Sunday, July 31, 2011

Valuing our Ecosystem Services

The Royal Society of New Zealand has highlighted the importance of natural ecosystems as providers of services that benefit human wellbeing and suggest these need to be included in economic decision making. For Green supporters this is not a revolutionary idea but the Royal Society has articulated the concept well: 

"The natural economy provides us with many natural ‘goods and services’, but most are not considered in economic valuations, says a new paper released by the Royal Society of New Zealand.
In its “Ecosystem Services” paper the Royal Society describes how ecosystem services or processes benefit human wellbeing and the need to include these in economic decision-making. It says when these ecosystem services are not recognised in the marketplace, it leads to decision-making failures.
Examples of ecosystems services are forests reducing soil erosion, shellfish filtering water pollution, unfarmed areas improving natural pest control on nearby farmland, and ecosystems providing recreation and cultural value."

My concern at our monocultural farming practices and the dangerous loss of biodiversity is covered well in the supporting paper:

The complex relationship between biodiversity and ecosystem services

Biodiversity is often valued for providing resilience to environmental change. More biodiversity generally leads to more resilience, but the relationship is rarely simple. Ecosystem functions, such as nutrient regula- tion, are provided by the traits of organisms within that ecosystem. Greater genetic diversity provides a greater reservoir of traits that can replace traits lost if particularly important species are lost. More diversity also provides more opportunity for functions to oper- ate across a broader range of conditions. In this way, biodiversity provides the insurance value that future environmental changes will not reduce services.

Biodiversity itself provides existence value and option value (in this case, the value of preserving the benefits of unknown future uses of currently-unused species and the opportunity for current use of those species).
The past fifty years have seen a “substantial and largely irreversible loss” of biodiversity. New Zealand’s unique endemic biodiversity has similarly seen serious decline—an unknown but large loss of com- mon wealth and natural heritage.

The Society is organising a workshop on August 9 to explore how to implement ecosystem services thinking in a policy context and I think it deserves support.

Saturday, July 30, 2011

20% of Schools Break the Law!

I have already expressed my concern that this government's focus on numeracy and literacy, above all else, will have negative consequences on our children's learning. The Ministry have just revealed that around 20% of schools have refused to set targets against the Standards and therefore rejecting a legislated requirement. These school communities (boards and staff) have felt so strongly about the negative aspects of the standards that they have broken the law to protect the children in their care. Considering that the Minister of Education has threatened to withhold resources or replace boards with statutory managers, their stands haven't been taken lightly. One can only imagine how many schools have difficulty with the Standards but aren't prepared to break the law. A number of surveys have indicated at least 75% of principals and schools have major concerns.

It will be difficult for the Minister to continue to claim that this is just political action initiated by education unions when whole school communities are taking action and the New Zealand Education Institute has mainly focussed on finding professional solutions. The Institute even attempted to engage with the Minister's NS Sector Advisory Group only to find that there was no ability to address the flaws in the standards, its sole function was to facilitate implementation.

With such overwhelming opposition the Minister needs to start engaging with the profession and actually start responding to concerns in a professional way. The cracks are now too wide to cover up and reading the odd supporting letter in Parliament is not going hide the reality.

Friday, July 29, 2011

Rich List Prompts Questions

Reading the release of the latest "rich list" prompted me into asking a few questions in the form of a letter:

The Editor
The Southland Times

Dear Sir

If New Zealand’s rich list of those with a personal wealth of over $50 million is growing, why are most New Zealanders earning less than $28,000 a year?

Why have the rich enjoyed an 18% average growth of their wealth when most of us have seen a reduction of our disposable incomes?

How can one man have $2 billion, largely from investing in Southland dairy farms, yet the government can only find $15 million to invest in protecting our rivers from farming effluent?

Why does the government insist that the tax cuts for the wealthy are justified when many of those wealthy are expressing concern at the inequities of income and would be prepared to pay more?

If almost half of New Zealand wage earners need financial support from the government to survive on their incomes, are we not subsidising business profits and the incomes of the wealthy?

Given that 151 New Zealanders have a combined wealth of around $45 billion why is it that 100,000 of our children live in poverty?

Why is New Zealand one of the most inequitable countries in the OECD and why are many New Zealanders still shifting to Australia?

Yours sincerely...

It was interesting to note that new rich lister, Phillip Mills, sees that the future is in "clean technology"!

