Don Brash Speech: What did NZ get for the $34 billion?

Address to a combined meeting of the Hutt Valley Rotary Clubs

I am told that during preparations for his America's Cup campaigns, Sir Peter Blake asked a standard question when confronted with a new proposal to spend valuable campaign funds.

He would ask: "Will it make the boat go faster?"

That, I suggest, is a question which governments need to ask themselves every time they deal with a new proposal to spend taxpayers dollars.

Will this spending make our economy grow faster or contribute measurably to the quality of life of New Zealanders?

It is plain that this Government is not asking this question.

In 1999, tax revenues were $30 billion.

Last year, tax revenues spiralled out to $42 billion.

Since 1999, the Government has, cumulatively, had an additional $34 billion to spend. $34 billion.

Do we believe that money was spent effectively?

Do we believe the Government should have made the decisions about all of those billions?

Or to put that another way: Do you believe the Government knows how to spend your family’s money on your family better than you do?

I don’t. National doesn’t.

Where has the $34 billion gone?

Are we getting value for money?

That’s what I want to talk to you about tonight.

This is an issue which intersects with all of the key themes I have identified as major concerns for the next National Government: economic growth to lift the incomes of working New Zealanders, more effective educational outcomes for our children, more secure communities through better law enforcement, reversing entrenched welfare dependency, and moving on from the backward-looking Treaty industry.

Unless we get better value for public money, we will not achieve these objectives.

……….

This Government inherited an economy well into an economic upswing, with growth of about 5% in 1999. International conditions have kept growth strong.

The result was a flood of revenue from taxpayers.

Increased tax rates have siphoned off even more.

Public spending was boosted in many areas, and so it should have been.

But where is the great leap forward in the quality of education, of healthcare, and of law enforcement that $34 billion should buy?

There simply isn’t one.

We have experienced no decisive lift in the quality of public services in this country.

I am not suggesting that there were no benefits from that $34 billion. Of course there have been. How could there not have been?

Some of the frontline professionals providing core government services are a little better paid. Some areas of need that missed out due to difficult fiscal conditions over the previous decade have had cash applied.

You would expect some bonus from the recent growth. The surpluses have allowed us to reduce net public sector debt, largely by way of investment in the New Zealand Super Fund.

But as I will show, a good part of the growth bonus was wasted. The benefits have not been remotely proportionate to the amount of cash taken from taxpayers. Those tax revenues have built a Wellington-based bureaucracy.

Not enough of that cash is getting through to the essential frontline services of health, education and law enforcement.

That is why the last five years were an expensive wasted opportunity. While the Government has thrown money away on some extraordinarily foolish programmes, working families have had to struggle on with a rising tax burden.

We have seen no tax relief, no tax refund, for working families. Just the promise of a drip-feed of family support building up over the next few years, benefiting just one family in five. In that sense, the last Budget was like a compensation scheme for previous ill treatment of taxpayers.

Violent criminals are getting better compensation packages than hardworking Kiwi taxpayers. And what a grotesque parody of justice that is.

Big Government

This Government is saturated in what I can only describe as a culture of big government.

Theirs is a culture of endless plans, initiatives, targets, grants, panels, boards, and regulation; all of this staffed by numerous layers of government, an expanding network of bureaucrats and administrators implementing all these plans, targets and initiatives.

Then you have another layer overseeing and reviewing them. And then a final layer trying to figure out what went wrong.

Think about what we have witnessed in recent years. Numerous revelations of funding outrages in community education; spectacular growth of bureaucracy in the health and education sectors; and ludicrous grants made, apparently without the oversight of anybody with an ounce of commonsense.

The Prime Minister describes this as rebuilding public sector capability. To me it is a roll-call of dishonour.

Expanding Bureaucracy

Let’s take a case study in this culture of big government, the Tertiary Education Commission, or TEC. It’s a prime example of the way this Government has added layers to the education bureaucracy.

TEC was set up to manage our tertiary education system.

The Tertiary Education Strategy is a striking example of the bureaucratic way of thinking. It lists six key strategies. It has nine key change messages. And it lists 35 objectives.

