Stuff: Ardern's govt has failed to deliver meaningful gains in growing trust

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In Jacinda Ardern’s rightly lauded Harvard speech last week, the best line came when she spoke of the need “to ensure [that] difference, the space where perspectives, experiences and debate give rise to understanding and compromise, doesn’t instead become division – the place of entrenchment, where dialogue departs, solutions shatter and a crevice between us becomes so deep that no-one dares cross to the other side”.

The rhetoric was impressive, the sentiment commendable, the analysis accurate. In particular, the prime minister drew our attention once again to the deep irresponsibility of social media and the algorithms that promote the most extreme content, pushing viewers towards division, not difference.

Yet for all that, the address had at least one major defect. It’s not just that the prime minister was vague as to how those algorithms could be improved, or that her much-touted Christchurch Call has only slightly amended an internet still heaving with hate speech. The regulation of global social media giants, after all, is not something she controls.

More bothersome is what is happening in Ardern’s own backyard. Or rather, not happening. One of her speech’s other themes was trust: the foundations of a strong democracy, she noted, include trust in institutions, experts and government – something that “can be built up over decades but torn down in mere years”.

What, though, has Labour done to substantively enhance trust in government? The prime minister’s own leadership has, I think, been largely positive for democracy, never more so than when she embraced kindness, and eschewed hate, following the Christchurch mosque attacks. But that is a product of her own style and personality, and will depart with her when she leaves politics.

The deeper question is whether Ardern has changed anything in the structure of g​overnment that will outlast her time in Parliament; whether there is any enduring and substantial alteration in public processes. Sadly, I think there is not.

One can point to noticeable if minor improvements. Far more Cabinet papers are published (something that would be unfathomable in many other countries), and ministerial diaries likewise. This allows us to better understand how the government makes its calls and who influences its politicians.

Public Service Minister Chris Hipkins says his fellow ministers front up to select committees far more than their National predecessors did. The promised creation of a register of the true owners of New Zealand companies will also enhance trust in public life.

It’s not enough, though. Distrust in government – or indeed anything else – may not be as bad here as in, say, the United States. There may be no crisis. But we cannot be complacent, given the democratic deficits that do exist, and the growing attempts to instil mistrust, manifested most obviously by the parliamentary grounds occupiers.

According to journalists, governmental abuses of the Official Information Act – delaying responses to questions, redacting information and other subterfuges – are as bad as ever. Statistics claiming to show more requests are answered on time may simply reflect the fact that officials have been asking for more extensions.

And all this pertains to just one half of the relationship between the governors and the governed: the dissemination of data from the former to the latter. More important, probably, is what runs the other way – the ability of the public to become involved in shaping the political decisions that affect them.

A strong democracy may, as Ardern said in her speech, rely on “debate and dialogue”, but it depends equally on political participation. If we are to build trust in government, that g​overnment needs to be much more open and responsive to citizens’ input.

This would mean, at a minimum, involving citizens more in designing the services they use, so that things happen with them rather than to them. Beneficiaries and frontline Work and Income staff should be able to co-design the way that welfare offices work, rather than having these things handed down from on high.

This would also mean adapting overseas innovations like crowdsourced legislation, in which ordinary individuals work together to suggest laws and even write new constitutions. Or citizens’ assemblies, in which a demographically representative group of people is selected to discuss a major issue and make recommendations that set or influence policy. Or community-led budgeting, in which residents hold public meetings to debate, and then directly allocate, part of a city’s infrastructure budget.

All these things are happening, right now, in other countries. They work, they deliver better services and they build trust. They provide spaces for citizens with very different perspectives to encounter each other, to listen and learn, and to find consensus.

Yet Labour had made no noticeable steps in this direction before the pandemic, and there are few signs of greater impetus now. If the prime minister wants to leave a substantive legacy, that needs to change.

Stuff: Poorer Kiwis sidelined in rush to help ‘squeezed middle’

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It’s always a bold move, in a Budget, to deliberately bar the poorest New Zealanders from its centrepiece policy. Yet that’s what happened yesterday.

The surprise announcement of a $350 ‘’cost of living’’ payment was carefully targeted to the ‘‘squeezed middle’’, excluding anyone earning over $70,000 – but also those receiving the winter energy payment, among them pensioners and everyone else on a benefit.

The Budget does, admittedly, have some bright points, the starriest of which is to reverse an inexplicable and decades-long injustice for sole parents on benefits. Up until now, child support payments from their ex-partners have been taken by the state to “offset” the cost of their benefit.

This has always been bizarre: the point of child support is to do what it says on the tin, support children, not reduce a government’s net welfare costs.

Campaigners have urged the full “pass-through” of child support, as it is known, for years now, and will be delighted. Some 40,000 parents will benefit, typically by $24 a week, and an estimated 6000-14,000 children will be lifted from poverty. Elsewhere, Community Service Card holders will get permanent half-price public transport, and poorer households will have their dental grants increased from $300 to $1000.

