Gareth Morgan, Director of Gareth Morgan Investments
In the Wellington Central election campaign Labour candidate Chris Laidlaw has extolled the benefits a “small” rise in taxes would deliver in terms of preserving free education and health systems. The idea that the problems of publicly- provided education and health can be solved by more bucks being thrown at them while pathetic, is traditional NZ politicking.
That the provision of “free” education and health generates an insatiable demand and hence a never ending call on the public purse, is a reality the Labour candidate ignores. Unquenchable demand for what’s free to the consumer, compounded by the lack of accountability by providers of such services, has been at the core of the overdue revamp of social services currently being undertaken by the government. Introduction of at least part charging and the loss of the funding role (writing their own pay cheques) by those who provide the services, is critical to raising the simple economic efficiency of these sectors. Ensuring services provided are those the customers would be prepared to pay for, is at the heart of the social services reform.
Contrary to Laidlaw’s claim there is no logical solution to these problems likely by just raising the level of funding compulsorily acquired from taxpayers. Issues of economic structure and organisational accountability are not simply ones to be solved by commandeering monies from other legitimate economic activities. The higher funding option is a path that ignores the economic losses inherent in public provision. To treat public funding as a sacred cow no matter what the wastage it generates is simply reckless politicking and the type of transfer of responsibility and costs to future generations of taxpayers that has landed NZ in such a public debt hole. Bringing an end to such political short termism is what the reforms begun by the last Labour government were all about.
Labour’s leadership is clearly refreshed by the seeming respectability that Clinton’s election and his endorsement of the populist but unsustainable economics of Robert Reich and other disciples of the worst of Keynesian fiscal policy expediency. Now it seems Labour can credibly, under the thin veil of respectability America’s lurch back to high tax and high debt provides, sponsor paternalistic, growth-cramping public sector expansionism of the kind that precipitated the 1984 reforms.
Humiliating though it must be Mike Moore finds himself having to go cloth cap in hand to capture the electoral preferences of the “yuppies from hell” as he described them, who populate this by-election seat. Promising just “small” tax rises as a means of solving New Zealanders’ economic constraints is recognised at least in Wellington as an option starved of credibility. While it can be a political winner with a public desperately seeking free lunch solutions the chances of Wellington Central having the required quorum of such escapists will be lower than in less politically conscious electorates. The by-election will be a stiff test of the wisdom Labour’s embrace of greater welfarism, entails.