Farewell 2011

Well 2011 has come and now it has gone. Key's strategy of timing the election to coincide with the Rugby World Cup worked and analysis of the dire straits our economy is actually in, were pushed to the back pages of our dailies as stories of rugby teams and our collective fascination with odd shaped balls and cauliflower ears took over.

The year ends with the country in a worse state than Treasury forecast. Worse is to come, as 2012 slides towards the second recession in three years. Virtually everything the Key government has done has made matters worse. In reality Key promises much but delivers little, he is a comfortable opportunist possessed of an affable shallow charm and a fecal version of the midas touch.

While Key soft peddles on green values, he is certainly in to recycling. We are seeing a recycling of old ideas - charter schools - the putting of state education out for tender to the private sector, privatisation of prisons, benefit cuts, cuts to the public service, deregulation and tax cuts for the rich. Now the greatest piece of recycling - the privatisation of state assets. All of this with the aim of narrowing the wage gap with Australia and reversing the decline of our economy. It appears that Captain Key's plan for New Zealand not being wrecked by the iceberg of the global recession, is rather than steering around the iceberg, is to steer full steam ahead onto it.

What we can expect is for things for the bulk of New Zealanders to get worse. But will our mainstream media pick it up? As our SOE's are privatised, expect the cost of power to go up. As people have less money in their pockets, they will have less money to spend and businesses will go bust. Expect more diversionary policies - going hard on crime (ooh look shop lifters might be stealing food, but we've increased the penalties for theft) etc, etc. In other words going hard on the effects of poverty - not preventing poverty itself. The OECD's latest report on rising inequality finds the bottom 30% with just 3% of our wealth, while the top third commands 75%. With money comes the power to sway governments to protect tax privileges and loopholes. Notice how Key whined about poverty and inequality when first campaigning for office in 2007-2008, but this year both he and his poodle media were practically silent on it. In reality under Key the richest people in NZ increased their wealth by 20% over the past year, to $45.2 billion. That translates to an amazing 35% of NZ’s yearly GDP owned by 150 people. But we didn’t have 20% economic growth in 2010. We didn’t even have 2% growth. There will be more poverty and even more children will face hunger, poor housing and the health effects that flow from this.

While domestic violence is on the increase as are the sizes of queues outside foodbanks, Key like a modern Ceasar used the distraction of the rugby Colosseum, to distract people from the fact that New Zealand is on life support, and that in reality the only people to benefit under National are people like Key himself. With the smokescreen of rugby New Zealanders were seduced into the fact that National were actually doing something for New Zealand.

Not only has National presided over the sale of our state assets, they have also eroded many of our civil liberties and free trial rights. It was repugnant to witness a government almost dispose of our cherished right to silence without demur. We have lost the right to counsel of choice for many charges (a strange contradiction for a party that prides itself on the right of people to choose)and we have lost the right to elect trial by jury for a number of offences, all in the name of efficiency.

Weirdly we have also seen in 2011 amazing examples of "double speak" aka "pissing on our backs and telling us it's raining." Unemployment is a classic example. Key campaigned in 2008 about reducing unemployment (it has grown from 95,000 to over 157,000), narrowing the wage gap with Australia (it has grown not reduced). Key chided Labour for the fact that 33,000 people had left our shores for Australia, yet under his leadership that figure has now grown to over 100,000. In addition we now have over 200,000 children living in poverty. On the 3rd of November 2011 Key declared that an increase in unemployment was proof that National’s policies were working. I quote from the Herald:

“Prime Minister John Key has reacted to unemployment figures released this morning, saying more people are seeking work, and "confidence is coming back".
The figures showed the jobless rate unexpectedly rose in the third quarter, with little evidence the start of the Rugby World Cup drove an increase in casual workers to service the wave of tourists.
The unemployment rate rose to 6.6 per cent in the three months ended September 30 from 6.5 per cent in the June quarter, according to Statistics New Zealand's Household Labour Force Survey.”

"More people are seeking work" and this is good? What planet is he on? The only reason more people are now seeking work, is that more people are out of work!

One of the most prescient moments for me came when I was in Dannevirke several days out from the election. I was having a pie at a cafe. The owner came over and started talking to me. "Labour hasn't got a chance" he said. "Why do you say that? We have plans for the future, national super is unaffordable in the long term and only Labour is planning for that. What about capital gains tax and the need to broaden our tax base? Labour has plans our long term future, National has nothing." The shop keeper's eye glazed over, "Yeah, but John Key knows what he's doing, he's a millionaire." "True", I said, "But are you saying that because he has lot's of money, he know's how to handle an economy?" "Yep" came the reply. "So", I said, "You'd vote for Bernie Madoff the billionaire fraudster?" Again the eyes glazed over, "Yeah but Key's a millionaire."

I tried another strategy, "How's your business going?" It turns out that this man's business was in the crap and he closes shop for several months of the year and props it up by working in the mines in Australia. "Doesn't that tell you something - if your local economy is so stuffed, that you have to find work in another country to prop up your business?" Again it was to no effect. Effectively this individual had been subjected to a charm offensive from a political party promoting a brand based upon a man as opposed to policies and for 3 years there has been minimal challenge in the media to that brand.

So 2011 for me represents the apotheosis of a failed capitalism that is eating itself. We are in the shit because of the free market and the lack of regulation of the international banking sector. A compliant media owned by large corporate interests have feted as our economic messiah a millionaire who made his money feeding off the extravagance of the very sector that dropped us into the shit in the first place.

2012 is the year of the Winter Olympics. Key should lead a New Zealand tabogganing team - his ability to drive New Zealand downhill at speed, must mean we have a sure chance of a gold.

Charter Schools - The Education of Children Used As Deal Maker

Former National cabinet minister, new Act member and sole ACT MP John Banks has won a concession that John Key will allow some New Zealand children to be subjected to the charter school experiment as part of his deal to assist National with its programme of forcing a free market agenda upon New Zealand.

Considering neither National or ACT campaigned on charter schools a number of people are asking, "What are charter schools and do they work?"

Worryingly I have just heard the Prime Minister on Radio New Zealand respond to a journalist's question about not putting this before the electorate, with words to the effect, "Well do you think that the average voter will actually care if with all the hundreds of state schools in New Zealand, if we make a couple of them charter schools?" To my mind this speaks of an callous indifference to the welfare of the children he is subjecting to being John Banks' guinea pigs.

First charter schools are publicly-funded private schools. They are primary or secondary schools that receive public money but are not subject to some of the rules, regulations, and statutes that apply to other public schools in exchange for some type of accountability for producing certain results, which are set forth in each school's charter.

Do they work? From my reading of evaluation research and several articles I believe that charter schools don't outperform public schools in any meaningful way. Interestingly the New Zealand Business Roundtable has a link on its website to this article which summarises the research concisely: "The evaluation by the School Choice Demonstration Project, a national research group that matched more than 3,000 students from the choice program and from regular public schools, found that pupils in the choice program generally had “achievement growth rates that are comparable” to similar Milwaukee public-school students. This is just one of several evaluations of school choice programs that have failed to show major improvements in test scores, but the size and age of the Milwaukee program, combined with the rigor of the study, make these results hard to explain away."(Charles Murray, Perspectives: Issue 368 Why Charter Schools Fail the Test, 19 May 2010).

There seems to be a preoccupation with testing in charter schools. That is as success is measured by children meeting predetermined test markers, processes are put in place to ensure the schools accept only those children who will perform. This has led to allegations of "cherry picking."

Ross Barkan on 21 July 2011 wrote an article highlighting several problems entitled, "Bronx Charter School's Failure Highlights Failure of Charter Schools": "As a charter school, Academic Leadership is required by New York state law to admit students through a random lottery. But multiple parents and staff members described a process designed by the school’s director to weed out low-performing students.

Four parents who tried to enroll their children at Academic Leadership, an elementary school, this year or last year said that school employees tested their children before deciding whether or not to accept them."

This article reveals several of the problems inherent in the charter-school model. One is that a randomised lottery is supposed to determine who goes to a charter school. Since when did access to education become a game of chance? One might think that lotteries, at least, must be fair, but why should the educational futures of small children — who already hail from the economic underclass because wealthier areas tend to keep charters out of their school districts—now hang in the balance of one right or wrong selection from lottery box?

Further, the state school system is already struggling. Now it appears that state schools who take allcomers regardless of ability - to give them their entitlement - a free education; are going to have precious funds siphoned away to fund charter schools when the international research shows that despite promising much in fact deliver little.

Earlier this year John Key announced in a public meeting in Masterton that funding was going to be cut for the Wairarapa's flagship last chance school Ohorere Student Transition Programme. That school has a proven track record with an 85 percent success rate at taking troubled young children and getting back on track to return to and complete mainstream education. It cost just $150,000 a year to run (the same prices as 10 minutes of fireworks used to open the Rugby World Cup). It has ERO report after ERO report congratulating the school on its success. It is shameful that a school which has a proven record of success with some of the children from the poorest levels of our communities, is going to be binned when Mr Key can find millions of dollars to plough into charter schools, just to make a deal with a former National Party cabinet minister, when the bulk of research suggests charter schools are a failure.

