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Speech: Prebble - Business is being Hawkesbied

Thursday 24th Jun 1999 Richard Prebble Speech -- Economy

Speech to Wellington Chamber of Commerce ASB Bank lunch

Resolution Room James Cook Centra 1 pm Thurs 24th June 1999

Hon Richard Prebble CBE

Leader ACT New Zealand, MP Wellington Central

Business is being Hawkesbied

Thank you for the opportunity to speak to the Wellington Chamber of Commerce. I believe that the Chamber has done an excellent job in promoting enterprise in our city. You will have noticed, that as Member of Parliament for Wellington Central, I have taken a leadership role in promoting issues of importance to the city.

As the nation's capital, some things have been too easy. No matter how the economy is going, government, like taxes, never stops. So we miss the recessions. The downside is that we also miss the boom times.

When government directed the economy from the Beehive and directly owned a wide range of businesses from banks to airlines, from insurance to energy companies, Wellington was the national corporate as well as political capital.

The freeing up of the economy has seen a drift north of corporate headquarters. I believe that as a city we have been too slow to react to the threat of losing corporate headquarters. Corporates make excellent civic citizens. They employ staff, they contract for services, they contribute to the rating base and frequently sponsor a range of activities. When the BNZ moved north they not only dumped a large amount of prime real estate, they took a large legal and accounting business north.

I am pleased to see that the Mayor has announced the setting up of a special group to target the corporates. Its task, as I understand it, is to talk with the corporate headquarters about what they need to persuade them to stay in Wellington.

Allow me to help the Council. A 16% rate rise, when the CPI for March was minus 0.1% is very anti business. While I expect that the rate rise will probably be 8% rather than the suggested 16%, it's totally unacceptable. Back in May the Council talked of a 27% increase. Now it's 10%. We are being softened up so that when they announce 8% we will say "well done".

I have been back to examine the election statements. Not one Council candidate promised a 16% rate increase. Now we are being told that rate increases are inevitable because the sewerage scheme will cost $30 million a year to run. Few of the present Council voted for the scheme that pumps out from its outfall, water purer than the Pacific Ocean. Presumably, in about a million years we will have purified the ocean.

Local bodies right around the country, with a few creditable exceptions, are proposing enormous rate rises. I am not aware of a single council proposing a nil increase. Waikanae urban ratepayers face a 9.77% increase and the rural ratepayers 7.17% increase. Paraparaumu ratepayers have an average increase of 15.57%. Christchurch is increasing commercial ratepayers 12.6%. The councillors apparently know nothing about the crisis facing rural New Zealand and have increased farmers rates 19.8%. Auckland is talking of a 17% increase. Over the 1990's local bodies have already increased rates nearly twice the rate of inflation.

This latest round will mean rates have increased twice as fast as inflation. Indeed rates and local body charges have become the single most inflationary factor in the economy. Our local bodies are badly managed and a threat to the total economy. Local body revenues round the whole country have fallen. This is because of their appalling fiscal management.

Local bodies have taken to depositing large sums with the banks. When banks were paying high interest on deposits, it was a strong revenue source. The fall in bank interest rates have seen local body revenue fall significantly. Why local bodies, when they run large bank accounts, have heavy debt, is a mystery to me. What I can tell you is it is one reason why we face rate increases that no councillor has yet told us.

A further reason is local bodies desire to be in business. In Wellington we are paying for the council's political decision to remain a minority investor in an airport, something that councils have no expertise in managing. Local bodies absorb about 4% of the total investment of New Zealand and yet produce just 2% of GDP.

The Victorian government has adopted a vigorous programme of local body reform. Local bodies are required to tender for services and to exit from commercial activities. Victoria has gone from being an economic basket case to being a leading economic state.

Councils say, with some justification, that central government has placed many legislative burdens on councils with no revenue to pay for the new duties. The Resource Management Act is an example. But local bodies have taken to the new regulating regime like pigs in mud. Many councils have used their new powers to pass regulations that are basically hostile to business. The National Government has been promising for two years to present to Parliament some amendments to streamline the Resource Management Act. We are yet to see the law changes.

It's my understanding that the Maori MPs, on whom the Government is reliant, are demanding law changes that would give iwi further ability to exact what are, in many cases, little more than blackmail payments from business.

ACT has made it clear we will not support proposals that make the Resource Management Act even more bureaucratic.

Labour and its left wing ally the Alliance have announced that they will pass a law that requires the taxpayer to fund any group that calls itself green. Nothing is free. These costs will fall on business.

The Alliance's call for an extra week's holiday for all employees is another example of penalising business to buy votes. The Alliance says an extra week's holiday will increase employment, because business owners will have to hire more people to cover the holiday period. I say it will drive more businesses to the wall, and result in less jobs.

I believe that the present Parliament is out of touch with the business environment. The media is even worse. The media has been running a piece all week about whether or not Mr Hawkesby has or is about to get (or never will get) a million dollars. And the media is running this as an accountability privacy issue.