But that’s about it from a Budget mostly devoted to salving middle-class pain. In one sense, it’s scarcely surprising: middle-income voters swing elections, and they feel – rightly or wrongly – that previous Budget packages, and their big benefit boosts, have helped the bottom more than the middle.

As I’ve written before, middle-class people may say there is too much inequality – but only because they believe themselves to be its principal victims, while the rich evade taxes and the poor gorge themselves on the supposedly over-generous welfare state.

There is, though, widespread sympathy – I think – for poorer (as well as middle-class) families facing rising fuel and grocery prices. So even politically speaking, the exclusion of beneficiary households from the cost-of-living payment seems strange.

Philosophically, it looks worse still. The Government’s own logic here is tortuous. The Treasury’s Budget release says inflation will have a greater immediate impact “on low and middle-income households”.

It is, in fact, even more unequal than that: over the last decade and a bit, the cost of living has risen just over 25% for the typical household, but 35% for the poorest households. Those most affected by inflation have been excluded from the payment designed to address it.

The logic here is probably fiscal: even with beneficiaries excluded, the payment will cost over $800 million, and the Government’s refusal to raise much more tax means there is little left in the kitty.

Either way, the decision poses major problems for the Government’s anti-poverty drive and the targets it has set itself to cut child hardship in particular. It has done moderately well so far, thanks mostly to 2018’s $1 billion-a-year Families Package of payments to low and middle-income households. Anywhere from 20,000 to 60,000 children, according to the measure, have been lifted out of poverty.

But progress had flat-lined, and foodbank queues lengthened, even by the middle of last year.

Projections in the Budget paint a mixed picture: the declines in poverty, thanks to child support and other changes, are balanced out by the increases, as the cost of living bites. In a few years’ time, the projections say, child poverty will be where it is now: lower than when Labour started out, but still far higher than it should be.

Labour has three main child-poverty targets for 2024; as things stand, it will miss at least two, and perhaps all, of those targets. This is potentially disastrous for a prime minister who has put such store by this issue, and for whom kindness is supposedly paramount.

The absence of any big-bang welfare spending in the Budget was, admittedly, predictable. There has long been a sense that Labour feels it has “done” benefit increases for this term.

The problem is that the advice from officials is exactly the opposite: alongside moves to get beneficiaries into paid work, and to tackle housing and debt issues, the Government needs an equivalent of the Families Package every term if it is to keep making inroads into poverty. Yet no such package has been delivered, and even in the unlikely event of one coming next year, it would be too late, at least for the 2024 targets.

In the final analysis, the big story here is the failure of what Education Minister Chris Hipkins likes to call “radical incrementalism”, the Government’s strategy of trying to achieve its grandest goals step by step. This works only if you are prepared to increase the ambition of your policies at every point along the way. Instead what we see, for the poorest New Zealanders, is a slowdown.

Stuff: The right-wing recipe to cure climate change that is doomed to fail

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If the price of petrol continues to soar, will you be able to seamlessly shift to taking the bus instead? On such questions hangs the fate of the climate change fight.

Outright deniers having been banished to the fringes, the debate now turns on how best to reach net zero by 2050.

And while most observers believe a wide range of tools will be needed, a rearguard effort is being fought by those who would deploy just one lone policy: putting a price on carbon.

If, the argument runs, everyone has to pay a price for their carbon pollution – $100 a tonne, say – they will automatically cut their emissions. And, knowing their options far better than Beehive bureaucrats, they will find the cheapest method possible.

Such views are a throwback to 1980s-style market fundamentalism, which held that almost all problems can be solved by individuals buying and selling things. It is a largely discredited dogma.

Yet the old cry of “just get the prices right” still echoes in some corridors.

The New Zealand Initiative think-tank, scion of the 1980s right-wing icon the Business Roundtable, recently published a report accusing the Government of committing “fraud” simply by promoting other climate policies, like enhancing public transport.

The report’s author, Matt Burgess, now works for National leader Christopher Luxon. Which creates problems for the party.

Last month, its climate change spokesperson, Scott Simpson, had to publicly disavow the Burgess report, saying it “does not reflect the National Party’s view”.

Think-tankers can think all they like; Simpson has to get elected by a public that wants governments to actually do something on climate, not just attach price labels.

The Burgess report, though, is backed by ACT, which could help form the next government. Right-wing lobbyists the Taxpayers’ Union, and some of Simpson’s colleagues, take market-fundamentalist lines. So it matters that these ideas are out there – and wrong.

There are, for starters, changes that individuals and businesses simply cannot achieve. Only the government can make the investments in the national grid needed to enable more renewable energy.

Many price signals get lost in transmission.

If driving becomes costlier, but there are no decent walking, cycling or public-transport options, people won’t switch.

Ditto if carbon pricing makes an EV cheaper over its lifetime, but families can’t afford the upfront cost. Hence the need for cycleways and clean-car discounts.