Fairfax Media Poll Provides Mixed Messages

The latest Fairfax Media Poll has National being able to govern alone if the election was held now. It is an interesting phenomenon when there are so many concerns and protests around this government's initiatives and yet it continues to receive (according to the polls) widespread support.
  • We have Christchurch people concerned at the lack of information and urgency in dealing with their situation.  
  • Early childhood educators and communities are reeling after ongoing cuts to funding qualified teachers.
  • ACC claimants struggling with having to climb through endless hoops to get reasonable compensation (especially if you are over fifty or a rape victim). 
  • Those on low incomes and benefits struggling with the leaps in food prices and the general cost of living.
  • Primary schools having to abandon the implementation of the new National Curriculum to make sense of an untested and flawed assessment system.
  • Wage earners struggling to see why their wages cannot be increased to keep up with inflation while company management get huge salary increases and bonuses.
  • The Government's plan to mine National Parks created protests up and down the country involving numbers not seen since the early 80s
  • Constant revelations of self serving decisions and activities like BMW purchases, mates rates for appointed positions, budget blowouts for the PMs protection squad and government MPs accepting numerous treats provided by secret lobbyists.
  • Intensive and largely uncontrolled farming polluting 90% of our lowland rivers.
  • Banks and large corporates successfully using tax avoidance to keep billions of dollars of potential government revenue.
  • John key threatening attacks on employment conditions in the next term.
The very same poll showed the following issues were regarded as important or very important to a large percentage of respondents (estimations based on the graph provided):
The state of hospitals and education (92%)
The state of the economy (85%)
Cost of living, including the cost of fruit and veges (84%)
Law and order and drug and alcohol culture (83%)
The rebuild of Christchurch (75%)
The state of the environment (72%)
Social welfare reforms (65%)
The sale of state owned assets (59%)
Superannuation and Kiwi Saver (54%)
Immigration and emigration (47%)
Maori issues and influence (37%)

Given the record and intentions of this National led government it does not appear to be performing well in the areas that voters regard as important. The John Key factor appears to be providing an acceptable gloss over a multitude of sins....

Wednesday, July 27, 2011

Reform and Rehabilitation Worth the Investment

It seems to me that many of the costs that our government and tax payers have to shoulder are due to poor investments in areas that would save money in the short and long term. Spending on early childhood education is one area of investment that I have promoted previously in this blog. This is obviously too much of a long term investment for this government to consider as the benefits would take at least ten years to fully come into effect. David Lomas' article in the latest Listener titled "Senseless Sentencing" highlights an area that would show an immediate return to an investment that members of this government have actually identified themselves, prisoner rehabilitation.

We currently spend about $92,000 per annum on each prisoner and the costs of the legal process before incarceration must also be considerable. All in all we are looking at over a billion dollars a year to manage a prison population of around 8700 offenders. According to Lomas the majority of our criminals have drug and alcohol addictions and much of their offending comes from this. Due to the fact that few have the cause of their offending identified or treated we have, compared to most other OECD countries, a high rate of recidivism (around 49%).

Judith Collins has openly supported the value of drug and alcohol programmes, claiming their 30% success rate of stopping recidivism make them "very fiscally sound". It is interesting, however, that if you conservatively say that such programmes would stop only 10% of inmates from reoffending, and 10% of $1 billion is $100 million, then spending anything less than that on these programmes would be justified. I would have to say that the $3.4 million currently being spent on addressing adictions seems comparatively low. For every prisoner we are currently looking at only $390, on average, being spent to identify the cause of a prisoner's offending and then provide a programme to address it.

If we can spend $150 million for the rights to host the Rugby World Cup, surely we can spend half of that to turn our addict criminals into productive and useful members of society. It is all about priorities...

Poverty, Absolute Poverty and Skiing Holidays

My wife is a GP and I am currently working part time as a teacher and our combined income makes us well above New Zealand's median household income of about $35,000. We do have a disposable income that we can use to buy more than the necessities of life and even the odd skiing holiday, like the one I have just returned from.

Our Summer holidays are generally based around camping, tramping and playing around in water and tend to be relatively cheap. Our skiing holidays tend to be not so cheap once we have paid for a rented cottage or motel, our ski passes and the odd meal out, yet there are many who obviously find few problems in affording this expensive recreational activity.

While we drag our aging, 12 year old, two wheel drive up the mountains we are often left in the dust created by large and relatively new 4WDs that dominate the car parks. My 10 year old skis and 22 year old ski boots do look a little different from those most others appear to use and I am surprised at the number of families who appear to be kitted out in the lasted equipment and clothing. While we bring packed lunches it is obviously a non issue for many families to always buy the expensive food in the field cafeterias. When all costs are accounted for many families must easily spend in one day of their skiing holiday what most families earn in a week.