ASSET SALES IN A BEAR MARKET?

There has been a lot of heat generated in the debate over asset sales. ACT claims the assets are underperforming and need the discipline of the market. Key claims we need to sell a share of the assets to “balance the books faster.” Brent Sheather is an Auckland-based authorised financial adviser who has analysed the logic of National’s proposed partial sale of state assets and finds it wanting.

National’s sweetener is that part of the money from the sales will be used for schools, and hospitals etc:

“The spin is that if we sell up to 49 per cent of each of Meridian, Mighty River Power, Genesis Energy and Solid Energy, and part of the Government's 75 per cent stake in Air New Zealand, this will produce cash for an investment fund to buy schools, hospitals and fund transport projects.”

Sheather explains why some big hitters in the finance world either support asset sales, or are keeping quiet:

“But don't expect too much negative comment, because many people stand to benefit from these transactions. The management and/or directors of the privatised companies will be looking for share options that will massively reward them if the companies do well.”

Duncan Garner comments on the same point on the TV3 site, “But at Treasury the process has already begun – an Australian investment bank Lazard has been hired to prep their sale before voters have their say.
Labour has estimated Lazard will be paid a fee of around $100 million for their troubles. As Phil Goff puts it, “It’s a bloody rip off - $100 million to line the pockets of Aussie banks,” That’s money we should be keeping in New Zealand.”

Let’s deal with the ACT argument that the SOEs are underperforming dogs (admittedly this was came from the ACT Wairarapa candidate). If that was the case why is Key spinning the deal as being a great for “Mum n Dad” investors to plough their retirement savings into?

On another level, the assets sales don’t make economic sense. Sheather contrasts the two ways governments raise money – selling something or issuing debt.

“Let's look first at the economics. A government can raise money by selling assets or issuing debt. The price we get for assets versus the cost of borrowing the same amount is a good place to inform a view as to whether we sell or hold.
The secondary market in 10-year government bonds prices them to yield 4.4 per cent. The yield on five-year government bonds is just 4 per cent. To get these asset sales, the Government will need to price the companies at price-earnings multiples of somewhere around 14 to 16 times, which implies after-tax earnings yields of 6 to 7 per cent.
In lay terms, that means the Government is proposing to sell assets producing returns of at least 6 to 7 per cent a year after tax plus growth, when it could issue debt costing just 4 to 4.4 per cent. On the face of it, this doesn't look particularly bright, does it?”

In other words, National wants to flog off assets that provide a positive long term return, when short term capital expenditure can be funded from borrowing easily serviced from the profit generated from dividends. Make no mistake about it, SOEs have been a brilliant investment and what’s more they are owned by all of us:

“In terms of historical performance, the SOEs have been a good investment - Treasury reckons they have returned 17.5 per cent a year during the past five years. From a financial perspective, selling state assets is not a no-brainer. The real tragedy of these asset sales is that the average New Zealander will see his or her equity in these great assets reduced. At the moment, every New Zealander, rich or poor, young or old, has an equal shareholding in the assets proposed to be sold.”

So once these assets are sold, the wealth of some New Zealanders will increase and more of us will be poorer. This will hit home as the new boards begin to work to increase profits for the investors. Power prices will rise as this is the easiest way to bump up profits:

“While many individuals will buy shares in the new companies either directly or via their Superannuation or KiwiSaver Fund, there will be a much larger number of less well-off New Zealanders and young New Zealanders who won't be able to participate in any way, shape or form.
This sad situation will probably be compounded by the new "private enterprise model and strategy" implemented by the new boards of directors of the privatised assets, which is frequently spin for putting up prices and restructuring the balance sheet to increase borrowings. These two factors mean that, unfortunately, the rich will get richer and the poor will get poorer.
The only rationale for these transactions that might have some validity is that private ownership could introduce a higher level of efficiency into these state-owned enterprises. But is it realistic to think that the current directors and management of Meridian, Mighty River and Genesis are asleep at the wheel?”

The other question is why the hell are we selling our blue chip investments in the middle of a market slump? So when the market is at its lowest we are pitching our most valuable assets. It is bad business to sell at a low point in the market. I thought even Key would know that? It is highly likely that the old mistakes of the past are going to be repeated:

“Furthermore, all of the above assumes the mistakes of the past will not be repeated. New Zealand governments have a long and consistent history of selling assets at low prices to the private sector. Contact and NZ Rail are a couple of examples. How confident can we be they will get the pricing right here?”

Sadly we can’t trust Key that asset sales will stop with the power companies, Solid Energy and our airline. With Key you need to read the fine print printed on the back of the contract. As Garner sceptically quotes Key, “If we are the Government for the next three years and the process goes well, then we’re not in a position to say what we will campaign on in 2014 – we will cross that bridge if we ever come to it.”

KEY - INCREASE IN UNEMPLOYMENT SIGN OF SUCCESS

The other day John Key mocked Phil Goff over his costings with taunts of “show me the money.” Today Labour has released its costings. National will no doubt try and confuse matters. But one thing, as I demonstrated yesterday is that Key is dodgy with his own use of figures.

What cannot be disputed is that Key campaigned last election about reducing unemployment (it has grown from 95,000 to over 157,000), narrowing the wage gap with Australia (it has grown not reduced). Key chided Labour for the fact that 33,000 people had left our shores for Australia, yet under his leadership that figure has now grown to over 100,000. In addition we now have over 200,000 children living in poverty.

Meanwhile we have Key’s big idea from the 2009 jobs summit of building a national cycleway that would create some 4000 jobs. Aside from the interesting contradiction in using public spending to reduce unemployment (a contradiction because Key is actually reducing public sector jobs to increase unemployment), the actual number of jobs created by the cycleway is only 120.

As Phil Goff remarked today with the release of Labour’s figures, “show me the jobs!”

On the 3rd of November Key’s pronouncement about an increase in unemployment being proof that National’s policies are working was incredible. I quote from the Herald:

“Prime Minister John Key has reacted to unemployment figures released this morning, saying more people are seeking work, and "confidence is coming back".
The figures showed the jobless rate unexpectedly rose in the third quarter, with little evidence the start of the Rugby World Cup drove an increase in casual workers to service the wave of tourists.
The unemployment rate rose to 6.6 per cent in the three months ended September 30 from 6.5 per cent in the June quarter, according to Statistics New Zealand's Household Labour Force Survey.”

"More people are seeking work" and this is good? What planet is he on? The only reason more people are now seeking work, is that more people are out of work! This is weird it is like a cancer specialist telling a patient to relax because "relapse" means that they are cured. We would think the doctor was mad and change our specialist. Likewise with lunacy like Key’s, that an increase in unemployment shows the economy is on the up, New Zealanders should be waking up to the fact that it is time to change our Government as this current lot are out of touch and bereft of ideas.

The Second Leaders Debate

I smiled at watching John Key trying to get one over Phil Goff during the second leaders debate, with his shrill taunts, of, “show me the money, son!” He came across as an out of touch school bully who had lost the intellectual argument and reverted to shouting 'son' and 'show us the money'. Let us not forget that Key largely gained his experience at the now defunct Merrill Lynch, an investment business that went under through dodgy management from which fold Key was recruited into National. His so-called skill can be seen from his adding up in the Christchurch debate. $1.3 billion a year for 4 years is $5.2 billion not $6 billion (as claimed by Key) and over the previous three days his claims that Labour will increase debt have gone from $17 to $16 and last night $14 billion and all of this is done with double counting. Key adds in the projected short-term gain from asset sales to the cost of tax cuts. This is artifice they are two different things.

Key is claiming that not selling off assets will run up debt, this is a myth. Keeping the assets and the dividend they bring will help pay off debt and in the long run generate greater returns. Goff and Labour seem to have costed their policies to me, increase tax on those in the best position to pay more and introduce a Capital Gains Tax, which will over a period of time bring in billions.

I would rather have a long-term vision for New Zealand rather than short-termism from Key whose theory that tax cuts for the wealthy and cutting Government spending encourages growth has been rubbished by top experts. When President Obama uttered this mantra, the comments drew a rebuke from Nobel Prize-winning economist Paul Krugman, who said in a Web posting that Obama was embracing “the myth of expansionary austerity and the confidence fairy.” So here we go with Key, a brighter future consisting of shonky maths, and optimism sustained by myths and manipulation.

Welfare Changes Won't Lead to a Brighter Future

When National took over unemployment was at 17,710 it is now at 56,264. To force people to look for jobs that aren't there is bizarre. Similarly the solo mums I know don't "breed for the benefit." The way forward is to move people onto paying jobs. These changes don't create any jobs and just appeal to prejudices unsupported by facts or informed by reality.

