The Letter – Monday, 18 April 2006

The Letter Limited - www.theletter.biz

The Haps

Parliament is in recess. Thousands have been dropped from hospital waiting lists only we no longer have waiting lists. Yet another treasury proposal for capital gains taxes on overseas earnings. Looks like a soft landing for the economy.

Pretty sick.

This week Muriel Newman in her weekly column Newman Weekly www.nzcpd.com gives some graphic statistics on the nation's hospital system. There are around 180,000 people waiting for an operation. As no one is to wait more than six months, administrators simply send patients back to their GP. There are now 12,000 health bureaucrats, one for every hospital bed. Despite an increase in hospital spending of around 40%, elective surgery has increased by just 8%.

Private v public

The private system has always been more efficient but the gap is increasing. The cost of a night in intensive care at Auckland Public Hospital costs $3901, while at the private Auckland based Ascot Hospital it is just $929. The conclusion of the Gibbs Report into health, now 20 years old, is still valid. Gibbs found that the most efficient public hospital was more inefficient than the most inefficient private hospital. Answer; use the private system for all elective surgery.

Most concern

In the latest polls health has again become the issue of most concern - the wisdom of crowds. It is a much more difficult issue than superannuation. A health system that today is not coping will have no chance of providing for aging baby boomers.

No Debate

The Government refuses to debate the problem by denying there is one. The Opposition's answer is to call for another drug to be added to Pharmac's list.

Soviet model

Hospital Boards used to be connected to their local community and had a high degree of autonomy. Labour campaigned to restore elected boards and local control. But now the boards are there to do the Minister's wishes. A directive by new Minister of Health Pete Hodgson dated 27 March stated that no MP may visit a DHB without ministerial "permission". If given a briefing the DHB is "to provide the Minister with a written report on the nature and details of the visit." Not one board protested at this removal of even the pretence of local autonomy. It took a complaint from ACT MP Heather Roy to the Auditor-General for the Minister to claim the directive was unauthorized. However the "corrected" directive of 6 April says that "it is normal practice for them [MPs] to approach the responsible Minister and advise of their intention to visit." (False, MPs have never sought ministerial approval to visit hospital boards). DHB's are advised to "please ring or email the Minister's office and check that the requesting MP has advised the Ministers office." "Following the visit, we would appreciate a written report". Copies of the directives can be read at www.theletter.biz/directives.

Ructions in the Red City

The big political news in Christchurch has been the attack on the Labour Mayor Garry Moore by the city's Labour MPs. The mayor is attacked for having favoured the Council's proposal to have the management of the Port of Lyttelton run by the Chinese international port owner Hutchison Port Holdings. The Labour MPs accuse the Mayor of wanting to reduce workers' conditions, a charge he angrily denies. In fact Lyttelton's productivity has been amongst the worst of all the ports because the city council has over the years refused to introduce labour efficiencies. The Letter wonders if the attack on the Mayor has more to do with prostitution law reformer and Chief Whip Tim Barnett's desire for the Mayor's job.

Decriminalisation did not work

As an interesting aside, everyone now agrees that the prostitution law reform has been a failure. There is more prostitution, more street walking and younger girls are involved.

Capital Gains Tax

The managed funds industry, which makes up for its lack of performance with its skill in lobbying, has succeeded in gaining concessions for the industry at the expense of the individual investor. The penalty for investing outside Australasia is horrendous. There is not just a capital gains tax but the tax has to be paid on unearned gains. The investments need to be revalued in NZ dollars, so that a portfolio in the US that fell in value in US dollars but appreciated in Kiwi dollars because of the fall in the currency attracts a capital gains tax even though no shares were sold. We predict the tax will lead to widespread avoidance. Just what exchange controls lead to. The advice now to those doing their OE is to open a foreign bank account and never tell the IRD.

It's a form of exchange control

When examining NZ's chronic balance of payments deficits, the only thing that explains how the country continues, is the existence of large undeclared overseas holdings by NZ'ers. The logic of the government's present tax penalty on overseas earnings is to prevent the formation of NZ owned multi-nationals and to force entrepreneurs who want to expand past Australasia to migrate. This is exactly the history of the past twenty years.

Soft Landing

We think Michael Cullen is right on one matter. The economy is looking to make a soft rather than a hard landing.

Our Poll

86% percent of readers prefer Phil Goff as Finance Minister to the idea of Trevor Mallard reading the budget. A number of readers emailed that they preferred Cullen to stay on. This week's poll. "Do you think our health system will be able to provide health care for you and your family?" Vote at http://www.theletter.biz/vote. We will send the results to the Minister of Health.

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