This morning I happened to catch the end of a TV item on "Breakfast" where a primary school principal was explaining how 10% of the children in his school regularly arrive having had no breakfast and aren't likely to have anything for lunch either. It was with this thought in my mind that I found myself an hour later on a ski field and surrounded by the physical manifestations of affluence. I enjoy skiing and have no issue with those who are able to afford the full trappings of a skiing lifestyle, but I do have difficulty understanding how we have become a society where 20% of our children live in poverty.

I have heard it said by many on the "right" that poverty does not exist in New Zealand and that real poverty is what we see portrayed on the evening news around the African famines. This sort of view seems to justify the neglect and relative suffering many of our children experience, as long as we don't have distended bellies and deaths through malnutrition we have no cause for concern. In a developed, educated and resource rich country like New Zealand poverty at any level should not exist. To encourage and accept a situation where extremes of wealth can occur and allow an increasingly visible "underclass" to develop is unacceptable and immoral.

This election the Green Party intends to promote policies that will lift 100,000 children out of poverty. The policies may not enable all these children to experience the privilege of a week's skiing but will provide the essentials for a life where breakfast is provided every day, real choices exist and a prosperous and secure future can be a reasonable expectation.

Sue Bradford makes some useful comments on the "Green Paper" that includes some interesting links.

Saturday, July 23, 2011

MoE Appointment May Challenge Quality Public Education

Despite the fact that New Zealand is regarded as having one of the best education systems in the world the government has decided to appoint a new CEO for the Ministry of Education from the UK, possibly the first to be appointed from outside our country. Lesley Longstone is currently employed to oversee infrastructure and funding for the English Department of the UK system. It is interesting that we have appointed someone who has a leadership role in a national system ranked 9 places beneath ours according to one assessment.

The really worrying aspect of this appointment is the fact that our Minister of Education has shown an interest in the "Free Schools" being supported by Britain's coalition government and Ms Longstone is an enthusiastic supporter of these schools. It appears that those that benefit most from these schools are the wealthy middle classes, at the expense of low decile schools.

New Zealand's public education system has been based on ensuring access to quality education for all our children and making sure all schools are well supported no matter what community they serve. Free Schools are free from following many of the controls of normal state schools and this has created some interesting outcomes in the US with their comparable Charter Schools.

NZEI has indicated it would like to establish a good working relationship with the newly appointed CEO and hopes that Ms Longstone will take time to really appreciate the strengths of our education system before implementing any changes. We don't want to emulate countries ranked well below us and lose what has made us one of the best. We especially don't want to introduce an education system that creates winning and losing schools.

Wednesday, July 20, 2011

The Rugby World Cup is a Trojan Horse!

We have constantly been given the impression that the hosting of the Rugby World cup is a prestigious gift, but I am increasingly discovering that this gift is more like a Trojan horse.

In the first place it is not a gift at all, it cost us a good deal in promotion and lobbying to gain the privilege in the first place, then we had to pay the IRB $150 million.

Once gaining the hosting rights logistical planning revealed that we lacked the necessary public transport infrastructure and stadiums that would meet international expectations.

The school terms had to be reconfigured at great inconvenience to schools and those sitting NCEA so that school busses could be used to cover the inadequacies of our public transport systems. By chance I happened to talk to someone involved with managing transport logistics and it was her opinion that we would barely manage to cope with this event and unless our transport infrastructure underwent huge improvements this would be the last event of this scale we could conceivably host.

Rate payers in Auckland and Dunedin will be fully aware of the costs they have had to shoulder to ensure that local stadiums were constructed in time for this year's event. Dunedin, due to its smaller population, has had to pay dearly ($200 million) for the status of having a suitable stadium and the construction went ahead despite huge protests from local ratepayers. Many initiatives that would have had a positive benefit to a greater number of local citizens were sidelined so that the stadium could be funded.

The opportunities for ordinary New Zealanders to watch a major game are also prohibitive, the cost of the cheapest seat in the Invercargill stadium to watch Scotland play Romania will be $77 and to watch Ireland play Italy in Dunedin the cheapest category D tickets cost $66 and most seats will be well over $100. The cheapest ticket to the quarter final at Eden Park will set you back almost $200 and final has already sold out, but I can imagine few average New Zealanders will be attending. If you are having to travel to attend a game, the cost of plane fares and accommodation are bordering on criminal.

