Bill English Embraces Homeopathy
Bill English has been the Finance Minister for three consecutive National led governments. After substantially cutting taxes for the wealthy in 2009 he discovered that the increase in GST did not make the policy fiscally neutral and a hefty level of borrowing was needed to make up the shortfall. Public debt under a Labour Government totalled around $10 billion when National took office and this quickly ballooned to $60 billion.
Bill English and his Government have made little effort to increase revenue by chasing up the billions lost through tax fraud and closing existing loopholes. Instead they have attempted to squeeze the lowest income earners the hardest by tightening criteria for benefits and chasing up overpayments and benefit fraud.
Rather than the hard work of tightening tax law and deflating the property bubble, multiple quick rich schemes were explored instead. In the first term coal and oil were seen as the pathway to increased wealth. This dream crashed with the fortunes of Solid Energy and the opening up of our national parks and territorial waters for exploration and mining (offering subsidies and low royalties) failed to spark interest.
Selling off state assets was Bill's next ploy to balance the books and while this allowed for some financial relief, the income earned was less than expected and the government lost the longterm income from dividends.
The dairy boom was the next potential earner and the government paved the way for greater milk production through subsidising irrigation schemes and ensuring environmental restrictions were minimised. This involved sacking Environment Canterbury and turning a blind eye to increasing levels of water pollution. However, Fonterra paid the price of focussing on commodity markets rather than value added, branded products and its fortunes slumped as other milk producers increased supply.
Currently the tourist industry is holding up our economy and it has been difficult to benefit fully from this with minimal infrastructure to deal with the increasing numbers. This hasn't been helped by cuts to regional funding to deal with Auckland's growing pains.
While Bill English has been struggling to boost government income a number of serious crises are emerging that desperately need government investment. Child poverty has increased to 30%, our housing crises has deepened and our degraded rivers desperately need attention. The New Zealand health system is increasingly struggling to meet the needs of a growing and ageing population and climate change is the global crisis that our country has done little to address.
Bill English may not be the most effective economic manager (under his management New Zealand's productivity has stagnated), but his short term survival instincts are excellent. He has successfully created the impression of safe hands during 'difficult' times and even succeeded in achieving the holy grail of financial management, a budget surplus.
Few realise that our current Prime Minister's success is based on his adoption and practice of fiscal homeopathy, a little known economic tool that is very good at giving the impression of a recovery with very little input. It also relies on the 'placebo effect' by making people think that they have been given something substantial when the opposite is the case. Here are a number of examples to show how English has used the principles of homeopathy:
- Talk about increasing budgets by millions. Most people see these numbers as huge given their own incomes and do not realise that such figures are mere drops compared to sums actually needed. Compare many budget increases to the salaries of CEOs to get some perspective.
- Giving the impression of investing in something when no funds will be committed for some time. This has been used to good effect to deal with the need for public transport in Auckland, pest eradication in our national parks and lifting our refugee quota.
- Passing the buck to NGOs and expecting them to perform on a homeopathic injection of funding.
- Promoting the idea that better services can be achieved with less funding.
- Focusing on narrow targets to give the impression of improvements.
- Lowering expectations over time so that any service at all is seen as substantial.
Homeopathy and the placebo effect has allowed Bill English and his government colleagues to be elected three times in a row. It clearly takes a while for snake oil salesmen to be exposed and the 2017 election should be the time that the ruse is identified and proper, evidence based treatment can be finally implemented.