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Hide: Prosperity and how to achieve it

Prosperity and how to achieve it

Thursday 24 Feb 2005

Rodney Hide - Speeches - Other

Rodney Hide, Leader ACT New Zealand - Address to the Taranaki Chamber of Commerce, The Courtney Room, The Devon Hotel, New Plymouth. 7.15am,

Thursday 24 February 2005.

I want New Zealanders to be rich.

To be rich means to have more choices and more opportunities. It means better housing, better health care, better education, better everything.

To be richer as a country means being able to provide for our elderly and our young - and everyone in between.

To be rich we must produce more of what the world wants. That requires work, investment and entrepreneurship.

To get more of all three we need to cut taxes - not just a little but dramatically.

Taxes penalise work. Taxes penalise investment. Taxes penalise entrepreneurship.

Taxes are the government-applied penalty to productive activity. To prosper we need to cut that penalty. Tax cuts put more money in everyone's back pocket - but more importantly tax cuts make for a more productive and prosperous economy.

To prosper, we must also cut waste. Poor investment and poor spending waste our hard-earned wealth. The key source of waste in New Zealand is our own government. That's because of the way governments spend money.

Consider the four ways that money can be spent.

The first is to spend your own money on yourself. When you spend your own money you take great care. You make sure you get value for money.

The second way is to spend your own money on someone else. You still care about the cost. But you are less concerned about what you buy. That's what happens when we buy a present.

The third way is to spend other people's money on yourself. That's the lunch you have when I pay. You don't care what it costs but you are very concerned about what you get.

The fourth way is to spend someone else's money on someone else. You don't much care what it costs. You don't much care what you get. And that's how government works. It spends your money on someone else.

That spending makes up 40 percent of all that we produce.

Trevor Mallard has said that he was concerned even before he became Minister about the taxpayer getting value for money on Te Wananga O Aotearoa. Back then the taxpayer was providing $4 million a year into the Wananga. Trevor over the next five years pumped that spending up to $239 million a year. And all the while Trevor was concerned.

The problem is that it's not his money he's spending. And it's not his children's education that he's paying for. If it were, he would be making sure that he was getting value for money.

Trevor hasn't had to earn the dollars he spends as Minister. He doesn't even know the students that he's spending it on. That's the problem.

The two old parties National and Labour argue over who should be spending your money. Labour says it should be them. National says they can spend your money better.

ACT is different - we say you should be spending your own money yourself.

That is the basic question confronting voters this election. Do you want Labour spending your money? National spending your money? Or do you agree with ACT that you should be spending your own money?

There is so much that government now does that we could do so much better if we were left with our own money to do it.

Sure, there are some things that government has to do - national security, police, the justice system, basic infrastructure, looking after those who truly can't look after themselves - but these basic functions of government don't account for 40 percent of all that we produce.

Besides, the basics for which we rely on government to provide are precisely the things that government is neglecting. Our government is so busy handing out money that they ignore the basics of ensuring that our police have the necessary resources to do their job.

Government is now colossal. When my grandfather was born the government took just $500 in today's dollars per person. We were then the second richest country in the world. It now takes $10,500.

Since 1900 we have increased output per person four-fold. But government taxation has increased twenty-fold. Government has grown five times faster than our productive capacity.

Back in my grandfather's day government wouldn't trouble a law-abiding citizen from one year to the next. Law-abiding citizens were left free to get on and prosper. And they did. But back then if you took someone's property or assaulted them the police would come down on you like a ton of bricks. It was the bad guys that government troubled.

Nowadays it's the other way around. The government troubles law-abiding citizens each and every day. We spend hours trying to figure out how to comply with an ever-increasing maze of laws and regulations.

The bad guys aren't bothered at all. They don't care about complying with the rules and regulations - and the government now is so busy hassling us it doesn't get around to troubling those who bash and steal.

Our forebears would be shocked at how much we pay to government - and how much hassle we get in return for it - and how the bad guys are now left unfettered.

And even with all that spending the surplus is $6.5 billion

The government is rich. But we are poor. The average household is $8,000 better off than it was five years ago. But sadly it's no better off after allowing for extra taxes and price rises. Despite strong growth the average household has stood still. We have a rich government but poor people. The government is rich on our money.

The economy is growing but kiwis aren't seeing the benefit.

Only the government is.

Helen Clark likes to claim credit for our growing economy. She's wrong. Her economic advisors explain that we are doing okay because of the past reforms that began in the mid-1980s. Helen Clark opposed these reforms. It was these reforms that produced "a trend increase in New Zealand's growth rate since the early 1990s". That's not me saying that. That's what Treasury declared in December last year.

Helen Clark still prattles on about the "failed policies of the past" and declares that "in the 1990s the economy marked time". Helen Clark is talking rubbish. We have averaged 3.7 percent growth a year over the last five years. That's not bad. But that's what we have averaged since 1993. Helen Clark has failed to boost growth at all despite the best economic conditions in my lifetime.

Helen Clark declared that her goal was to get New Zealand into the top half of the OECD in ten years. She then dropped the ten-year time frame to just some time in the future. She's now dropped even that.

It's easy to see why. Treasury are forecasting growth over the next four years at 2.7 percent - one point less than what we have averaged over the last 12 years - and well below Michael Cullen's stated goal of 4 per cent a year.