The market-fundamentalist view is also short-sighted.

Decades ago, solar and wind power were expensive, and shunned by market-fundamentalist politicians. Others, fortunately, understood that if government invests in something, its massive purchasing power can help create a market, allowing firms to rapidly drive down costs through learning-by-doing.

Prices today are not the same as prices tomorrow. Those past state investments lie behind the now-plummeting price of wind and solar.

Another problem: since the carbon price increases gradually, it doesn’t always deter bad decisions now.

Firms invest in polluting technologies while they are still cheap; when the price rises, they must either abandon their stranded assets, or become powerful lobbyists for a high-pollution status quo.

Politically, too, emissions pricing alone is a losing strategy. The public feels the pain in higher prices, but sees no immediate gain. Politicians fare better if they can point to positive investments like improved public transport or job-rich green-energy schemes.

Such emission cuts might diminish the pressure on other parts of the economy to decarbonise – but if so, the government can simply reduce the number of carbon “permits” it issues to industry. It is plain wrong to say that policies beyond carbon pricing will achieve nothing.

Of course, as Burgess points out, one cheap way to meet our climate targets would be to forget about reducing the carbon we emit and simply plant more trees to suck it out of the atmosphere. But the required afforestation of another 1.5 million hectares of farmland would be politically untenable.

There is no guarantee the carbon would stay captured – what if the forests all burnt down, or were harvested with no replacement? Betting the farm on forestry, as it were, would be an unfathomable risk.

Of course prices can be a useful tool. But there is so much they can’t comprehend.

Encouraging cycling, for instance, cuts emissions – but also makes for happier and healthier people. Only by looking beyond carbon prices will we spy such opportunities.

This isn’t just a crisis: it’s also a chance, as Simpson puts it, to create “behavioural change in the way we live, do business, and exist as a society”.

It requires us to make collective decisions on collective investments – and not just force the choices onto isolated individuals grappling with a crude price instrument.

Stuff: How do we fairly tax the rich?

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The holes in New Zealand’s income tax net become more apparent by the day. When it comes to the several hundred Kiwis with fortunes over $50 million, nearly half of them – according to IRD research – pay a lower tax rate than minimum-wage workers. They take much of their income as untaxed capital gains, or find other means to avoid or evade making a larger contribution to the public purse.

At least one-third of those fortunes, my own analysis suggests, are being handed onto the next generation. Those inheritances are income, just in a lumpier, more irregular form than conventional salaries. Yet those lucky few will pay no tax on that income, as New Zealand – unlike many other countries – has no inheritance tax.

Further down the ladder, a similar unfairness applies. People who sell properties after the brightline test expires pay no tax on their income, while salary-earners pay it on every cent. Inheritances increasingly allow some young people to buy houses while others languish, property-less.

Both capital gains and inheritances, of course, are good in and of themselves; the problem is simply that not all income is being taxed equally. Every fortune has been generated partly by drawing on a common pool of resources – public roads, schools, ultrafast broadband, other infrastructure – and tax is an essential way to replenish that pool.

For this reason, a landmark 2018 OECD report recommended that countries levy both a capital gains tax and an inheritance tax. Both can be designed to exempt smaller amounts of income, enhancing their fairness and political feasibility. Some capital gains taxes exempt the family home, or the first few hundred thousand dollars of its value.

Ireland’s lifetime inheritance levy, meanwhile, allows people to receive gifts of up to NZ$540,000 tax-free, but taxes all subsequent inheritances they receive. The revenues can then be used to compensate those unlucky enough not to inherit. The focus on taxing the receiver of the income, rather than the giver, makes it harder to avoid than New Zealand’s old estate tax, scrapped in 1992.

Alternatively, the OECD report found, countries can deploy a wealth tax: an annual levy on the largest fortunes – those over, say, $2 million or $5 million in New Zealand. This effectively taxes the above flows of income once they have accumulated as wealth.

This requires upper-end wealth, including family businesses, to be valued annually, making it slightly more complex than levies that, like a capital gains tax, are applied when a sale has already been made. But Switzerland has a wealth tax, and raises several billion euros a year from it.

Some would argue New Zealand’s rich would simply head offshore. But where would they go?

Australia, with its capital gains tax? Britain, with its inheritance tax? The United States, with its capital gains tax and its inheritance tax? In all these places, New Zealand’s well-off would also pay higher tax rates on their standard salaries – 45% in Australia, for instance.

Wealthy people are less mobile than we think. In America, where each state levies its own income tax, research shows multimillionaires do not move to the states with the lowest rates. Despite its wealth tax, Switzerland has not been suddenly abandoned by its billionaires. Family ties, a country’s ability to ensure peace and order, and the quality of its infrastructure all hold people in place.

The wealthy might still move not their physical selves but their assets, hiding them in the Bahamas and other secrecy states (or tax havens, as they were formerly called). Countries’ inability to track and seize the assets of Russian oligarchs shows the success of such contemptible methods.

