A particular perfect storm of deregulation, state asset sales, recession, cuts to welfare and entitlements, and lack of wage growth in the 1980s and 1990s has left our economy, and our society, sick at heart. More and more evidence shows how bad inequality is for our whole society – we’re all worse off in an unequal society, not just those at the “bottom”. The impact on New Zealand is well-presented by Richard Wilkinson and Kate Pickett, authors of the groundbreaking book on inequality The Spirit Level, in this video presentation.

So what can we do about it? Well the OECD – that bastion of progressive economic and social policy – recommends policies in three key areas: making tax fairer, upskilling the workforce, and investing in human capital and education.

Funnily enough, these are key features of Green policy. Russel spoke yesterday about how a Capital Gains Tax is exactly the kind of tax change the OECD recommends to combat growing inequality – it closes the ultimate tax loophole.

In 2010, the Green Party undertook a major project on reducing inequality, and released to to coincide with the 2010 Budget. We called it Mind the Gap, and it included 10 practical, achievable policy solutions to combat growing inequality, including a comprehensive capital gains tax, raising the minimum wage, a tax-free bracket of $10,000, progressive electricity pricing, extending Working for Families Support, reinstating the Training Incentive Allowance, building new state houses, and minimum standards for rental accommodation.

Those who bat off evidence of the growing gap between rich and poor and say there’s nothing we can do are wrong. There’s plenty we can do. But we need to accept that inequality is a problem that it’s in all of our interests to solve. Then we need the will, the guts, and the political leadership to get on with it.

It was a great and powerful speech that clearly defined the Green vision for Aotearoa. Russel also attacked National and Labour for bludging off our grandchildren and pulling the ladder of opportunity out of reach for those who need it the most.

Watch the speech below or click here to read.

Unfortunately, Jonathan Coleman, as the Minister introducing the bill, was given the speech notes for a different tax bill – the Taxation (International Taxation and Life Assurance and Remedial Matters) Bill. He gave this speech from 2008.

Now we all make mistakes but here’s the thing –  HE DID NOT NOTICE

So Coleman proceeded to read a ten minute speech about a different bill.

AND NONE OF HIS NATIONAL PARTY COLLEAGUES IN THE HOUSE NOTICED EITHER

They don’t seem to know what’s going on.

Here’s my speech in response:

Dunne has long advocated couples with children being able to split their income to minimise their tax obligations.  Fortunately, past Finance Ministers Bill Birch and Michael Cullen, and even self-styled Treasurer Winston Peters in the 1996 National – NZ First Government, would have no truck with this obsession of the Eternal Minister of Revenue.

But today, thanks to the confidence and supply deal between Dunne’s one-MP Party and National, income splitting will be back on the agenda.  National has guaranteed support for at least a First Reading in Parliament for this loopy idea.

Under income splitting the following would occur:

• One parent earning $140,000 and one parent not working: $8800 less tax
• One earning $50,000 and one earning $25,000: $250 less tax
• One earning $35,000 and one earning $15,000: no tax savings
• Parents earning the same: no tax savings

So it is highly regressive; providing substantial tax savings to some wealthy couples with children, but doing nothing to assist those on low incomes.

It is also a licence for child support avoidance. Child support is assessed on taxable income, so if one partner pays child support in respect of children from a previous relationship, the amount received by the custodial parent of those children will be reduced if the non-custodial parent enters an income splitting arrangement with his or her new partner.

It discriminates on the basis of marital status. It also discriminates on the basis of family status, because it is not proposed to be available to couples without children.

And bizarrely, given that Government is pushing single parents out to work, income splitting provides an incentive for parents with a high earning partner to stay at home or reduce their hours of work.

Let’s hope National sees sense and promptly consigns this stupid idea from Peter Dunne to the dustbin of legislative history where it rightly belongs.

Yesterday the Weekend Herald ran a sycophantic piece penned by its property reporter Anne Gibson after she interviewed property investor Pat Baker.

Baker owns $10 million worth of residential property.  It brings in about $700,000 in rental income a year.  But she bleats:

“My husband and I worked hard,” she says.

“We never had highly-paid jobs but we did have good opportunities to improve our situation. We saved and invested in something tangible which everyone needs.

“Now I am a 73-year-old widow. I manage very well. I am not a poor old-age pensioner because I took steps when I was younger to invest and accumulate wealth.

“But now property investors are maligned in the media. That’s not fair.

