Compulsory savings still a good option

An infometrics economist published in the Dom Post this weekend trying to argue against compulsory savings schemes.  Apart from a vague philosophical point that compulsion is bad and freedom of choice is good he appeared to have very little new to say on the subject.  In fact he glossed over the central problem with NZ having insufficient domestic capital and being far too reliant on overseas funds for business investment capital.

There is a risk that politicians in the future might try to break into any savings scheme for allegedly urgent needs of the day.  But it should be possible to ringfence such investments - if necessary by placing it in the name of individual account holders.  The onus is on the opponents of compulsion to say in plain terms how, in the absence of a large pool of domestic savings, they propose to solve the decades-long problem of large overseas borrowings to fund NZ consumer and household-led consumption and housing spending?

Former Council candidate opts to focus on school build

For those of you who have asked me over the last couple of months whether I will stand for Council in October....the answer is no.

Since the 2007 election I have gained further senior management responsibilities with my employer. I am also very keen to continue working on the Establishment Board of Trustees to complete the new Amesbury School, in Churton Park, during the next 18 months. These commitments together with some community volunteer projects mean that I am not able to devote the time required for a council campaign this year.

Income Sharing: empowering parents

Parents make decisions about the care of their children. Often this decision is influenced by subsidies and penalties arising from government policy. Fostered by large-scale state subsidies the NZ childcare industry (and many of the providers are large commercial corporations) has become a juggernaut.

According to the Ministry of Education “The taxpayer’s contribution to the early childhood education sector has risen from $428 million in 2004/05 to $1.17 billion in 2009/10.”

The Minister of Education said recently that the cost of funding 20 hours free early childhood education for under five year olds had nearly trebled over the last five years and was projected to continue rising at about $200 million a year.

These subsidies are not just for low income households. In fact, according to the NZ Herald for families with three children or more the income eligibility threshold is currently $99,320 per annum.
In addition to the taxpayer largesse enjoyed by those who entrust the care of their children to State-funded carers, it is estimated that the 310,000 kiwi families who choose to care for their own children now pay as much as $450million more in tax per year than they would if each parent could share their income for tax purposes.

It’s one thing for one group of parents to get a helping hand from the State. But it is not reasonable for other parents who miss out on those subsidies and do their own caring to have to pay for the subsidies other families enjoy.

Why does it matter? Well if state-subsidised childcare was universally better for our children then it might be more difficult to argue against heavily taxing families that don’t use childcare centres. However, there is some evidence that full time childcare has long-term negative effects on learned attachment and behaviour. At best the evidence is mixed. In fact a Treasury paper on the subject says:

“A meta-analysis by Violato and Russell (2000) on the psychological effects of non-maternal care on children in terms of cognitive development showed that children in day care are in all likelihood not at risk of negative outcomes compared to children in maternal care. On the other hand the results for the socio-emotional and behavioural domains showed clearly negative outcomes for non-maternal care. There were negative consequences for both boys and girls, analysed together and separately, however boys are seemingly more at risk. In terms of maternal attachment, children in day care arrangements were at increased risk of “insecure attachment” due to extensive non-maternal care. Maladjustment might not necessarily be causally connected to insecure attachment. There does exist substantial evidence that attachment patterns formed early in life extend into later childhood and adolescence and perhaps beyond, while there also exists evidence that early attachment patterns effect psychological adjustment in childhood. “

Quite apart from the debate about the costs and benefits of childcare the consequences of a cost-plus approach to childcare provision and widespread state subsidies is not hard to predict.

A Listener article from May 2004 stated that:

“…a government scheme paid bounty hunters up to $2275 a head for enrolling Maori or Pacific preschoolers raises far more damning issues.

… the Manurewa-based Whare Akonga Learning Centre received $1.13m – the most bounty of the 59 organisations that enrolled 5280 children nationally, at a total cost of just under $7 million. It has close links with two other Manurewa organisations that reaped $387,000 from the scheme. Both organisations were found by audits to have dozens of irregularities in their records. These included placing children in unapproved playgroups, claiming to have introduced children to preschools that had never heard of them, and providing names that turned up on another contractor’s database. There were high dropout rates for these children. And there was a clear conflict of interest, with bounty hunters placing children in their own organisations.

