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Don Brash Writes

Don Brash Writes


No. 64, 3 August 2005



Labour's monstrous bribe


As regular readers of this newsletter will know, I don't usually spend many words commenting on what Labour has done or has not done, preferring to spend more time talking about what National will do in government.

But last week, Labour made a promise so outrageously irresponsible that I have no alternative than to attack it. I refer, of course, to Labour's promise to forgive all the interest on student debt, now and in the future. There are several points that must be noted.

First, this promise was made by a Government which just over two months ago argued that there was no room for any reduction in tax rates - in fact, not even a minor adjustment in tax thresholds until 2008. And now they make a promise which would cost an absolute minimum of $300 million a year (their estimate) and possibly up to $1.1 billion a year (an estimate by Brendan O'Donovan, chief economist of Westpac Bank). This very large subsidy will go to people who have already been generously subsidised through their tertiary education (the taxpayer picks up, on average, about three-quarters of the cost of tertiary education), and comes at the expense of all those hard-working people who have never had the benefit of a tertiary education, or who scrimped and saved to put themselves through a tertiary course without taking out a loan, or who have now paid off their loans.

Second, the Labour Government seems to imagine that, offered interest-free money, students will not borrow any more than currently. Assuming students are stupid is obviously not wise.

If they are bright enough to be undertaking a tertiary course, they will be bright enough to realise that interest-free money should not be turned down, even if it is drawn down and put on deposit at the local bank. Far from reducing student debt, this policy will cause student debt to escalate sharply, as it did after Labour decided to waive interest charges while students were studying, back in 2000. And this is a Government which has been trying to pretend that it was concerned about inadequate personal saving!

Third, the policy would have a material effect on the government's own balance sheet. Brendan O'Donovan has estimated that student debt could escalate by $10.9 billion over 10 years if this policy was put into place, and of course this would lead to an escalation in the government's own debt to finance these loans.

But the most extraordinary figure is this: the book value of the current student debt, about $7 billion, would need to be written down by around $1.7 billion to reflect that the loan book would be non-earning. That write-down is the true measure of the cost, the true measure of the scale of wealth transfer, that ordinary taxpayers will have to shoulder on the existing loans, and of course there is still more cost to shoulder on all the new loans.

Clearly under Labour, there will never ever be a reduction in the tax burden, and that is an ominous sign when 600 Kiwis already head off to live in Australia each and every week.

Fourth, the Government used as its main excuse for the policy that it would encourage those with student loans to stay in New Zealand rather then emigrate. But as I argued in an earlier newsletter, 94% of all those with student loans outstanding are already in New Zealand. The notion that "most" of those with student loans have to leave the country because of the loans is nonsense put about by the New Zealand University Students Association.

Labour's policy in this area is seriously bad public policy.

National's alternative policy would allow students to deduct the interest on student loans against earned income in New Zealand. That policy was based on the logic that the loan had been taken out to acquire an asset (human capital in the form of a degree or diploma) with which to generate income so that, just as a tradesman can deduct interest on a loan taken out to buy tools, so also should the student be able to deduct interest against earned income.

The only good thing about Labour's announcement is that never again in this election campaign will Labour be able to argue that any proposal we make regarding tax relief for hard-working New Zealanders is irresponsible - or at least they won't be able to with a straight face. Michael Cullen's reputation for fiscal prudence, already dubious, has been shattered beyond repair.


Auckland's transport worries


Last Sunday, the Herald on Sunday highlighted the fact that the main concern of many Aucklanders is the state of the roading network in the city. Road congestion in Auckland has been estimated to cost the economy in excess of $1 billion a year, and the cost keeps rising, year by year.

In December 2003, the Labour Government announced with great fanfare a special transport package for Auckland. A total of $1.62 billion was to be made available over 10 years to accelerate investment in roads. Well, on 3 June this year, the Auckland Chamber of Commerce issued a press release which noted that "it is false to claim that the Government's 2003 funding package has been used to help accelerate the (roading) programme. Of seven projects that were ready to go at the time of the Government's announcement in 2003, just two have had timelines brought forward:

* The SH1 Alpurt bypass of Orewa, as a result of a decision to use tolls to help fund it following intense lobbying by Rodney Mayor John Law; and * The SH1 Waiouru peninsula link, as a result of intensive lobbying by Manukau City Mayor Sir Barry Curtis."

The media release was attached to a copy of a letter from the Chamber to the Minister of Finance, which notes that "Transit's draft 2005/06 programme reinforces our conclusion that none of the timelines for the major state highway projects have been accelerated as a result of the Government's 2003 ‘Investing for Growth' transport package."

