Friday, 24 June 2011

We aint broke and we can fix it

When I talk to people in the Wairarapa electorate about, for instance, restoring the money that has been cut from early childhood education, I am asked “But how can we afford it? The country is deep in debt.”
The short answer to this question is “Wrong”. Read on and I’ll tell you why.

There is nothing complicated about issues related to the country’s debt; the principles are the same as managing your own household debt. If you owe $100,000 as a mortgage and your house is valued at $300,000, you’re secure, provided you can make regular repayments over time. If you owe $300,000 and your house is worth $100,000 you’re in trouble.
The government is in the “secure” bracket. In December 2010 the government held $2 billion more in overseas assets than debts. (So selling our assets to pay for government debt is false economy. All we would be doing is selling off what is now a major government income earner.)

Another aspect of government debt management can also be explained by looking at simple household economics. Apart from property value, how secure you are with your mortgage also depends upon your income. Even if your house is worth more than you owe, you still need to be earning enough to make the regular payments. The same applies to government. The productivity of the country is in a way the government’s pay packet. Even the tax income is dependent upon productivity because that is what pays the wages. When you compare our government debt with our productivity, ( that is our ability to cope with the debt) our debt is the same as Australia’s and tiny compared with that of the major European and North American countries other than Denmark, Sweden and Finland.
So can the country cope with our government debt?

The Christchurch earthquake was every sort of disaster, including an economic disaster. It will be a long term disaster for many Christchurch households but a short lived one for the larger economy. Re-building Christchurch, and all the production needed (from construction work right through to the manufacture of bathroom ware, curtains and carpets) will increase New Zealand’s productivity to near record levels. The Reserve Bank predicts that productivity will rise steeply in 2012. NZIER predicts a drop in unemployment in the same time scale but not such a marked change.
None of this means that nothing needs to be done. It would be great if we could be in Finland’s shoes – they have a massive credit. But it does mean that we do not have a crippled economy and there is room to re-prioritise spending, particularly in spending on those things that matter – health, education, family support, research and development, employment.

In spite of the fact that government debt is not at crisis level, we do have another debt problem. Private debt is getting out of control. This is the debt to overseas interests by big business and the banks. In some cases it is as simple as borrowing to finance people’s credit card debt or a loan from the bank being underwritten by overseas finance.
It is when government debt and corporate debt are lumped together that the outlook looks scary, but you can’t use corporate debt as a reason to sell government assets. That is as silly as my selling my house because the neighbour is in debt. It doesn’t improve my situation, and it certainly doesn’t help the neighbour.

Private debt is a serious problem – too big and too complex to go into here. It comes from the globalisation of finance, but nobody wants to wind back to the 60s when you needed a permit to take money out of the country or to import goods. But it must not be used as an excuse to slash government spending and to justify the National / ACT agenda of cutting social services, education and development.

Tuesday, 21 June 2011

New Zealand’s Hidden Shame!

There were two startling reports this month which, when put together, are most concerning..

The first is that thousands of children are going hungry, in New Zealand each and every day. KidsCan, the programme for providing breakfasts at schools, is failing to meet the demand. Not just failing – falling so far behind as to create a major crisis. The problem is increased demand.

The programme to provide food in schools has been running for six years and this year 11,000 children a day will miss out on food. The chief executive of KidsCan, describes the poverty causing this crisis as “New Zealand’s hidden shame”.

Given that two of the causes of poverty are low wages and lack of jobs, the Wairarapa, under the policies of the current government, is either already hit by this crisis or about to be hit. My experience from door knocking in the electorate over the past few weeks shows that the crisis is here.

The other report puts it all in perspective. Finance Minister Bill English has reported that wages, when the tax cut is included, rose faster than prices in the year to March. His report notes that wages rose 7.1 per cent once the tax credits are included. I suggest that you should check your pay slips.

The fallacy of this argument is that Bill English cites increases in the average wage which includes salaries which most Wairarapa workers can only dream of. These are the wages that received the benefit of huge tax cut. However only about 10% of the population received them. To suggest that the population at large has had a 7% increase in income is trickery and just plain wrong.

In the 8 months from September to May food prices rose by 20% and families, rather than receiving a 7% increase in pay, are struggling andthat’s only half the story. Throughout the electorate the number of people who are unemployed and dependent upon a benefit is increasing rapidly.