So should childcare subsidies be ended? Well the evidence on the effects of childcare centres is mixed. In any case with over 60% of families now hooked into childcare subsidies it would be a brave politician who unplugged the subsidy drip.

The supporters of income-sharing are simply saying – setting aside the arguments about childcare – parents should be free to choose without having the State making “an offer they can’t refuse”.

An income-sharing tax credit helps to restore the balance so that parents can make their own decisions about the care of their children.

The objectives of income-sharing are:

 give parents greater choice in their work and caring roles; and

 acknowledge the contributions of those who forego paid work to care for children.

The Taxation (Income-sharing Tax Credit) Bill introduces a new tax credit for couples with dependent children, based on sharing their incomes equally and paying tax based on half of the shared income.

The changes proposed in the bill will also mean some couples have greater choices to work fewer or more flexible hours of paid work in order to care for children, by increasing their combined after-tax income. At long last income sharing would give some recognition to the work done in the home caring for children.

New Zealand can empower parents and let them make their own choices if a majority of parliamentarians support the Income sharing Tax Credit Bill.  Write or email your MP asking them to support the Income Sharing Bill. Join the facebook group: Friends of Income Sharing at http://www.facebook.com/group.php?gid=145385598816660

Income Sharing Bill gaining support

Peter Dunne, United Future leader, is on the campaign trail promoting his income sharing bill.  He seems to be gaining public support.  A radio interview today sets out his view.  Seems to us to be a sensible option that provides real choice for parents all over New Zealand. For more details see the United website.  Those voters who are tired of the social engineering that tilts the playing field in the direction of both parents working will welcome this initiative.  It's disappointing to see the Labour Party rejecting this idea out of hand. John Key has indicated he has an open mind on the matter.  People who support this policy proposal need to show their support and write to their MP about it.

Obama criticised for defending religious freedom

USA today reports on President Obama's statements related to the right of all Americans to practice their own religion - including muslims.

Time is right for compulsory super savings

DPF over at Kiwiblog remains opposed to compulsory super because he is concerned that politicians of one stripe or another will eventually be tempted to spend the money on a pet project - rather than on funding citizens' retirement.  What he overlooks, however, is that we already have a risky arrangement in place.  It is called income tax and national superannuation. A new compulsory savings scheme should tag all funds for funding citizens' retirement and should be in the name of specific individuals.  It should not be accessible for spending by government - unlike the present tax & spend arrangement.

The main benefit of a compulsory retirement savings scheme would be reduce New Zealand's dependence on overseas savings and capital for investment.  The consequence of decades of borrowings - largely to fund housing - has been to increase the per capita debt of NZ towards to Icelandic proportions.  A sovereign state cannot continue with such an approach without either the receivers one day being called in -  in the form of the IMF in the case of countries -  or dramatic reductions in citizens' living standards. Neither prospect is something New Zealanders can be blase about.  Here's hoping the government has the courage to move to a compulsory retirement savings scheme - with safeguards to keep politicians away from our nesteggs.

Wellington City Council told to Constrain Spending | Scoop News

Business and residential ratepayer groups have frequently expressed concerns about ongoing increases in rates costs. The Wellington Chamber of Commerce made submissions on this issue earlier this year -
Wellington City Council told to Constrain Spending Scoop News  .   While we may not agree with the WRCC comments about climate change - which we see as everyone's responsibility - we do agree that above inflation rates rises over the long term are having a deleterious effect on the city's growth, private sector job creation and prosperity.

A thorough review of the Council's scope of activities is long overdue.  Central government too has a responsibility to provide funding if it is going to force councils to deliver certain non-core services not previously delivered.

Schiff promotes sound economics - and has a good track record

Peter Schiff http://blogs.telegraph.co.uk/news/danielhannan/100047096/teach-yourself-free-market-economics-in-a-day/ accurately predicted the global recession because he saw that some key fundamentals were out of whack. You can't fund prosperity by borrowing your way to growth.  Savings are a key source of investment capital.  Spending more than you earn on an ongoing basis is a recipe for disaster - basic stuff really but for some reason the global financial community forgot the basics.

Broadband Policy in The Age

Broadband Policy in The Age explores the high cost NBN network and its alternatives - well worth for those of us who want to see better broadband but want to minimise the risk around large State-led investment projects.