TEC employs 341 staff and has an operating budget of $42 million. 341 staff. Despite that staffing level, last year it spent $6.9 million on consultants and contractors.

What does it do with all these staff and all this money? TEC is not responsible for approving or quality-auditing tertiary education providers - NZQA does that.

It is not responsible for tertiary education policy - the Ministry of Education has a team of 50 people to do that.

It is not responsible for monitoring the financial performance of tertiary institutions - the Tertiary Advisory Monitoring Unit does that.

And neither is it responsible for monitoring student financial support - Study Link and the IRD do that.

So what does it do?

TEC’s core work is the allocation of the Crown’s financial contribution to tertiary education and training. Previously this was done through the combined efforts of the Ministry of Education and Skill New Zealand.

The transfer of responsibility to TEC did not go smoothly. In its first year of operation, TEC oversaw a blow-out in tertiary education spending in the single least strategic area of the tertiary system: community education.

This is the very area that has been the source of scandal after scandal through this year.

Funding for community education in the year 2000 was $14 million. Under TEC’s oversight, and with a minister asleep at the wheel, that funding exploded to $105 million by 2003. $105 million.

What did we get for this funding? We got more than 400,000 enrolments in non-assessed, non-quality-assured, non-qualifications-based community courses of the twilight golf and radio sing-along variety.

To raise that $105 million requires the taxes of almost 11,000 single-income families earning the average wage. Imagine that: 11,000 people working for about a fifth of the year to pay for this appalling waste of money.

We also got a funding scam that saw Christchurch Polytechnic claim over $15 million for handing out CD-ROMs to students, with no proof of further learning.

The whole point of TEC was to streamline the bureaucracy. But it didn’t streamline anything.

Within its first year of operation, concerns with the governance of TEC led to an independent review - a perfect illustration of that final layer of bureaucracy that is required to figure out what has gone wrong.

These bureaucracies create red tape. In 2003, TEC called for “Charters” from 35 polytechnics, universities and wananga; from 39 industry training organisations; from 24 rural education assistance providers; and from literally hundreds of private training establishments.

These agencies had to obtain a positive “charter assessment report” from TEC. Just about everyone who received a charter assessment report was told to work on their “Approach to fulfilling Treaty of Waitangi obligations”, and were also told to work on their “Approach to meeting the needs of Pacific peoples”.

How many hours were spent writing these charters? What student in New Zealand gained any benefit from this? And what is the point of writing charters when, as the Vice-Chancellor of Victoria University wrote to the Minister earlier this year, “the system is haemorrhaging dollars right before your very eyes?”

The same outbreak of paper shuffling and form filling is happening in our schools.

Even the PPTA has called for a “red-tape commission” to reduce schools’ compliance costs.

An internal ministry report about student enrolment data collection said this: “Currently at least 100 people or groups in the ministry collect over 6,000 data elements using approximately 150 forms. Of the data collected, 35% are redundant or duplicated.”

The report notes a heavy burden of compliance in providing data. It says that, on average, form filling for primary schools takes 30 person days each year, and for secondary schools 35 person days.

The Education Standards Act 2001 introduced new reporting requirements for schools. Principals noted that the new regime would add to compliance costs and reflected a “nanny-state” mentality.

What we are creating here is a “Tick-the-box, play-the-game, make-it-sound-right” mentality. This mentality is the enemy of those attitudes required for genuinely effective public services: commitment, energy, enthusiasm, common-sense and sensitivity to individuals.

This illustrates another aspect of the control and planning instincts associated with the culture of big government.

This Government doesn’t trust teachers or principals to make sensible choices and decisions. And yet these are the people who surely have the expertise and local knowledge. Instead, they must explain themselves to the Wellington bureaucracy.

Nor does the Government trust parents. It doesn’t trust parents to make sound decisions about the things that matter most to them and their families, such as choosing a school.

Your children can be herded like cattle to a local school of the Government’s choosing. And if you want to take your child elsewhere, you will just have to pay twice, or sell your house and buy close to the school which you prefer for your children.

Can we imagine people putting up with being told what GP to use; what lawyer, mechanic, accountant, builder or supermarket they must use?

But that fundamental choice is denied our parents on an issue infinitely more important - the education of their children.

