Ministerial and business budget summit tomorrow

31 October 2007
Media Release

Ministerial and business budget summit dealing with major health, skills and tax reform issues

The country’s second annual Business Budget Summit will tomorrow look for long term policy solutions to avoid a major future health cost shock, overcome the country’s critical skills shortage – and possible paths to long term personal tax reform.

Eighty business leaders and observers will call on their personal experience to provide Deputy Prime Minister and Minister of Finance Hon Dr Michael Cullen, and Revenue Minister Hon Peter Dunne with options to solve key social and economic growth issues. The tax reform one is going to drive the decision of up to 62% of voters at next year’s general election.

While eight out of 10 New Zealanders want tax reform, ShapeNZ research for the Summit, being hosted by the New Zealand Business Council for Sustainable Development, also shows overwhelming public demand for provision of health spending and ensuring social spending and equity are retained.

Research papers and presentations prepared for the summit highlight the following main issues:

Health

The country needs to find ways to avoid the huge tax cost shock from health spending which will double from $11.5 billion a year by 2050 on current trends.
Some policy discussion options include:

• Pre funding (for example, setting up a superannuation-like “Cullen Fund”)
• Greater take up of medical insurance, particularly by younger people, phased in over time
• Introducing Personal Health Accounts, provided to individuals by Government and topped by employers in some cases, as a way to transition
• Freeing up state capital by private provision of health infrastructure
• Greater use of the private sector in providing services to DHBs through competitive tendering (to also try lifting efficiency and reduce waiting lists)
• Using facilities here or overseas to reduce waiting lists more effectively
• Placing more emphasis on firstly treating those who are employed or on sickness benefits

Personal tax reform

Short term options:

• Reduce tax rates and pay through fiscal drag (bearing in mind everyone now on the average wage of $46,000 will enter the top 39c tax bracket in 10 years)
• Pushing out the income limits before a new marginal tax rate cuts in, does not address our international tax competitiveness, specially with Australia
• Reduce top rates to 30c to match corporate rate
• Reduce top rates to 28c, and corporate rate to 28c
• Increase GST to 20% to finance a single rate tax of 20c for all individuals and corporates while adjusting allowances and benefits to compensate for price rises for lower wage earners, families and beneficiaries. Maintaining Government spending at 31% of GDP
• Introducing a land tax and increasing GST to 15% to raise revenue for personal tax cuts

Skills shortage

Most New Zealand businesses are no longer constrained by how much they can sell, but by a shortage of skills and capacity.

New Zealand incomes are no longer high enough to allow easy recruitment from anywhere in the world.

The summit will look at whether the country can do a better job of developing skills in New Zealand and providing support to attract talent from overseas.

It will consider if the New Zealand in response needs to:

• Deal with literacy issues in the workplace and schools (40% of workers are functionally illiterate – they do not have literacy sufficient to train for skilled work)
• Undertake a special major effort to ensure the large and growing Maori and Pasifika student population gains qualifications (53% of Maori boys leave school without one NCEA pass)
• Focus on recruiting high quality teachers, not teacher volume
• Support teachers with training post-engagement
• Intervene quickly when children fall behind

Migrants

Do we:

• Provide internships at work for skilled migrants to develop workplace English (the main barrier to employment according to ShapeNZ research)
• Provide for a big expansion on work place literacy programmes
• Streamline immigration procedures, enabling migrants to move into more skilled positions
• Increase trade training at secondary school and related new academies
• Align tertiary and secondary training with business needs
• Promote the benefits of new technology use
• Develop new training and retention strategies for use by business
• Address employment law and other barriers?

The summit runs from 9am to 5pm at the Wellington Town Hall.
Details of papers, ShapeNZ research and the agenda are at www.budgetsummit.org.nz

Ends

The Business Council believes sustainable businesses are profitable, contribute to social progress and ecological balance – and protect New Zealand’s quality of life. The Business Council’s 60 members jointly employ more than 60,000 people in managing resources, manufacturing, retailing and the service sector. Members contribute annual sales of $44 billion to the economy, equivalent to 34% of GDP. The Business Council runs a national online survey panel, ShapeNZ, to allow public input on major issues. The panel is built from purchased lists and is representative of the population as a whole, compared with the 2006 census. ShapeNZ members register and provide demographic and previous party vote information to ensure results can be accurately weighted to reflect the New Zealand population. Registration is also available at www.shapenz.org.nz

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