But that failure will only further spur the decades-long growth of automatic exchanges of information, in which tax authorities provide their foreign counterparts with details of the income and wealth held in their country by overseas residents. The international community is slowly repairing its tax net. New Zealand should do likewise.

Stuff: Labour's rearranging of the furniture does not amount to a vision

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When their political careers end, perhaps Grant Robertson and Jacinda Ardern should take up interior decoration, since they so enjoy rearranging the furniture. Whether it be polytechs, the health sector, or even the current talk of the town, Three Waters, they appear convinced that restructuring – the shuffling around of agencies and staff – is the surest route to success.

All governments are prone to restructure: it gives the appearance of being busy. When National was last in office, Steven Joyce created a bizarre super-ministry, MBIE, by wrapping housing into economic development. Labour then had to restore housing to a ministry of its own. But fewer excuses can be found for its other restructures.

Take the long-running reform of vocational education, which involves a mega-merger of the country’s 16 polytechs and institutes of technology into one body, Te Pūkenga. Nowhere do the reform documents adequately explain why this new body, unwanted by the public, is needed.

Yes, some polytechs are collapsing, partly because there is too much unnecessary competition, too many institutions offering duplicated courses. But this could surely be fixed by the existing Ministry of Education taking a stronger hand with the sector, rather than creating yet another centralised bureaucracy, distant from local communities.

And what is the wider vision here? The reform documents contain the usual banal, management-speak bingo: the new system, we are told, will be “collaborative, flexible, innovative and sustainable”. But there’s no inspiring, fully worked-out conception of a lifelong learning system in which public funds ensure people’s skills and interests are perpetually renewed.

Andrew Little’s health reforms suffer the same issues. Even if few lament the passing of district health boards (DHBs), is wrenching structural change really the solution to their defects?

Their duplication, admittedly, makes them an easy target: 20 seems too many for such a small nation. And everyone loathes the postcode lottery that leaves rural West Coasters receiving worse care than urban Wellingtonians.

But guess what? It’s impossible to deliver care completely from the centre. So the health white paper envisages “four regional divisions and a range of district offices (Population Health and Wellbeing Networks in DHB localities)”. Service decisions will still be made “close to the ground”. Welcome to the new bureaucracy, much the same as the old one.

For many issues, structural change is irrelevant. When a Christchurch woman crashes her car in Wellington, the local A&E doctors may have no access to her medical records. So let’s mandate information-sharing between agencies. Why leap straight to restructuring – especially when it’s so disruptive? Even public-sector HR managers think it “costs a lot and promises more than it actually delivers”, one New Zealand study found.

Little’s reforms will heighten uncertainty and stress for already burnt-out health workers, and damage future morale. British research suggests that, after a major restructure, staff can take five to six years to regain their former productivity.

The wastefulness is mind-blowing. And time spent restructuring is time that could have been spent improving services straightaway.

In health, again, vision is lacking. Labour could have promised to fund a truly preventative health system – the fence at the top of the cliff, not the ambulance at the bottom – or one centred on community-based care, backed by new technologies that allow self-monitoring and treatment. But nothing so innovative is clearly set out, only gestured at vaguely.

Ironically, of all the government’s proposed restructures, it is the most controversial, Three Waters, that is actually the least troublesome. The four centralised water bodies would create economies of scale, co-governance with Māori is welcome, and the water sector’s core goals – well-maintained pipes, reduced contamination, and so on – rely more on centralised standards than local sensitivity.

Still, the political backlash may require an alternative plan: forcing councils to set aside more money for infrastructure, for instance, or centralising delivery only where they fail to meet exacting quality standards. Restructuring can be politically costly even when right pragmatically.

Taken together, the restructures – even in education and health – may not be an unmitigated failure. They’re just not what you’d do if you knew what you were doing. For there’s no disguising this Government’s lack of a coherent outlook. Values and ideas aren’t in short supply; they simply haven’t coalesced into an ambitious and cohesive worldview.

Within modern-day Labour, ideology is, in the words of one former adviser, “about as popular as flared trousers”. Even when flexible, ideology makes clear what you stand for – and therefore what you don’t. It forces difficult discussions, and leads to people leaving your beloved broad tent.

Vision, for a left-wing party, also tends to be expensive, and Labour has never wanted to have tough conversations with the electorate about tax. Much easier, instead, to talk mushily about values few could dislike (kindness, anyone?), muddle some policies through, and keep on rearranging that furniture.

Openness on company ownership: the government’s response

I have a story in the Guardian today, about New Zealand’s poor record as a conduit for illicit global finance. I didn’t have space to give much detail on the government’s latest move, a register of true (“beneficial”) owners of companies. So below are some questions and answers with the relevant minister, Commerce and Consumer Affairs Minister David Clark.

Will trusts be caught by the proposed register of beneficial ownership?

