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Insights 17: 18 May 2018
Budget 2018: The good, the bad and the risky
Latest report: Smoke & Vapour, the changing world of tobacco harm reduction
Upcoming event: researchED Auckland conference

Better fiscal futures
Dr Eric Crampton | Chief Economist |
The two most exciting items in this year’s budget barely even made it into the budget tables. Both point toward better fiscal futures.

First up, Hon James Shaw announced that the government will this year start work on a new independent fiscal council.

Last year’s election was dominated by whether there was a $12 billion hole in Labour’s proposed spending programme. That debate was always going to be sterile. Any coalition would pick up some of the policies and drop others. Policy-by-policy costings or, even better, policy-by-policy cost-benefit assessment, makes more sense.

The government will be investigating setting up an independent body to do that costing work, and to keep an eye on whether the government is remaining within the boundaries of fiscal responsibility commitments. This is all to the good.

The Initiative’s 2014 report Guarding the Public Purse urged the then-National government to adopt this kind of institution. We recommended a fiscal council as an independent Office of Parliament to serve a range of functions: monitoring compliance with fiscal responsibility principles, assessing the performance of major spending programmes, and assessing whether government has a sufficient eye on the long-term fiscal forecasts.

A strong, independent fiscal council providing checks on party promises during elections, and checks on delivery of programmes between elections, could greatly improve transparency and enable voters to better assess their options.

Next up, better infrastructure.

At the budget lock-up, Finance Minister Robertson was criticised for not spending enough on infrastructure. His answer was excellent. Large infrastructure requirements in Auckland require more than just government spending. He suggested private-public partnerships and special purpose vehicles for infrastructure delivery, and infrastructure bonds.

Auckland’s housing affordability crisis is, at heart, a problem of the incentives facing local councils when they bear all of the costs of enabling growth but see little of the benefit.

Growing American cities fund growth with infrastructure bonds that are paid off over time by a levy on the properties benefitting from the infrastructure. This means that infrastructure can grow whenever it is a viable business proposition rather than waiting around for Council.

Better infrastructure funding unlocks housing affordability for the longer term, so that affordability would not again become a crisis.

A fiscal council and better infrastructure financing will barely show up in the budget numbers, but could be very important for New Zealand’s fiscal future.

A message of hope for smokers
Jenesa Jeram | Research Fellow |
A few weeks ago, I wrote in Insights that public health policy works in mysterious ways.

I stand by that statement.

As a teaser for The New Zealand Initiative’s latest report Smoke and Vapour: the changing world of tobacco harm reduction, I wrote that there was some frustration that the Labour-led government had not yet expressed a position on e-cigarettes.

I also noted that there are a range of other nicotine delivery products available overseas (snus and heat-not-burn) that should be made available in New Zealand to help people cut down or quit smoking.

Just days before the launch of Smoke and Vapour, something exciting happened.

The Ministry of Health announced that all tobacco products (except for tobacco that is chewed or dissolved in the mouth) can be lawfully imported, sold and distributed in New Zealand. This includes vaping products, heat-not-burn products and possibly snus.

This is an excellent step for the country, and for the future of smokers wanting to quit.

But there is still work to be done.

The Ministry will be considering how best to apply risk-proportionate regulations across these products. In the meantime, retailers are encouraged to continue trading responsibly.

Smoke and Vapour makes some recommendations on how these products should be regulated. Though legalisation is an important first step, our report argues that regulations should not inhibit smokers’ access to these products.

Applying tobacco-style regulations (advertising restrictions, standardised packaging, excise) to products that are less harmful than cigarettes would be counterproductive to New Zealand’s wider smoke-free policies and aspirations. It also sends the misleading and damaging message that these products are as risky as smoking, so people might as well smoke.

Risk-proportionate regulations should not automatically mean risk averse. The potential benefits of these products need to be considered alongside the potential risks.

This interregnum will be an important time for retailers to demonstrate that regulations can and should be light-touch. Monitoring the uptake of these products should also inform whether potential risks (like significant uptake of these products by minors) are realised or remain hypothetical.

For smokers who have struggled to quit, or who want to reduce the harms of smoking but do not want to give up nicotine, the future is looking optimistic.

Scientific understanding has developed to point the finger at the real culprit of smoking-related harm: combustion. Technology has developed to produce a range of nicotine delivery products that can compete on price, effectiveness, and consumer acceptability.

And now, it seems New Zealand public health policy is catching up too.

You can download the report and a two-page summary on our website. The Ministry of Health’s announcement can be found here.

Invitation to Karl Marx’s 200th Birthday Bonanza
Joel Hernandez | Policy Analyst |
The candles have barely dimmed since his last birthday and we’re already celebrating Karl Marx’s 200th birthday, capitalism’s arch-critic.

Over the past couple of centuries, capitalism has come to dominate a large part of the Western world.

If Marx knew, he would be rolling over in his grave.

Or would he? Because our new version of capitalism goes hand in hand with Marx’s famous dictum “from each according to his ability, to each according to his need”.

In many countries, including New Zealand, the Government readily hands out and distributes wealth across the country as it deems fit. It may still be capitalism, but it is capitalism with a Marxist touch.

Once you are born, the state provides free health and education well into your early adulthood. This was recently topped up with a free year of tertiary education.

Then, when you retire at 65, they give you a SuperGold card with access to free public transport, including to and from Waiheke Island.

The bonus gift from the government is free ongoing advice on how to live our lives.

The Government really takes good care of us, but there are still some deplorable gaps over our lifetime where so far, we have to pay for our own stuff and make our own decisions.

This is where the Resolution Foundation comes in. The UK think tank recently recommended a £10,000 ($19,400 NZD) government gift to every citizen turning 25. It argued that such a ‘citizens inheritance’ would reduce the intergenerational gap between Baby Boomers (born 1946-65) and Millennials (born 1981-2000).

That’s obviously a good start. But in celebration of Karl Marx’s 200th birthday, let’s do things properly. Given everything in place, we are already half-way there. So let’s just fill in the gaps.

Starting from 25 you get your government gift of $20,000 to spend on a first home deposit or on an overseas experience.

Then again at 50 you get another gift from the government to help you deal with your mid-life crisis. Harley Davidsons for everyone!

And at 65, the government will also load your SuperGold card with a free cruise once a year to thank you for your contribution to the country.

You can imagine Karl Marx cheering in the background “you get a gift, you get a gift, everyone gets a gift!”

Hang on, but that was Oprah!

There is just one difference between Oprah and Marx: Under Marxist capitalism, everyone pays for their own gifts with their taxes.
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