Each week I am out knocking on doors, and always asking people how they are coping. In a way I dislike asking that question, because people want to be able to say that they are managing and many do tell me they are. Then they tell me about the cost of food and then the full story comes out. One woman who had three kids was in despair. Her face showed the strain as she recounted her story. She lives on potatoes and bread she bakes herself. She can't afford to run a car, so carries all her groceries home by hand. Some Monday's her kids’ stay home from school as she is ashamed to send them off without cut lunches.

Basic food items such as cheese are regarded as luxuries by a lot of people in the electorate. One mother told me that she "has enough to buy her bread, meat and some milk, but cheese is a rarity”. It is sad that in an area surrounded by dairy farms milk has to be used sparingly. From many front door chats I have heard the same thing - the rising cost of living is not only using up what little money people have each week; it is now eating into what little savings people have and is driving them into debt.

The Government’s cutback policy has as one of its stated aims to reduce debt. In reality it is driving more and more people deeper and deeper into debt. In New Zealand, debt to a bank is largely financed by overseas borrowing. Hang on! – isn’t that the economic crisis we are trying to struggle out of?

The crisis we face is threefold: Huge cost increases, few jobs and low pay. In the Wairarapa electorate we are suffering from the three more than any other electorate in New Zealand. The National led government, supported by our current MP, is doing nothing about any of them. (There was an attempt by National “to raise wages to the level of Australian pay”. Don Brash was put in charge of developing a plan – and that was the end of that.) The intelligent response to a recession is not to go down with it, but to build pathways out of it.

Labour is committed to rebuilding the country’s skills, restoring research and development programmes so that we can support business and compete internationally, reducing the tax burden on low paid people, banning the sale of the country’s assets so as to stop price gouging by private owners, and building an economy that can support growth and development.In addition we will remove GST on fruit and vegetables which will be a huge help to many local families.

Above all, Labour is committed to support for families so that children get a good start in life – in education, in health, in access to support systems. Full support for families in the early childhood years was the first policy announced by Labour and continues to feature as the priority.

Wednesday, 8 June 2011

When the Cows Come Home

Labour is proposing that agriculture will be covered by the Emissions Trading Scheme from 2013. That has generated heated discussion, much of which seems to be missing the point.

There is an international crisis. There is a New Zealand crisis, and there is an agreed goal and purpose. It is a goal that both Labour and National are agreed on; if New Zealand is to maintain its status as a responsible country with a clean green image, then there must be a radical cut in our greenhouse gas emissions. That is a done deal. It stems from our being a party to the Kyoto Protocol.

The Kyoto Protocol is an international agreement that is based on penalties and rewards. Countries can actually trade both of these with each other, so that a country which increases its toxic emissions can buy a “Get out of Jail Free” card from a country which has reduced theirs. So on an international scale there is still a balance, and even more important, the polluter has had to pay as a reward to the non polluter.

If a country pollutes more than it did in 1990 it will need to buy from other countries to cover the excess. If a country emits less than it did in 1990, it can sell its spare allowance to other countries (or “bank” them for future use). New Zealand is in the former category. We pay.

If that cost isn’t charged back to the New Zealand polluter then it is the tax payer who pays and there is no incentive for polluters to cut their emissions. There is already a charge levelled against transport, and major industries and power generators are charged on the basis of a “free” allowance and a charge on any increases in emissions beyond that covered by the allowance. These free allowances reduce each year until eventually abolished. There is no point in the scheme if we tax payers pay up and the polluters can avoid their obligations and continue to pollute.

Labour introduced this scheme. Agriculture was to come into it in 2013 (with the same gradual reduction of free allowances as described above). National however has extended that date to 2015. They have also extended the date on which free allowances finish; from 2030 to 2050. Labour states that this move takes away the urgency and we cannot afford to slacken.

Bringing the start date for agriculture back to the original 2013 will mean that we gain another important benefit. The money saved by reducing the load on taxpayers will be used to fund the restoration of the tax credit for research and development which was killed off by National. Research and Development funding is vital if we are to find ways to reduce greenhouse gasses. If we can fix the problem, there will be no cost to farmers and the entire country will benefit.

Mind you, from 2013 to 2017, the free allocation for farmers will cover 90% of the emissions leaving only 10% having to be paid for. That is not a huge toll on the agricultural sector.

