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"A Political Paradigm" -- Richard Prebble


Sunday 1 Dec 2002 Richard Prebble Press Releases -- Other

Speech by Richard Prebble MP, Leader ACT NZ, to Auckland North Conference Bruce Mason Theatre, Takapuna Date 1:15 pm, Sunday 1 December 2002

I will outline to this ACT conference today a new approach to politics, a new way for ACT to campaign that has the potential to completely change this country's voting patterns, transform politics as we know it, and the future of our country.

For over a century the great divide in politics has been economic.

The Labour party is not called Labour for nothing. The divide has been between Labour on one side and capital on the other.

Sir Roger Douglas in a paper he has presented has pointed out that in successive elections this has seen the centre/left get around 60 % of the vote.

Sir Roger's solution is to increase the number of New Zealanders who see themselves as having property, by creating a fund based super scheme that would see most adults having capital and voting accordingly.

I like the idea of creating a property owning democracy and ACT should promote policies that would enable adults to own their own homes, have their own superannuation and make their own choices.

Electorally, ACT has seen the challenge with Sir Roger's programme is voters have to vote for a benefit that is many years away.

I believe we can combine Sir Roger's approach with an immediate campaign and create a new political fault line that can shatter the left and create a new winning centre /right coalition.

Labour has put together a centre/left coalition made up of its traditional Labour vote to which Labour has added groups who have not traditionally voted Labour.

Labour has won back the Maori vote from New Zealand First. Labour has courted its traditional voting groups - but who have a poor record of voting - Maori, social welfare beneficiaries and Pacific Islanders.

The to the coalition Labour has added two new groups - the retired and students.

There are 450,000 superannuitants, 300,000 Maori, 125,000 Pacific Islanders, 175,000 voting age students and 400,000 adults on social welfare.

That's a total of 1.5 million out of a total electoral roll of 2.6 million, of whom about 2.1 million vote.

Added to Labour's traditional trade union vote it translates into about 60% of the vote for the left.

Labour has been remarkably successful.

In the 1999 and 2002 elections Labour won a majority of the over 65s election vote. National received just 30% of the superannuitant's vote. During my lifetime Labour has never won the superannuitant vote so this is a very significant shift.

Labour won the Maori electorates and National, despite having quality Maori candidates, was beaten from second place by NZ First.

There is no reliable data on the Pacific Island vote but there is no reason to suppose that it is not overwhelmingly left. Data is also unreliable about the student vote but Labour may have won a majority of student votes. Even in the 1960s and the Vietnam War, a majority of students voted National, so this is another significant voting shift.

So how has Labour achieved this voting realignment to the left?

The answer is money.

The Labour government is engaged in a very amoral strategy - the biggest wealth transfer in our history - and more importantly the groups that Labour has chosen to support financially are growing exponentially year after year, election after election.

And where is Labour getting its enticement money?

Labour is transferring an extra billion dollars a year from the productive sector to its new coalition.

The payouts are large.

Labour has increased superannuation that goes to everyone over the age of 65 regardless of wealth by $212 million a year, $684 million so far.

In an astonishing exposure of Labour's clinical targeting, in 2001 Labour faced the problem that of 450,000 superannuitants, a mere 1,300 superannuitants had slipped above the Community Services Card income test threshold because of Labour's boosting of super payments. Labour, fearing the rile of Grey Power, asked officials for options for protecting these 1,300.

The officials said they could keep their entitlement to the card, but that there were 48,000 low-income workers on the same income or less than these superannuitants, and that they should also be entitled. The cost to include these working poor was only $14 million.

The Officials also stressed that New Zealanders, whether they were working or on a benefit, had always been treated the same, and that the Labour Cabinet had explicitly confirmed this in 2000.

To Labours shame, but consistent with their strategy, they looked after the 1,300 superannuitants, but excluded the working poor from the Card.

Labour has courted the social welfare vote by simply relaxing the rules. Despite a growing economy that should see welfare roll decreasing, spending on welfare benefits has increased by $340 million.

As most state house tenants are on welfare, the $100 million reduction in state house rentals a year, has gone mainly to beneficiaries, very little to the working poor.