These changes will do nothing to address the real concern that under National the gulf between rich and poor has grown and we now have 200,000 children living in poverty. These changes should not be seen as reforms, but rather a cheap shot appeal to the uninformed by a tired Government bereft of ideas and lacking in compassion.

Everyone would accept the basic premise that the way out of poverty is through paid work. But the corollary is that well-remunerated jobs must be available, along with quality childcare. Second, job seekers must have the necessary skills and health to be in those jobs, or be adequately supported to enable them to get the jobs available. National's benefit shake-up won't change this, unemployment has grown under National and there are an absence of jobs to actually look for.

Leaders Debate: Round 1 to Goff

I was impressed with Phil Goff in the last night's leaders debate. Phil came across as having integrity and was reasonable as evidenced from his being able to learn from his mistakes. Phil admitted that his biggest mistake was in supporting asset sales. John Key said his was in not spinning successfully the purchase of flash BMWs. Phil said at least he learns from his mistakes. A telling point came when Espiner asked, "Is it possible to survive in politics without occasionally bending the truth?" Key responds, "Well, we live in a dynamic environment, so of course things change."

Key looked decidedly slippery over his promise not to raise GST, saying it must be seen in the context of a "dynamic environment", and he made the promise in the sense of not raising GST to bring in extra revenue (that is crap btw if you see his promise on Youtube, he was clear he wouldn't raise GST in his 1st term). After the debate, Goff said Key had introduced a new meaning to the words "dynamic environment. That means you can actually change your story, promise one thing and do the opposite, but that's because the environment is 'dynamic.' Those are weasel words."

Judging by the pro-Key media of the past year Goff was the underdog going into the debate. In reality this is the first time members of the public have really seen Key outside of his minder managed comfort zone, going face to face with his opponent. Goff exceeded expectations he got his policies out, landed some good body blows and properly attacked Key on his integrity. He showed that he can be Prime Ministerial. Key to my mind sounded arrogant and flippant.

To my mind going into the debate, Key had everything to lose, the media have given him a cake walk so far and now the rose-coloured (or should that be blue-coloured?) spectacles should start to come off.

Probably the best question of the night came from Wallace Chapman, who asked each leader,"What is the one thing you’d march for? Key says he’d march for equality of opportunity, and bangs on about being brought up by a solo mother, and tells us he’s become prime minister of New Zealand. What is interesting is that he has promoted policies which make it harder for solo parents to give their kids the same advantages that Key himself enjoyed growing up. To be honest I just couldn't see Key marching for anything.

Goff cites a number of things he has actually marched for: stopping mining of our national parks, stopping early childhood fees rising and to keep ACC fees down. He also says he supports the people marching around the world in the Occupy Movement.

I was left with one nagging question at the end of the debate though. I have no idea why TVNZ had Claire Robinson as an "expert commentator"? She sounded like some kind of pro-National zombie, who couldn't deviate from the pre-recorded script that would play when you pulled the drawstring dangling from her back.

We're Only Selling 49 Percent - Remember the Kiwishare!

Key says we don't have to panic about his plans to flog off our state assets as he is only going to flog off 49% to his rich mates. Remember “Kiwishare” free local calling protection – put in place when Telecom was privatized.This year the govt repealed the Kiwishare with a Supplementary Order Paper to the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. The Kiwishare also meant that Telecom our largest telecommunication company could never be completely foreign owned. Now that the Kiwishare has gone, there is nothing to stop Telecom falling entirely into foreign ownership. This shows you that 49% is no long term protection at all.

John Key - More Ostrich than Kiwi on Retirement

Labour’s policy announcement last week about gradually lifting the retirement age to 67 by 2023 has provoked some interesting comments on my travels around the electorate. Most people realise the sense of the move. As life expectancy grows the entitlement age should move with it. The demographers show us the fiscal time bomb is out there, the sooner action is taken, the smoother the introduction. Most people accept that, as people live longer (life expectancy is rising at the rate of 3 months per year) and the population ages, the retirement age needs to go up. Most of us realise that the limited resources of the welfare system need to be fairly distributed over the whole population. The pension system was never intended to support the average retiree for 25 years as it does now (that average is rising). Nor was it intended to support one pensioner for every three working age people.

It has been recognised for decades that in the long term our national superannuation scheme was going to be unsustainable. Over time the payments became meagre with many superannuitants, whose only income is national superannuation, struggling to survive. Many Kiwis thanks to low wages and no savings scheme had no nest egg available for when they retired. It was Labour under Helen Clark and Michael Cullen that took the bold moves to address this issue with the NZ Superannuation fund (the “Cullen fund”) and the introduction of KiwiSaver in 2007. Now Labour is proposing to make KiwiSaver compulsory, to raise employer contributions from 3% to 7% by 2014, and to restart funding the New Zealand Super Fund, the combined effect of which will bolster and fortify savings.

John Key during the last election campaigned on New Zealand “closing the gap with Australia”. The comparison with Australia is worth reviewing. Australian employers pay about a 9% levy on top of their wage bill to fund their employees' retirement plans. In New Zealand, it is a minimum of 2% and that 2% is only payable if the employee joins an approved scheme. The gap will continue to widen when Australia moves its rate to 12% in 2019 (New Zealand's will rise to 3% in 2013).

People are increasingly healthy and capable as they age. Every dollar spent on supporting 65 and 66 year olds who are capable of supporting themselves (and 40% of them are working) is a dollar that can’t be spent on higher priorities, like health, education, tackling climate change, and investing in the future for us all.

Despite the odd negative comment, most people recognize the need to plan for the expected increase in the population of older people in New Zealand. The cost of providing superannuation, accommodation and healthcare for older New Zealanders will balloon from 2020 as the “baby boomers” start to retire.

Retirement Commissioner Diana Crossan has been beating the drum for ages on the retirement age issue, saying it needs to be planned for now to avoid having to make harsher cuts later on. Labour has now taken two major steps to ensuring the ongoing affordability of NZ Super by broadening the tax base via a capital gains tax, and now the small increase in retirement age.
Labour’s retirement and savings policy is about building savings for the country and for every New Zealander. The goal is to ensure that all Kiwis will have a nest egg of hundreds of thousands of dollars they wouldn’t have had otherwise. If we take the initiative now, a twenty five year old putting in $10 a week will have about $400,000 when they retire. That’s a very comfortable nest egg. Simply put Labour realises that we can’t afford not to save.

One news item that concerned me recently raised the specter of having to accommodate the elderly in care two to a room – this is an appalling idea and must be avoided. Our elderly deserve the right to be treated with dignity and respect in their vulnerable years; the idea that cost cutting in this way is better than biting the bullet on issues like the retirement age is ridiculous.

Winston Peters has commented that a raise in the retirement age can be avoided if we lift our economic performance. The problem with this is that basing vitally important policy on the level of economic growth in the future can only end in tears when things turn out differently than expected (just ask the folks at Treasury about how easy it is to accurately forecast economic growth). Too many factors can affect our small, open economy, so even if we do everything right to lift our productivity and rate of growth, outside factors can overwhelm us. Policy has to be based on simple, logical steps not hopes that we’ll be able to afford the status quo if we crank the handle on the economy.

Kiwis will be assisted if they can’t work past 65 with access to a transition allowance of the same value as the pension. Most of us are pragmatic and realize we must make some sacrifices now to improve things later on.

My visits to local retirement villages and discussions with residents in the electorate have highlighted to me that we have some work to do to ensure that those who need it have access to quality care in their area. I met a woman from Dannevirke who was having to quit her job to look after her elderly father because the nearest available care facility was in Marton. It’s all too easy to romanticise the idea that family should look after their own, but the disruption to this family’s life was severe. We need to plan now to make sure enough elderly care facilities are built in our area.

It is negligent of the current Government to refuse to deal with this looming issue of retirement, aged care and savings. Mr. Key in saying he would rather resign than raise the retirement age is more ostrich than kiwi with this issue, and his lack of vision will only hurt us all downstream.

Only Labour has the bottle to plan for a long-term future that is fair and benefits us all.

And Now A Housing Crisis Is Looming ....

