Budget Speech Part 3 - The Rest

Thursday, 15 June 2000, 2:40 pm
Speech: Alastair Thompson

(The Budget Speech is released on a rolling embargo this is part 3.)

Employment
I am confident that an active industry policy, harnessed to a streamlined and much improved training system, and a vibrant research and development programme, will generate quality jobs.
A job though, at any price, is not the standard that a participatory democracy sets itself. We spend too much time at work, are too much defined by work, and express ourselves socially too much through work, for work to be set aside from social policy.
Yet work is the biggest part of the well-being of most of us. That is why the quality of working life is a vital component of the quality of participation in economic and social life. The Government has moved to improve the quality of working life in three critical ways. The minimum wage has been increased, employment law is being rebalanced, and the accident prevention, rehabilitation and compensation system is being refocused in its purpose while ensuring costs are carefully controlled.
This Government will not attempt to create a trade-off between jobs and rights. That is no way to run a modern civilised society. We have to do both.
Unashamedly, this Government sees fairness at work, and even-handed relationships in the workplace as a part of its social and economic objectives.
Every individual should have the opportunity to participate in the labour market - this is an important part of building an inclusive society. The Government will provide $21 million in additional funding to provide vocational services for people with disabilities.
We know the cost of childcare is an impediment for many parents to taking a job or increasing their hours of work. Accordingly, we are raising from 30 to 37 the maximum number of hours a week for childcare and Out of School Care (OSCAR) subsidies during school holidays.
We will also invest over $70 million in the next four years on creating new job opportunities in areas of high disadvantage. There will be $21 million for the development of Maori social employment services, with a further $14 million targeted specifically to supporting Maori women into business and training.
The Government is spending $7 million on Pacific peoples' organisational development. This will build the capacity and capability of Pacific organisations so that they can deliver services efficiently, and promote economic and community development.
3 Closing the Gaps
A key task the Government has set for itself is closing the divisive and debilitating gaps that have opened up throughout New Zealand society. There are gaps between the skilled and the unskilled, between employment-rich and employment-poor communities, and between the cities and the provinces.
But the most urgent and visible gaps exist between Maori and Pacific communities and others.
A lot of effort to close the gaps is going through traditional delivery channels: schools, polytechnics, universities, housing agencies and hospitals. A lot is also going through Maori and Pacific controlled and managed organisations.
We need to know whether that effort is achieving the intended results. We are making a significant investment in improving the information base and our monitoring capability. Te Puni Kokiri will receive an extra $12 million over the next four years to monitor the effectiveness of social policy programmes for Maori.
We are also making government departments more accountable for their delivery to Maori and Pacific peoples. From this year, departmental chief executives will be required to disclose in their annual reports what steps they are taking to close the gaps, and will be held accountable for their effectiveness.
And we are building the ability of Maori and Pacific communities to realise their own aspirations. The Budget dedicates $114 million over the next four years to build the capacity of Maori and Pacific peoples to design and deliver their own initiatives.
The needs of Maori landowners are often impeded by issues of multiple ownership. The Maori Land Court will get an additional $8 million over the four year period to help overcome some of these barriers.
This Budget establishes a base on which we will continue to build. Some of the building will be done during the coming year. I have made provision for a fund of $50 million for Closing the Gaps initiatives that are developed between budgets. This will allow us to put in place innovative programmes as soon as they are developed. But the bulk of further work will be undertaken in the 2001 Budget.
