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Insights 8: 18 March 2022
NZ Herald: Roger Partridge on questions for the Covid-19 Royal Commission of Inquiry
Podcast: Understanding Putin's dictatorship with Associate Professor Xavier Marquez
Stuff: Michael Johnston comments on teaching children to participate in the contest of ideas

Excise tax holiday doubly wrong
Roger Partridge | Chair |
Double jeopardy is a defence that prevents a person being tried twice for the same offence. Unfortunately for the Government, the defence is not available for bad public policy decisions.

Prime Minister Jacinda Ardern was right to acknowledge the pain the rising cost of living is inflicting on low-income households. But it is another thing altogether for Ardern to have allowed her Minister of Finance to dip into the Covid-19 fund to provide short-term relief.

Of course, the Covid fund is not a fund at all. It is simply an overdraft limit. And a big, $74 billion one at that. It nevertheless had bipartisan backing. All parties acknowledged that debt-raising for pandemic purposes was necessary.

But now, the Government is spending $350 million of Covid-tagged borrowings to cover a non-Covid related cost. No one is even pretending the three-month petrol excise holiday is a response to the pandemic. Meanwhile, a host of pandemic-related needs go unanswered. Like N95 masks for teachers during an Omicron wave that is forcing schools to close because so many teachers are sick.

It may be expedient for the Government to raid its Covid reserves in response to public pressure. But opposition parties are hardly likely to back future calls for emergency borrowing when the debt risks becoming a political emergency slush fund.

Worse still, a temporary petrol excise waiver was the wrong tool. The surge in petrol prices has nothing to do with excise tax. Petrol excise is a per-litre charge. It does not rise as the price of petrol rises.

Consequently, it made no sense for the Minister of Finance to suspend it.

Cutting excise tax also poorly targets those road users most acutely feeling pain from petrol price hikes. Instead, all road users - rich and poor alike - benefit from the excise tax holiday. (The halving of public transport fares is poorly targeted for the same reason.)

The welfare system is the usual tool for supporting low-income families unable to support themselves. A temporary increase in welfare payments might have made sense.

Or perhaps the Government could have provided road users with relief in some other way that makes economic sense in its own right – like the carbon dividend Eric Crampton discusses in the column below.

But the temporary excise holiday makes no sense, and it leaves the Government doubly guilty. It has used the wrong tool. And it has funded it the wrong way.

A bad portent
Dr Eric Crampton | Chief Economist |
Carbon prices are the best way of getting us to Net Zero. The Emissions Trading Scheme can get the job done if the government lets it.

This week’s petrol tax holiday is a worrying portent.

Politics has always been the biggest risk facing the ETS.

Carbon prices have quadrupled over recent years, to little fanfare. But what would the government do if carbon prices jumped from $70 to $120 in a hurry? Would it let carbon prices adjust while finding ways to help poorer families? Or would it throw sand into the ETS’s workings and force up the overall cost of reducing net emissions?

The Initiative has advocated a more sustainable approach for reducing that risk.

The government will earn over a billion dollars auctioning new credits into the ETS this year. It could tally its expected ETS earnings, split the money five million ways, and give each family of four a carbon dividend of just over $1000 – right now.

The best way of adapting to permanently higher energy prices is different for each of us.

Government cannot know what is best for you and your family. A carbon dividend would help each household adapt in ways suited to its own circumstances. The ACT Party announced its support for a carbon dividend on Sunday.

Increasing carbon prices would then mean a bigger carbon dividend for Kiwi households, helping families adjust while protecting the system.

At the same time, a better ETS price cap would reduce the risk of serious carbon price spikes.

If our carbon prices rose to match prices in reputable international markets, like Europe’s, the government could buy carbon permits there to sell here. Our prices could then never rush ahead of prices elsewhere, reducing the political risk to the ETS while reducing the cost of reaching Net Zero.

The case is now more urgent. We have had a warning that our government responds badly to rising energy costs.

Nothing in the past weeks’ rising petrol prices is due to carbon charges. But being able to adapt to permanently higher energy costs matters.

The government could have announced a carbon dividend or found other ways of supporting poorer households.

Instead, it chose to meddle with prices, in a knee-jerk response to a small hit in the political polls.

It does not bode well for our path to Net Zero.

No excuse for being Russian
Dr Oliver Hartwich | Executive Director |
There is no excuse for being Russian these days, not even if you are a cat.

The Fédération Internationale Féline (FIFe) reacted swiftly to Putin’s war against Ukraine.

We “cannot just witness these atrocities and do nothing,” the federation of cat registries said in a statement. And so, to underline its seriousness, it banned Russian-bred cats from registration and participation in cat shows.

The removal from friendly feline society would have shocked the Kremlin. Putin probably feared he would soon lose his European oil and gas customers as well.

But no, it got worse.

Cardiff Philharmonic Orchestra decided to drop the works of Russian composer Pyotr Ilyich Tchaikovsky from its repertoire.

Tchaikovsky had nothing to say in his defence, which might be related to his having died in 1893.

The Welsh orchestra responded to public criticism by saying it was not about Tchaikovsky being Russian. No, it was simply about one of his pieces being “military themed” and coming “with the sound of cannon fire.”

Putin will be relieved that the noise of his bombardment of Ukraine will not have to compete with the Cardiff Philharmonic Orchestra.

The University of Milano-Bicocca’s U-turn will also lift a weight off Putin’s shoulders. The university had planned to cancel a course on the famous 19th century author Fyodor Dostoevsky. After an outcry from the public, the university reversed its decision, grudgingly.

Nobody wants to be Russian these days. And nobody even wants to be mistaken for being Russian. So, the world’s most popular vodka brands do not miss an opportunity to say they are Swedish, American – well, anything but Russian.

Targeting Putin and his supporters makes much sense, of course. But demonising Russian culture more broadly is stupid, not least because it pushes Russians into line with the dictator.

And so, as Russophobia grows, it might be worth listening to Billy Joel, the quintessential American singer-songwriter.

Towards the end of the (first) Cold War, Joel released his album Storm Front. It contained the most beautiful antidote to confusing the people of a country with the politics of that country. The song was called Leningrad.

Leningrad is about the confrontation between the US and the Soviet Union. The fear and despair it had created on both sides subsides the moment Joel and his daughter meet Russian clown Viktor Razinov: “We never knew what friends we had until we came to Leningrad.”

For the opening of Leningrad, Joel adapted a theme from Tchaikovsky’s Violin Concerto. Let’s hope that does not get him cancelled now.

On The Record
Initiative Activities:   
  • Podcast: Understanding Putin's dictatorship with Associate Professor Xavier Marquez 
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