Real leadership involves more than just turning up for photo opportunities. When times are hard you can actually see true character coming out. We saw it in Mr Key’s treatment of Ohorere School and now over this past fortnight we have again seen the real character of this Government.
For the first time in 13 years we have just had a double credit rating downgrade.
This was doubly damaging for National given Mr Key’s measuring of the success of the 2009 budget by the fact that an alleged possible downgrade was apparently avoided. Evidently credit rating agencies do not think highly of Mr Key’s performance.
Then Mr Key was caught out being slippery when he claimed that Standard & Poors said a downgrade would be more likely under Labour. His defence was weak in the extreme and consisted of providing an anonymous email that did not back up what he alleged.
The Government was also caught out on the emergency video surveillance legislation with its claim that the legislation must have retrospective effect otherwise compelling evidence would be lost. This was untrue. Section 30 of the Evidence Act allows courts the discretion to admit improperly obtained evidence in any event.
And then the Rena shipwreck happened.
The Government has been hamfisted and slow in its response. Four days of good weather were wasted as the Rena slowly oozed oil so that now an environmental tragedy is inevitable. Where was Mr Key?
The day after the wreck, there was a picture of our smiling PM in the Herald, pretending to put up a campaign billboard for his Hamilton candidate.
When real pressure is applied this Government is not up to scratch.
When the Government raised the GST tax to 15 per cent, accompanied by a major tax cut for the wealthy and small change for everyone else, it was obvious that the move was grossly unfair.
The Treasury report confirms that the gap between the lower paid and the highly paid widened as expected. Further, we now have the admission that the GST didn’t pay for the tax cuts to the rich, as Mr Key claimed and, in fact, cost us more than $1.1 billion – this makes Mr Key’s competence and management suspect.
In essence, this move of the Government’s was one that New Zealand couldn’t afford. It has seriously depleted the Government’s coffers and led to cuts in services and jobs and added to Government debt. Labour warned about this at the time and we now see that these concerns were justified. The Treasury report has revealed that the tax switch has pushed up the cost of living, dramatically increased income inequality, and failed to stimulate the economy, not to mention the gaping hole it has created in Government accounts.
The Government has had to face many challenges such as the global financial crisis and the Canterbury earthquakes. But they have also made some poor policy choices that have made it even harder to cope with the crisis and the earthquake.
And the irony is that although many of their policy choices have been on the basis that we must not lose our international credit rating or the cost of borrowing on the international market would rise steeply, our rating has just been downgraded. That will send interest rates up and will dramatically increase the cost of mortgages. Add the proposed trebling of house insurance costs, and we have a looming housing crisis to add to the mix.
Labour is going into these elections with a tax policy that will help correct that basic inequality which is now crippling the country; tackling youth unemployment, reducing cost of living pressures, taxing capital gains, retaining our national assets as a vital income source – no tax on the first $5000 of income and a tax increase for those who earn more than $150,000.
Under National’s watch, the gap between the rich and poor continues to grow. Unemployment has increased and the cuts will continue.
Time and time again my encounters with the people of the Wairarapa while out doorknocking, brings home to me that many people are struggling to make ends meet. Some of the stories I have heard on the doorstep have left me appalled. Those stories come from almost every area within each of those towns, in an electorate that has been neglected by the Government.
National has a commitment to ‘‘Building a Brighter Future’’,the slogan they used three years ago!
Labour has a carefully costed plan for fixing the underlying problems that are holding us back. Forget the slogans – go for the detail. As a gentleman’s tailor would say ‘‘Never mind the width, feel the quality’’.

Published in the Wairarapa News, 19 October 2011

You Can’t Run the Economy on BMW’s

“You can’t run the economy on BMW’s alone” according to respected US investor Jeremy Grantham. “If the average person is in a pickle, how do you have a healthy economy?” he asks.
Time and time again my encounters with the people of the Wairarapa while out door-knocking brings home to me that many, many of you are struggling to make ends meet. I’m not ashamed to admit that some of the stories I have heard on the door-step have left me appalled.
Take the story of Victoria and Troy of Dannevirke. Troy has been unemployed for three years, and has applied for a massive 200 jobs, without success. This winter they couldn’t even afford to buy firewood. It wrenches at my heart to think that as a society we can turn away from these folk, and blindly follow a political leader who has about as much depth as a caravan site. I believe a Government focused on beneficiary bashing and public service cut backs in these difficult times is greedy, arrogant and out of touch.
My deep concern for folks like Victoria and Troy fuels my passion to be selected as your next Member of Parliament. I will devote myself to making the Wairarapa a better place for everyone – from hard working families, young people, to businesses and pensioners alike. I believe Labour’s policies strike a balance between caring for folks like Victoria and Troy, and putting policies in place that will help the economy to prosper.
The US investor’s comments were made in the context of looking at the soaring gap between rich and poor. The top 10% of U.S. workers currently receive about half of the nation’s total income, with half of that going to the top 1%. Grantham is shocked, noting that the last time the US had a wage gap so extreme was just before the 1930’s Depression. He says that income inequality at these levels takes a real toll on ordinary workers and society as a whole, and I totally agree. To narrow the gap and improve the lot of ordinary workers, Grantham suggests investing in education, training, and changing the US tax structure to make it fairer – ring any bells anyone??
Ideas like these are at the heart of Labour’s policy. The trouble we face under a National government is that they have put extra money in the hands of the people at the top of the heap, but they are either saving it or, as Grantham says, “buying BMW’s”, which does nothing for the economy. I firmly believe that we would all be much better off by putting more cash in the hands of those who will spend it – and this would benefit the whole economy, promoting economic growth instead of choking it off.
We are constantly reassured by National that the economy is doing well – this may be true compared to the basket case countries of Europe, but NZ’s rate of economic growth nose-dived to 0.1% in the June quarter – it’s great to have the Rugby World Cup to enjoy at the moment, but the news that the economy has choked got buried.
Fortunately the gap between the incomes of the rich and poor in New Zealand is not as extreme as the US, in no small part due to schemes Labour introduced like Working For Families. This was brought in after the gap between incomes blew out during the 1990’s.

The amount of our wealth held by the top 10% in NZ is very similar to the US, at around 50%. Grantham is appalled that in the US the top 1% hold 25% of the wealth. In NZ the Department of Statistics puts the figure held by the top 1% at 16%, not so very far behind. The NZ data available is very old though, (from a survey done in 2003/4) – heaven knows what it would be now. I can say however that the richest people in NZ increased their wealth by 20% over the past year, to $45.2 billion. That translates to an amazing 35% of NZ’s yearly GDP owned by 150 people. But we didn’t have 20% economic growth in 2010. We didn’t even have 2% growth. So where did all their extra wealth come from?

With 8 weeks to go until the election on 26 November, I am determined to put in the hard yards on the campaign trail. I am burning up the shoe leather in my determination to meet as many of you as I can. You can look me in the eye and see my resolve to work tirelessly on your behalf to make the Wairarapa a better place for everybody.

Bott: National’s flip-flop over Ohorere a disgrace

Labour’s Wairarapa candidate Michael Bott has slammed the National Government’s flip-flop over the future of Ohorere School in Masterton in light of John Key’s comments that the school will have no last minute reprieve (Wairarapa Times Age 30 September 2011).

“It’s an absolute disgrace that National promoted Ohorere School as a success story in their election campaign in 2008 and have since stabbed our community in the back by completely cutting the school’s funding”.
“Hayes and Key used that school and those kids in their "Ambitious for NZ" DVD in 2007, now they are in power they pull the rug from under the school and actively work to shut it down. This is a disgrace. The school has an 85% success rate in getting last chance kids back into mainstream education. “

“At $150,000 a year to run it is as cheap as chips compared to paying $100,000 per year to lock and inmate up in one of our prisons - which is where kids often end up if they drop out of school."

Bott says “Ohorere is an important school for the community which gives at risk young people a chance to get back on track in their lives and the funding cuts to the school is bad for the entire community.”

“John Hayes has done nothing to save the school. For that I say shame on him, he has let the community down.”

“Yesterday I met with South End School Principal Rod O’Leary, he told me about the important role Ohorere School plays in the community, John Hayes hasn’t bothered to ask what the experts have to say. What kind of local representative is he? No wonder his face isn't on his party’s hoardings, I'd be ashamed too if I used Ohorere and those children like National has."

Bott says he will lead a strong fight to save the school. ""Far from closing Ohorere down, we need more of them. Wairarapa can be proud of its support for Ohorere."

“Labour have committed to keeping the school open and enhancing alternative education in New Zealand. We need to build a fence at the top of the cliff, not pay for ambulances at the bottom. I will fight hard to keep this school open and I ask the community to get in behind me."

Building A Brighter Future

There was a ray of hope for a while. It was when John Key announced that it was National’s plan for New Zealand wages to match those of Australia. This would stop the skill drain across the ditch and set New Zealand on a path to a brighter future.
As I travel through the northern part of the electorate (where local body by laws allow for earlier election advertising than is permitted in the south) I am confronted by National advertising placards, with John Key’s smiling face and the slogan “Building a brighter future”.
Good idea John – we all want one. The trouble is that we don’t know what he means by that. I guess we just have to decide for ourselves. For my part I go back to the original idea of wages that match those of Australia. That would indicate that the government had really got it right.

But it was an empty promise – a goal with no steps in place to actually get there.

First of all, he set up a group to flesh out the plan, headed by Don Brash, and that was the end of that. Their report indicated that the group had no idea how to achieve the aim and it disappeared into the bowels of the Beehive never to be seen again.

Then Deputy Leader Bill English stated that New Zealand’s lower wages were our competitive advantage –lower wages will lead to our that are our brighter future – (shades of Roger Douglas and Ruth Richardson?)

When a government sets up a goal like “incomes that match those of Australia”, it’s a good idea if everything else they do isn’t in head-on conflict with the plan. So where are the steps that will lead us to a brighter future?

