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Newsworthy 2006 - No. 89

Newsworthy 2006 - No. 89

Here come the tax cuts Last week it was revealed that the 2005/06 budget surplus (following some accounting changes) was $11.5 billion. That equates to around $8,000 per household.

Such a level of over-taxing is indefensible. Tax reductions are now a virtual certainty.

The Treasury's post-election briefing in 2005 emphasised the role of lower taxes, particularly lower marginal tax rates on personal and company income, in promoting economic growth.

Some commentators have argued that the surplus should all be applied to higher operating spending, for example on health and education.

But government spending has increased steeply in recent years to around 42 percent of GDP, including local government. This is squeezing the productive sector of the economy, putting pressure on monetary policy and the balance of payments, and harming economic growth.

In its fiscal planning, the government is allowing around $2 billion a year for new spending or tax reductions. There is ample scope for both.

A toxic Parliament Parliament was in urgency this week to pass the "Appropriation (Parliamentary Expenditure Validation) Bill. The Bill validates unlawful expenditure relating to the 2005 election.

The Bill was bitterly opposed by National and for good reason.

It was shameful that the Government did not provide a copy of the Bill to MPs on the commencement of sitting of Parliament. This was a clumsy attempt to stifle debate. Not until the debate started was a copy of the Bill provided.

The reason for urgency to pass the Bill is spurious. In a Treasury report dated 13 October 2006 it was noted that unappropriated expenditure occurs every year in a number of votes. The validation of such expenditure is simply a usual part of the overall budget legislative cycle. Parliament was treated to an attempt to take the issue off the ongoing public scrutiny of the Labour pledge card and the associated brochure material.

Curiously the validation period is for the period 1989 to 2006. The legislation thus goes far beyond the identified period of mischief.

Whilst the Act says it does not "affect criminal liability" this is mere whitewash. The Police made a judgment on 27 February 2006 that were a criminal charge brought against the Chief of Staff to the Labor Leader's Parliamentary Office that "such a charge would likely result in a conviction". But they refused to take criminal action.

The affect of validating the expenditure is to release five of the parties from any legal obligation to make the payment. It also abruptly brings to an end litigation pending in the courts against Members of the Labour Caucus in respect of the unlawful expenditure.

There is now only a moral obligation to pay. The current debtors are Labour, the Greens, NZ First, United Future and ACT.

God defend New Zealand The Defence Force Annual Report is sobering reading. It notes that the Defence Force failed to meet many of its operational targets across almost every arm of the service. The examples include:

* Naval Combat Forces - Crews at manning levels as specified in the RNZN Funded Personnel Level "Shortages in key positions and branches, particularly Aircrew, Bridge Watch-keeping and Warfare Officers, technicians and some Operations Branch personnel, continue to provide challenges in manning the NCF [Naval Combat Forces]. (p 61)

* Seasprite helicopters "Critical shortages in aircrew instructors availability, preventing conversion course training from being conducted ashore while simultaneously conducting embarked aircrew training."(p. 62)

* Land Combat Forces - Elements contributing to the forces available at manning levels as specified in Army Tables of Organisation and Equipment "Most units are staffed at below 80% of establishment. Ongoing composite deployments continue to highlight the shortages of infantry personnel and equipment available for rotation." (p. 79)

* Maritime Patrol Forces - Air and Ground crews up to the RNZAF directed personnel levels "There were insufficient aircrew personnel to generate the number of crews required to meet Schedule 4 of the NZDF Output Plan. Efforts to regenerate aircrew numbers remain a high priority." (p.93)

* Specified equipment types and numbers "Mission equipment is inadequate for the majority of the more demanding surveillance and maritime air operations tasks. Spares support for the existing mission systems is becoming increasingly problematic with increased failure rates impacting on mission completion rates and increasing maintenance and logistic support overheads." (p. 93)

Political Quote of the Week "When a man says he approves of something in principle, it means he hasn't the slightest intention of carrying it out in practice." -- Otto von Bismarck" - founded the German Empire in 1871 and served as its first chancellor for 19 years

Richard Worth

ENDS


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