The Letter – Monday, 18 April 2006
The Haps
Parliament is in recess. Thousands have been dropped from hospital waiting lists only we no longer have waiting lists.
Yet another treasury proposal for capital gains taxes on overseas earnings. Looks like a soft landing for the economy.
Pretty sick.
This week Muriel Newman in her weekly column Newman Weekly www.nzcpd.com gives some graphic statistics on the nation's hospital system. There are around 180,000 people waiting for an
operation. As no one is to wait more than six months, administrators simply send patients back to their GP. There are
now 12,000 health bureaucrats, one for every hospital bed. Despite an increase in hospital spending of around 40%,
elective surgery has increased by just 8%.
Private v public
The private system has always been more efficient but the gap is increasing. The cost of a night in intensive care at
Auckland Public Hospital costs $3901, while at the private Auckland based Ascot Hospital it is just $929. The conclusion
of the Gibbs Report into health, now 20 years old, is still valid. Gibbs found that the most efficient public hospital
was more inefficient than the most inefficient private hospital. Answer; use the private system for all elective
surgery.
Most concern
In the latest polls health has again become the issue of most concern - the wisdom of crowds. It is a much more
difficult issue than superannuation. A health system that today is not coping will have no chance of providing for aging
baby boomers.
No Debate
The Government refuses to debate the problem by denying there is one. The Opposition's answer is to call for another
drug to be added to Pharmac's list.
Soviet model
Hospital Boards used to be connected to their local community and had a high degree of autonomy. Labour campaigned to
restore elected boards and local control. But now the boards are there to do the Minister's wishes. A directive by new
Minister of Health Pete Hodgson dated 27 March stated that no MP may visit a DHB without ministerial "permission". If
given a briefing the DHB is "to provide the Minister with a written report on the nature and details of the visit." Not
one board protested at this removal of even the pretence of local autonomy. It took a complaint from ACT MP Heather Roy
to the Auditor-General for the Minister to claim the directive was unauthorized. However the "corrected" directive of 6
April says that "it is normal practice for them [MPs] to approach the responsible Minister and advise of their intention
to visit." (False, MPs have never sought ministerial approval to visit hospital boards). DHB's are advised to "please
ring or email the Minister's office and check that the requesting MP has advised the Ministers office." "Following the
visit, we would appreciate a written report". Copies of the directives can be read at www.theletter.biz/directives.
Ructions in the Red City
The big political news in Christchurch has been the attack on the Labour Mayor Garry Moore by the city's Labour MPs. The
mayor is attacked for having favoured the Council's proposal to have the management of the Port of Lyttelton run by the
Chinese international port owner Hutchison Port Holdings. The Labour MPs accuse the Mayor of wanting to reduce workers'
conditions, a charge he angrily denies. In fact Lyttelton's productivity has been amongst the worst of all the ports
because the city council has over the years refused to introduce labour efficiencies. The Letter wonders if the attack
on the Mayor has more to do with prostitution law reformer and Chief Whip Tim Barnett's desire for the Mayor's job.
Decriminalisation did not work
As an interesting aside, everyone now agrees that the prostitution law reform has been a failure. There is more
prostitution, more street walking and younger girls are involved.
Capital Gains Tax
The managed funds industry, which makes up for its lack of performance with its skill in lobbying, has succeeded in
gaining concessions for the industry at the expense of the individual investor. The penalty for investing outside
Australasia is horrendous. There is not just a capital gains tax but the tax has to be paid on unearned gains. The
investments need to be revalued in NZ dollars, so that a portfolio in the US that fell in value in US dollars but
appreciated in Kiwi dollars because of the fall in the currency attracts a capital gains tax even though no shares were
sold. We predict the tax will lead to widespread avoidance. Just what exchange controls lead to. The advice now to those
doing their OE is to open a foreign bank account and never tell the IRD.
It's a form of exchange control
When examining NZ's chronic balance of payments deficits, the only thing that explains how the country continues, is the
existence of large undeclared overseas holdings by NZ'ers. The logic of the government's present tax penalty on overseas
earnings is to prevent the formation of NZ owned multi-nationals and to force entrepreneurs who want to expand past
Australasia to migrate. This is exactly the history of the past twenty years.
Soft Landing
We think Michael Cullen is right on one matter. The economy is looking to make a soft rather than a hard landing.
Our Poll
86% percent of readers prefer Phil Goff as Finance Minister to the idea of Trevor Mallard reading the budget. A number
of readers emailed that they preferred Cullen to stay on. This week's poll. "Do you think our health system will be able
to provide health care for you and your family?" Vote at http://www.theletter.biz/vote. We will send the results to the Minister of Health.
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