The real issue is how is our employment law got to the point that an individual can believe that he is entitled to 2 million compensation. I personally have little doubt that the figures bandied around are in the ballpark. Industry sources tell me that the ratings drop when Richard long was replaced by Mr Hawkesby was the most disastrous in the history of NZ's media. Big advertisers contract with TVNZ to pay on the basis of tarps - the audience reached by the programme. The most conservative figure I've heard of TVNZ loss of revenue caused by the Hawkesby affair is $10 million and the highest is over $20 million. So paying Mr Hawkesby out is cheap.

Nobody appears to be asking or concerned that state TV was so out of touch with its audience that it wasn't aware of how fond the audience was and is of Richard Long. If we had a really accountable system, Mr Hawkesby's contract would only be one of the ones being terminated. Frankly, I have little sympathy for the Government. Small businesses have been faced with John Hawkesby-type claims for the last 6 years.

If you're a small business owner having to pay out $10,000 to someone you had to fire because they were doing comparable damage to your business to what Mr Hawkesby did to TVNZ you will know this. But unlike the Government which can just pass the cost of their incompetence on to the rest of us, small business has had to pay out of their own pockets.

There are literally hundreds of businesses that in the last 5 years have gone out of business because their Hawkesby-like payments have wiped them out. National has been promising business for over 5 years that they will legislate to curb this practice. And for 5 years they've failed to deliver. Now the problems have come and bitten them. If it causes the Government to act then it may be a good thing.

This is the reason why the Government is really tied hand and foot over the tourism issue. As a lawyer I say that even though the payments to Messrs Mogridge and Wall are almost certainly illegal, I have no doubt that the present Employment Court - if it went to court -would not only uphold payments but would probably decide that they should get another $100,000 because the parties when they signed the agreement thought it was non taxable.

The shareholders in Brierleys got no sympathy from this Government in Parliament when their directors had to pay out. It's only when the government is itself getting bitten that the reality of the world it has created is coming home to them.

Labour and the Alliance who are making so much political capital out of this, ought to be in the dock of public opinion along with the Government. Part of the reason Parliament hasn't acted is because of the implacable opposition of he Alliance to any reasonable employment reform.

I remind Labour that when Helen Clark was Minister of Health, on one famous occasion she sacked the whole of the Auckland hospital board including her husband. If she was to do that today, the cost to the taxpayer would be at least $1 million. At the time, Ms Clark said she was sacking them, because she's accountable. What is she arguing today?

This week in Parliament we've had the absurd suggestion that the Hawkesby, tourism board and NZQA affairs are all matters of Ministerial accountability when it's really about the fact that our employment law on dismissal is thundering our of control. The idea that a Labour Minister of Tourism or Education or Broadcasting could have somehow by accountability had a different result is nonsense.

As I said, the present Parliament is out of touch with the business environment. Very few National MPs have ever been in business. Labour has almost none and Jim Anderton - who once ran my local dairy - is the only Alliance MP who has mortgaged his house and gone into business.

The civil service is also woefully ignorant of business realities. When the civil service ran airlines, banks, insurance companies and forests, admittedly very badly, there were some senior civil servants who had some idea of business realities. Now there is none.

The regulations are written for big business. The civil servants assume that every business has a financial section, computers and legal advisors, like government departments have. New Zealand is a nation of small business. Most of us work for businesses employing less than five people. The accounts section in most New Zealand firms is Mum and Dad working on their GST return over the kitchen table.

The IRD's new penalty regime is so tough that if you make a mistake the interest penalties you are hit with would make a Mafia loan shark operator embarrassed.

The Government has been embarrassed by a number of high profile cases of employees who have left either because they did not agree with government policy, or because they were incompetent or simply because they found a better job and have been rewarded with a golden handshakes.

It is clear that Ministers have been caught unaware by this and are now scratching their heads about what to do. The public is outraged. I have no sympathy for the Government. They are reaping what they sowed.

Business has been grappling with this problem for years. Under the Employment Tribunal's rulings it's become virtually impossible to sack a dishonest or incompetent employee. Even employees who leave for their own reasons file unjustified dismissal claims and get paid. Successive National Ministers have promised reform and failed to deliver.

If a takeaway bar assistant is entitled to $25,000 in damages when he is caught stealing, how much is the takeaway manager entitled to? What about the managing director of the whole takeaway chain? Private sector bosses have been filing and receiving six figure sums for the last five years. It is the reason for the huge payouts to BIL managers last year.

It's now happening in the State Owned Enterprises. Welcome, Ministers, to the real world - the one you created.

Ministers are contemplating a law to exempt state businesses from this rip off, while leaving private sector business owners to continue to be the victims of this legalised extortion. A Government MP who was in touch with business would have realised that there is nothing wrong with the Employment Court that abolishing it would not assist. But that would take decisive leadership.

Replacing the present government with Labour and the Alliance won't help. One promise I do believe, is Labour's to give Trade Unions even more power. I say to you there is only one party that is openly pro business. There is only one party that is prepared to say that it's the private sector that creates wealth, growth and jobs. There is only one party that has continually fought for less bureaucracy, less regulation, less red tape.

We have the party, the policies and the candidates; the rest is over to you.


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