policy problems facing the country. Their papers are prepared independently of Ministers and involve public consultation. Details of published briefings and current consultations can be found HERE.
In their introductory paper, the IRD, which intends investigating the future shape of our tax system, notes that compared to other OECD countries New Zealand has a relatively stable tax system, with a broad-based low-rate approach:
The level of tax revenue New Zealand raises, relative to the size of the economy, is close to the OECD average. New Zealand is unusual in the OECD in not having significant specific taxes on labour income, such as social security contributions or payroll taxes. Further, many OECD countries operate schedular taxation systems that tax capital income at lower rates than labour income. Consequently, most OECD countries have a higher tax burden on employee labour income than New Zealand. New Zealand raises more than the OECD average in general consumption taxes, relative to GDP, through the goods and services tax. New Zealand has a higher company tax rate than the OECD average, and high effective marginal tax rates on inbound investments compared to other OECD countries. New Zealand also raises more than the OECD average from recurrent property taxes – through local government rates.
The IRD identifies some of the long-term trends that will have significant implications for the future of New Zealand’s tax system, including increased government expenditure on superannuation and the escalating cost of healthcare for New Zealand’s ageing population.
They explain their project will firstly focus on how the tax system should be designed in the face of long-term fiscal pressures, and secondly, they will investigate whether there are alternative approaches to better address the problems we face.
They explain that under current settings, the net cost of New Zealand Superannuation is expected to rise from 4.1 per cent of GDP in 2020 to 6.3 per cent of GDP by 2060. Health-care costs, they say, will increase from 6.9 per cent of GDP in 2020 to 10.6 per cent in 2060. They point out that such a cost burden is unsustainable.
While the New Zealand Superannuation Fund, established in 2001 to pre-fund the rising cost of the baby boomer generation reaching retirement age, will start to be drawn down from 2035, it will not be enough.
The IRD notes that many OECD countries have taken decisions to gradually lift the age of retirement to deal with similar problems, but they also explain that another option is to consider shifting the existing policy balance between universal and contributory retirement support.
They explain that New Zealand is an outlier – the only OECD country to rely primarily on a publicly provided pension scheme for retirement-income support.
They also point out that New Zealand and Ireland are the only two OECD countries that do not to have a mandatory personal retirement savings scheme in place.
And they also note that New Zealand’s tax treatment of voluntary personal retirement savings schemes is among the least generous in the OECD.
If the IRD is serious about investigating countries that are successfully dealing with the dual problem of funding the escalating costs of retirement income and healthcare for an aging population, they need to look beyond the OECD to Singapore.
Through their Central Provident Fund – which is now worth over $500 billion – Singapore provides amongst the world’s highest quality living standards for the elderly. Through a mandatory personal retirement savings scheme, funded by employees and employers, a generous pension annuity is paid on retirement; as well, universal health insurance cover is provided for life.
As an Opposition MP in 1972 Sir Roger Douglas drafted a private member’s bill to create a similar contributory scheme for New Zealand. This formed the basis of the New Zealand Superannuation Act, which was passed into law by Norman Kirk’s Labour Government in 1974. The scheme required employees to contribute four per cent of their wages into their own super account, which was then matched by their employer.
Unfortunately, the scheme only lasted 11 months, before it was axed by the newly elected Prime Minister Sir Robert Muldoon on December 15, 1975.
Sam Stubbs, the chief executive of the KiwiSaver-fund Simplicity, describes that decision as the worst ever made by a New Zealand politician: “Few economists would disagree that Robert Muldoon’s decision to cancel the fledgling New Zealand Superannuation Scheme on that day was probably the worst financial decision ever made. Why? Because had it continued, New Zealand would now be one of the richest countries in the world. We would have at least $500 billion saved in our own individual retirement accounts.”
These days, the former finance minister and ACT founder Sir Roger Douglas believes that instead of funding such a scheme from wages and employer contributions, a better system is for individuals to direct a portion of the tax they would normally pay to the government into a personal retirement savings account, to take advantage of the compounding of interest and provide a universal health insurance cover and a generous annuity in retirement – along with a range of other services including income protection, education funding, and home ownership assistance.
Sir Roger’s calculations show that with such a personal super-savings scheme, not only could an 18-year-old retire at age 65 with three million dollars in their account, but New Zealand’s tax rates could be reduced to 12.5 per cent – amongst the lowest in the world.
The reality is that the way we fund public services in the future needs to change if this country is to maintain high living standards and avoid bankruptcy.
What Sir Roger shows – his paper can be seen HERE – is that with innovative thinking New Zealand’s future funding crisis can be averted in a way that not only enables people to have more control over their lives but will lead to a far more prosperous and successful society.
Will the IRD consider investigating such an option for New Zealand?
If you have suggestions for the IRD, they are accepting public submissions until 4 October – the details can be found HERE.
This article was originally published by the New Zealand Centre for Political Research.