There is a register of companies and a register of limited partnerships. The reforms announced mean that those registers will contain information not only about who the shareholders and directors are (as currently), but also about who the beneficial owners are. If a company or limited partnership includes a trust in its corporate chain of ownership, then the trustees of that trust (but not the settlors) may – if they meet the definition that you cite – qualify as the beneficial owners.

In practical terms, this means where a trust has any beneficial interest in a company, we will now be collecting all kinds of information we were not collecting before. The changes mean we will be able to look through those trusts where required.

By contrast, there is no register of trusts. The Law Commission recommended against creating such a register in its 2013 report. The Government accepted that advice when it passed the Trusts Act 2019.

However, it is unlikely that trust use will subvert the reforms I have announced. The reforms that led to the Trusts Act in 2019 mean that there are a lot more requirements involved in operating a trust these days. I also note that recent reforms to the Tax Administration Act 1994 require trusts that generate a taxable income to disclose a lot more information to Inland Revenue about the parties to the trust.

The Cabinet paper mentions extra funding for administering the register, but will there be extra funding for verification and enforcement?

The Cabinet minute notes that “the ongoing operating expenses to provide for a beneficial ownership register and an identifier system are estimated to be $3.4 million per annum” (rec 31). While details are still being settled, this will include an annual sum for identity verification (i.e. checking that a beneficial owner is a real person) and for enforcement (e.g. prosecuting any person who provides information to the Registrar knowing or being reckless as to whether it is accurate [rec 22]).

Will the Registrar verify that a beneficial owner is who they say they are?

The Registrar will systematically check/verify the identity of every beneficial owner (both new ones, as they register, and existing ones, in a stand-alone work programme). However, this verification will be limited to checking that the individual is a real person and that the individual communicating with the Companies Office is that same real person (and not a third party). What officials are considering is the possibility of the Registrar going further – where there are red flags – and verifying that the individual in question is in fact a beneficial owner of the company or limited partnership concerned.

There is no apparent mention of empowering any agency to actively check for failures to comply with the register or punish non-compliance (though penalties are listed). Does that not suggest the register might be relatively toothless?

The Registrar will have the power, and the funding, to enforce the new offences set out in the Cabinet minute.

Directors and shareholders will be able to apply to have their residential addresses suppressed. But what will the test be? Will requests be automatically granted, or will people have to show likely harm from publication of their address?

This will depend on whether the request concerns the display of the residential address on the entry for the company or limited partnership in question, or the inclusion of the residential address on a document that the individual uploaded at some stage in the past. In the former case, the Cabinet minute notes [rec 25.1] that directors and shareholders “can require the suppression of their residential address from the main register information if they provide an address for service” – in other words, there is no test beyond the provision of an address for service, so there is no need to show the likelihood of harm. By contrast, the Cabinet minute also notes [rec 25.2] that they “can require the Registrar to suppress their residential address from uploaded historical documents if they provide an address for service, in return for a fee, if they can demonstrate specific safety concerns.

It must be stressed, the use of a residential address has previously been a proxy for an individual identifier, but did not always work effectively, especially where someone had multiple addresses. The implementation of the unique identifier system, will make linking connected interests far more streamlined.

The 2021 Financial Action Task Force report on NZ pointed out multiple problems. In light of these issues, don't the changes announced (beneficial ownership and individual identifier) look rather inadequate?

The proposed reforms are specifically targeted towards addressing deficiencies related to the transparency of beneficial ownership of companies and limited partnerships, and will go a long way towards improving New Zealand’s compliance with the FATF standards related to this issue.

Stuff: Rich list donors are great for political parties but not for democracy

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In a democracy, government is supposed to be “of the people, by the people, for the people”, in Abraham Lincoln’s famous phrase. The recent flood of donations to National and ACT, though, suggests we risk getting a government of the Rich List, by the Rich List, for the Rich List.

National has reportedly, in just one month, raised $1.8m in large donations, and ACT $850,000. These are extraordinary sums, roughly ten times the normal amount for a non-election year. And what no-one seems to have noticed is that, in National’s case, all bar one of their 17 donors are on the Rich List.

Graeme Hart, worth $11b and New Zealand’s richest man, reportedly gave a quarter of a million, as did toy entrepreneur Nick Mowbray (family net worth: $2.5b) and former Brierleys chief executive Murray Bolton ($400m). Other mega-donors reportedly include former strip-club owners the Chow brothers (a reported $500m) and property investor Trevor Farmer ($750m).

The only apparent non-Rich-Lister is Mike Thorburn, who, news reports suggest, is the inheritor of the ECC lighting empire. ACT’s donors, meanwhile, include Hart (again), and billionaires Rod Drury and Stephen Jennings.

The issues raised by such donations go well beyond the Right, however. A number of individuals face charges relating to allegations of concealing or improperly reporting donations to the Labour and National parties while two people are facing charges relating to allegations of fraudulently depositing money into a New Zealand First Foundation account and Te Pati Māori is being investigated over its reporting of donations.

