It’s interesting that the Greens want a discussion about wealth. The announcement of their new “Greens with envy” tax policy certainly started a conversation.
For as long as most of us have lived, we’ve been regarded as a prosperous country. But we’re not any more. Sure, it’s still a nice place to live, the climate is moderate and the scenery is magnificent. But wealthy and prosperous? Sadly, no longer.
We’re now having daily conversations about child poverty, homelessness and youth crime. Our educational establishments are failing. Our universities are in decline. And despite the good intentions of our champions at the medical coalface, our healthcare system is not coping with the needs of the people.
These factors, in turn, mean our once-envied standard of living is slipping alongside a weakening economy, infrastructure failures and arguments about racial equality.
Prosperous countries don’t have those discussions. They don’t need to. They have that stuff sorted.
Some of our issues have gradually built up over many years, or even decades. Others are very recent. But there is no question that we have big problems to solve.
Those big problems mean that both Labour and the Greens are expected to go into the election demanding a greater share of our wallets. The Greens have already announced their controversial tax policy, complete with unaffordable wealth taxes (yes, unaffordable, even for the wealthy) and increased tax rates on some individual and company income. Labour is yet to announce theirs.
But why do they want to raise taxes?
Is it because they have highly valuable programmes that need to be put in place that will ultimately benefit all New Zealanders? Or is it because they see the current system as unfair? Or perhaps, is it because they feel some sort of resentment towards people who are successful?
In the Greens’ case, it would appear to be the latter. Let’s face it, they’ve seldom had a worthwhile programme to implement and their entire purpose has typically centred on stopping things from happening rather than starting them. And in my view, experts are telling us the so-called global climate emergency is diminishing, so the Greens need a new reason to exist.
So they have moved from a Green party to a socialist party. Immediately before their big tax announcement, their revenue spokesperson grabbed a headline. “Wealth in Aotearoa is concentrated in the back pockets of a wealthy few”, she said. “It’s time we get in and fix this.”
Fix what? Success? Aspiration? Financial security? Oh dear. It really is about envy after all.
I have an alternative sentence with which a politician can grab some headlines: “The amount of money wasted by this Government and their coalition partners is disgraceful. It’s time we get in and fix this.”
We don’t need to raise more money from taxpayers. We have plenty of money. In fact, the Government is collecting more tax than ever before. In the year ended June 2022, we taxpayers contributed almost $108 billion to the government coffers to pay for the operation of the country. This compares with approximately $70b in 2017, a 54 per cent increase in just five years.
What we need to stop is the irresponsible spending. We’re spending over $1b more every week than we were just five years ago. And we’re borrowing every dollar to do it.
That would be OK if it was going into the right places. The areas of need. Delivering solutions. Solving problems. Fixing stuff. But it’s not. We’re spending millions of dollars every week on problems that are getting worse. Despite the spending, we’re not seeing results.
For most households the formula is pretty simple. When we spend more than we earn, we have two clear options. We have to decide, usually quickly, whether we are going to earn more or spend less. Earning more might be an option if we have the time or ability to take on another job. But spending less is usually the obvious, and often painful, option.
And that is where this country is at. While the farmers do their best to generate export receipts and tourism slowly recovers, we need to spend less. Not just a little bit less, but a lot less. Somehow, we need to fix education, the health system, reduce crime, make life-saving medicines more accessible and build infrastructure, all while spending less money.
It might sound difficult, but the answers are obvious.
We need to stop wasting money. We need to stop pouring more into the same old failed initiatives or failed people. As a country, we need to cut costs. We need to do it on a scale we have never contemplated before and we need to do it quickly, probably within the next 18 months.
The taxpayer is not a bottomless pit. So how about a plan to pull spending back to 2019 levels? We should then hold it there for two years. Thereafter, let’s allow ourselves an annual increase of between 1 and 3 per cent per year. That’s the sort of discipline we need.
Cost management is a mindset. It’s a mindset that you need to carry with you as you consider every move. Good questions get better outcomes. Do we have to do that? Does it have to cost that much? Can we do it another way?