The Government will not stand back on this question. We are determined to close the gaps. Our very foundations as a country demand it.
4 Restoring Trust and Rebuilding Public Services
To restore trust in the political process, we have introduced legislation to discourage MPs from party hopping. We have also moved quickly to honour key election commitments. This Budget continues that process.
Housing
The Government is committed to the elimination of poverty. There is a widespread agreement that the housing policies of the previous Government were poorly targeted. They resulted in empty state houses alongside overcrowding. Poor housing is associated with low health status and poor educational achievement, particularly among the young.
From 1 December this year, low income state tenants will pay no more than 25% of their net income in rent. Around 40,000 households will benefit, by an average of about $40 a week.
This honours a key election pledge of both Coalition parties. It has not been a low cost option, but the Government is confident that the personal, educational, health, employment and social benefits that will flow from a better housed population will far outweigh the narrow commercial focus that has driven housing policy during the last decade.
Health
New Zealanders receive excellent health services from dedicated health workers. There is no doubt, though, that no amount of dedication and commitment can provide satisfactory service if the health system is poorly aligned and underresourced.
This Government is strongly committed to public health. We have committed $412 million more to health in the coming year. Our commitment to a healthy nation is also reflected in the reorganisation of health services to put them more directly under the control of the communities they serve.
It is reflected also in a major new injection of $257 million over the next four years into mental health. Mental health services have been dangerously underfunded for years, at the cost of considerable pain to people with mental illness and to the general community.
Disability support services receive an extra $40 million over the next four years. Access to home support and personal care services is being improved, as is support to care givers.
And this Budget provides for more elective surgery: $74 million a year more.
This financial allocation is not necessarily the most important health initiative, but it does symbolise the Government's commitment to facilitating social participation to the fullest possible extent.
Elective treatments could be seen as luxuries: not essential to the maintenance of life. But for those who need them and cannot afford them, the sentence can be exclusion. Participation must not be the preserve of those who can afford it. Funding elective health treatment is a statement that the Government is interested in social well-being, not just social welfare.
It is crucial that the gaps in health status between Maori and Pakeha are closed. Smoking is estimated to cause 4,700 deaths every year. Maori are twice as likely to smoke as non-Maori. We are therefore focusing on Maori with our investment of over $20 million through the next four years for smoking cessation initiatives. Work is also being undertaken on further anti-smoking initiatives.
Social services
The extension of economic opportunity is not only the basis of economic prosperity, but also of social justice. Meeting the world's demand for innovation and quality requires that every one of us has the opportunity to contribute to New Zealand's economic and social renewal.
This in turn requires strong social institutions, strong families and strong communities that enable people and businesses to grow, adapt and succeed.
The Government has allocated $36 million in the next financial year, increasing to almost $40 million in 2003/2004, to the Department of Child, Youth and Family Services to continue improving the quality of its service, particularly for Maori and Pacific clients, and to enhance the role of the community in helping at risk groups.
This includes over $1 million a year of extra funding to not-for-profit organisations providing family violence prevention services, including women's refuge.
Law and order
A substantial part of this speech has been devoted to removing the barriers to equitable participation in economic and social life. That is the best way of establishing a viable social fabric. There must be an acceptance, though, of social obligation.
