THE BUDGET

This year’s phrase is “smart growth”. It’s cargo cult economics – the idea that governments can pick some easy way to achieve prosperity. Cullen has been, as finance ministers always do, lowering expectations. But with a massive $4 billion surplus the budget has room for significant giveaways. ACT is pressing for a reduction in the tax rate. The IRD has been doing work on small business tax compliance costs. The average small business “works” for the government many hours a week just on compliance. There are rumours that Cullen may announce measures that would reduce small business tax compliance costs. As NZ has an imputation system, tax on companies is just a withholding tax. To really reduce the cost of investing and growing the country, the individual income tax must be lower.

WHAT WE WOULD LIKE

Not only is there enough money to reduce company and personal tax to 23 cents there are many measures that cost nothing: Open ACC to competition; RMA reform; Slash red tape; Reintroduce external exams; More labour market flexibility; More private sector in energy. Cost – virtually zero. Benefit – enormous.

TAX SURVEY

ACT has surveyed 80,000 businesses and 400, 000 households. The result shows that the one third of the community who pay significant income tax strongly believe their tax is excessive and unfair. ACT is presenting the case for a tax cut on Wednesday and will post the results on the website http://www.act.org.nz/budget.

AMERICA’S CUP

72% of all surveyed opposed paying $5 million to the America’s Cup campaign. Just 17.5% were in favour. $35 million is now the cost. The government having got involved now finds it can’t get out, as ACT predicted. Why would a sponsor put in money if the government will do it for you?

PARLIAMENT

Helen Clark boasted to the press gallery that she would not be easy meat in parliament last week but collapsed into babble on the first question. Labour Ministers cannot handle repeat questioning. Trevor Mallard, acting Minister of Energy, got so confused he forgot that Labour is blaming Max Bradford for the energy crisis and blamed Richard Prebble – who has not been a minister for 12 years and has never been energy minister.

LOBBYING MMP STYLE

In urgency on Wednesday Parliament the government increased the tax on alcoholic beverages between 14 and 23% proof. It was to stop youth drinking said Jim Anderton. The opposition pointed out that the alcopops the young like are only 5% proof. United’s Judy Turner and Green’s Rod Donald told the house they had pressed Labour for the tax increase. The Liquor Lobby had told the MPs that 14 yr olds were drinking gin at 23% alcohol, ie just below the tax rate for gin. No proof of this claim was made. The real situation is that NZ firms have been producing local spirits like “Mississippi Moonshine” at 23% proof that have taken significant market share off the imported scotch, London gin and Jamaica rum. All the tax increase achieved was to protect the sales of imported spirits. Labour Ministers were incredulous when the minor parties supporting the government, United, Greens and Jim And

MINISTER TARIANA?

MPs feel great sympathy for Mark Gosche who resigned from cabinet because of his wife’s illness. Lobbying is now intense for his job. Under Labour’s rules Helen Clark nominates a replacement. Gosche was Labour’s only Pacific Island minister. That could see either Phillip Field or Winnie Laban promoted. Both MPs do not belong to Labour’s important factions – the Women’s or the Maori Caucus. The smart money is on Tariana Turia, and Judith Tizard – both women Clark likes. The vote could be tomorrow, as Clark does not want another week of lobbying. By appointing an associate minister Clark creates an opening. The Labour whips want Clark to make Deputy Speaker Ann Hartley a minister to remove an embarrassment.

LAVS

Questioning from ACT’s Ken Shirley has shown that the army’s new LAVs do not fit into a Hercules aircraft unless the armour is removed! A recent article in the The American Spectator completely vindicates ACT’s concern about the $800 million purchase. It’s worth reading: http://www.act.org.nz/heavymetal.

FAMILY COMMISSION

In the Dominion Post 7 Oct 2002 Jonathan Milne reported ”United is looking for something between the Law Commission (at $4 m pa) and a small ministry (starting price $6 m pa)”. This item led Peter Dunne to write a testy letter to the paper (14 Oct): “What he (Jonathan Milne) writes is incorrect...He dredges up figures of millions of dollars to fund the commission, figures of which I am unaware...After many years in political life, I do not expect columnists to write only admiringly about politicians, but I do expect honesty, integrity and the abil-ity to stick to the facts”. In a pre-budget announcement it’s now revealed that the Commission for the Family will receive $28m, $7m a year! Silly us. We thought Peter Dunne was complaining because Jonathan Milne’s figures were too high. (An apology is called for Mr Milne.)

BUDGET POSTSCRIPT

Russia adopted in 2001 flat tax at 13%. Since then the Russian economy has grown at 10% a year and interest-ingly, inflation-adjusted income tax revenue has grown 50%. (See http://www.act.org.nz/flattaxwworks).

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