15 August 2002

Brash Will Mire National In The 90s - Cullen

“Don Brash’s promotion to number three in the tiny National caucus and appointment to the shadow finance portfolio will make it impossible for Bill English to distance his party from the extremism of the 1990s,” Finance Minister Michael Cullen said today.

He said Dr Brash’s meteoric rise said more about the rest of the National caucus than it did about Dr Brash and would put the neophyte MP under huge pressure.

“Georgina te Heuheu’s humiliating demotion from 8th spot to 13th is a slap in the face to both Maori and women and the treatment of Maurice Williamson is simply petty,” Dr Cullen said.

“As Reserve Bank Governor, Dr Brash regularly spoke about his prescription for

New Zealand. This shows his thinking is much closer to Act than to National so we can expect Dr Brash to use his influence to shift National sharply to the right.”

Dr Brash is on record as supporting:

- A radical privatisation programme, including New Zealand Post, Contact Energy and the ACC to name just three. He would even privatise the schools because he does not see why virtually the entire education system should be operated by government.

- Reversion to the law of the jungle in the labour market. In 1996, at the height of the Employment Contracts Act, Dr Brash was lamenting that deregulation was not complete as New Zealand still provided for a minimum wage, minimum holiday entitlements, parental leave and equal pay for men and women. In the same speech - the Hayek Memorial Lecture - he also lamented that the ECA did not permit at will contracts - contracts which either the employer or the worker can walk away from freely at any time.

- A permissive regime for GE on the grounds that every restriction has a cost as well as a benefit, and sometimes the cost can be very substantial.

- Tax relief for the richest New Zealanders through the introduction of a $500,000 tax cap after which all income would be tax-free. The McLeod Tax Review recommended that, if a cap was to be applied, it should be set twice as high, at $1 million. Other tax reforms Dr Brash has flirted with publicly include a flat tax and a capital gains tax.

- Raising the age of entitlement for New Zealand Superannuation: Could we perhaps gradually raise the age at which people become eligible for NZ Superannuation, reflecting the gradual increase in life expectancy and improved health among the elderly.

- User pays in public health care: Every economist knows¡Kthat if you offer to supply something for free, the demand for it will be enormous, and if you don’t use price to limit that demand, you will soon be unable to meet that demand¡Kand will be faced with long queues.

- A savage cut to welfare entitlements. Dr Brash in his contribution to the Knowledge Wave Conference raised a number of options from abolishing the unemployment benefit and scrapping all benefits to the able bodied to imposing a lifetime limit on access to welfare.

“Implementation of this agenda would produce a much harsher and much more divided New Zealand with huge income and social inequalities. And make no mistake, Dr Brash is deadly serious about implementing it. That is why he entered politics,” Dr Cullen said.

The World According to Brash.

Hayek Lecture, June 1996: “There is clearly scope for further reform, despite the very substantial progress which has been made over the last 12 years. Government still owns major trading activities which could, in principle, be privatised - New Zealand Post, the Electricity Corporation (and its progeny, Contact Energy), and the Accident Rehabilitation Compensation and Insurance Corporation (ACC) to name just three.”

Stuff, May 2002: “I strongly support a major role for government in funding education. But it does not follow, as so many seem to assume, that virtually the entire educational system should be operated by government."

Hayek Lecture: “The deregulation is not complete. The [Employment Contracts] Act provides for certain minimum entitlements that must be observed in employment contracts, including a minimum wage, minimum holiday entitlements, parental leave and equal pay for men and women.

Hayek Lecture: “The Employment Contracts Act does not permit employers and employees to opt for at-will employment contracts.

Speech to the Knowledge Wave Conference, August, 2001: “In particular, we need to ensure that our regulatory framework does not close off developments in biotechnology, an area where we must surely have the potential to be world leaders. This does not, of course, mean that there should be no restrictions whatsoever on experiments in this area, but it does mean that we should remember that every restriction has a cost as well as a potential benefit, and sometimes the cost can be very substantial.”

Knowledge Wave Conference: “Even a maximum of $500,000 per annum would be more than enough to cover 10 times over the cost of public services likely to be used by a person paying that much tax, but would be a level of tax which would seem very attractive to many expatriate New Zealanders and other entrepreneurial people in the US, Europe and Asia, from whom we are currently collecting no tax revenue at all.”

National Radio, April 2002: “I think there are a lot of merits in a flat tax but I’m not sure that I want to go as far as that at this point.”

The Independent, March, 1997: “It is clearly the absence of capital gains tax, even on investment property, that is one of the things which makes New Zealanders so totally preoccupied with that form of investment.”

Knowledge Wave Conference: “Could we perhaps gradually raise the age at which people become eligible for NZ Superannuation, reflecting the gradual increase in life expectancy and improved health among the elderly.”

Speech at NZIER/Qantas Economics Award, August, 1999: “I am certainly not going to step into the political maelstrom which is the health care debate, at least in part because I simply do not know what to suggest or recommend. But every economist knows from the days of Economics 101 that if you offer to supply something for free, the demand for it will be enormous, and that if you don’t use price to limit that demand, you will soon be unable to meet the demand¡Kand will be faced with long queues.”

Knowledge Wave Conference: “Could we, for example, drop all benefits to the able-bodied and scrap the statutory minimum wage, so that pay rates could fall to the point where the labour market fully clears, but simultaneously introduce a form of negative income tax to sustain total incomes at a socially acceptable level? Could we introduce some kind of lifetime limit on the period during which an able-bodied individual could claim benefits from the state? One of my colleagues has suggested the idea of abolishing the unemployment benefit but introducing some kind of “employer of last resort’ system, perhaps run by local authorities with support from central government, under which every local authority would be required to offer daily employment to anybody and everybody who asked for it.”

Ends

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