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Grey Hospital re-build funding explained


Wednesday 13 August 2014
Grey Hospital re-build funding explained

Recent discussion about the funding of the Grey Hospital re-build may be confusing for some people but the position is actually very simple, according to David Tranter, Democrats for Social Credit Party’s Health Spokesman.

The proposed $74 million loan (including the latest increase of $7 million) at an average of 5 percent interest for 23 years will cost $85 million interest.

On the other hand, if government used the Reserve Bank (which it is entitled to do under the Public Finance Act 1989) to provide this at 0.15 percent (the administration rate which is applied to the government's existing DHB loans) the total outlay in interest would be $2.55 million, a saving to the DHB and the taxpayer of $82.45 million. Of course, in either case that leaves the matter of the $74 million debt hanging over the DHB.

Given that the DHBs are always short of money one can only presume, in the absence of any comment from Government, that they intend the DHB to be permanently stuck with this debt - and the interest. Imagine what health services could be provided on the Coast with an extra $82.45 million over 23 years.

Now for something equally interesting. A 2012 report by the International Monetary Fund analysed a proposal by eminent economists Henry Simons and Irving Fisher who stated, “Allowing the Government to issue money directly at zero interest, (in New Zealand's case, through the Reserve Bank) would lead to a reduction in the interest burden on government finances and to a dramatic reduction of (net) government debt.....". In other words, a win-win situation for everyone - except the overseas-owned commercial banks who rake in the profits.

So whose side are successive New Zealand governments on - Kiwis or the international rip-off merchants? Why won't Bill English - and a succession of past finance ministers - adopt this method of funding? Why do they force DHBs - and other organisations undertaking public works - to operate under this crippling finance system? And again I ask, why have Tony Ryall and Bill English evaded my questions on this matter for two years?

Do they want DHBs like the West Coast's to become bankrupt whereupon they can blithely claim that since DHBs have "failed" they must be put up for sale to the highest bidder as another step in successive governments' over-riding privatisation agendas?


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