One of the difficulties we face is that the delay we have already experienced since we signed the Kyoto Protocol has meant that there has been little urgency in researching and applying sustainable alternatives. To make matters worse, this has happened at a time when Fonterra payouts to farmers has meant a huge increase in dairying throughout the country. Fifty percent of New Zealand’s greenhouse gasses come from the agriculture sector. We need to act now.

There is a massive need for research – there are already innovative ideas for reducing methane emissions, and practical farming methods to reduce soil pollution and run-off. Labour’s plan is to tackle the research issue, and create strong incentives for farmers to embrace change.

Being “clean and green” is also an image we have to be seen as taking seriously if we are to avoid criticism from our competitors for being misleading and inconsistent with our “New Zealand 100% Pure” marketing campaign.

With National’s plan we will be twiddling our thumbs ’til the cows come home and all taxpayers will be picking up the bill.

Wednesday, 1 June 2011

National - out of touch with ordinary people

A few days ago I went with some mates to Dannevirke and spent the morning and afternoon door knocking as part of our campaign for Labour in the Wairarapa. We listened to local people telling us how they were coping under a National Government. It became clear; Dannevirke and its people like most communities in the Wairarapa have been poorly served under National as a result of Key's policies.

The National/ACT agenda of borrowing to fund tax cuts to the rich while cutting back on social spending and benefits is devastating middle and lower income New Zealand. Rural towns like Dannevirke relied in the past on a few large employers like the carpet mills and freezing works. One by one these have been closed or outsourced. No one has come to fill the void. The result is that generations who grew up in this beautiful rural town are now unemployed. Their parents are elderly and there is no economic future for the people in that community. Many don't even have the money to relocate for work. But if they do, they leave elderly parents behind and the place slowly becomes a ghost town.

Things that you and I would regard as staples such as cheese and lamb are regarded as luxuries by a lot of people in Dannevirke. One mum told me that she "has enough to buy her bread, meat and some milk, but cheese is a rarity”. It is sad that in an area surrounded by dairy farms - mums use milk sparingly and cheese is regarded as a rarity. As I knocked on door after door I heard the same thing - the rising cost of living was not only using up what little money people had each week, it was now eating into what little savings people had and was driving them into debt.

The Government’s cutback policy has at one of its stated aims to reduce debt. In reality it is driving more and more people deeper and deeper into debt.

I walked past the local National MP's office. It is only open 6 hours a week. Most people have never seen him. No one I spoke to could ever recall him coming to talk to him or her to ask how he or she was doing? These people are hurting and desperately need a hand. All they get is the Prime Minister crowing about how great the Government is doing and an absentee MP. It is as if National lives in a bubble divorced from the realities of what life is really like for people in rural New Zealand towns.

Up one street I spoke to a young single mum. She had applied for 100 jobs and had been knocked back every time. Cheese was something her kids hadn't tasted since last year. The temperature had dropped to 9 degrees, but there was no fire in the hearth. Wood was not an essential.

One woman who had three kids was in despair. Her face showed the strain as she calmly recounted her story. She lives on potatoes and bread she bakes herself. She can't afford to run a car, so carries all her groceries home by hand. Some Monday's her kids’ stay home from school as she is ashamed to send them to school without lunches.

Across the road there was a block of flats. At the first door I met Victoria. She was a small woman who was middle aged. She was married to Troy. They have no kids. She told me that Troy used to have a job as a handyman at a police station. They both had been looking for work for three years but had found nothing. She is one of life battlers. She told me of the despair and hopelessness they feel with life under National. What little they had saved has now long gone. Some nights she said she just sits and cries.

National has done nothing to help everyday New Zealanders. It is common when I am out door knocking to hear similar stories. People are being let down by this Government which is arrogant and out of touch. It appears that despite the smiles and waves this Government has only one aim - to make those at the top richer while ignoring how life is for everybody else.

All of the people I spoke to had had enough. They only heard of Labour's policies because people like myself and my team went to speak to them. They won't hear this hope from the media, which is pro-National and is just as out of touch as Government.

As Labour's policies around food and taxation were explained to them they experienced something they hadn't felt in a long time - hope, and the fact that someone in politics actually cares about them. We need to get up and start telling our communities this simple truth - that only Labour really cares and will stand up for a fair deal for everyone.