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Free Thoughts - ACT's budget priorities

Free Thoughts - ACT's budget priorities

Next week’s Budget will show continued steady progress away from the massive deficits associated with the aftermath of the global financial crisis and Christchurch earthquakes. The National government will continue to make incremental gains, albeit from a firmly centrist political position.

For every halting step forward, there will continue to be the occasional step backwards.

New Zealand doesn’t need a policy revolution, but we need much more than this tentative incremental change.

Here’s what ACT would like to see in the Budget.

A clear message to investors, entrepreneurs, and the business sector that New Zealand is on the path to a much more favourable business environment.

A willingness to confront big fiscal issues like the structure of NZ Superannuation.

A promise to households that their tax rate won’t be sneakily lifted each year.

A pledge to provide education opportunity to all children; the current monopolistic state education system, while serving most children quite well, fails all too many children.

Recognition that, with 20% of children born to parents already on benefits, more must be done to reform welfare, thereby reducing child poverty.

A commitment to wind back corporate welfare, using the funds to cut the tax rate on all businesses, not just subsidise a few.

The guts to tackle the housing market malfunction at root through substantive reform of the RMA. That means removing the anti-development bias and, with it, excuses for councils to restrict the supply of land for building.

Our specific proposals for Budget 2015 focus on the following priority areas.

The fiscal elephant in the room is NZ Superannuation. Life expectancy continues to rise. In 2006 we had five working people for every one person over 65 years of age. By 2050 we will have just two people for every one person over 65. In just 15 years’ time NZ Super costs, as a percentage of GDP, will rise by 50%. We are just fiddling with the fiscal levers if this is not addressed.

Most people understand that we need to make some changes. NZ Superannuation is one of the simplest retirement income systems in the developed world. So long as we make the necessary changes to keep it affordable and fair across the generations, it is an effective pension system. But it is also a political football, and politicians have proven incapable of making these vital adjustments.

An ACT budget would signal that the future structure of NZ Superannuation would be decided by referendum. An expert committee would be formed to consult with the public and come up with reform options which, together with a no-change option, would be decided by the voters. I am confident that common sense and a sense of fairness would see the public support changes allowing NZ Superannuation to remain a sustainable pension system for all New Zealanders through this century. Oddly enough we have a process for this, but we are only using it to decide on a flag design.

Next, we need to signal the future environment for investors and the business sector. We would foreshadow an eight year programme for reducing the company tax rate by one percentage point each year, until we reached a 20% tax rate. That would signal New Zealand as open for business, stimulating investment and allowing companies small and large to create new jobs and boost wages.

To fund much of this we wouldn’t have to cut core services. Instead we would allow the lapse of programmes that are simply targeted corporate welfare – bureaucrats picking winners and distorting competition through unjustifiable business subsidies.

For households, we would index tax thresholds to inflation, putting an end to the ongoing stealth increase in tax rates. If government wants to increase your tax rates, they should do it openly.

We would make genuine reform of the RMA a priority. Substantive changes here could hugely boost investment, jobs, incomes and the welfare of all New Zealanders. Ensuring that councils focus on allowing development of land would return affordable housing to our major cities, making a huge dent in inequality and poverty.

And for a genuinely brighter future for our children, we would expand the Partnership Schools policy by allowing state school conversion to a Partnership School funding model, whenever school boards choose to do so. This would be a visible manifestation of a core empowering principle for ACT - choice.

These advances would create jobs and reduce poverty by fostering a thriving, innovative economy.


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