Hang on a minute Pat!  Lots of us work hard.  But we pay our fair share of tax on what we earn.  Why do you think, as a property investor whose income is derived from residential rents and capital gains, you should get favours from the tax system that none of the rest of us get?

All you are being asked, at least by the Greens (the Government seems to only want to reduce your tax privileges as a property investor, rather than abolish them), is to pay your fair share.

As for the journalistic quality of Anne Gibson’s Weekend Herald story, in which she failed to even ask Baker how much tax she actually paid on her $10 million in assets and annual rental income of $700,000 (my bet is zilch), you can’t go past Danyl at the Dim Post:

There have been complaints that I don’t write enough satire, but I do publish the occasional parody piece in the Herald under the (obvious) pseudonym of Anne Gibson.

It’s a bit like a really cheap GST, but not just for goods and services – for financial instruments also.

http://robinhoodtax.org.uk has a poll on their home page which asks whether the idea is a good one or not. Soon after launch, Goldman Sachs used a computer to spam the ‘no’ votes – casting over 4,000 votes in under 20 minutes. If they’re scared of it, then maybe it’s a good idea? ;-P

There must be thousands of people … who own a house, flat, apartment which is their way of saving for that extra to help them with their retirement and good on them too.

I have told them that I have no inside information and know just what they do from the public record.  They all feel put upon by the implication in the papers and from the commentary that somehow they have been gaming the system, ripping off taxes and are somehow directly or indirectly to blame for the “imbalance’ in the tax system.

These people have all worked hard.  They have saved hard, forgone big holidays and other excesses in order to pay off their first house and then save for their second property, their retirement income.

All well and good, but what he omits to tell us is that they pay no tax on the capital gain on their investment property.

He also omits to tell us that there are others who own multiple rental properties which run at an operational loss and they offset that loss against their other income, thereby minimising their income tax, and often minimising their child support, and/or qualifying them for Working for Families as well.  Then they make a whopping tax-free capital gain when they sell one of the properties.

I don’t agree with some of what the Tax Working Group has proposed, but I do agree they have identified a gaping hole in the tax base here that needs to be plugged.

Barker and the people he says he’s been talking to just don’t seem to get it that when you work hard and save you should still pay tax on your earnings!  Why should one form of income be tax free? Why not wages too?

During the Clark-Cullen years there was at least an attempt when setting up advisory boards and review panels to get a range of voices – not that the Clark-Cullen administrations would then necessarily utilise the advice given.

In 2000 for example the Labour-Alliance Government picked Rob McLeod – then just a member of the Business Roundtable – to head the Tax Review panel.

When the current Government needs some advice it is also likely that now Business Roundtable Chair Rob McLeod will be on hand to give it to them.

Should the Government need advice on Maori Economic development than Mr McLeod is ready to proffer his thoughts.

Should the Government want a spot of advice on tax reform then once again Mr McLeod will be on hand to provide it.

Need a hand to sort out New Zealand’s infrastructure needs – who you gonna call?  Yep you guessed it the ubiquitous Mr McLeod.

Also ready to proffer his knowledge on how to equip New Zealand’s Defence Forces in a post 9/11 insurgent combat kind of way will be… Rob McLeod!

Of course it is hoped all these new appointments don’t interfere with the previous Labour Govt’s Capital Market Development Taskforce where a certain Rob McLeod’s advice was sought.

No doubt the PM and his Deputy have Rob’s number on speed dial should they need any other advice on say…welfare, health policy etc.

Of course if Rob is too busy sorting out the needs of the Knights of the Biz Roundtable then Business Roundtable affiliated economist Bryce Wilkinson could be ready for a few more appointments.  Mr Wilkinson is so far on only a paltry two advisory boards.

Mr Wilkinson will be jumping in to assist us catch up with Australia in the 2025 Taskforce by say “finishing the job” Roger Douglas started in the 1980s.  And should NZ need some red tape slashed then Mr Wilkinson has been appointed to Rodney Hide’s Regulatory Responsibility Taskforce

Of course Mr Wilkinson’s views on regulatory responsibility are likely to be fairly similar to Mr Hide’s.  Rodney Hide’s Regulatory Responsibility Bill was directly inspired by a report by Mr Wilkinson for … the Business Roundtable!