In short, the Labour Government has utterly failed to do anything significant to deal with Auckland's roading crisis.

National will move swiftly to deal with that crisis, by dealing with the legislative obstacles to faster road construction (the Resource Management Act, the Land Transport Management Act, and the Building Act - both of the last two being Labour Government creations) and ensuring that adequate funding is made available. We have committed to increasing the money available for road construction to the full extent of the money now being raised from the petrol excise tax and being diverted into the consolidated fund. We have committed to getting the entire Auckland Corridor Network as envisaged 40 years ago finished within 10 years.


Of Maori preference


Ever since Helen Clark recognised that the views I expressed in my speech to the Orewa Rotary Club last year were reflective of the views of a great many New Zealanders, she has tried to pretend that the Labour Government too believed in treating all New Zealanders equally under the law. If this had been a genuine change of policy on her Government's part, this would have been just one more major U-turn on her part. But of course the reality has been quite different. There are still a great many examples which reveal that the Labour Government has no plans to start treating all New Zealanders as equals, regardless of race. A few recent examples:

1. Following the example of the Bay of Plenty Regional Council, the Rotorua District Council, the Auckland City Council and the Manukau City Council are all contemplating creating separate Maori wards. This is despite the fact that, in the case of the Rotorua District Council, about one-third of the councillors are already Maori. We are rapidly moving down a track towards separatism.

2. In the middle of June, Michael Cullen admitted in Parliament that the Maori Land Court is in the process of appointing six new judges to deal with claims lodged under the Foreshore and Seabed Act. As Gerry Brownlee noted at the time, Labour is clearly expecting a flood of claims over the foreshore and seabed. Just how secure is the foreshore and seabed under Labour's so-called Crown ownership?

3. Recently, I received an email from a member of the public whose husband is in the Navy asking why on earth taxpayers had had to pay for a "Maori Cultural Advisor" to attend the 200 year celebrations of the Battle of Trafalgar. She not unreasonably asked what input Maori had had to that battle.

4. Last month the Environment Court determined (now under appeal at the High Court) that Genesis Power can divert water from the Whanganui River, but only for the next ten years instead of the 35 years it sought to ensure security of supply. The court ruling largely backed Whanganui River Maori, who say siphoning their water for electricity generation is sacrilege and a denigration of their values and beliefs. They objected to the diversion of water from one river system to another. Environment Court Judge Gordon Whiting said in the decision: "To the Maori people, the severing of the headwaters of their rivers is a sacrilege resulting in denigration of Maori values and beliefs affecting their self esteem". As Owen McShane has pointed out, although we may not have an official state religion, and Helen Clark may ban the saying of grace at state luncheons, we now have an animist religion which is officially endorsed by the courts at least.

5. And only a few weeks earlier, Parliament passed a Treaty settlement bill that National voted against, the first ever. Why? After a full select committee process, a lengthy House committee process, and a Third reading, Labour was still insisting on a schedule in the settlement bill which National believes is simply unacceptable. What caused the problem was this. Because of this legislation, the law of New Zealand now states: "Ngaa Rauru Kiitahi emanated from the cosmogenic tree of the gods. It came by way of the legion of spirits who were not seen but heard, down through the generations of the Kaahuu Rere and the genealogies of the ‘immediate assembly of elders'. In this respect, Rauru is a progeny of both ‘divine and human parentage' and, therefore, so is Ngaa Rauru Kiitahi. This divine origin is particular to the sacred, mystical, and theological insight of the people of Ngaa Rauru Kiitahi. The esoteric nature of these claims is expressed through their own pertinent whakapapa link. It is through a knowledge and awareness of this whakapapa that one is able to gain a perception of the attitudes of the tribe towards the almighty powers of the celestial realm, the cosmic emanations of the divine beginning, the world and its creation, and the evolution of earth and its people."

As Gerry Brownlee remarked in explaining National's opposition to the Bill, "this makes it law for all those who are of the Ngaa Rauru Kiitahi iwi to be considered demigods of divine and human parentage. Further it makes it clear that the law must accept that there is no difference between the physical geography as defined in the agreement and the people of Ngaa Rauru Kiitahi themselves. How on Earth could any judge interpret that?"

Under Labour, we are a very long way indeed from treating all New Zealanders as equal before the law. Only National will deal with this issue. We will, of course, resolve historical grievances - fairly, fully, and finally - by the end of 2010. We will, of course, respect the religion of every New Zealand. But we will not write the religious views of any group into the law; we will do away with separate Maori representation at local, regional, and national level; and we will fund healthcare and education on the basis of need, not on the basis of race.

Don Brash


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