Donations cause our parties recurring problems because they revive the age-old concern about the confluence of politics and money. Liberal democracies insist that every citizen should have an equal chance to influence politics, even while allowing concentrations of wealth that are often translated into excess power.

This can take the form of a quid pro quo: a donation buys a favourable decision. Such instances, thankfully, are rare here. But one of the most concerning aspects of the NZ First case is that, allegedly, the party's fundraising foundation hid thousands of dollars in donations from industries directly affected by its MPs' decisions.

Perhaps nothing untoward happened. But if so, why the apparent effort to hide the donations? The appearance of misbehaviour should, by itself, concern us: even just a suspicion of corruption can corrode people’s faith in politics and stop them voting.

Donations can also have a subtler influence, biasing politicians not towards specific individuals but towards the wealthy as a whole. The Rich List donors represent not even the 1% but rather the 0.01%. (Almost all, moreover, are Pākehā men.) And the $1.8m they have given National is a large sum, domestically speaking, worth nearly half what the party spent contesting the last election.

Research by Victoria University’s Thomas Anderson and Simon Chapple shows that, between 1996 and 2019, big donations from businesses outweighed those from trade unions by four to one. If political parties become dependent on large donors for the cash needed to contest elections, how will they not also become, subtly and over time, biased towards those donors’ interests and worldviews? As the Stuff columnist and former National Party staffer Ben Thomas has observed, donor relationships can, in a given policy area, “change your idea of what’s possible or desirable”.

Several of the donors, Hart and Farmer among them, founded their fortunes in the heady, hyper- individualistic 1980s, when state assets were sold at fire-sale prices and inequality and child poverty soared. If, as ACT leader David Seymour says, such donors are dissatisfied with “New Zealand’s long-term direction”, and want other values “cemented in a more serious way”, we might reasonably suspect they seek a 1980s revival entirely out of step with the public’s desires.

The counter-argument is that wealthy donors are nobly disinterested individuals who simply “care about democracy”, to quote National fundraiser (and former Cabinet minister) Paula Bennett. But this seems inconsistent with what we know about money and politics, which is that the former tends to corrupt the latter. We make politicians declare every gift they receive over $500, on the basis that these things typically lead to bias; why would we suddenly abandon such suspicions when it comes to donations of $250,000?

Donations can, finally, create imbalances between parties, allowing the richer ones to buy more advertising and employ more campaigners. National’s advertising expenses will be capped next year, during the official three-month election campaign, but no restrictions apply before then. It could spend large sums on a “permanent campaign” for the next year or so, in a manner that other parties, except its soulmate ACT, may not be able to match.

The party expects the money to keep flowing: “I’m not finished here,” Bennett told reporters. That would be good news for National, but by no means for democracy.

Stuff: Excess profits and lack of competition play role in inflation story

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Every good political narrative needs a villain: otherwise how do you create a sense of crisis, or present your own idea as the solution? And so it is with our hugely inflated cost of living. The National Party already has an evildoer in its sights: the government’s supposedly wasteful spending. Some commentators see a looming threat from workers whose wage demands could push inflation still higher. But are these really the right villains?

We can, for a start, take Labour out of the police line-up. It’s hardly Grant Robertson’s fault the cost of bringing a 20ft shipping container here from Shanghai has gone up tenfold, from US$500 pre-pandemic to US$5000 last September.

Nor did he launch the war in Ukraine that has caused the biggest commodity price spike in half a century, while sending oil prices soaring. And although inflation may be 5.9 per cent here, it’s also 6.2 per cent in Britain, under a Conservative government, and 7.5 per cent in the States. It’s everywhere.

Examined closely, official figures show nearly four-fifths of our current inflation occurs in three sectors: transport (mostly oil, plus second-hand vehicles); food (especially fruit and vegetables); and housing (rising construction costs and rents). Very few of those increased costs relate to public spending or regulation.

As to the supposedly “massive” $6bn in new spending Robertson will announce in May’s Budget, we mustn’t forget that the government already buys $110bn-worth of goods and services each year, and the price of those items is rising. Easily half the $6bn could be taken up just maintaining government agencies’ purchasing power: it’s a reaction to inflation, not a cause of it. And given the state of our water pipes and social housing, we need – if anything – to be investing more, not less.

Countering inflation is of course a core role of the Reserve Bank, which will presumably keep raising interest rates to dampen down demand. Politically, though, Robertson can’t just sit idle on an issue rapidly dominating public debate.

In the short term, the best he can do is ease inflation’s impact on the poorest. Inflation can actually be redistributive, because it erodes savings (largely held by the well-off) and makes it easier for governments to pay off debts (their tax take goes up as wages and prices rise, while the dollar amount of debt stays the same).

But that’s true only if the lowest earners have their purchasing power protected – rather than taking the biggest hit, as they are currently. Halving public transport fares was a sensible temporary step. It should be made permanent, and planned benefit and minimum-wage increases should at the very least be maintained.