The Clerk of the House advises that urgency be accorded the introduction and first reading of the Taxation (Business Tax Measures) Bill, the Gangs and Organised Crime Bill, the Criminal Investigations (Bodily Samples) Amendment Bill, and the Sentencing (Offender Levy) Amendment Bill.

So this week we’re going to tax the crims, create curb-appeal police to clean up Wanganui’s ill dressed households on top of Chester Burrow’s fashion police, and we are going to take DNA samples from everyone arrested for an imprisonable offence to profile them against a database, all without proper parliamentary scrutiny. I seem to recall a certain Hon Dr Nick Smith bludgeoning the last government for “rushing” legislation (which had, in fact, gone through a proper select committee process) and calling it un-democratic. It seems the new government is no better.

Tumeke has an interesting take on the DNA bill and an “exclusive” on police profiling here.

NoRightTurn blasts the DNA Bill as a violation of the Bill of Rights Act, here.

RadioNZ has a brief summary here.

What I would like to know is; How the law will differentiate between a law-abiding person  with a gated driveway and a suspected gang house with the same? Are we not about to criminalise both? And what are the enhanced surveillance powers being given to police, ostensibly to fight the gangs? Will they be turned upon other groups that the police think are threatening? Just how are we going to define “gangs”?

The report on the first reading debate can be heard here. (audio)

And as far a taxing the crims, well, populist an idea that it is, is it even remotely practical in the real world? Are criminals as likely to pay their fines on time as anyone else?

I will stop short of damning it all outright, but I wonder if we haven’t traded in the nanny state for Big Brother.

It lends credence to Treasury’s call for tax cut’s to be delayed or reduced if government was not planning on cutting spending. But that’s not the real point of my post.

More importantly, it opens the door for a discussion on just what a NZ fiscal stimulus package should look like, and what sort of actions are likely to produce the most jobs. From the chart above, it seems to me that allowing SME’s to defer or even suspend provisional tax payments would be the only “tax cuts” worth considering. There is no doubt that we are about to embark on a huge debate of what constitutes “infrastructure” spending.

What do you think it should be?

MotherJones sums up their reaction to the chart quite well, but I’m interested in your opinions.

The takeaway? Food stamps, unemployment benefits, and infrastructure investment put the most money back into the economy for every dollar spent on them. Tax cuts for corporations and the wealthy do the least. (A payroll tax holiday, which is essentially a tax break for poor people, isn’t so bad.) Job creation maps similarly.

So when conservatives tell you that FDR’s public investment programs made the depression worse and that we need to hold fast to the conservative economic principles that created the current mess, shoot them this link.

Perhaps Mr Key should have a look at this chart too, before the infrastructure announcement due this week and the upcoming jobs summit.

Hat tip: Valis

The bill replaces the tax cuts voted in by the last parliament. The tax cuts voted by the last parliament haven’t all come into force yet but if left alone would roll out over the next few years.

The Nats tax bill replaces the last bill and reduces the tax cut of low earners while increasing the tax cuts for those earning upwards of $100,000. Yep, you heard it right. The Nats bill means that low income earners will pay more taxes than if the parliament did nothing. And it means that high income earners pay less tax.

To test this proposition, Michael Cullen moved an amendment to the effect that if any taxpayer found themselves worse off under the Nats tax act then they could get their money back. Bill English as Finance Minister put in a financial veto – that is the government can block an amendment if it has a significant fiscal impact – saying that it would cost $750m if Cullen’s amendment got up. What English was admitting was that taxpayers will be $750m worse off under Nats tax bill then under the existing tax cut law.

Then bizarrely English withdrew the financial veto so the amendment could be voted on. National, Act, Maori, United voted against the amendment, effectively admitting the truth that their tax bill take tax cuts off the low paid.

National and Act voting for such a bill makes sense, but the odd thing is that the Maori Party would vote for a bill that takes money off the poor and gives it to the rich. Sitting in the House tonight, National kept a very close eye on the Maori party. Rahui Katene was given very close attention by Tau Henare.

I think the Nats want to rush this through so that people won’t realise the true situation. Most taxpayers will get a tax cut next year and will think National did it. They won’t realise that they were going to get a tax cut anyway and if they are a low income earner they would’ve got a bigger tax cut.

Why would a “mainstream” party that campaigned on an ETS – but a different one – set up a select committee enquiry into maybe preferring a carbon tax?

What does Key mean when he says the ETS will be “put on hold” when most of it won’t be operational for more than a year anyway?

