Open Policy debate a progressive step

The Labour Party should be congratulated for its move towards promoting open policy development via its blog Red Alert.  Open and transparent policies are the lifeblood of any democracy and help reinvigorate a political party.  The greater the level of public participation and debate the more likely a policy will emerge with greater rigour at the end of the process.

RSA Animate - Drive

Three Strikes Policy more expensive than first thought

California Department of Corrections and Rehabilitation:

Inmates Sentenced Under the Three Strikes Law and a Small Number of Inmates Receiving Specialty Health Care Represent Significant Costs

HIGHLIGHTS

Our review of California's increasing prison cost as a proportion of the state budget and California Department of Corrections and Rehabilitation's (Corrections) operations revealed the  following:

• Inmates incarcerated under the three strikes law (striker inmates):
  • Make up 25 percent of the inmate population as of April 2009.
  • Receive sentences that are, on average, nine years longer-resulting in about $19.2 billion in additional costs over the duration of their incarceration.
  • Include many individuals currently convicted for an offense that is not a strike, were convicted of committing multiple serious or violent offenses on the same day, and some that committed strikeable offenses as a juvenile.
• Inmate health care costs are significant to the cost of housing inmates. In fiscal year 2007-08, $529 million was incurred for contracted services by specialty health care providers. Additionally:
  • 30 percent of the inmates receiving such care cost more than $427 million.
  • The costs for the remaining 70 percent averaged just over $1,000 per inmate.
  • The costs for those inmates who died during the last quarter ranged from $150 for one inmate to more than $1 million for anotherCalifornia Corrections Report

Getting to the core of local government reform

I have just read the Business NZ submission on the Local Government Act 2002 Amendment Bill.  It contains an array of innovative thinking some of which I agree with others which I think will advance no further than the Select Committee filing cabinet.  The submission does make some important points in regard to the prevalent pattern among local councils to increase rates by significantly more than the inflation rate.  While there may be some times when such increases are justified - they should not be the norm. The consistency of such increases in recent years points to a problem with operational expenditure control by councils. 

The submission suggests that local authorities' core business should be funding and - in justifiable circumstances -  the provision of local public goods that cannot better be provided by firms, households and non-profit organisations, plus the administration of appropriate regulations. While I would be reluctant to treat such a proposal as requiring overly religious adherence it may be a useful place to start in commencing a thorough review of local government expenditures. The case for funding activities beyond the core than then be made on its merits under the watchful eye of ratepayers and their watchdogs - an informed media and blogosphere.

The submission also calls into question the potential for duplication and ill-informed decisions when local government attempts to enact redistributive policies on top of similar policies enacted by central government.  Clearly with all the data held by IRD and WINZ central government has access to more comprehensive data on incomes and wealth distribution throughout NZ.  While all levels of government should deal with citizens justly perhaps there is a case for ensuring that well-intentioned policies at local government level are actually achieving the outcomes they were intended to deliver.

We cannot go on borrowing our way into a hole

New Zealand has had three decades of current account deficits.  These deficits have piled up since Britain entered the EU in 1973.  As a nation we have spent more on imported items than we earn from exports.  We have borrowed to make up the difference.

Selling assets for cash has also been used as a short term palliative by the NZ government in the 1980s.  But this tends to mean that we end up having assets in NZ owned by overseas investors.  The dividend outpayments on those investments then become another overseas cost we have to meet and is usually added to the country's overseas debt. The culprits have tended to be NZ households and the private sector.  Asset sales are not a long term answer to resolving our indebtedness problem. With the right controls and given sufficient domestic capital savings they may be a useful vehicle to grow local shareholding ownership.

Foreign investment can certainly play a positive role in a country's economy - especially when local residents do not or cannot afford to invest.   But if we end up with most of the economy owned offshore then we would need to call into question the meaning of national sovereignty in such a context.  To turn it around we need to steadily build a much larger pool of domestic savings here in NZ.  Enhancing full participation in Kiwisaver would help towards an effort to re-New Zealandise the economy by having local families and companies buy shares in those organisations that own the productive assets of our economy.  I'm not a great fan of tariffs and import substitution because it tends to hurt low income consumers and it hides inefficient companies from more efficient competitors. A solution would be to do more to promote high value premium exports to markets around the world.  Increased focus on technology, innovation and improved productivity are all part of the solution to this major structural challenge.

A budget for the times

Finance Minister Bill English announced his second budget yesterday.  The budget provides for personal tax cuts for all and a reduction in the company tax rate.  It also attempts to slow down the rate of growth in government spending.  Health and Education still received significant new spending above where they were last year but that didn't stop some critics somehow construing these increases as "funding cuts".  Others have stoked up the politics of envy by pointing out that much of the tax gains will go to those on higher incomes.  But what they don't say is that the top 20% of earners pay 70% of the tax take -  which is also unfair and short-sighted. The budget also recognises that the truly rich manage their assets so as to minimise tax exposure anyway.  The people who get savaged by high income tax rates are the middle class and the working poor. Rather than resort to class war analogies critics would be better advised to look to the longer term economic outcomes - as well as social cohesion outcomes - of these changes.


The important thing about this budget is that it begins to set a new policy direction for the long term.  The new policy settings will provide better rewards for working, earning and saving. It will, through the GST increase to 15%, encourage kiwis to save any spare money - rather than spend it. By tightening up the rules around LAQCs and depreciation the government has also nudged NZers away from putting our savings into speculative property and towards other more productive investments. Changes to Kiwisaver contributions are also helpful - although could have gone further in boosting NZ's domestic savings rates.  With the economy poised to grow over the next 12 months it is a steady budget appropriate for the times.