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Insights 35: 21 September 2018
News: Entrepreneur Stephen Jennings joins our Board of Directors
Watch: Bryce Wilkinson discusses his new report on TVNZ Breakfast
New report: Fit for Purpose? Are Kiwis getting the government they pay for?

Government Waste is a Taxing Matter
Dr Bryce Wilkinson | Senior Fellow |
Yesterday, the government released the Tax Working Group’s interim report. As foreshadowed, the Group was coy about what it will recommend in December.

The government on the other hand is clearly eager to see the Group make the case for new taxes. Almost as a matter of regret the background material mentioned the past removal of sales tax, excess retention tax, land tax, estate duty, stamp duty, gift duty, and cheque duty.

Next, it almost wistfully observed that New Zealand does not have financial transaction taxes, wealth taxes, or a general capital gains tax.

Pointedly, the government directed the Group to look at four “specific challenges”. First was a capital gains tax or a land tax (with exemptions for the family home). Next was a progressive company tax, greater recourse to environmental taxation, and exemptions from GST for low income people.

So why is the government keen to consider these options? Doing so increases policy risks for investors. The sole justification for general taxation is to fund necessary spending.

Ineffectual spending is not necessary. Compelling evidence of ineffectual spending on a grand scale was provided in a report The New Zealand Initiative published this week, Fit for Purpose? Are Kiwis getting the government they pay for?

It exists because government agencies are not focused on outcomes in relation to spending that is value for money or productivity. Successive Productivity Commission reports have documented this deficiency. Any new tax revenue could well be spent ineffectually, if not appallingly.

The Initiative’s report also cites international comparisons of government spending efficiency. A 2013 Fraser Institute study indicated that perhaps one dollar in three of general government spending in New Zealand could be saved for much the same wellbeing outcomes if the money could be spent as effectively as in South Korea.

That would be of the order of 13% of GDP, or $20,000 per household, annually. That is twice what the average household spends each year on food.

Spending money ineffectually means a lost opportunity to do more about real problems like child neglect and abuse, mental illness, hardship, inadequate education, and much else.

Governments undermine social cohesiveness if they fail to demonstrate to taxpayers that the money will be well spent. Social cohesiveness is one aspect of wellbeing. Why undermine it?

NCEA Review Big Opportunities or Big Mistake?
Roger Partridge | Chairman |
As every law student learns, a rescuer owes a duty of care to a victim not to worsen the victim’s plight. The same principle applies in medical ethics. A doctor’s first duty is to do no harm.
Based on the submissions on the government’s NCEA review, this duty is something Education Minister Chris Hipkins would do well to heed.

The review aims to rescue our failing NCEA assessment framework. It identifies six so-called “Big Opportunities.”  Among the proposals are halving the credits required for NCEA Level 1 (or eliminating it altogether); introducing compulsory 20-credit, student-led projects to NCEA at all levels; and extending the concept of literacy to include “digital, financial, or civic literacy.”

While NCEA certainly needs fixing, the way the government is going about it may do more harm than good. As the closing date for submissions approaches, a chorus of disapproval is emerging. And it comes from a broad church, including prominent school principals, academics and teachers.

A common criticism is the lack of an evidence-base for the proposals. As the submission from 18 Victoria University academics explains, “no research evidence in favour of them has been cited in the [Ministry’s] discussion document or, to the best of our knowledge, elsewhere.”

The Post Primary Teachers' Association is even more damning. Noting the perils of unintended consequences, the PPTA observes there is “no evidence of the ideas floated… being tested in any way.”

Considering the proposals would bring about the most radical redesign of NCEA since its inception, this is alarming. But it is also no surprise given how poorly evidence has been deployed to inform education policy for many years. Our falling rankings in the international league tables are testimony to this failure. And this year’s elaborate korero, or ‘public consultation,’ is hardly a reliable scientific technique.

Citing our evidence-based report, Spoiled by Choice: How NCEA hampers education, and what it needs to succeed, the PPTA concluded “there are significant equity issues in the NCEA… with Maori and Pasifika students more likely to gain NCEA on the strength of disparate standards that do not constitute pathways to further education.”

Lowering the requirements for students to achieve NCEA Level 1, and demanding that they guide their own learning by completing a compulsory project, will do nothing to resolve those inequities.

Unless the Minister is careful, his NCEA review risks breaking the rescuer’s cardinal rule. Unfortunately, the victims will be the country’s school children.

Crazy Rich Ministries
Joel Hernandez | Policy Analyst |
You can’t get more lavish than washing down some white gold caviar with Moet champagne while partying on top of the Marina Bay Sands in Singapore.
That’s how the rich and famous celebrated in Crazy Rich Asians, the latest blockbuster to hit theatres.
Well, you might. Especially, if you were one of the delegates at the Ministry of Justice summit in Porirua, or at either of the Ministry of Education summits in Auckland or Christchurch.
At $1.5 million for the justice summit and $3 million for the two education summits, the ministries spent more than $2,000 per person.
We ran the numbers here at the Initiative and the only reasonable price, albeit overestimated, we could get to was around $1,000 per person. That is if they spent $300 on flights, $200 on taxis, $200 on food, $60 on venue hire and AV, and $200 on accommodation. And that’s if they flew all 2,100 delegates to the three summits and back.

We concluded that the only way these three summits could have cost $2,000 per person is by serving kopi luwak coffee for breakfast ($80 per cup), beluga caviar for morning tea ($8 per teaspoon), and wagyu steaks for lunch ($250) – and by giving everyone a bottle of Dom Perignon ($215) in their goodie bag to boot.

We still couldn’t create a $1.5 million event!

Even when we subtracted the $440,000 to design and develop the two education summits, the Ministry of Education still spent more than $1,900 per person.

Seriously, where did all that money go? Did they fly every delegate to Queenstown for a team building exercise beforehand?

Here at the Initiative we’ve organised one-day events with international guest speakers for less than $400 per person.

Taxpayers shouldn’t be surprised. It was only a few years ago that the Ministry of Business Innovation and Employment spent $140,000 on a 3.5-metre screen in their reception and $67,000 on a sign outside their building.

Indeed, the latest headline news stories on ministry overspending are completely in line with the Initiative’s latest report, Fit for Purpose? which concluded that one-third of New Zealand government spending is wasteful. This represents around 13% of GDP, or $20,000 per household, annually.

Not only does the data say the government is wasting money, but anecdotal evidence from anyone who’s worked in a Ministry points to an ongoing, egregious waste of taxpayer’s money.

Crazy Rich Asians are spending their own money, while Crazy Rich Ministries are spending your money.
On The Record
All Things Considered
  • Graph of The Week: How Are Global Living Conditions Around the World Changing?
  • We Are Still No Nearer a Proper Definition of Poverty.
  • The Fourth Industrial Revolution Can Close the Digital Divide. This is How.
  • Whatever His Critics Think, Trump Has Every Chance of Victory in 2020.
  • Feel-Good Bans on Straws and Plastic Bags Don’t Help the Ocean.
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