Why would a government that has set a target of reducing greenhouse emissions 50% below 1990 levels by 2050, oppose and dismantle every measure that could help achieve that, while at the same time reviewing whether there should even be a pricing signal?

Why would a government that wants to be taken seriously internationally, on the eve of the next climate change talks, set up a committee of politicians to review whether the scientists of the IPCC, the Royal Society and NASA, etc., know what they are talking about, or whether an alternative view is “right”?

Why would a government that aims primarily at economic growth and positions itself as business friendly create such policy uncertainty that international investors withdraw from New Zealand?

Most of these bizarre situations can be explained by the transition from opposition to minority government.

Key has set up a carefully balanced government where he can go as far to the right as he wants and justify it as “Act made me do it”. But he doesn’t have to go an inch further than he is comfortable with – “sorry Rodney, Maori Party won’t go there”.

It will be a true National government, able to do pretty much what it wants.

So Rodney’s posturing about scrapping the ETS was just a distraction and a nuisance during government formation. “You want to scrap the ETS Rodney? Let’s put that to the select committee. You want to review the science? Good idea. They can do that too. You think a carbon tax would be better? Fine – let them consider that.”

So Rodney calms down and the government is formed. The test will be when the chair of the committee arrives with a draft terms of reference, and Act has only one vote on the all-party committee. What that will really tell us is whether National is seriously committed to major delay. Considering a carbon tax and reviewing the science as well as considering National’s proposed amendments to the Act would be a huge job. It would take well beyond 2009. Meanwhile taxpayers are covering the cost of 100% of our emissions. Oh – but high income earners will be paying less tax.

Of course, Act doesn’t really want a carbon tax. Neither does the Business Round Table (BRT) which has been advocating it. But it gives them three advantages:

• more delay – so there is no price for as long as possible;
• if there is a carbon tax, it will be low, and cause a huge political fight whenever a government tries to raise it. The BRT is talking of $5-10/tonne, while the international carbon price for quality units is around $30-40.
• A carbon tax can be repealed as soon as there are the numbers in the House. An ETS creates property rights and cannot easily be done away with.

Under these conditions it’s not surprising that the Greens are not leaping at the chance to go there. Also, trying to apply it to agriculture and providing assistance for industries competing internationally with firms with no carbon price create the same problems as with an ETS.

I can’t believe that Key doesn’t understand that the only part of the ETS that is operational before 2010 is forestry, and that to “put the ETS on hold” either means nothing at all, or it means taking away the credits for planting over this last winter, which foresters are entitled to expect under the legislation, and taking away the deforestation penalty. This would lead to a huge deforestation this summer for conversion to dairying – exactly what Nick Smith endlessly criticised Labour for during 2007. To “put on hold” the ETS would require legislation before Christmas to amend the starting date for forestry – with all the international derision and challenge in Parliament. My pick is it was a figure of speech to keep Rodney happy.

Rumour has it that when Key complained about the air travel emissions tax in the UK, he was told to pull his head in and get his own house in order carbon-wise before he became a laughing stock internationally. He may be finding the hard way that sound bites that go down well with the uninformed on the campaign trail raise eyebrows in informed circles around the world and are not so simple to implement.

It must have been embarrassing when Nick Smith announced the cancelling of the green homes insulation fund (negotiated by the Green Party as part of the ETS agreement) and Key was announcing infrastructure spending to keep jobs and businesses afloat during an economic crisis, that Brian Easton was saying on radio that the home insulation fund was one of the best ways to keep jobs going because it could be done fast with little capital and only a very short training period. So should we expect an amendment to the ETS legislation, which has cemented the fund in law, to remove that clause? Will it be called the “ETS (keeping NZ homes cold and damp) Amendment Bill? Will it be introduced before Christmas? I look forward to the debate.

It must be embarrassing that investors ready to build biofuel plants making fuel from wastes and low value by-products are putting plans on hold because the Biofuel Act may be repealed.

It must be embarrassing that the EcoSecurities Group, one of the world’s largest, most reputable carbon trading companies has cancelled its plans to set up in NZ because there is uncertainty over whether the ETS will proceed.

It must be embarrassing for Gerry Brownlee to learn that the so-called ban on incandescent lights, which he campaigned to get rid of, is actually an efficiency standard for lighting just as we have for dozens of home appliances; that the appliance efficiency programme has saved households $148 million on their power bills over 7 years; and that some incandescents, as well as halogens and compact fluorescents will all meet the standard. It must be worse to find that without that standard, many of the best quality lights will not come into NZ because our market is too small if most people are still buying crap. Woops, market doesn’t always work after all.