The forecast is for government spending to expand from 39.3 per cent of the economy now to 41.1 in three years' time. That represents an extra $2.7 billion of New Zealanders' money that they could otherwise spend on themselves being spent by politicians. Helen Clark is planning to confiscate one half of all our expected extra output. Talk about disincentive!

Helen Clark pats herself on the back for our economic growth. It's been nothing to do with her. She thinks that it's government in partnership with business that generates wealth. And so she hands out millions of dollars to the favoured few. Like the $280,000 the Government gave this year to Hubbard Foods. Money that Hubbard Foods said that it didn't even need.

We can't prosper as a nation by putting business on welfare. They have to stand on their own feet. The money that government hands out is simply money taken out of other businesses. It gets taken from the many and shuffled to the few. It takes money out of those businesses who are creating wealth and shuffles it to those who can't go it alone.

It is workers, investors and entrepreneurs that create the wealth of New Zealand. Not government. The way to prosper is to get the government off their back and out of their pocket.

We should cut the dopey hand-outs to business like Hubbard Foods and give every business in the country a tax cut.

It's diabolical how Helen Clark identifies a problem .. and then comes up with a solution that makes the problem worse. Helen Clark taxes us all hard and then complains we don't save enough. How can we save when we are being taxed so hard? Her solution is not to let us keep more of our own money. Her solution is to tax us even harder and to save for us through the dopey Cullen Fund.

There's no security in having government save for us. There is security in having the wherewithal to save for yourself.

Don Brash declared the $2 billion a year Cullen Fund financial smoke and mirrors. He was right. The Cullen Fund doesn't change the overall cost of superannuation one bit. All it does is increase taxes making it harder for kiwis themselves to save.

But Don Brash has now agreed to keep the fund. National's aim is to minimise the differences between National and Labour. That socks Kiwi households hard. They have to cough $1,400 for the Fund each and every year.

That money would be far better off with the people who first earned it. They would then be so much better able to look after themselves.

We could get taxes and boost work, investment and entrepreneurship. That would provide a more prosperous future. And that's the way to look after the elderly in the future.

Sir Robert Muldoon wrecked Labour in 1975 over their nationalised savings plan. Now the National party is agreeing with it!

And now Helen Clark is worried about the ownership society. We don't own things because we can't prosper and we don't get to keep enough of what we earn. The way to achieve an ownership society is to allow workers to own what they earn!

Helen Clark's approach to problems is well illustrated with her Working For Families package. On assuming office Helen Clark put taxes up for all those earning over $60,000. That was because she considered them rich.

She is now providing a handout to taxpayers earning over $60,000 because if they have children she considers them needy. A "high tax - big hand outs" policy establishes dependency and control. That's precisely what Helen Clark wants. It also removes the incentive to work and get ahead.

For example, a family with one income earning around $50,000 will keep just 11 cents of every extra dollar they earn. The Government takes 89 cents, 33 cents tax, 30 cents loss of family support, 25 cents loss of accommodation supplement, and 1.2% ACC levies.

What sort of incentive is it when the Government takes nine dollars out of every extra 10 earned?

Imagine this. A family earning $35,000 a year works hard and increases its income by $20,000. They get to keep only $2,500 of the extra $20,000 they earn. Why would anyone bother?

The Labour government is totally opposed to tax cuts. Michael Cullen declares it a simple assertion that cutting taxes boosts economic growth. He says no one has actually demonstrated that it works!

Prime Minister Helen Clark dismissed tax cuts in her Budget Day speech as "voodoo" economics.

Her tax policy puts a 39 cent penalty on work, investment and entrepreneurship in New Zealand.

We need to reduce that penalty. Turning the surplus back to those who earned it would allow us to have a tax cut for every worker.

Michael Cullen spent a million dollars of your money getting advice on tax in the McCleod report. He spent the money ... and never took the advice.

The advice was to flatten the tax system and simplify by going to just two rates.

That's what ACT says we should do. We should drop the company rate and top rate of personal tax to 25 cents in the dollar. And we should extend the bottom rate of 15 cents all the way up to $38,000.

We could do that ... and not cut spending by a dollar.

But we need to go further. There's much poor spending in government that shouldn't happen. Think hip hop tours. Think handouts to Hubbard Foods. Think Te Wananga O Aotearoa.

And there is enormous government spending done on our behalf that we could do for ourselves. 95 per cent of parents are quite capable of choosing their child's school. They should be entitled to do so.

That spending decision should be theirs - not Trevor Mallard's. Likewise with Health. We could do so much better in heath if we had more say over how the money is spent.

Winston Peters was going to fix health waiting lists by throwing money at it. He failed. Michael Cullen was going to fix the waiting lists by throwing even more money at health. Health spending under Labour has increased a whopping 40 percent - and still there is no discernible improvement. That's an extra spend of $2.3 billion a year.

Why? The structure is wrong, that's why. What we need is more choice, more competition, more entrepreneurship. Throwing more and more money at a failed government monopoly is no solution.

The National Party in office never cut the top rate of tax. They never cut the company rate of tax. Don Brash has told those suffering Helen Clark's "let's sock those over $60,000 with a 6 cent success penalty" will have to wait. Cutting their tax rate is not his priority.

For voters who want all taxes cut - not increased - there's only one party to vote for this election: ACT.

The party that stands up for those who work and produce.

Thank you.


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