The students have been won over by interest free loans. The cost to the taxpayer has been $300 million. The real losers are students as the irresistible attraction of interest free loans has seen student debt double to $5 billion.

Labour has won the Maori vote also with money. While the words "Closing the Gaps" are banned, the spending is continuing: $466 million on Maori initiatives. This is on top of Waitangi settlements, Maori TV, and special privileges for Maori.

A similar but scaled down expenditure is being targeted for Pacific Islanders, the latest being $8 million for a number of Pacific Island radio stations.

I need to mention another group in Labour's target - the media/arts. Labour has realised that pages of magazines and newspapers are filled with the arts - music/films/theatre/art.

Labour has sought to buy that group also. How else to explain the 5000 on the dole who are removed from seeking work by simply claiming to be artists.

The $100 million extra to the arts has earned Labour incredible PR with the media.

My list of benefits that Labour has squandered on the `non' productive sector is a massive $1 billion extra a year.

How do we respond?

Let me say what won't work, joining in the electoral auction for the non-productive sector's vote.

Here is what will work.

Setting out as I have done how Labour is spending taxpayers' money. No one would drop a coin into a collection box that said "Give money to allow Tuku Morgan to have $250,000 to make a TV programme no-one will watch!" but that's what Labour has done with your money.

Next we need to set out how Labour is raising the extra money from all working taxpayers.

There are 1.5 million full-time taxpayers, the same as Labour's non-productive coalition.

Labour has raised $8.5 billion extra in the last three years in income tax.

The top rate was increased by up to 18%. Fiscal drag has moved people into high nominal wages and a higher income tax. And of course inflation increases GST receipts.

Petrol tax is up $120 million a year. Labour really hit its own voters when it raised tobacco taxes to collect another $200 million in three years.

In addition to taxes there are many stealth taxes, increases in charges and levies. ACC levies are up, going to court costs more, so is the cost of birth, death and marriage.

The total increase in taxes, government charges and licenses over the last three years is $14 billion. Labour, elected on a promise not to increase taxes except on the top 5% of taxpayers, has, in monetary terms, increased tax revenue more than any government in history.

The burden falls almost entirely on working taxpayers.

The effect of these tax increases has been devastating on working taxpayers.

The latest research, which has been checked by the parliamentary library, reveals that real net average wage levels have declined since December 1999 by 3.3%.

This is a devastating economic fact. This means on average real net pay is 45 cents an hour lower than when Labour took office.

For a 40-hour week since Labour took office real cash in the pocket for the average worker has been cut by $18 a week. And that is a cut in income of $930 a year.

Across the 1.5 million full-time taxpayers the reduction in their real net wages is $1.4 billion a year.

When full-time wage earners feel that despite rising wages they are poorer there is a very good reason - because they are.

This is Labour's real weakness. The Clark/Cullen Labour government has done nothing for the working family and Labour's stealth taxes have lowered real living standards.

Let me explain the paradox of rising wages and lower income.

Since December 1999, Labour department figures show the average gross wage has increased from $17.49 to $19.05 per hour - an 8.9% increase.

Inflation has been 8.1% - so there would appear to be a net wage increase.

But "fiscal creep" has pushed workers into higher tax brackets, so the average net wage (take home pay) has increased from $12.58 an hour to $13.15 - an increase of just 4.5%.

With inflation at 8.1% and a 4.5% take home pay increase and we have a real decline in take home pay of 3.3%.

To have net income shrinking when the economy is growing is appalling. The Westpac household survey has shown the average household is losing ground with Labour.

How have living standards been maintained? Household debt has increased by over $15 billion. Every day Labour has been in power we have, as the song goes, "another day older and deeper in debt."

Working taxpayers, whether they are employers or employees, own the company or on the minimum wage, self employed or casual, are on the same side.

Labour has treated ordinary working taxpayers as if they were the rich to be soaked.

Even taxpayers who work for the government have been harshly treated by Labour.

The treatment of the hospital radiographers who are being offered a below the cost of living increase is typical of how Labour has behaved to its traditional supporters.