One would expect them to be positive changes; there’s no way that cuts are going to lift the economy. I would start with putting money into early childhood education. Giving our youngest people the best possible start is certainly forward looking. Then I’d make sure that families with young children are fully supported in their difficult role of caring providers and income earners. Then I’d make sure that all school leavers were fully equipped to enter the world of work and are either immediately employed, or are in a training programme or further education. I’d make sure that government was providing the support and resources and services that are needed in a complex modern economy. I’d boost wage rates by making it illegal for any worker to be paid less than $15 an hour. And finally (although this is far from a complete list) I’d make sure that everything possible was being done to increase the productivity of New Zealand. That is a vital step. It is the step that makes the rest of the plan affordable.
It is the very opposite of what the National government is proposing.

Frequently when talking to people in the Wairarapa electorate, I hear comments suggesting that the party policies are the same – the tweedle-dum and tweedle-dee principle. This couldn’t be further from the truth. What I have outlined above is Labour policy. National’s policy is to cut spending on early childhood education; to reduce family support; to blame and punish people who can’t find a job, when there are no jobs out there; to limit the bargaining strength of unions so that wage increases are rare, and to leave it to employers to build the skill base of New Zealand when employers are struggling to survive.

The weird thing about National’s response to the recession is that it has reverted back to the failed free market logic of the 1980s and 90s hence a prescription of asset sales, deregulation, free market dogma domestically to counter a global economic recession caused by that very same deregulated free market dogma that fuelled the recession in the first place.

I would avoid, at all costs, cutting public spending on the grounds that the private sector can do it better. Public spending is a driver of economic growth. Take infrastructure for example. Private companies do not invest in infrastructure. The road and transport system, the electricity system, the telecom system, the postage system, the water and sewerage system, all have been built up through public spending. The failure of rail under private ownership is the perfect example.

Then there is the secondary infrastructure of any civilised society; the public services such as the health system, the libraries, the universities and polytechs. The stuff that supports the growth and development of people and supports and generates a highly educated and skilled work force. As economies grow, the demands become more complex and more expensive, but the services needed to support the new economy become more and more essential. Cuts in public spending are entirely justifiable when there is waste, but when they are cuts because of an ideological stance that public provision is bad and private provision is good, the result, as we have seen twice before in recent times, can mean economic collapse.

We can have an economy that is strong enough to pay our people well, and to stop the exodus of our most skilled workers in both the public and private sectors. We can build our productivity by a planned approach that I would expect a government to pursue actively. And it would include free education and quality education at every level and most importantly, it would not include selling our money earning assets to private interests.

It won’t be a brighter future if we can’t afford to turn on the lights.

Income Inequality Increasing

National’s strategy to lift us out of recession is creating high unemployment, low wages, few jobs, and no vision of a future that might lift our spirits. Labour will lift businesses, families and workers out of recession as we have done before.

Sadly since the current Government has been in office the number of families who can’t make ends meet on their income has increased and the number of families that need to go to a food bank continues to increase.

Last week I was invited to Super Grans in Masterton with Labour leader Phil Goff. We both were impressed at the dedication of the women we saw teaching young people how to prepare a nutritious meal from a food bank parcel.

The Salvation Army says it gave about 35,000 food parcels in the first six months of this year, compared to 53,000 for the whole of last year. Every week I am out listening to people in the Wairarapa and I continually hear stories of families below the poverty line desperately seeking help. The facts are out there on the streets, and at the social services agencies who are at the front-line in helping those most in need.

This reliance on the food bank to make ends meet also accompanies a growth in inequality between those who have grown in wealth and those who now have less. Inequality reduced from 2001 under Labour and continued to reduce throughout Labour’s last term, mainly as the result of Working for Families, but it’s returned sharply since the end of last year. A change of government has seen policy veer sharply away from active redistribution and the recent changes to income tax have favoured the better off.

The wealth of the 150 richest people in New Zealand increased by more than $7 billion last year, and every one of these people got at least a thousand dollars a week in tax cuts. The truth is that a small number of New Zealanders hold 50 per cent of our total wealth.

Massive income inequality was a factor in the great depression and was also a principal feature leading to the financial collapse of 2008. The high level of inequality created the opportunities that made it possible for many to get rich. They made decisions that they knew or should have known were dangerous and destructive to their institutions and the economy, and of course to themselves once the crash happened.

When the fruits of growth in productivity go disproportionately to a small part of the population, the result can only be disaster. In 1914, Henry Ford of Ford Motors doubled the wages he was paying to $5 (US) a day. He said he wanted his workers to be able to afford the cars they were making. He saw them as part of the population Ford was selling to. Today any company can make more profit by driving down the wages they pay but the result is economic disaster – and it is one which I see reflected in the Wairarapa electorate – the lowest paid electorate in the country. The trouble is that the workers of the Wairarapa are also the purchasers and consumers of the Wairarapa. They are the heart of the local economy.

High levels of inequality mean an increase in poverty and growing health and social problems - worsening mental health, a rise in addictions, obesity, teenage pregnancies, higher imprisonment, less trust, more murders and violence, worse social mobility, and the list goes on.

Professor of Public Health Philippa Howden-Chapman, from Otago University, recently showed that New Zealand's infant mortality rate before the mid-1980s was comparable to Denmark, but was now almost twice as high as Denmark. This is linked to inequality. As Professor Howden-Chapman says, "The period when our income inequality started to rise very rapidly ... there's a strong association with the way this terrible disease [meningococcal disease] took off in New Zealand. It should not occur in a developed country."

Labour is working hard to correct the imbalance created by National. Borrowing millions each week to fund tax-cuts, the bulk of which go to the top 10 percent of income earners in a recession is madness. Our undertaking to remove the tax on fresh fruit and vegetables is not just about lowering food costs. It’s about healthy food. It’s about good quality school lunches. It is part of Labour’s wider programme of support for families with young children.

The promise to make the first $100 of income each week tax free is also one part of a wider programme – some of which can be seen in the announced plan for a tax on capital gains. There will be a shift away from National’s tax benefits for the top elite. Income above $150,000 a year will be taxed at 39%.

Increasing the minimum wage to $15 has huge implications for our economy. It is a simple and obvious move which has a major effect on the local economy of every town in the Wairarapa electorate. $15 an hour is still close to the poverty borderline but the effect is not just on the wage earner, but also on the local economy. Small businesses are going broke because customers don’t have the money to spend. Any wage increase can lead on to an economy that supports jobs and growth.

If you’re in a hole... You don't sell your ladder!

The official period of the election campaign began on 26th August – three months before election day. Now you will see bill boards and TV promotions and information about issues that will help you decide.

I’m happy to say that many of the billboards you will see show my smiling face, with a big tick for Michael Bott. I have already had a few digs in the ribs about the tie I am wearing – pink. Perhaps it should have been red but there is nothing wrong with “passionate pink” for an image.

The other billboards coming your way include a promise to remove the 15% tax on fresh fruit and vegetables; to make the first $100 a week of you pay tax free; and to increase the minimum wage to $15 an hour. My favourite is the billboard against selling our state owned enterprises like the power generators : “When you are in a hole – don’t sell your ladder”.

The trouble with electioneering is that we have to get messages down to no more than the few words that will fit on a bill board. So my job in the run up to the election is to flesh out those billboards so that they mean more than what you get from the first hit; as I am constantly doing at meetings and at peoples front doors.

The undertaking to remove the tax on fresh fruit and vegetables is not just about lowering food costs. It’s about healthy food. It’s about good quality school lunches. It is part of Labour’s wider programme of support for families with young children.

The promise to make the first $100 of income each week tax free is also one part of a wider programme – some of which can be seen in the announced plan for a tax on capital gains. There will be a shift away from National’s tax benefits for the rich. Income above $150,000 a year will be taxed at 39%.

Increasing the minimum wage to $15 has huge implications for our economy. It is a simple and obvious move which has a major effect on the local economy of every town in the Wairarapa electorate. $15 an hour is still close to the poverty borderline but the effect is not just on the wage earner, but also on the local economy. Small businesses are going broke because customers don’t have the money to spend. Any wage increase will benefit not just the earner.

The National government’s strategy to lift us out of recession is creating high unemployment, low wages, few jobs, and no vision of a future that might lift our spirits. Labour will lift businesses, families and workers out of recession as we have done before.

THE FOURTH ESTATE, THE TONGUE THAT OTHERS LISTEN TO

In the middle of the 19th century, people began referring to the press as a fourth estate, referencing the fact that most parliaments had an area set aside specifically for the press, and recognising that the press was a distinct group within civil society. Some credit the origin of the term to Edmund Burke, who is said to have referenced the fourth estate when discussing the French Revolution, and Thomas Carlyle, a 19th century thinker.

Thomas Carlyle writing about the first estate in 1841 pointed out that the press had a powerful role in parliamentary procedure, shaping the will of the people and influencing the outcome of votes among the government, as well. Carlyle also argued that the press was an important part of a democratic society, saying that writing gives people “a tongue which others will listen to.”