Currently, there is little danger of such increases creating a wage-prices spiral (in which rising prices drive up salary demands, which in turn raises prices, and so on), if only because New Zealand’s sparsely unionised workforce won’t mount sufficient pressure. (This is especially true if ordinary people, like the Treasury, expect 5.9 per cent inflation to be a blip, not the new normal.) Official estimates, meanwhile, suggest the upcoming minimum-wage hike will add just 0.12 per cent to inflation.

Rather than blaming salary earners, we might look at business owners. Some overseas economists believe excess profits, especially in uncompetitive industries, are a key inflationary force. Cartels find it easy to hike prices, and keep them high: where, after all, will the consumer go? US president Joe Biden certainly thinks it’s a problem.

Domestically, many of our bars and restaurants may be struggling – but overall, firms report higher profits, and more cash in the bank, than they did before the pandemic.

Recall the main sectors causing inflation: food, transport, housing. Food retailing is dominated by a supermarket duopoly that, according to the Commerce Commission, rakes in $1 million of excessive profits every day.

Fuel retailing is not as competitive as it should be. Markets for housing materials, which cost 20-30 per cent more here than in Australia, are riddled with cartels. Electricity generation, meanwhile, is run by a handful of firms. The government’s aim, in all these sectors, should be to inject greater competition, curb excess profits, and keep costs down.

Here’s another thought: in the wake of Covid, supply-chain chaos, and the West’s now-unwanted interdependence with Russia, other governments are rethinking globalisation and mass importing – so why not ours? Buying things overseas may often be cheaper than making them here. But if more domestic production, in a few strategic areas, gave us extra resilience, and insurance against huge supply-chain cost increases, it might start to make economic sense.

Any such moves would take time. But then the Treasury’s forecasts might be wrong: high inflation could be a lasting phenomenon. We also need protection against future inflation shocks. And lastly, though least importantly, such action would give Robertson the appearance of doing something. Because that, too, is a question of political narrative.

RNZ: Government makes inroads on poverty but what's left in its toolkit?

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The stratospheric rise of poverty and inequality during the Covid-19 pandemic can be seen everywhere - except in the statistics.

It has become something like received wisdom that in the last couple of years, the economic damage wreaked by the coronavirus, combined with an inadequate government response, must have sharply widened disparities.

But a few weeks ago, Statistics New Zealand released data showing child poverty declined on two out of the three key measures between July 2020 and June 2021, as well as the year before - that is, through the first stages of the pandemic. The number of children in families unable to afford necessities like proper clothes and heating fell by 6000.

That data was followed by another release showing income inequality had reduced in the 12 months to June 2021, and in the previous three years. Finally, last week, new wealth inequality data revealed no overall change between 2018 and 2021. The share of assets held by the wealthiest 1 percent even declined fractionally, from 20.1 percent to 20 percent.

How can this be, some may ask, if foodbank use is soaring while supermarket owners rake in record profits?

The answer is that economic inequality, which is essentially a question of whether income and wealth is distributed fairly across the whole population, has many facets.

Foodbank use is a stain on our society, and a sign of the desperation some families feel. It is also part of a wider story that wraps in hundreds of thousands of families under or around the poverty line.

Many of those families have been helped by the government's benefit increases, which have lifted Jobseeker Support by $90 a week, not to mention more generous Working for Families payments, the food in schools programme and other poverty-reduction policies.

The Covid-19 wage subsidies, and the consequent prevention of mass unemployment, have been a boon to middle- and lower-income households. In the bigger picture, minimum wage rises and pay equity settlements have helped, too. These are real increases in income that make it easier for families to buy food and clothing, heat their homes and give their children a good start in life.

At the wealthier end, the government's 39 percent tax rate on income over $180,000 is bringing in at least $600 million a year and gently correcting high-salary excesses. The removal of some tax privileges for landlords - who tend to be among the better-off - will continue this trend.

In short, commentators who take hold of just one or two readily available figures, and on that basis proclaim that inequality is soaring, are liable to be wrong.

This does not imply, though, that everything is fine. Poverty rates remain stubbornly high for Māori, people with disabilities, and others.

Even though over 20,000 children have been lifted above the poverty line since 2018, another 150,000 are still left below it, on one measure. Having over one-fifth of all assets owned by just 40,000 New Zealanders is an extraordinary concentration of wealth in a supposedly egalitarian country, and leaves very little to go around for everyone else.

Progress is also slowing. In the first years of the Labour-led government, the $1 billion-a-year Families Package, which boosted benefits and tax credits, made big inroads into the poverty figures. Since then the reductions have slowed to a crawl. They may even, in the last nine months, have gone into reverse, as the Auckland lockdown and rising living costs have hit household budgets.

The prime minister's officials have told her that, if she wants to meet her ambitious target to halve child poverty in a decade, she needs another Families Package every few years. Most experts think billions more dollars must be added to baseline spending - something the government has apparently little appetite for, and would struggle to do anyway, since it refuses to raise the requisite tax revenue.