Consider this recent example. The flagship early childhood education policy announced in this year’s Budget will provide 20 hours of free education to every three- and four-year-old child - but only so long as they are receiving their education at a non-profit “community” education provider.

What an extraordinary condition to put on access to childcare! What a senselessly mean-spirited policy.

Think for a moment about how the Ministers of this Government, sitting around the Cabinet table, made this decision. They very deliberately, very consciously, sought to exclude more than 45,000 children who attend the 1000-odd private for-profit early childhood centres from any benefit from this policy.

In some small towns there is no alternative to private centres. Don’t parents in smaller provincial towns matter?

Parents choose to send their children to these centres because they have hours and levels of service that appeal to them. These Ministers went out of their way to quash that choice by distorting the market in favour of services that parents wouldn’t otherwise choose.

And we discovered this week that the Treasury advised against this policy, saying it had no clear educational rationale and did not offer value for money. In fact, the Treasury advice was that parents, some early childhood centres, and low-income and solo-parent families could all suffer because of the policy.

But the Cabinet went ahead regardless. This is left-wing ideology at its most odious.

This Government is saying to parents: you may have an arrangement with your local provider that suits you and your children. But if you want any financial assistance, do it the Government’s way.

That is a disgrace.

The Labour Government has also sought to kneecap private providers in the compulsory school sector. It has capped the total amount of subsidy available to independent schools at the 2001 level of $40.2 million - a bit less than the amount allocated to run the bureaucracy which is the Tertiary Education Commission.

Independent schools are therefore punished for their success. Each year, their rolls have grown in response to parental demand, at rates higher than in the public sector. But each year the Government punishes this success by reducing the per-child subsidy.

This defies logic. Independent schools return about $22 million each year to the government through GST paid on school and activity fees. In addition, they save the government at least $100 million that would otherwise have to be spent educating those pupils at publicly funded schools.

But most importantly, they enable parents to exercise choice about the kind of school their children attend.

I find it impossible to understand the mindset behind these decisions. What is wrong with choice? Why isn’t the Government seeking to expand the options people have, rather than closing them down?

One of the supreme ironies of course, for a Government that pretends to be concerned about ordinary New Zealand families, is that some New Zealanders do have choice - but only if they are wealthy enough to be able to send their children to an independent school, or wealthy enough to buy into the school zones which have the best state schools.

This Government simply doesn’t care that most New Zealand families have no choice about where their children go to school.

This Government doesn’t trust parents. But it does trust its bureaucracy in Wellington. Since 1999, the number of staff in the Ministry of Education has increased by 20%.

But an expanding bureaucracy in Wellington is not what our children need.

An Education Review Office report last week showed that around 20,000 children are being taught by teachers judged “not effective”. The ERO report stated that more than a third of second-year primary teachers and almost half of second-year secondary teachers were found not to be meeting the required level of competence.

As Bill English said, this is a much bigger scandal than Cambridge High School. And who will be accountable for that? As usual, the Minister has ducked for cover.

The growth of bureaucracy is not restricted to the education sector.

Consider health.

Labour said it would shrink the health bureaucracy, but instead expanded it. The growth was disguised by moving functions around, some being merged into the Ministry, some transferred to district health boards.

What we have now is a maze of bureaucracy. And the most notable feature of it is the lack of accountability by Government.

We have 21 District Health Boards, each with up to 11 members. And in a misguided attempt to get fair representation, two of those 11 members must be Maori.

Thus we have institutionalised racial discrimination in our DHBs.

And to complete the layers of the bureaucratic wedding cake, in a final layer each DHB is required to have three statutory advisory committees, again with mandatory Maori representation.

Accountability has disappeared from the health system.

You may be familiar with the notion of a computer firewall, which is used to protect a computer from the rest of the world when connected to the internet.

This Labour Government has essentially managed to build firewalls throughout the health sector. Any operational matter is simply passed off as a matter for the individual DHB, for which the Government denies all responsibility.

It goes like this: Tell the public you will fix the health system, but ensure there is minimal information available, therefore minimal scrutiny, and therefore no accountability.