The guarantee of freedom of expression and information is recognized as a basic human right in the Universal Declaration of Human Rights adopted by the UN in 1948, the European Convention on Human Rights. Article 19 of the 1948 Universal Declaration of Human Rights states:

Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.

The positive relationship between the growth of the free press and the process of democratisation is thought to be reciprocal. The core claim is that, in the first stage, the initial transition from autocracy opens up the state control of the media to private ownership, diffuses access, and reduces official censorship and government control of information. Once media liberalisation has commenced, in the second stage democratic consolidation is strengthened where journalists in independent newspapers, radio and television stations facilitate greater transparency and accountability in governance, by serving in their watch-dog roles to deter corruption and malfeasance, as well as providing a civic forum for multiple voices in public debate, and highlighting problems to inform the policy agenda.

Through this process, numerous observers have emphasized that a free press is valuable for democracy, for good governance, and for human development. This perspective is exemplified by Amartya Sen’s famous argument that in independent and democratic countries, the free press encourages government responsiveness to public concerns, by highlighting cases of famine and natural disasters. “...in the terrible history of famines in the world, no substantial famine has ever occurred in any independent and democratic country with a relatively free press.”

The independent media, Sen suggests, enhances the voice of poor people and generates more informed choices about economic needs and priorities echoed these sentiments when he was the president of the World Bank: “A free press is not a luxury. A free press is at the absolute core of equitable development, because if you cannot enfranchise poor people, if they do not have a right to expression, if there is no searchlight on corruption and inequitable practices, you cannot build the public consensus needed to bring about change.”

The Fourth Estate brought us news, presented opinions and often played the role of the peoples guardian, when it found abuse of power in one of the three branches of government. While not always completely objective, journalists are human, we expected truth, and at the very least we demanded a dearth of ideological paddling of particular political creeds.

As with business consolidations driven by economies of scale and profit so too with the Fourth Estate. 

The past twenty years have seen enormous consolidations occur at alarming rates throughout the corporate landscape. These machines are profitable cogs for their masters. Journalistic freedom, budget constraints have meant that little research now occurs within the fourth estate as journalists prefer their news "ready made."

Former British politician and commentator Bryan Gould has been thinking about this recently in relation to our Fourth Estate's seeming perpetual homage at the feet of John Key:

There are times when it seems that nothing can happen, either internationally or domestically, so far as our media are concerned, unless the Prime Minister is on hand to comment on it or otherwise certify by his presence that it is indeed news. He seems to serve the roles, variously, of national leader, moral guide, social commentator, sports journalist, pub drinking companion, comedian - and even politician. There is scarcely a television news bulletin which does not feature his appearance at some point in one or other of these roles.

There are dangers for democracy opines Mr Gould:

The consequences for our political system are more extensive than may be thought. It is not just members of the government who suffer from being denied a voice in the media. In a properly functioning democracy, politicians from all sides need to feel that they have a well-tried and reliable way of getting heard.

If that access is available only occasionally, both sides of the transaction get used to doing without it. Expectations are lowered. Understandings of what might be newsworthy are adversely affected by both media and politicians. Those who find that they are not regarded as worth listening to give up trying.

My own experience in the year or two before a general election in Britain was that I would be involved almost daily in a press conference - not just commenting on the news but trying to set the agenda and make the news as well. Both media and politicians got used to this. The result was a rich and varied diet of political news and views that helped to promote a healthy political climate.

With three months to go before our own election, I look in vain for that kind of debate. The deficiency is likely to get worse during the World Cup. It is not good enough to say that opposition politicians are not heard because they have nothing to say. How do we know?

No one can blame John Key for using his charm and likeability to the best advantage. The concern is whether the media have become so used to it that they are now constrained by it as well.

No one needs persuading of John Key’s value to his party and government, and it is inevitable and right that he should play a major part. But a strong and effective government needs more than a single foundation stone. The Prime Minister’s dominance, paradoxically, weakens his government and – by constraining the scope of the political debate - diminishes our democracy as well.

Labour leader Phil Goff has complained about policy debate not getting any sensible traction in the media at the moment. He is right. With our current journalists it appears that it is simply not their job to delve, probe or question, ploughing for truth, while well armed with information. It may be some time before we recover from the lack of analysis into the ideological games that are currently being played National Party politicians manipulating the levers of influence. Not one member of the Key Administration has been purposefully brought to task by anyone in the mainstream media. We have not benefitted from any vigorous investigative reporting on the creation of the financial train wreck created by unfettered free market greed and exacerbated by a Government who thinks the cure for this free market malaise is a further dose of the free market with a privitisation agenda. Where are our 21st Century versions of Brian Edwards, Ian Fraser or the crusading Pat Booth? The few who attempt such efforts are independent, and considered marginal. Their labours bear little fruit. If the mainstream media doesn’t pick up the story, its likelihood of gaining traction is minimal at best.

We need to clamor for a refurbishing of the fourth pillar so necessary in the sustenance of a healthy democracy. Currently any view opposite to that of the Government is not getting fair analysis from our mainstream media. Worse still the policies being pursued by the Government are receiving little analysis at all. It appears that far from an objective reporting of news, our media is actually partisan in shaping it and the risk is that our democracy will be the worse for it.

Flagship Wairarapa School In the Red for the First Time

Labour’s Wairarapa candidate Michael Bott is on a war-path after learning about the miserable funding for education in the Wairarapa.

Today after meeting the Principal of Greytown’s Kuranui College Bott was disturbed to learn that for the first time the school is running at a deficit for the financial year.

“I’m disturbed to hear yet another case of one of our major schools finding it financially difficult to function as a modern and well resourced school. Last month I visited Masterton’s flagship last chance school, Ohorere School which is facing closure due to funding cuts.”

Bott was disturbed to find that funding for alternative education, that is specialist education for vulnerable children with adjustment and learning difficulties was fixed by the Ministry at just $11,000-00 per child annually.

“That figure includes tax, so in reality that amount is substantially less (around $9,565-00). You couldn’t afford a fulltime specialist on that rate” Bott said. “Tragically if these kids don’t get help now they will wind up being graduates in our Polytech of Crime – prison.”

Bott says education is absolutely key to ensuring our kids and region have a good future.

“As a criminal lawyer I see too often the failures of our school system. Education is key to preventing this and our kids especially our most vulnerable are being let down by the systemic underfunding of education”.

I have been impressed with the resolve of our local schools to provide innovative outcomes for our regions students.

“As a local MP I intend to work tirelessly to push for our schools to be given the proper funding to do this job. Children are far too important to rely upon the current smell of an oily rag and number-8 wire approach favoured by the current Government,” Bott said.

Last chance education going under

John Key is about to close Masterton’s Ohorere Student Education and Transition Programme – a programme that takes at-risk students and (with a great deal of success), returns them to mainstream education.
Far from closing Ohorere, we need more of them. It is far wiser to spend $150,000 on a class of young kids in years 5 to 8 than spend 10 times that amount locking them away as adults.
Recently I had the privilege of visiting the programme, which is based in the old trout hatchery in Pownall St, Masterton. It is run under the umbrella of Masterton Primary School largely thanks to the efforts of Chris Webb and the work of Masterton Primary School principal Sue Walters.
Ohorere works with year 5 to year 8 children and their families for two school terms, with the aim of returning these children to mainstream education. If this school did not exist, these children would face being expelled from school and permanently excluded from mainstream education.
I was very impressed at the efforts of the staff and their stories of success, as these dedicated professionals helped give young kids hope and a sense of achievement.
Chris told me about ‘‘Pedro’’ a big boy (not his real name) who had just finished his time at Ohorere and had been living under a bridge in Auckland from six years of age. He was placed with whanau in the Wairarapa and was finding it difficult to adjust back into school. After two terms at Ohorere he was back in a mainstream class and doing well.
Ohorere aims to provide a ‘‘wrap-around service’’, with staff providing links to community and government agency help. What’s more the staff not only become mentors for students, they become friends. Chris commented about how he often goes to watch Pedro’s rugby games even though he has left Ohorere and gone back into the mainstream.
I think staff deserve to feel proud of what they do. This valuable educational tool is currently running on just $150,000 annually. In short, like a number of families in the Wairarapa, it gets by on the smell of an oily rag. As Sue observes, the school really needs an operating grant of $200,000 annually.
Before the last election John Key recognised the importance of Ohorere when, during a flying visit to Masterton, he dropped by and filmed a promotional video there. He spoke about the importance of the school and he told the students how ‘‘he was really proud of them’’. Now, however, as Prime Minister, the photos and smiles have served their purpose and he now presides over an administration that is engaged in cutting funding for Ohorere that will actually see it close.
I think Ohorere is a valuable tool in turning young lives around that not only benefits the students but also society as a whole. For the past 10 years I have worked as a lawyer, predominantly practicing in criminal law. In the course of my job I have had a front row seat for seeing how extraordinarily efficient our criminal justice system and our society is at perpetuating fresh criminals.
To be blunt, prison, as a cure for offending, mostly does not work. There is a considerable risk that a prison sentence might actually make the factors associated with reoffending worse. By aggravating the factors associated with reoffending, prison sentences can prove counter-productive as a contribution to crime reduction and public safety.
This does not mean that I do not believe in prison, far from it. Society does need protection from dangerous people, but before we bang someone away it makes sense to see if we can put steps in place to ensure that individuals don’t offend in the first place.
A common feature among a large number of the criminals I have dealt with is a lack of prosocial peers and limited education, combined with poor literacy and numeracy. This failure at the start sets the course for adulthood.
This is why I can see the immediate value in schools such as Ohorere. The June 2011 ERO report stated that ‘‘it is evident that five out of six of Ohorere’s students improved their learning and behaviour during their [time] in the unit. Moreover the progress these students have made has continued since they re-entered mainstream education’’.
The Wairarapa can feel justly proud of the efforts of Ohorere. As Sue says, Ohorere is the last chance for these kids and it actually works. If this school closes these young people are going to be lost.