Considering our median income is around $27,000 most New Zealanders will feel they have directly subsidized the hosting of this event for the benefit of those in the accommodation industry and wealthy sports fans. I'm sure if the All Blacks finally win the cup this time it will give the country a huge emotional boost and the financial hangover resulting from this expensive sporting celebration will be deemed worth it. Another loss, however, doesn't bare contemplating.

Thursday, July 14, 2011

National's Naughty Nineties

It appears that some decisions made in the 1990s are causing some slight difficulties for us today. In 1991 the National government of the day decided that pesky building regulations were getting in the way of the building industry's ability to fast track projects, the industry could be trusted to make sound decisions without bureaucratic interference. Now, twenty years later, we have a leaky building disaster every bit as bad as the Christchurch earthquake, $11.5 Billion dollars worth of repairs and rebuilding.

In 1993 the National government of the day ignored advice and repealed the Coal Mining Act and regulations. This meant the loss of the coal mines inspectorate and the knowledge and experience within it. Now almost twenty years later we are grieving the needless deaths of 29 men. Kevin Hague has voiced concern that due to the obvious inadequacies of mine safety in New Zealand we need to act immediately to protect those currently mining. The Minister of Mines, Kate Wilkinson, sees no urgency and is prepared to wait for the findings of the Royal Commission.

The historic evidence of National's laissez-faire attitude to bureaucratic but essential checks and balances is clear for all to see and we will continue to pay the costs of their past negligence for some time to come. The current National government is no different, their eagerness to trust business and market forces and cut regulation is just as apparent. This government ignores advice just as much as they did twenty years ago and their corporate, GDP focussed agenda is no different. The future costs to this country of not responding properly to water degradation, ignoring carbon emissions, not building strong public transport infrastructure and reducing funding to early childhood education will see us paying dearly again in the not too distant future.

"Trust us," says John Key, Bill English, Gerry Brownlee and Anne Tolley, "We know what we are doing......"

Wednesday, July 13, 2011

Four Great Myths Busted


Here are some great Myth Busters dealing to some common myths that have no basis in fact: 

1) National's ACC Crisis Myth - Myth Buster: Bill Rosenberg, CTU economist 

ACC’s financial position continues to improve according to the government accounts for October, directly contradicting ACC Minister Nick Smith’s claims of crisis for the corporation, said the CTU today.
“ACC’s reserves are now above forecast by $739 million (5.4 percent), a further improvement over last month,” said CTU Economist and Policy Director Bill Rosenberg. “The strong performance of ACC’s investment portfolio shows that the Government’s claims of blowouts and financial mismanagement are completely inaccurate.” 
ACC’s claim liabilities, above forecast largely because of changes in the assumed interest rate used to estimate it, are now just 0.6 percent ($166m), more than forecast, again an improvement over last month. These numbers are driven largely by constantly changing market valuations and by actuarial assumptions. “The main problem is the full funding of future claim payments which means ACC accounts will always be susceptible to large apparent variations which in reality may have little practical consequences for the ACC scheme,” said Rosenberg. “A pay as you go scheme with a prudent level of reserves could be much more stable.”
National used a natural downturn in the in the performance of ACC's investment portfolio to fabricate a sense of crisis, a highly dishonest way of forcing unnecessary change in the entitlements of many deserving New Zealanders. There has been an increase in those on Invalid and Sickness Benefits.
2) ACT's Great "Maorification" Myth - Myth Buster: Gordon Campbell 
As usual Gordon knocks Brash's silly claims with logical and factual arguments. 
3) National's National Standards in Education Myth - Myth Buster: Lester Flockton, Respected Educationalist/Researcher 
Lester wrote a letter to Education Minister, Anne Tolley, (who had criticized his claims) and asked for evidence that he was wrong. After over a year he is still waiting for a reply. Here is Lester's fact sheet. Lester also joined three other highly respected education academics, including John Hattie (the Government's chosen education advisor) to write an open letter voicing their concerns.
4) National's Over-Investment in Early Childhood Education Myth - Myth Buster: Sir Peter Gluckman, Prime Minister's Chief Science Advisor
Sir Peter strongly believes that an increase in investment in early childhood education today will build emotionally stronger youth tomorrow. John Key needs to listen to the man he appointed.

Monday, July 11, 2011

A Dairy Story with a Happy Ending!

While dairying is an industry that generally deserves the bad press it receives, there are moments when something positive bubbles up through the effluent.