Here is where Labour is vulnerable Labour cannot afford to lift the standard of living of working taxpayers; Labour needs too much money to bribe the non-productive sector.

Labour has to tax the low paid because there are not enough wealthy taxpayers.

Low paid New Zealand taxpayers pay one of the highest income tax on their wages in the world. Over 400% more than in the UK.

This is ACT's opportunity to create a new political coalition of taxpayers.

Last election, ACT used the McLeod tax report to modify our flat tax promise to offer a tax cut to every worker. In our polling we detected the beginnings of a political earthquake. We conducted daily tracking polls and we asked, "What party are you considering voting for?" Some nights, 28% of the electorate said they were considering voting for ACT.

ACT was appealing across the old left/right divide to the tradesman: voters who had promised their grandfathers never to vote Tory but had never said anything about not voting for ACT. ACT's tax cut aimed at working families did resonate.

In Auckland ACT received 12% of the vote compared to National's 19%. I believe the reason Labour failed to reach its hoped for 50% majority was the fall in Labour core "working family" vote.

ACT has the opportunity to become the party of the hard working class, the people who produce the nations prosperity.

So I put out an ambitious goal to the ACT party.

Let's seek to create a new political paradigm. To create a new electoral coalition of working taxpayers.

Let's also remember we can also raid Labour's coalition of the non-producers. Just because one is not in the productive sector does not mean that those voters do not care about NZ.

Intelligent New Zealanders realise that Labour policies are not sustainable. You cannot, by the politics of redistribution, create real wealth.

ACT's proposal for a prosperity creating tax cut has wide electoral appeal. Intelligent New Zealanders realise that it's a rising tide that lifts all ships. They know that this country as a trading nation cannot compete with a higher company tax rate than our trading partners.

Those who have experienced life know that Labour's policies of envy will end in strife, so lets not give away the senior citizens' vote.

ACT at last election did very well at our universities. Students are open to our liberal message of personal responsibility and they know they are students for a few years and taxpayers for a lifetime. Students do not buy into the old parties' left vs right. Students are receptive to ACT's new fresh approach.

There are many on benefits who want to leave the poverty of dependency.

There are Maori and Pacific Islanders who do not want to be a different class of citizen, who want ACT's promise, one law for all.

Artists of real talent know that it's freedom, choice and people wanting their art that produces great wealth. The great works of art produced under state socialism were the works of the dissenters who rejected state patronage.

No other party has a vision like ACT's of a nation where individuals are free to make their own choices.

We have the vision, the policies and the leaders to create a new political paradigm.

Let's be ambitious. Let's do it.

ENDS For more information contact: Hon Richard Prebble ph 027 475 3128 Sue Ryan ph 04 470 6643 or 027 279 24 37

1 December 2002 Movements in real net wages since November 1999 (the methodology has been checked by the Parliamentary Library)

· Since December 1999, average gross wage has increased from $17.49 to $19.05 per hour (8.9%). · However, because people have been pushed into higher tax brackets, average net wages have increased by a smaller amount, from $12.58 to 13.15 an hour (4.5%). · The benefit to the government is borne out by a whopping 27% increase in the level of source deduction revenue collected as PAYE since November 1999. · Inflation has been 8.1% (cpi up from 1004 to 1087). · This means real net wage levels have declined by 3.3%, or 45c per hour. For a 40 hour week, this equates to a $18 wage cut. For a full year, the cut in real net wages is $930. · Across all 1.5 million full time employees, the reduction in the level of real net wages is $1.4 billion a year.

How can real net wages go down when gross wages go up?

Because higher incomes increase peoples average rate of tax. This is why for someone on, say $40,000 a year, a 4% wage rise is needed to deliver a 3% increase in net pay. When people think wage increases keeping pace with inflation are OK, they are mistaken. To keep real spending power constant, a 4% wage rise is needed to offset inflation of 3% Of course it works the other way for the government. When Dr Cullen acquiesces to a little more inflation, he knows that tax revenues will increase at an even faster rate- he even said so in his budget. A 3% increase in inflation means a 4% increase in tax.

For more information visit ACT online at or contact the ACT Parliamentary Office at

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