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Richard Prebble's Letter From Wellington

Richard Prebble's
Letter from Wellington
Monday, 04 September 2000


The coalition’s first round of spending proposals has produced bids for hundreds of millions of dollars. Ministers have responded to the Finance Minister’s call for corre-sponding cuts by offering just four!

There is no team spirit in this Cabi-net. Ministers like Annette King faced with an expensive wage round are desperate for extra cash.

The Letter understands while Treas-ury’s revenue forecasts have weak-ened a little, the real pressure is on expenditure. New programmes are turning out to be more expensive than forecast. Cullen's claims that fiscal limits are cast in iron are com-ing back to haunt him.

Answer - More Cash

With this coalition it is easy to predict their next move. What is the worst policy option when faced with a deficit caused by more spending? Answer: increase tax.

What about the election promise? Answer: claim you are just closing a loophole anomaly in the tax code.

CG Tax on UK Investments

New Zealand unit and super trusts are taxed on their capital gains. The same shares, if held by an individual, do not attract a capital gains tax (CGT). It is an anomaly, and part of Treasury’s long term plan to gradually introduce a CGT.

It has had the perverse effect of pro-moting CGT-free passive index funds – a poor use of capital. It has also promoted UK trusts.

The UK is on the ‘grey’ list, and trusts there are not subject to CGT. UK trusts are highly efficient vehicles, and with the performance of world shares and the falling Kiwi, have made very good returns.

Michael Cullen has had the idea of bringing the trusts under the punitive FIF (foreign investment fund) tax re-gime. This would mean that capital gains – including unrealised capital gains – are taxable. This includes translation gains made when the Kiwi falls.

As Cullen can claim the review was ‘announced’ when he said he was going to close loopholes – he believes he can make it retrospective – ergo taxing for the drop in the dollar.

There are no statistics on how much New Zealanders have invested in UK funds but it’s believed to be billions. To Cullen it’s very attractive – few of the investors are Labour voters. The New Zealand fund industry is lob-bying hard in favour.

Of course the proposal will just result in Kiwis avoiding tax through trusts or migrating to follow their money. A more sensible policy would be to abolish CGT on New Zealand trusts which would encourage saving.

Scientists Join The Migration

The coalitions mandatory ‘voluntary’ moratorium on GE experiments is having devastating effects. One of New Zealand’s few world ad-vantages in agricultural research is disappearing fast. Other nations have not stopped experimenting.

Research scientists have a limited working life. The government’s moratorium means our leading sci-entists are seeing their life’s work put on hold, while foreign scientists catch up in the race to be published.

The result has been a mass exodus of New Zealand’s most talented scien-tists – primarily to Australia, taking their research with them.

The Royal Commission’s decisions leave no reason for optimism. ACT was refused permission to give evi-dence and argue the case of sound science - the Greens, who argued their political anti-GE spin, were given status.

New Zealand’s science and agricul-ture future is in the hands of the Rev Richard Randerson and his fellow commissioners. Regrettably, it ap-pears they prefer populist rhetoric to proven science.

Transient

Helen Clark made a high profile objection to a boarding house catering for the elderly. She claims the establishment would attract un-desirable ‘transients’. The one resi-dent who made a submission in fa-vour of the boarding house was Mary Prebble, the 82 year old parent of the ACT leader. Mrs Prebble points out that most people at some point in their life can be defined as transient as the Labour leader no doubt was when she was a student.

The real reason for the submission is life experience. Mrs Prebble lived for 20 years next to an inner-city board-ing house. Boarding houses, far from being unsupervised as Helen Clark believes, are very closely managed. Helen Clark’s submission also claimed there was no demand for such accommodation as she’d never seen it advertised. Of course the fact is that there is such a critical shortage of boarding houses they don’t need to advertise. This story is not a reflection of Helen Clark’s heartlessness, rather her simple lack of life experience.

NB: The Letter understands Helen Clark had already decided she needed to move house for security reasons. Her security advisers had informed her that the house was too close to the road and couldn’t be made secure. The Sunday Star Times story was simply too good an op-portunity to pass up.


Response To Letter

Keep those e-mails coming. Many of the Letter’s news breaking stories come from readers’ e-mails. Last weeks Letter drew a strong response to two stories.

Unit Standards

They have not been called unit stan-dards for some time – they are now called achievement standards.

There are not just two standards sat-isfactory and unsatisfactory – there is a merit grade as well.

Kathryn wrote – “I’ve always thought that the new system, which gives credit for specific results…and does away with the rather loose “50% must pass, 50% must fail’ approach, is very compatible with ACT’s phi-losophy on rigour in education.”

Young Doctors

Andrew writes the Letter “has been seriously misinformed. First year doctors do a hell of a lot of things that nurses and other non-medicals can’t do…I am in fourth year out of med school… I am working 100 hour weeks once every three weeks, and about sixty five hours, the other two weeks on a salary of $60,000. I could go to Australia and earn NZ$150,000 to work 40 hour weeks. I will do this if there is not a significant pay rise, as there is nothing else to keep me in New Zealand until the next election.”

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