The Editor
The Southland Times

Dear Sir
Two years ago I had strong objections to the dairy conversion that was proposed for a farm near Curio Bay. I felt it was an inappropriate activity to exist in an area reliant on tourism and the pristine nature of the marine environment. There were many other submissions objecting to the conversion at the time, especially when there was wide mistrust for an industry that appeared to ignore the negative environmental impacts it was causing. When consent was given for the conversion I was extremely dismayed and felt sure that, despite the stringent guidelines that were set in place, there would be serious consequences.

When the Environment Southland’s environmental awards were announced on Friday I was pleasantly surprised to see the same farm “South Coast Dairy Ltd” listed as a winner. After so much negative news regarding dairying recently it was especially good to hear a good news story and particularly around a farm that began its life under a cloud of controversy.

I would like to congratulate Chris and Lynsey Stratford for their genuine commitment to doing things properly and even enhancing the farm’s natural environment. Chris and Lynsey have demonstrated clearly that the impacts of dairying can be managed far better than is happening on many other farms and I hope others will follow their example.

Yours sincerely.....

An article and a news report on Chris and Lynsey's achievement.

Sunday, July 10, 2011

National's Cunning Plan!

Q&A this morning devoted its programme to innovation and they had collected together a number of academics and successful entrepreneurs to discuss what was required to really develop a strong economic future for New Zealand.

Some common themes came through strongly:
  • We need a well educated population.
  • Good ideas come from innovation and creative thinking.
  • The most successful companies spend at least 6% of their income on R&D.
  • Good ideas need investment to be fully realized and we need to divert money from non productive sectors like property.
  • Our country has to invest in itself first to attract international investment.
  • Ideas that have global aspirations are more likely to succeed.
  • A vision that goes beyond ten years is important.
Our current Government have done some serious thinking and based on these themes they have developed a cunning plan that is so revolutionary that we have failed to see its true brilliance. New Zealanders are naturally resilient and innovative and we have come to where we are because of our number eight wire and "get on with it" mentality. We actually do better with less so the government has embarked on an ambitious underinvestment strategy.

They have placed the education portfolio with their least capable Minister (more cunning underinvestment). This Minister is able to ignore all professional advice and truly knock the guts of the Primary education system. By removing all advisors from curricula like technology and science and forcing an unworkable assessment system on schools it will force teachers to be more innovative and independent.

Cutting funding for adult education was obviously done to force unemployed adults into becoming independent learners and not funding early childhood centres and kindergartens that have fully qualified staff was such a clever idea the reason behind it is beyond me. The fact that we have amongst the best early childhood and primary education systems in the world on one of the lowest levels of investment in the OECD means that reducing funding must be a successful way of producing quality. The complaining families and teaching profession just don't appreciate that lack of investment is investment.

This government knows that desperation drives creative energy, so forcibly keeping our median income as low as $28,000 we will have a population of desperate but creative people who will need to develop innovative ideas just to survive. It is amazing what meals some people can produce from the humble potato and we now have budding entrepreneurs taking advantage of the booming market for secondhand clothing.

Wayne Mapp was quick to correct Paul Holmes' comment that New Zealand spends 1% of GDP on research and development when the rest of the world spends 6%. We actually now devote 1.3% on R+D and he claims the extra .3 is seeing some amazing developments, we are obviously well on the way to making our mark on the world in this area. While concerned that the extra .3% may be a little too rash our strategy of underinvestment is seeing good results.

To divert funds directly out of property investment through a capital gains tax would seriously damage the underinvestment strategy the government is pursuing as this would shift too much money into productive sectors and would stifle any innovation that non-investment brings.

National is keen to see us again become world leaders in public transport and rail. New Zealand led the world with its ambitious development of rail transport 100 years ago when money was tight and the skilled workforce was developed from nothing. By forcing the closure of our rail workshops the Government hopes that by starting from nothing again we can use the same pioneer principles to develop our rail capacity, if we start with a capable workforce we just won't succeed.

The government has taken on board the need for a global approach to economic growth and has embarked on another cunning plan to achieve this. They have taken the term "global buy in" literally and have decided to sell off state assets and out source as much as possible. New Zealanders have over-invested in ourselves and we have become too comfortable with having control of our strategic assests. Real innovation will come when we have very little sovereignty over our own country and we will really have to look outside the square to survive.