Where there are rights there are also responsibilities. The Government therefore makes no apology for measures to strengthen the justice system, and to upgrade crime prevention. Sustainable communities are safe communities.
Youth crime and burglary are the stepping-stones to serious criminal careers. The Government is taking both a preventative and treatment approach to each problem. For youth crime this takes the form of youth mentoring projects and resourcing for Police to address youth offending. For burglary, the strategy is to prevent repeat burglary victimisation by funding education and security measures while also increasing funding for Police to target burglars.
In the past the criminal justice system has tended to focus on the perpetrators of crimes, while ignoring the victims. This Government will remedy that imbalance. We have extended services for victims and established a fund for them to attend court hearings outside their residential area.
We have also identified restorative justice as an alternative means of resolution that addresses the needs of the victim and the problems of the offender. Early success in pilot programmes and strong international evidence suggest that these strategies produce better results for both parties. An extra $6.6 million over four years will be allocated to this purpose.
5 Nurturing the Environment
No economic or social system can survive if the ecological system within which it is located is not sustained.
The Government has announced that we intend to ratify the Kyoto Protocol on Climate Change by mid-2002 and has allocated funding of over $2 million a year for work on measures to ensure that we are able to meet our climate change commitments.
Improving New Zealand's energy efficiency will help us meet these obligations. The Energy Efficiency and Conservation Authority is being established as a Crown entity, and is getting a $3 million funding boost.
Many of New Zealand's indigenous species are unique to this country. This uniqueness makes responsibility for their continued existence entirely ours: the kiwi and the tuatara cannot be conserved in nature anywhere else on earth.
The New Zealand Biodiversity Strategy, released in March this year, sets out the Government's plan to halt the decline in New Zealand's indigenous biodiversity - our native species and the ecosystems that support them. It sets national goals, over a 20 year timeframe. The Government has made a commitment to provide additional funding of $18 million in the coming year and up to $28 million in the following year toward the achievement of these goals. This amount will then be increased by a further $10 million each year, peaking at $55 million in 2004/2005.
Implementation of the Biodiversity Strategy has begun already. Priority actions have been identified that will lead to the greatest gains for biodiversity in the first five years.
6 Building National Identity
Outside of work, New Zealanders express themselves and develop their talents through participation in the arts and music, through movement and sports, and in recreational pursuits.
It is with pride that the Government is able to talk about this in a budget statement and to make substantial financial allocations to the arts, to culture, and for sport and fitness programmes.
The Prime Minister and Minister for Arts, Culture and Heritage has already announced a package of $146 million for the creative industries. We are allocating $16 million to fund three high performance sports centres for the 2004 Olympic Games and another $5 million for the 2003 America's Cup Defence.
To encourage emerging young sports talent, we are establishing funding for Sports Education Scholarships. These will assist athletes to juggle tertiary study with the demands of representing New Zealand at an international and elite level.
7 Revenue
This Government is committed to a robust, broad-based tax system that raises revenue both fairly and efficiently. We also want to ensure that the business and wider community have certainty about the way in which tax issues will be managed in the current term of this Government.
To this end we have adopted the following revenue strategy: "To generate the Government's revenue requirements at least possible economic cost, whilst supporting the Government's equity objectives."
This leads to the following tax policy priorities:
· maintaining revenue flows
· minimising the economic costs of the tax system
· tax simplification
· maintaining the integrity of the tax system by encouraging voluntary compliance and reducing avoidance, and
· maintaining a direct tax system augmented by broadly based indirect taxes.

