Peter Dunne - The Leader's Letter 17 July 2007

Rates are back in the news again.

It is little wonder, given the ongoing surge in property prices. Many people, elderly folk in particular, on low or fixed incomes but living in expensive properties are struggling to pay the rates bill.

Last year, in response to this crisis and threats of rates revolts, the government set up a toothless inquiry into the rating system, which has yet to report, and which will not come up with anything significant anyway. It is merely tinkering around the edges, rather than addressing the two fundamental problems.

They are the nature of rates themselves, and the scope of local government activities which the rating system funds. When United Future tried to broaden the inquiry to get to the heart of the issue, we were brushed aside, proving clearly the government has no real interest in dealing with the issue. Currently, rates account for 57% of the spending by our 12 regional councils and 74 territorial authorities.

Households pay about $2.1 billion in rates each year – about $650 per taxpayer. To put these figures into perspective, the total rates take by Councils is equivalent to the amount central government spends on law and order each year. By contrast, Councils raise only about only 8.5% (or just over $230 million) of their revenue each year from direct fees and charges, while their liabilities are just over 5% of the total value of their assets.

The amount our Councils raise from direct fees and charges is about only one-sixth of the income that Councils in Britain, Australia and Ireland raise from this source to keep rates down. Against that background, the question has to be asked whether the time has come to do away with household rates altogether, with the shortfall to be made up from a combination of a direct taxpayer contribution (on a population funding basis), greater use of local authority charges and more astute asset management policies. July 17, 2007 No. 10 A direct local authority tax of $12.50 a week per taxpayer might be another alternative. These approaches (or any combinations thereof) would not only place greater discipline on Councils with regard to their spending, but could also be phased in over time, as domestic rates were phased out. The one thing everyone agrees on is we cannot go on the way we are. Families and communities are being squeezed by the rates burden, and we need a fairer system.

However, none of the alternatives comes cheaply, and there are no silver bullets. It is clear that the present rating review is a white elephant which will provide no lasting answers, so United Future wants to know what you think.

I am not sorry the Government has been forced to drop its Trans Tasman Therapeutic Goods Agency Bill because it lacked the numbers in Parliament.

That is the essence of democracy after all. Why the Government decided in the first place to go ahead with the legislation and gave commitments to Australia that it could pass such a Bill, before it did any checking that it would have the Parliamentary numbers has always been beyond me. In any political environment, especially a close MMP Parliament like this one, the first thing you do is check you have the numbers. This Government never had the numbers to pass the Bill in its original form, and was therefore always going to be on a hiding to nothing. United Future supported the Bill's introduction only to allow its consideration by a select committee, but we had made it clear to them as long ago as last August that we did not support the mandatory inclusion of complementary health products and natural medicines.

So, as far as we were concerned, it was never going to proceed beyond the first reading if it remained in the form it was introduced. However, the Bill's shelving does raise some important questions about the New Zealand regulatory regime for medicines. Medsafe is the Government agency responsible for approving new medicines, which ANZTPA would have replaced. The Researched Medicines Industry is right to raise some concerns about the implications for the approval of medicines for the New Zealand market.

From my perspective as Associate Health Minister responsible for the development of our National Medicines Strategy, I share their concern, and have already met Medsafe to discuss the way ahead.

Here a few chilling tax facts to ponder: While only 20% of New Zealanders have a taxable income of more than $50,000, they pay nearly two-thirds (63%) of all income tax. At the other end of the scale, 47% of New Zealanders have a taxable income of less than $20,000, paying just 9% of all income tax. New Zealand's net worth as a country is $96 billion – which means each one of us is worth just over $23,000.

What these figures really highlight is how small we are a nation. A decent multinational corporation leaves us for dead. More importantly, the figures also show how low our incomes are by world standards. We need to focus on boosting incomes – low to middle incomes in particular – dramatically if our country is to survive and prosper in the years ahead.

Our national goal should be to at least halve over the next 5 to 10 years the number of taxpayers earning less than $20,000 a year in real terms, through boosting growth and productivity.

Our latest poll on the United Future website asked ‘At what age should teenagers be allowed to drive unsupervised?’ And the big winner was age 18, with 45% of you supporting that option. Eight percent thought 15 was a suitable age, age 16 got 21% support and 17 was supported by 28% of you.

Greetings to you and your family,

ENDS

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