Finally, having a long term vision that extends even beyond ten years is something that this government really appreciates. It has recognized, quite rightly, that this is also something it has failed to do in the past (remember leaking buildings...) and it needs to out source the development of such visions. Most businesses and corporates are very good at future planning to ensure ongoing profitability so market forces will lead our country into the future, it does not make sense to trust our government with such an  important role. 

National's cunning plan is well underway and I think most of us see the real benefits it has provided us, which is why more and more people are looking to this vision instead.

Friday, July 8, 2011

A Capital Gains Tax is a Fair Tax

I have already presented on previous posts my concerns at the huge inequities of income in New Zealand. Most working New Zealanders barely earn more than the minimum wage with the median income sitting around $27,000. The largest employers over the last year have actually been returning huge profits with Westpac seeing a massive 63% increase in profits over the last half year. The most profitable businesses and the wealthy of our country have benefited from huge tax cuts when many already escape taxes on much of their income. It has been revealed that the most wealthy gain around 40% of their income from capital gain and this is not taxed, whereas those earning moderate or low wages have all of their income taxed.

The Government have been relying on the old and failed theory (trickle down) that if you allow business to return greater profits and tax the wealthy less then they will invest in growing their businesses and employ more people. What has happened in the US and here is that many highly profitable businesses have not grown their companies within their own country and have outsourced much of their production instead. We also know that successful companies have also invested much of their profits into higher salaries for their top management. Fonterra placed a wage freeze on their middle management and awarded their CEO a 41% increase (after a 53% increase 5 years earlier), he is now earning $5.1 million.

The wealthy are largely keeping their profits to themselves, there are currently 2644 homes for sale on Trademe for over $1 million and a number of them are around $10 million or more. These properties are a small fraction of the mansions many of our wealthy elite are building or buying for themselves. At the same time over 100,000 of our children are living in families dependent on financial support and a large portion of those will be in substandard housing.

The tax cuts that were awarded to our wealthy has also seen sales of higher priced cars reaching a level where New Zealand has a big enough market for a Rolls Royce dealership. 120 new Bentleys were sold here over 2010 and at around $400,000 each it amounts to about $48 million being spent on Bentleys alone. Loss of jobs and reduction in real income is a reality for most New Zealanders while the wealthy elite are spending like never before. A CGT will not only generate much needed government revenue but will push investment into more productive sectors and allow property prices to become affordable for average families again.

Wealthy Australians claimed the introduction of a CGT in their country would have catastrophic results and their predictions of a property and financial collapse never eventuated and I can't imagine the same happening here.

Here is Russel's and the Treasury's view on a CGT:

Treasury: Millionaires biggest beneficiaries from lack of a tax on capital gains
Millionaires are the biggest beneficiaries from of the lack of tax on capital gains while the vast majority of New Zealanders would be completely untouched by such a tax, Green Party Co-leader Dr Russel Norman said today.

"Research produced by the Treasury and Inland Revenue shows that those on very high incomes gain disproportionately from the lack of a capital gains tax," said Dr Norman.

"In the USA, those earning $1 million or more derived 40 percent of their income from capital gains. The figure was similar in Australia, with those earning $1 million or more deriving 30 percent of their income from capital gains. Those on average incomes gain negligible income from capital gains.

"Treasury and Inland Revenue therefore conclude that a tax on capital gains (excluding the family home) in New Zealand would fall mostly on those on very high incomes thereby increasing the progressivity of the tax system.

"It's Treasury's way of saying that a capital gains tax is incredibly fair.

The joint paper published by Treasury and the Inland Revenue Department used data from the United States and Australia to draw conclusions about the likely equity implications for a capital gains tax here. They found that a capital gains tax (excluding the family home) would increase the integrity of our tax system while raising an additional $4.5 billion in government revenues over time.

"The research highlights the fact that the bulk of interest and wage income was earned by those on lower incomes. This income is fully taxed," said Dr Norman.

"The largest proportion of capital gains is earned by those at the upper end of the income spectrum. This income currently remains untaxed.

"This tax loop-hole for those that can afford to own multiple properties needs to be closed.

"By defending the status quo, John Key is arguing those earning more than $1 million a year shouldn't have to pay tax on 40 percent of their income while those on the average wage should pay tax on all their income.

"By refusing to implement a tax on capital gains, John Key is not protecting the interests of wage and salary earners.

"A capital gains tax is a fair, progressive tax one that treats every dollar earned the same."

Link to the Treasury & Inland Revenue's background paper on capital gains tax:
Related links
Capital gains tax - why it's smart
Taxing capital gains will help make homes affordable
Taxing capital gains essential to protect taxpayers and family farms

Thursday, July 7, 2011

Democracy Shouldn't Stop at the Polling Booth.