We are continuing to strengthen anti-avoidance measures and to simplify tax compliance, particularly for small and medium sized businesses. Some of the recommendations outlined in the discussion document Less Taxing Tax are in the process of being legislated in the March and May tax bills this year. Other proposals from that document will be developed for legislation in the October bill this year.
Another initiative with the potential to simplify the way taxpayers interact with the Inland Revenue Department is the development of technology-based systems that expand the role of third party intermediaries in the tax system. Officials are working closely with business groups to further develop proposals in this area.
Other simplification ideas are on the drawing board or are under way, including the rewrite of the Income Tax Act and the post-implementation review of the compliance and penalties regime.
But we are also mindful that the tax system's fairness and efficiency is constantly challenged by changing technology, growing globalisation and its own increasing complexity. We will set up a broad-based and wide ranging tax review to advise on the principles and structures best suited to sustaining a robust revenue base over the long term.
I am reaffirming the Government's very clear commitment to seeking a popular mandate at the next election for any major recommendations made by the review.
Tax policy will not stand still until the review is completed. This Budget contains two new initiatives designed to maintain the tax base: we will move to prevent the inappropriate use of a trust for income-splitting with a minor; and we will remove the ability of a company to elect the 19.5% resident withholding tax when the 33 cent rate should apply.
Making forward provision for the ageing population
We have safeguarded the relative living standards of today's superannuitants by restoring the floor for New Zealand Superannuation to 65% of the average ordinary time net wage. We did this because we are committed to providing, from age 65, a universal pension that is capable of supporting a reasonable standard of living.
All the evidence suggests that this is very much what the New Zealand public wants and expects. The political challenge now is to deliver on that aspiration by putting New Zealand Superannuation onto a sustainable long-term footing.
The ratio of those aged 65 and over to those in the working age population is projected to more than double by 2051. This means that spending on New Zealand Superannuation and health are likely to grow faster than GDP.
The problem is not confined to New Zealand. It is not even most acute in New Zealand. But it does demand a response. There are no easy options. There is still time but the window of opportunity will soon blow shut.
We can prepare for this by setting aside an allowance now to smooth out the anticipated costs of supporting the baby-boomers in their retirement.
The Government has not yet finalised details of its policy approach towards prefunding. But the implications at a general level are clear. In the medium term, prefunding will require the Government to generate cash flows sufficient to meet our debt commitments and to make the necessary payments to the proposed New Zealand Superannuation Fund.
This means the Government must increase structural fiscal surpluses from current estimated levels, which means in turn, forgoing opportunities we would otherwise have had to increase spending or reduce taxes. But while it may appear attractive to increase spending or reduce taxes now, it is not responsible in view of future fiscal pressures.
The risk is in delays. If we do not act soon, and act decisively, a core element in our support structure will become unsustainable. At that point, future governments will have only three equally unpalatable options: large tax hikes, big cuts in the level of New Zealand Superannuation or tough age, work, income or asset tests to limit eligibility.
Conclusion
Education, housing, health and dignity in retirement are the core challenges of any civilised democracy. These programmes improve the participation of all New Zealanders in the full range of opportunities that a productive economy makes possible. The problem that we face as a society is that for too long participation has been a privilege, not a right.
This Budget begins to redress the balance. There is something in this Budget for everyone, but because capacity to engage in social life is uneven, improving that capacity will require more to be spent on those who have been excluded.
I have talked about enabling people to participate in a vibrant social democracy. That is a strand that runs through the broader design and particular detail of this Budget. We must acknowledge, though, that participation, to be effective, has to be sustainable.
The Government has set itself conservative fiscal targets and established tight financial disciplines. More work needs to be done to get full value for the public dollar. That aside, the Government is determined to maintain positive operating balances, on average, over the economic cycle.
The money we are spending is money we have raised. We are not raiding the piggy bank or mortgaging the future.
There is one regret. I would dearly have liked to have spent more on many deserving projects that would have contributed to our goals. They will have to wait. I have had to make grudging provision for what I have called the $200 million pile of bones in the cupboard. I refer to a series of unrealistic spending cuts which had been built into budget baselines and which I have had to backfill.
At the start of this speech I indicated that the Budget 2000 was but one step in a longer journey. There is a lot to be done, and patience will need to be the country's watchword.
Patience will be rewarded if the measures we take are integrated and consistent with our overarching objectives. This Budget fuses the requirement to rebuild a democracy in which all of its citizens can feel a sense of belonging with the need for sustainable public finances, a sustainable economy and a sustainable environment.
This Budget reflects the objectives set out in the Speech from the Throne. There has been careful and responsible cooperation between Labour and the Alliance in working through these details. The result is a coherent programme reflecting the election platforms of Labour and the Alliance in the shared social goals of economic growth, social equity and environmental responsibility.
I am particularly grateful for the support from my Labour and Alliance Ministerial colleagues in charting a new course together. It will take many years to restore New Zealand's public, social and economic infrastructure. In this Budget, we make the new beginning that was expected by the people of New Zealand in the last election.
It reflects an exciting project, and one all New Zealanders can feel proud of.

ENDS

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Alastair Thompson

Scoop Publisher

Alastair Thompson is the co-founder of Scoop. He is of Scottish and Irish extraction and from Wellington, New Zealand. Alastair has 24 years experience in the media, at the Dominion, National Business Review, North & South magazine, Straight Furrow newspaper and online since 1997. He is the winner of several journalism awards for business and investigative work.

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