The high-level wealth inequality figures also conceal some disturbing trends. The wealthiest 1 percent's share has been unaffected by rampant house price inflation because housing is not, relatively speaking, very important to people who own such valuable businesses, shares and other financial investments.

What that inflation has done is lift the (apparent) wealth of the next set down, the property-owning middle classes - and thus widen the already alarming gulf between them and the property-less families immediately below. This is, of course, due partly to the government's 'easy money' policy of making borrowing incredibly cheap during the pandemic.

If the building boom continues, and predicted price falls finally eventuate, the housing gulf might slowly close. But other forces, especially the cost of living crisis, will only widen disparities.

If this government wants to be remembered as having decisively attacked poverty, it cannot rely on its early wins, but must rather take even more significant measures. The question it faces, then, is simply this: what do you have left in the toolkit?

Stuff: NZ's problem is it doesn't tax enough, or fairly enough

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A few years ago, dining out in Wellington, I spied a discreet card on the restaurant table, asking if I would top up our bill by a small percentage to help fund a new children’s hospital. I’m not against private charity, but this seemed bizarre, requiring sick children to rely on the whims of Wellington diners in order to get the care they needed.

It was emblematic, too, of the desperate underfunding of our public services. New Zealanders sense the problem: they see the schools unable to afford the computers on which learning now relies, the state housing waiting lists that grow ever-longer, the delays for people seeking hip replacements or the latest cancer drugs. And those lucky enough to have lived overseas, especially in Europe, will have a sense of how good – how modern, how responsive, how well-equipped – public services can be.

But few people understand the full scale of the problem: namely, that New Zealand’s public services are trying to get by on roughly $30 billion a year less than they would have if we funded them like the Europeans do.

The tax gathered by the New Zealand government, which funds our public services, comes to roughly 32 per cent of our annual income or GDP – just below the OECD average. But that average is dragged down by poorer nations – Mexico, Colombia and others – whose public services we probably wouldn’t seek to emulate.

Countries whose services we do envy fund theirs much more generously. Even leaving aside the tax-loving Scandinavians, the Austrian authorities take in 42 per cent of their GDP in tax, the Dutch 40 per cent, and the Germans 38 per cent. Such countries get greater tax contributions from those who earn very high incomes, make capital gains, or receive large inheritances.

New Zealand’s annual income or GDP is $345 billion​ a year, so our 32 per cent tax take yields roughly $110b for our public services. But if we taxed at Austrian levels, we’d have another $34b a year; at Dutch levels $26b, and German $21b.

Think what we could buy with that money! Computers in schools, thousands more state houses, reduced surgery waiting times. Electric vehicle charging stations and extra buses. The protection of our native birds against predators. Better support for pensioners and people with disabilities.

New Zealanders want those things; they just don’t currently stump up the requisite tax. They try, as the saying goes, to satisfy champagne tastes on a beer budget.

National Party leader Christopher Luxon wants to repeal every extra tax hike or added levy the Labour Government had imposed since 2017.

That’s understandable: a greater tax take, after all, implies less personal spending. But it’s a trade-off most European citizens make. And I think many middle-class New Zealanders would happily consume less if it meant they could rely on a better healthcare system when they fall ill, and if they knew the welfare system was doing more to help those down on their luck. Tax may or may not be love – as per Shamubeel Eaqub’s famous phrase – but it certainly is how we pay for civilisation, for all the thousands of things government does to underpin our way of life.

The counter-argument is that our public services could just squeeze more from the money they already have. Now, I’m all for efficiency, and have ideas about how government could be better run.

But on most measures, we already have a fairly effective public sector, ranking anywhere between second and sixteenth worldwide. (In other words, if you think ours is bad, you should see the others.) And most of the nations placed above us are also high spenders. If you really want superb public services, you have to pay for them.

As well as taxing more, though, we need to tax more fairly. Low-income New Zealanders already contribute a lot, partly because GST weighs heavily on them. Conversely, given the way the housing market has generated enormous, unearned capital gains, which Boomers convert into inheritances that perpetuate intergenerational inequity, the case for some kind of capital gains, inheritance or wealth tax looks ever stronger.

All this lends context to the current stoush over low earners being dragged into higher tax brackets via inflation. Yes, the brackets may need adjusting, but unless we add a new top rate to compensate, much of the benefit will go to the best-off. National leader Christopher Luxon’s plan would, by lifting tax thresholds and removing the current top rate, give him an extra $8000 a year – but someone on the minimum wage just $110. He’d also give property investors a tax break.

But even Labour’s tax strategy, which largely maintains the status quo, is like fiddling at the margins, when we should be imagining new ways to properly fund public services. We must invest more in our collective wealth. That way sick children can know they’ll get the care they deserve as of right, rather than having to constantly extend the begging bowl.