There appears to be a high level of mistrust for our elected representatives in regional authorities and at national level. In popular surveys politicians are well down the list of our most trusted professions and despite being elected by popular vote there appears to be little faith in their abilities to act in the best interests of those who put them there.

I think there are a number of reasons for this and two in particular stand out for me. The first is around transparency and this comes out of the number of closed meetings that occur at regional and national level where the public is excluded from deliberations. An Invercargill blogger rightly questions the necessity of public excluded (PE) sessions here and here. Many of these PE sessions appear to have have been decided on dubious grounds and while the final decisions may be sound they do not support confidence in how those decisions were reached. Often commercial sensitivity is used as a basis for PEs but I struggle to see the need for secrecy in many instances.

The other area of concern is when the public are not consulted on issues that may have far reaching impacts. It is one thing to be elected to a governance position to make decisions  on the electors behalf but to truly represent those who have put you there, surely an ongoing relationship is necessary to truly  appreciate the views and priorities of the constituency.  When submissions for the lignite briquette plant consent application were restricted through a limited notification process when there was widespread public interest, the transparency of the process was rightly questioned. Limitations within the current RMA legislation also appears to restrict wider views of those who see impacts beyond the immediate environment and when there is limited opportunity to discuss concerns with elected representatives the motives behind decisions can be questioned and distrust can develop.

It seems bizarre that Robert Guyton's open meeting to hear the views and concerns of his constituency on the further development of Mataura's lignite reserves should create so much attention and angst in some quarters. Surely such meetings should be standard practice for our elected representatives if they really want to honestly carry out their role. It is also important that the personal views and background of our councillors and MPs are openly presented as these must have a strong influence on how they perform in their roles.

Ex Environment Southland Chair, Mr Stuart Collie, needs to appreciate that personal interests are a reality and rather than an impediment to public roles it can be a strength when such influences are well known. Impartiality in decision making is an important principle but the personal weight individuals give to any evidence presented to inform decisions is always subjective and it is over to the voting constituency to decide what they are comfortable with in terms of the value base they support. More than any other councillor Robert Guyton's views and interests are openly presented in public forums through his blog,  regular columns in a national magazine and his radio exposure. The fact that Robert was well supported by the public votes he received surely meant there is widespread comfort for his views and his ability to carry out the role. Mr Collie also needs to accept that his own views were also widely expressed in public forums and his past record was well known yet he was not supported in his attempt to achieve another governance role.

Tuesday, July 5, 2011

Robert Guyton Follows a Tradition of Southland Leadership.

Environment Southland Councillor Robert Guyton's frustration with failings of our regulatory processes has led to an independent approach that follows a tradition of Southern leadership. Yet again the Government, and the nation, needs to sit up and take note.

Southland may be at the southern end of the country and be largely dismissed by much of New Zealand as inconsequential, but our impact as national innovators and leaders is actually substantial.

Southlanders are used to being sidelined or ignored by the rest of the country and rather than complain and make a fuss, we just get on with doing things independently. Southlanders are not overawed by the fact our population is small, we are a province of doers and we believe in ourselves.

My first experience of the Southland spirit was when I was involved in the Southland Section of the New Zealand Alpine Club. The Southland Section was routinely ignored by the national body when international expeditions were organized, so the Southland Section just organized their own. Hugely successful expeditions were organized from the sixties through to the eighties to Patagonia, China and even Everest. The technical challenges provided by Fiordland's Darran Mountains were a great training ground for Southland climbers and their sixties ascent of a virgin Patagonian peak wasn't repeated for many years because of the challenging nature of the climb.

In numerous sporting codes Southland punches well above our weight and with the funding assistance of our Licensing Trust we have been nationally competitive in Rugby, Netball, Cycling, Basketball, Rowing, Badminton, Swimming and many more.

Educationally we are recognized as leaders in supporting new technology and innovative approaches in teaching numeracy and literacy and our gifted and talented learners. It is not surprising that some of the strongest opposition to National Standards has also come from Southland where our professional integrity comes before any politically motivated initiative.

While there was a national move for provinces to lose their financial independence with provincial banking being absorbed by large Australian banks, Southland stood strong. The Southland Building Society remained independent and now as the SBS bank it has branches throughout the country and is arguably our largest New Zealand owned bank after Kiwi Bank.