Published in the Wairarapa News 24 August 2011

Capital Gains Tax - Time to Have the Guts To Prepare For Tomorrow

The feedback I’ve had from my article on Labour’s proposed capital gains tax confirms wide support for the tax. Naturally, those who currently benefit from not paying tax on capital gains aren’t keen on the idea. But let’s look again at why a capital gains tax makes sense for everyone.
Firstly, it corrects a major loophole in our tax regime. As a matter of economic reality it makes no sense that people who make money through a capital gain pay no tax, but those who make money from wages or a business do. We must close this gap not just for ourselves, but for future generations. Consideration of the burden being placed on future workers to help fund the retirement needs of our elderly in the decades to come doesn’t seem to be on the Government’s agenda. This is appallingly shortsighted given the aging population we all know is coming.
Concerns about how we are going to provide care for our elders was brought home to me during a visit to Carter Court retirement home last week. I was impressed as the Chris the manager and Board members showed me possible plans for expansion of this important community facility designed to meet our need as our population ages. It is a real worry that our population is aging at a rate that we are not preparing for in terms of residential care beds, tax base to cope with the increased demand for national superannuation and the need for expanding health facilities.
It is imperative that we close the obvious gap in the tax base from a lack of capital gains tax, otherwise we will continue to rely too heavily on wage earners and hikes in GST to fund the huge investment needed in care facilities, let alone superannuation payments.
The recent release of the Ministry of Social Development’s report on trends in household incomes was referred to by the Prime Minister because the report showed the gap between “rich” and poor” appears to have narrowed in the last couple of years. The graph in the report showing a decline in inequality was based on annual statistics produced before the rise in GST and lowering of top tax rates so doesn’t show the true picture.
However the report does highlight the issues I have raised about the need to act now to plan for the rising cost of caring for our elderly. The report states that NZ Super payments have been flat in real terms since the mid 1990’s. As a percentage of the median household income, NZ Super has fallen from 67% in 1994 to 51% in 2010. Also 40% of people over 65 are totally reliant on NZ Super and the next 20% are 80% reliant. So affordability of NZ Super in the decades to come is vital.
The Retirement Commission’s policy review published in December 2010 called on the Government to consider the long-term affordability of NZ Super. From 2020 baby boomers will start to go onto the NZ Super roll, and Commissioner Diana Crossan is concerned that changes need to be made so that the scheme remains affordable. I suspect most of us would argue that at least looking at these issues is sensible. Why is the Government refusing to budge?
PM John Key said he’d resign before agreeing to increase the retirement age – this seems a random sort of promise to make when he finds it palatable to sell off assets all New Zealand tax payers have paid for to solve a Government debt problem that doesn’t really exist (recall from past articles I have written that NZ’s government debt is relatively low, peaking at 30% of GDP post Christchurch earthquakes compared to the likes of Italy at 120% and the US at 100%).
Could it be that the affordability of NZ Super is a problem we don’t really have to face for another 9 years, so making a promise about it was more about needing to make a promise about something at the time, with little risk of it coming back to bite in the next few years? I wonder…
Diana Crossan warns “decisions will need to be announced and legislated well in advance. If there is no commitment within the next 10 years, the total cost of NZ Super will continue to trend upwards and more severe changes might need to be taken later, putting the long term future of NZS itself at risk”.

Leadership popularity contests aside, you have to admit Labour’s policies show more guts and determination to secure NZ’s future prosperity than anything “Smile & Wave” has come up with.

References: Robin Oliver, Good Returns website 18 September 2000
Ministry of Social Development report “Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2010

Rugby World Cup & the Homeless

The Auckland City Council has recently hired a Security Firm for $20,000 to move homeless people on from the central city area during the Rugby World Cup. Palmerston North City Council was reported moving to rid it's street of beggars before the same event. Evidently New Zealand now exists for some people, but not others. To my mind these actions speak of the widening gulf that exists in our society between the haves and the have-nots.

Every local territorial authority has bylaws relating to the use by citizens of public places within their area. The citizens of Auckland and Palmerston North, like all cities comprise a diverse mix of people and types. Some of their citizens are also homeless.

Like most large cities of the English speaking world, vagrants and their associated social problems, including alcoholism, have been a regular feature during the development of modern society. Until recently, their public presence has been fairly unproblematic, with the police tending to use informal measures to deal with them, preferring to ask them to ‘move on’ rather than invoke formal procedures of arrest, prosecution and so on where they had done nothing other than have a public presence. Earlier research found that the police tended to adopt a ‘peacekeeping’ rather than law enforcement approach to such people. As Bittner (1967: 714) put the matter, ‘peace keeping procedure on skid-row consists of three elements. Patrolmen seek to acquire a rich body of concrete knowledge about people by cultivating personal acquaintance with as many residents as possible. They tend to proceed against persons mainly on the basis of perceived risk, rather than on the basis of culpability. And they are more interested in reducing the aggregate total of troubles in the area than in evaluating individual cases according to merit.’

The way in most cases to reduce the ‘total of troubles in the area’ was to ask their skid-row customers to periodically move on, pushing any risks they posed out of sight. Arrest followed by prosecution might simply add to the ‘total of troubles’, solving nothing, wasting valuable police time and resources in a process that became, as it were, a ‘revolving door’ for all concerned: ‘drunks were a drain on resources which could be used more productively.'

Added to this now is the desire to 'put on a good face' for the global audience watching the Rugby World Cup. There is after all, no poverty in New Zealand? Hence as with India and the Commonwealth Games we are to be treated to local councils pursuing policies of ‘reupholstering’ urban domains, particularly city centres (and frequently gentrifying the former skid-row locations), with a view to ensuring that, as was the case in Wellington, ‘the city must be walkable, clean and safe, with people living, working and spending leisure time in the city’ (Statement of Proposal, Liquor Control Bylaw: 2).

We will see Police enforcing certain bylaws, such that Courts will become conduits for, some of the homeless community who will always be appearing, either in relation to a breach of liquor ban or some other minor public order type of charge during the Rugby World Cup as a result of theses purging sweeps.

As a lawyer who regularly appears in Court on behalf of clients I have begun to question whether the courts of criminal justice are the appropriate forums to address the issues around street people.

General Principles
The Local Government Act 2002 makes it a requirement that all bylaws have to comply with the BORA. In this sense a limit on a fundamental right will only be upheld if it survives section 5 BORA scrutiny. To qualify as a justified limitation, any inroad into a BORA right must be (a) prescribed by law and (b) reasonable and demonstrably justified in a free and democratic society. Once a prima facie BORA infringement has been identified it is up to the local body promoting the infringement to prove that the section 5 requirements are met.

BORA rights are rights not privileges to be granted by officials. A right may be regulated, but only in ways authorised and in accord with section 5 BORA described above. There is the further requirement that any restriction on a BORA right only restrict that right to the least degree possible consistent with the demonstrably justified limitation being pursued.

Section 6 - Interpretation consistent with the New Zealand Bill of Rights Act 1990 (“BORA”)
Recent judicial pronouncements demonstrate that the courts are utilising the direction in Section 6 of the Bill of Rights Act to accord preference to meanings of enactments that are consistent with the rights and freedoms contained in the Act. In Baigent’s Case for example, the Court of Appeal applied Section 6 in conjunction with sections 3 and 21 of the Bill of Rights Act when interpreting Section 6(5) of the Crown Proceedings Act 1950 determining whether proceedings could be brought against the Crown for a search in bad faith by the police. The Court concluded that “[i]t is consistent with that affirmed right [right to be secure against unreasonable search and seizure] to interpret s 6(5) of the Crown Proceedings Act as not protecting the Crown from liability for the execution of a search warrant in bad faith” (Baigent’s Case [1994] 3 NZLR 667, 674 per Cooke P (as he then was)).

