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Small Business Under Attack from Labour

Thursday 25 Jul 2002

Speech by Hon Richard Prebble, Leader ACT New Zealand

At the Red Tomato Pizzeria, 87 Upland Road, Kelburn, Wellington

On Thursday 25th July 2002 at 11.30am

The Labour government has made a sustained attack on small business. Since Labour took office, thousands of dollars in compliance costs have been added to the average small business, and driven many to the wall.

ACT has chosen a Wellington pizza restaurant to highlight Labour's attack on small business - wrapping the building in red tape, symbolising the extra costs under Labour's changes to ACC, taxes, the ERA, RMA, and OSH.

· A National bank survey last week showed compliance costs were the number one problem facing small businesses in New Zealand.

· A Business Herald survey of more than 700 Auckland Chamber of Commerce members conducted recently produced an overwhelming verdict (85%) that compliance costs have worsened in the past three years.

· Research last year showed extra costs of $26,000 a year on a medium sized business under this Labour government.

· The latest Employment Survey also shows a decline of 7,000 in the number of self-employed and employers in NZ over the last three years.

Clearly Labour's attack on small business is taking its toll. Everyone knows that compliance costs and red tape affect small businesses proportionately more than large ones. Small businesses are the backbone of this country, employing nearly 80% of the workforce.

ACT says it is high time that we had a bonfire of red tape and regulations.

We are planning significant changes, which will free small businesses to get on with what they do best. Together with proposed tax cuts, this is just the sort of balanced package required to get the growth this country needs.

The owner of this pizza restaurant, Steve Chapman, said he was saving $1200 to $1500 a year in accident insurance premiums when there was competition under the last National government. Labour has knocked that on the head.

Mr Chapman told me: "The tragedy is that Labour just don't care how much extra costs they lump on small businesses".

Mr Chapman presented a petition to Parliament in March 2000, signed by 2500 people, against Labour's re-nationalisation of ACC.

It is particularly galling for small business to have to read Labour advertisements trying to fool everyone that they've handled the economy okay.

Labour has been lucky that good exporting conditions, low interest rates and a low dollar have masked the damaging impact their policies have had. These factors are reversing rapidly, and the longer-term damage inflicted is becoming evident, with lower growth forecasts.

That's why Helen Clark called a snap election. She knows it's turning to custard.

Despite all the rhetoric, compliance costs have been rising under both National and Labour. This is the tough challenge that neither government has coped very well with - and Labour has made far worse.

Little research has been done on the total compliance cost burden faced by New Zealand businesses. One study in the mid-1990s estimated that the costs totalled $1.88 billion a year in 1990. That study also found businesses spent 46 million hours a year complying with tax laws and $600 million in fees on external advisers.

This has got much worse under Labour. Adjusting for inflation and growth alone you would estimate the 2002 figure as $4 to 5 billion. That's 4% of GDP. Worse is the opportunity cost- the economic growth, greater employment, and higher incomes that working New Zealanders could be enjoying if we weren't so suffocated by regulation and red tape.

ACT's own research indicates the opportunity cost of unnecessary regulation and red tape is around 1% additional GDP growth each year foregone.


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