Like most tough decisions, it starts at the top.
Someone sent me an article about the pared-down existence of Members of Parliament in Sweden. They have no official cars or private drivers. They’re expected to use public transport. When in the capital, they live in small apartments and use tiny public service-type offices. They’re treated like ordinary citizens and they are paid roughly twice as much as a schoolteacher.
If nothing else, the average Swedish politician would have a clear understanding of what a normal life feels like.
I’ve only been to the Beehive a couple of times, but I suggest the politicians in the Wellington bubble are as far removed from normality as it’s possible to be in this little country. They have big offices, cars, drivers, dining rooms, flights and expense accounts that most of us - the people they serve - can only dream about. But should we be led by people living elite lives in elitist environments, on our tab?
That sounds like a good place to start. Do we really need the Crown limousine fleet? What about the offices? The biggest tenant in Wellington is government. Is anyone asking how we could halve the office space used by government in Wellington?
The government is our biggest car owner. They’re on a misguided campaign to convert them all to electric vehicles. Why are we rushing to an unproven technology? Most vehicles are replaced after three years. Why? Today’s cars last forever. What if we held them for five years instead? Computers don’t wear out in three years any more either. If we upgrade assets a year or two later, we’ll save a bundle.
Every time I fly to Wellington, half the people on board appear to be working for the government. It’s not just the flights either. Travel means taxis, expensive carparking at airports and sometimes hotels. Do people in government jobs have to travel as much as they do?
Why do government employees need credit cards? Can’t they pay work-related costs with their own card and claim that cost back? If you have to put in an expense claim for your spending, you will think about it before you do. Why do government departments need to run advertising campaigns in the nation’s media? They don’t need to advertise their services.
I once had the opportunity to observe the operations of a small government department. They had approximately 520 people. Of those, 27 worked in the HR department. Another 52 worked in “communications”. At the same time, Spark, one of our biggest companies, had 6000 people, eight in HR and three in communications! It was a monstrous waste of time and money and the entire department was totally ineffective.
We’ve put on an additional 15,000 public servants in the past five years. That’s $1.2b in salaries alone, every year. Why? What are they doing? Do we need them all? Teachers and nurses, yes. But what about the others?
So, to those political parties who want to raise more tax revenue from us all, I ask one question: why? Before you go back to the well, you need to be sure that you are using your water as efficiently as possible. And you’re not.
A few weeks back, National introduced a policy initiative aimed at giving us greater transparency on where our tax money goes. Most people, including the PM, laughed off the proposal to provide taxpayers with “tax receipts”.
In fact, when asked about it, our Prime Minister completely missed the point. He told us that we can all go to the MyIR website to see how much tax we’re paying.
Prime Minister, we know how much tax we’re paying. What we need to understand is what you’re doing with the money.
The more you think about this stuff, the more obvious some of the solutions become. Do we need all the government departments? We have a Ministry for Children and another one for Youth. A Ministry for National Security and Intelligence and another one for the SIS. One for Veterans and another for Seniors. Are our kids better off because of the Ministry for Children? How about the separate ministries for each of the Environment, Conservation and Climate Change?
All of these departments have budgets that their executives will try to spend each year, so they get the same funding the following year. The system is flawed. The mindset is flawed.
So there are plenty of places to look. All we need is the mindset to change. Instead of asking the taxpayer for more money, how about a 10-year plan to get to a point where we can ask the taxpayer for less?
In my experience, I’m yet to see an organisation that can’t reduce costs by 10 per cent. Given the wastage in government, I’d be very surprised if you couldn’t get 20 per cent.
We need a new plan, with new cost structures and the increased transparency that comes with that.
Cost cutting is difficult work. It’s tough, it’s emotional. It affects people’s lives. But sometimes it is very necessary to ensure the survival of the enterprise. Or in this case, the country.
But it could be done, if there’s a politician who’s up for the challenge.
- Bruce Cotterill is a company director and adviser to business leaders. He is the author of the book, The Best Leaders Don’t Shout. www.brucecotterill.com