In Moonen v Film and Literature Board of Review (1999) 5 HRNZ 224, 234 the Court of Appeal stated that “where an enactment can be given a meaning that is consistent with the rights and freedoms contained in the Bill of Rights, that meaning shall be preferred to any other. Thus if there are two tenable meanings, the one which is most in harmony with the Bill of Rights must be adopted” (Moonen para [16]). When considering the meaning of the words “promotes or supports” in Section 3 of the Films, Videos, and Publications Classification Act 1993 the Court emphasised that a Bill of Rights consistent approach was required and that those words had to be given such available meaning which impinges as little as possible on freedom of expression.

The Court of Appeal went a step further in the recent decision of R v Poumako [2000] 2 NZLR 695, 702:
The meaning to be preferred is that which is consistent (or more consistent) with the rights and freedoms in the Bill of Rights. It is not a matter of what the legislature (or an individual member) might have intended. The direction is that whenever a meaning consistent with the Bill of Rights can be given, it is to be preferred.

While remaining within the appropriate realm of statutory interpretation, the courts continue to ensure a level of protection for human rights in New Zealand similar in large measure to that achieved in jurisdictions where a Bill of Rights or its equivalent has the status of superior law.

Compliance with the Bill of Rights Act
The legislation passed by a local body authority is subordinate legislation. Whereas Parliament is able to pass legislation despite a report from the Attorney General under Section 7 of the BORA indicating a conflict with BORA. Local bodies do not enjoy this power, Parliament has expressly stated that this is so in section 155 of the Local Government Act 2002.

Section 5 of the BORA provides that the rights and freedoms contained in the Act may be subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society. In determining whether a limitation is “demonstrably justified”, the Court of Appeal in its above mentioned Moonen decision set out the test to determine whether or not a limitation is “demonstrably justified” (Moonen para [18]):
(i) Identify objective that the Legislature was endeavouring to achieve by the provision in question.
(ii) Assess the importance and significance of that objective.
(iii) The way in which the objective is statutorily achieved must be in reasonable proportion to the importance of the objective.
(iv) The means used must also have a rational relationship with the objective.
(v) In achieving the objective there must be as little interference as possible with the right or freedom affected.
(vi) The limitation involved must be justifiable in light of the objective.

The Legal Issues Re Freedom of Expression

Forcing people to move on, from a public space, because they have no private space of their own, or because they ask for alms is to my mind offensive and is a blatant fetter on a person’s section 14 BORA right to freedom of expression.

Begging and the Right to Freedom of Expression
Pursuant to section 14 BORA all persons have the right to freedom of expression, including the right to seek, receive and impart information through any media, including orally, in writing or in the form of art.

As a first principle I consider that the proposed proscription and criminalisation of begging to constitute an infraction of the fundamental human right to freedom of expression.

Such restrictions would violate the right to freedom of expression in two basic respects. First, the proscription of begging renders peaceful verbal or written communication unlawful. Anti-begging provisions apply whether a person adopts passive begging techniques (such as sitting or standing in one spot with a cup, a hat or a sign) or more active begging techniques (such as approaching passers-by and entreating them to donate money). In each case, it is the act of expressing a need for money, rather than the conduct associated with that expression, that is the target of anti-begging provisions.

Second, anti-begging provisions infringe the right to freedom of expression in that they proscribe the imparting (and, by extension, the receiving) of communications regarding the way in which society treats its poor and disenfranchised. In many cases, begging amounts to an expression of poverty, alienation, homelessness, dislocation and the effects of inadequate social security, public housing and public health systems. In the US, many anti-begging provisions have been struck down or narrowed on the basis of inconsistency with the First Amendment right to freedom of expression: see, eg, Benefit v Cambridge, 424 Mass 918 (1997) per Greaney J:
"We conclude that no compelling State interest has been demonstrated that would warrant punishing a beggar's peaceful communication with his or her fellow citizens in a public place. (6) As one writer on the subject has observed: "At the least, for some panhandlers, begging is a way to augment their meager sources. For a few, it may be their only source of income. Panhandling is therefore close to the center of the personal liberty of some people in contemporary American society." Munzer, Response to Ellickson on "Chronic Misconduct" in Urban Spaces: Of Panhandlers, Bench Squatters, and Day Laborers, 32 Harv. C.R.-C.L. L. Rev. 1, 11 (1997). The statute intrudes not only on the right of free communication, but it also implicates and suppresses an even broader right -- the right to engage fellow human beings with the hope of receiving aid and compassion. The streets and public areas are quintessential public forums, not because they are a particularly convenient platform for expression, but because they are the necessary, essential public spaces that connect our individual private spaces, from which we legitimately may exclude others and likewise be excluded, but from which we almost all must inevitably emerge from time to time. If such a basic transaction as peacefully requesting or giving casual help to the needy may be forbidden in all such places, then we may belong to the government that regulates us and not the other way around."

The criminalisation of begging denies to persons who beg a form of expression that may be necessary for survival. It also denies the truly poor the right to impart, and society the right to receive, information regarding poverty, inequality, structural inadequacies and the need for urgent social reform. By silencing people who beg, anti-begging provisions stifle debate about social policies regarding the poor.

CAPITAL GAINS TAX – AN OPPORTUNITY FOR A FAIRER SYSTEM

John Key has this vein that runs along his forehead and every time someone talks about Capital Gains Tax it bulges. For some strange reason he is opposed to everyone paying their fair share, and it puzzles me. Virtually every other developed nation has a form of Capital Gains Tax, the name might vary and the amount people pay might fluctuate but as a tax it is fair and equitable.

So why is Mr Key so opposed to it and why is the National/ACT government currently jumping up and down, spreading myth and rumour saying it will be the end of the world? Well it is simple it is their rich friends that will be affected and not the average man/woman on the street.

Respected economist Gareth Morgan has acknowledged that a capital gains tax makes sense. As Morgan states: “Our redistribution regime is broken, it cannot be rectified with still more patches to a rotten core. We have a chronic misallocation of capital. Investment in capital here has very little to do with the taxable income generated, in some cases it is inversely proportional, people with the greatest means to pay tax are commonly asset-rich and deliberately income-poor. The time for a tax on capital is overdue.”

The first thing is that it is a matter of fairness. If I go out and work hard all year for the average fulltime wage, I get $48,000 a year gross and pay $8,400 tax. If I have a business and it makes $48,000 profit in a year, it pays $13,400 tax. If my only income is interest and dividends and I get $48,000 a year I pay $7,400. If I have some investment properties and their capital value appreciates by $48,000 in a year and I sell up, I pay no tax.

Now lets not forget that it is tax on the capital gain that you pay the tax on, not the full sale price of the property. Let’s look at a possible scenario. You buy a property for $200,000 you then do it up which costs you $20,000 you then sell it for $300,000. So to work out the capital gain you need to look at the investment of $220,000 and the $80,000 you make when you sell it. So it will be 15% of the $80,000 that is taxed. So $12,000 paid in tax and you make $68,000 after tax on your original investment.

Now lets compare it to someone who is a wage or salary earner on $80,000. That person would have paid just under $20,000 in tax or 20% of their income. So even with a Capital Gains Tax the property investor would still be better off than the wage earner paying PAYE by $8,000.

The absence of a Capital Gains Tax has created huge distortions in our economy. These distortions are hugely damaging to our economy. Because we have taxed income but not capital, investors are massively motivated to put their money into assets they hope will grow in value rather than those that produce income. Hence we have seen massive growth in unproductive property investment, which has made owning your own home unaffordable for a large number of young people starting out.

Just as important though is the negative impact that not having a capital gains tax has on the productive economy. Dairy farming is a good example. Most farmers take on massive debt to purchase land. Farmers work extremely hard, take minimal income out of the business and try and pay off the debt as quickly as possible. At the end many hope for the big tax-free payoff when they sell up.

Financial commentator Rod Oram states that the result of this has been that the dairy sector has quadrupled its debt to $43 billion in the decade before the current recession. This led to skyrocketing land prices that were uneconomic when compared with competing farms overseas. Good US pastoral land for example is one-quarter of the price here. This growth in New Zealand pastoral land prices added little to industry performance.

Essentially a number of farmers now farm for capital gains. The result is that ownership patterns are changing with young farmers gradually being priced out of the market with a growing number of farms now being foreign owned.

Capital Gains Tax is a great way of levelling the playing field. It gets the people at the top to pay their fair share. Labour is advancing a tax policy that most economists, the Reserve Bank, and the Government’s own Tax Working Group endorse. It is not novel New Zealand will just be coming into line with the rest of the world. Very few countries don't have Capital Gains Tax and most of them are tax havens such as, Belize, Cayman Islands and Isle of Man.

At 15% New Zealand will remain competitive against most other countries, over a period of time it will realise a regular income of a couple of billion dollars a year and this can be invested back into public services, removing GST from fruit and vegetables and finally developing a tax system that is fairer and will provide an income stream for the government that will enable it to significantly reduce foreign debt without selling our income generating assets.