Lifting our Game, Time for Bold Policies

Lifting our Game, Time for Bold Policies
By Rob McGregor

Finance Minister Bill English recently warned Wellingtonians that they needed to diversify and stop relying on the state sector, Dominion Post, 1 June 2011, and ‘get its head around’ public service cuts.

While I quite understand where he is coming from, I’m more interested in seeing some policy initiatives that fostered private sector growth to hasten the process. Business confidence surveys aside, I see little evidence at least outside Auckland that the economic recession is ending anytime soon. More importantly, I don’t see the type of Government policies in place to really promote initiative or encourage business formation and growth.

Nor am I confident that the current round of public sector reforms will produce any major gains; rather they are akin to tinkering around the edges. While Wellington may value its public sector, the fact is that public services don’t create wealth or generate foreign exchange earnings. Meaningful change will only come about when the incentives change, and bold and brave policies are introduced.

Given our current situation, exacerbated by the Christchurch devastation, we need to see more than tinkering. There are a number of initiatives the Government could, and I believe should take, to foster enterprise and the private sector. These include:
§ Lifting the age of entitlement to National Superannuation progressively over time. I’d also favour moving progressively toward means testing National Superannuation to encourage greater uptake of retirement savings.
§ Restructuring the benefit system to remove the current disincentive to work – lowering income tax would greatly assist here.
§ Significantly reducing or abolishing business tax and introducing a capital gains tax, with the family home exempt.
§ Abolishing the raft of business assistance programme which are costly to administer and which seem to be captured by well-established organisations, the only ones who have the resources necessary to ‘jumps through the hoops’ to qualify and who arguably don’t need them anyway.
§ Charging nominal interest on student loans and making the capital 100% tax deductible to encourage our graduates to work in this country rather than abroad after they complete their studies.
§ Likewise, treating sickness and unemployment benefits as a suspensory loan that is tax deductible when the beneficiary re-enters the workforce. There would appear to be many people of both benefits who are willing and able to work if there were meaningful jobs available.

Government should be about encouraging enterprise and investment by creating an environment that is conducive to business risking its capital. The current tax rates, particularly business tax and income tax, stifle growth and enterprise. Big Government means too many resources are inefficiently allocated to the non-productive sector. Regulation always imposes costs, witness the disproportionate cost businesses face in obtaining resource consents. A welfare system that traps people on benefits and doesn’t do enough to reintegrate them into the workforce provides a costly disservice to the people it is trying to assist, and business assistance programmes are demeaning, at best only marginally helpful but too often captured by those who don’t need them.

In order for Wellington and New Zealand to lift our game (and stop relying on the public sector) it would be helpful if the Government expedited tax reform and ‘tilted the playing field’ in favour of enterprise, productivity and self-reliance. I and I guess many other New Zealanders would vote for a party that promised to do that.

Rob McGregor is a Wellington public relations consultant and a director of Adroite Communications & Public Relations, see www.adroite.co.nz

ENDS

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