When the Government in the sixties and seventies decided that the natural values of Lake Manapouri were expendable to hydro-electricity production Southland led the largest and most successful environmental protest that New Zealand has ever experienced.

Southland is again finding itself being pushed aside because of spurious national interests and industrial greed. The growth of the dairy industry has seen Southland's natural resources exploited with blatant disregard for the local environment and the Government's flawed faith in fossil fuels will potentially destroy the food production future of the Mataura Valley.

Venture Southland's Draft Energy Strategy is far superior to the national strategy in its environmental awareness and focus on sustainability of resources. While the National led government is pulling back from its environmental responsibilities Southland's regional councils are taking these responsibilities very seriously and are attempting to address mistakes of the past. Yet again there is little regulatory or financial support and our region will have to assert ourselves as we have done before.

Sunday, July 3, 2011

Dr Rob Whitney and Conflicts of Interest

In a recent ODT article on the mining of Southland's lignite Dr Rob Whitney, New Zealand's representative on the World Energy Council, was quoted as very supportive of accessing this resource. It appears that Dr Rob Whitney is an influential man in the world of energy production as he heads the WEC's project looking into energy development through to 2050.

If Dr Whitney has influence at an international and local level it is important that we are also aware of his background and any potential bias he may have regarding energy production. One of his key roles in New Zealand is as the CEO of CRL Energy which is owned by the New Zealand coal industry. CRL Energy specializes in research, testing and consulting in all aspects of energy production and in particular focusses on fossil fuel energy and most particularly "coal related research".

Given Dr Whitney's background, his enthusiastic support for lignite and coal appears to come out of his strong connections to the coal industry, therefore any public statements he makes need to be regarded in this context. I would put much greater weight on the comments and reports from our Parliamentary Commissioner for the Environment, Dr Jan Wright, as she has no conflicts of interest and her real concerns around the mining of lignite should not be lightly dismissed.

Dairying IS the Problem!

The facts all point to the increase in dairying (19% growth in 2009-10 alone) in Southland having a direct relationship to a deterioration of water quality. The science collected around the Waituna by both DoC and Environment Southland shows the growth in cow numbers relates to a similar growth in nitrogen and phosphorus levels found in local rivers and the lagoon. From five dairy herds in the nineties there are now forty herds in the Waituna catchment. Consents for intensive stocking on porous peat land seems nonsensical now, especially when earlier consents only required two day holding ponds, and in wet winter weather many farms are awash with effluent. Regulations currently deal with only around 10% of the dairy effluent, most is excreted on to the wintering paddocks by the herds and washed into waterways with every rainfall.

Past Environment Southland Councils operated very much like a branch of Federated Farmers and the previous chair, Stuart Collie, openly supported the philosophy that the environment had to take second place to economic growth. An attempt to cover the increased costs of managing the growth in dairying and enforcing compliancy with an increase in rates was firmly blocked by the farming community and we have a continuation of general rate payers subsidizing the environmental management of the industry. Research into the external costs of dairying in Canterbury established that up to $45 million a year had to be shouldered by those outside the industry in that province alone.

I think we have to accept that any industry that promises huge profits creates a gold rush mentality and rapid growth creates growing pains for regulatory authorities who do not enjoy a parallel growth in their funding or operating capacity. The Dairy industry has grown with few constraints and many who have profited from that growth have turned a blind eye to the consequences. We can't effectively reverse what has been done and the new water management regulations have no retrospective powers, we are captured by the poor decisions of the past and there appears to be no clear way forward.

Nick Smith offered little hope. The $15 million of contestable funding to assist with cleaning waterways was one possibility, however, given the fact that the $8.8 million the Green Party got for the protection of wetlands for the past five years is about to end, this may barely replace what has already existed. Public money and local councils will not make a huge difference to the current situation so we are dependent on the goodwill and the moral or ethical heart of the dairy industry to step up and give something back.

Fonterra's  $293 million post tax profit for the last half year and the CEO's $5.1 salary ($100,000 per week) makes the $15 million set aside to clean our nation's water seem pitiful in comparison. It is about time the industry took a stronger lead in ensuring that the environmental consequences of the industry are properly managed. I suggest that they could easily set up some model dairy farms around the country where environmental best practice can be trialled, researched and promoted. Wintering pads could be subsidized on farms where wintering herds create environmental challenges and waste can be converted into commercially viable biogas or manageable forms of fertilizer. Such initiatives cannot be left to individual farmers and would have to be managed collectively and led by the industry as a whole.

There are solutions, there is the economic capacity within the industry, let's just do it!