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Marc My Words 31 May 2004

Marc My Words. By Marc Alexander MP

Cullen's Budget Hard to Swallow We have just been served up a cold dish of socialism masquerading as a responsible Budget and cooked up by the cynical machinations of Chef Cullen. While it may taste sweet at first bite - it is likely to have a long and bitter aftermath.

No one can dispute the wisdom of giving a financial boost to low and middle income families - they have been neglected far too long. But while it is easy to slam Labour for the biggest bribe in New Zealand history, who would not believe that National could do the same? No - we are expected to swallow a dead rat - this budget signals a sinister disconnection of the ethic of work from the rewards of work.

What is missing from the debate about the redistributive aspect of the Budget is not that families who are hard hit deserve help, but that this help is at the expense of other individuals who created the wealth for their own families and are equally deserving.

While it is true that there has been a well publicised shift to reward those in work more than those who are not in work, I believe that beneath this façade there exists a truly malevolent intent; namely, to concentrate on the State's ability to financially reward people in a way that has no distinct relationship to the work that people do. It's all about who gets the cake, and how much, with nary a reference to those who bake the cake.

There is nothing here to grow the economy other than to increase consumption from those who contribute the least. The bulk of the surpluses are not being returned to those who created them. That will, in the future, create the perverse incentive not to bother generating a wealth that they will not be able to enjoy. Instead, this Labour Government will put truth to their motto; 'We have what it takes to take what we want'.

In a climate of low unemployment, continued growth and lower CPI, it seems incomprehensible that rather than give back to those who create the wealth, we should add and 'lock in' additional welfare costs that are currently at a staggering $9.79 billion!

No thought seems to have been given to a potential future where unemployment shoots up, or business activity declines and we don't have the cash to pay for the widening of these benefits. Despite being demonstrably untrue, Cullen has argued for some time the fiction that New Zealand corporate taxes are less than those of our major trading partners (for example our rate stands at 33% and Australia's is 30%). Given Cullen's belief, in the event that our economy takes a downward turn, he may well find room in his dark socialist heart to justify raising corporate taxes to the level he thinks others should pay, for his government's increased welfare burden. A tax cut approach could have accomplished much the same result, but would not compromise the Government's costs because it would be self-adjusting.

However, I believe there is a glimmer of hope; none of these benefits will kick in until, and after, the next election. If National does squeak in . it may be that the delivery of these economic gains could be switched from a 'socialist dependency' model to a 'tax-break' one. With that scenario, at least low and middle income New Zealand families will not be disempowered, and we can prevent the relentless slide to an increase in State power and largesse.

The pernicious drop into dependency invites the State to become a de facto partner in the financial health of the family. Many families cannot survive even now on the incomes earned by its members but require the aid of Government. That is tragic.

The irony is that in a time when our economy continues to do well, this Government is putting more families into a state of dependency. There were alternatives. We could have reduced all tax rates down to 18%, costing us just $4.7 billion - much less than the surplus. Think of the jobs, economic activity, rise in consumption power and wealth creation opportunities lost - and what do we have now? Disempowerment of families, more State intrusion into the lives of Kiwis, and a side order of voter loyalty bought by Labour.

Don't get me wrong - we do need to help our families and many will benefit in the short term - but in the longer term the economic and ethical implications will be dire.

No-one said it any better than Phil Andrews in a vox populi interview in the Dominion Post (28 May 2004) who, when asked for his view on the Budget, said, ". I would have been happier if they had done it with tax breaks rather than benefits. No one likes being a beneficiary". Amen to that!


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