Much the same has occurred with waiting lists. In a textbook case of bureaucratic “yes Ministerish” dissembling, we now have a suite of pseudo waiting lists.

You can be put on ‘active review’ - a waiting list to go on the waiting list.

Or you might end up as one of those people who have a ‘plan of care’.

Thus, the Government claims to have hugely reduced the numbers on the waiting list. But people have simply been re-categorised - the ultimate insult when what they wanted was an operation.

In Opposition, Helen Clark went around the country saying she would “blitz” the waiting list. She didn’t tell people that by “blitz” she meant “re-label”. We could blitz a lot of problems like that.

So, how might we penetrate the bureaucratic sleight of hand?

Well, consider this. Simply compare the overall funding boost for health with the number of operations actually performed. From the fiscal year 2000 through to 2003, Vote Health increased by 30%, or about $2 billion.

This is a very large increase in funding. Indeed, the increase in funding for health over those three years was more than the Government’s entire annual spending on the Police, Courts and Corrections last year.

How dramatic was the boost in publicly funded operations (acute and elective) performed through to 2003, the latest year we have data for?

The answer is extraordinary. There was no rise at all. In fact, publicly funded operations went down.

The health budget went up by 30%, but operations performed actually fell by 2%. Major joint replacements were down 18%. Cataract operations down 17%.

It wasn’t all decline. Cardiac procedures were up 23%.

And of course, the bureaucracy became larger, more complex and less accountable.

The Government has passed more than 500 laws and more than 1,800 regulations during its term of office: thousands of pages of new rules have led to new layers of bureaucracy and more red tape.

There are 41 government departments, 17 SOEs and 84 Crown Entities. And they absorb a large slice of the income of working New Zealanders.

Concluding

That taxpayers could have contributed an additional $34 billion since 1999 without any discernible improvement in core public services is a tragedy.

That the Government could have taken such a massive taxation windfall and squandered so much of it instead of reducing the burden on families is a disgrace.

This Government has not had to deal with the fiscal pressures that previous Labour and National administrations had to battle to control.

It inherited an economy well into an economic upswing, with an already healthy and improving fiscal position.

Labour squandered an historic opportunity to reverse the steady rise in taxation on families, and squandered the opportunity to provide a decisive lift in the quality of public services in this country.

I would be appalled to have been associated with many of the spending decisions made by this Government over the past five years.

The character of a Government is evident in the priorities it sets and the decisions made - the decision to fund a hip-hop tour instead of a hip operation.

There is no shortage of follies to point to, but I think it is clear that the hip-hop tour will remain the enduring monument to this administration when it is gone - and it will be a worthy thing to remember them by.

…………………

I want briefly to conclude by contrasting this culture of big government with what National will be offering at the next election.

We will not be a hands-off government.

I have a positive vision of government. There are core functions of government, such as health, education, law enforcement, care of the elderly, and defence, where government is, or should be, the solution.

What National stands for is a government that is active, but focused; not one which tries to get involved in every aspect of your life, or attempts to solve every problem.

National stands for a government that does well what government should be doing.

A government that secures the future by ensuring first-class education for our children; that keeps our communities safe by guaranteeing effective law enforcement; and that supports us when we are ill or frail with a first-class health system.

National stands for allowing people choice, not telling them what to do, or how to live.

For a government that attempts to expand options for people, not close them off.

For decentralising decision-making to the local level, not centralising decisions to Wellington.

For allowing health and education professionals to get on with the job, using their skills and judgment, not wasting their time filling in forms for the bureaucracy in Wellington.

Every dollar spent by government is taken from taxpayers. We should never forget that.

I believe governments should budget and spend taxpayers’ money as carefully as hardworking families have to do every week.

Unlike Labour, I will hold the bureaucracy accountable for every dollar spent.

I will expect my ministers to ask all the tough questions.

• Will this spending reduce waiting lists?

• How will this spending improve literacy rates?

• How will the spending improve the quality of the teachers we attract?

• Should we spend this money at all?

• Or should we leave it in the hands of the individuals who earned it in the first place?

And so we come back to Peter Blake’s question.

The next National Government will focus on the core functions of government.

We will focus on making the boat go faster.

Thank you.

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