He will learn similar embarrassing facts about what the showerhead issue was actually all about when he is responsible for cancelling a hot water efficiency standard for new homes.

So the interesting question, which I intend to ask in the House at some stage, is how does National intend to meet its target of 50% by 2050 with no investment in home insulation; no regulations for energy efficiency; no waste-to-biofuel projects; presumably no economy standards for vehicles coming into the country (announced in the Energy Efficiency and Conservation Strategy but not yet legislated); transport investment hugely favouring roads over public transport; and an investment strike in new green technology because of the uncertainty over whether there will be an adequate price on carbon?

Sounds like an interesting term ahead.

Anonymous: Will you get rid of Kiwibank?

Bill English:   We will eventually, but not yet.

This is consistent with the Nat’s policy of not privatising within the first three years of their government. (Cue the Tui advertisement) The leopard has not changed his spots. National also announced that they will be borrowing to pay for tax cuts. Another fine example of forward thinking. Just when we are about to formally declare a recession, lets borrow more money for things we don’t need, (read roads and tax cuts), and saddle the citizens with more debt than they are already labouring under.

The logic is that because of the international credit crunch, individual Kiwis cannot continue borrowing against their depreciating houses in order to prop up the economy. Therefore, we should use the government’s good credit rating to borrow more, give it to the taxpayers in order to spend and prop up the tettering economy, and then charge them more for it in taxes later, with interest. Better yet, let’s charge our grandchildren for the tax cuts we get today!

If the government was going to borrow money for infrastructure we actually needed and in order to creat jobs at a time of recession, I would have less problem with it. Borrowing to buy lollies in order to buy an election is foolhardy in the extreme. At least Labour has the decency to take the money off the very people they are going to give it back to in their election lolly scramble. National is stealing candy from our babies in order to give it to their parents. And we Greens get vilified for wanting to tax the heavy polluters and give every Kiwi a tax break on the bottom of the income band! Go figure.

This is a 445 page tome of mind numbing discussion about various matters tax related including rights of non disclosure, joint ventures, and portfolio investment entity rules.

But, what it also contains is an exemption for ‘active’ income earned offshore by a company that has a New Zealand resident with a controlling interest but which operates off shore.

Currently this income is taxed. What it means is that companies that choose to manufacture offshore get a tax cut.

The really bizarre part of the bill is that a company manufacturing in New Zealand will still be taxed, so will be at a tax disadvantage to companies that choose to shift production offshore.

Treasury thinks this is a good idea because it will foster “economic transformation”, competitiveness, and be compatible with other countries, especially Australia.

In other words it specifically encourages firms to move their manufacturing base offshore. The underlying assumption is that we should not even bother manufacturing here in New Zealand because we can’t compete.

Contrast this with the reality. Manufacturing is worth 15% of GDP and 16% of full time workforce (240,000 jobs). It equates to 63% of exports and $70 billion in total sales.

Speaking in opposition to the bill last night Sue Bradford noted in Parliament:

What the Government is proposing will give Icebreaker a tax cut for making lovely outdoor wear  in China, but not Earth Sea Sky making lovely outdoor wear in Christchurch.  Norsewear, that former iconic brand,  will reap a financial benefit for having taken its jobs to Asia, while Swazi, staunchly staying local, will miss out.

This bill will give tax cuts to large firms that send fish to China for filleting and packing, but not to small fishermen who process locally, and who create environmental and social benefits by not carting fish back and forth across the planet.

This bill would give Fisher and Paykel a tax cut for the whitewear it makes in Mexico but not for the whitewear it makes in Auckland.

Manufacturing is a major provider not just of employment but of full time employment including many highly paid skilled jobs and major contributor to our economy.  It is bizarre that the government should be creating a tax structure that deliberately encourages companies to send their manufacturing base offshore.

But some of what he says is right there on the fringes of radical green philosophical thought.  Take this for instance:

New Zealanders eat a hell of a lot of food and don’t give a second thought to the fact that they themselves drive the food producers and any environmental effect from the food production.

In New Zealand we are and have for sometime been consumer led, not production driven. When government got out of our lives in the mid-eighties, we had to produce the food the consumer wanted, to rebuild our sector. The hypocrisy of those consumers living in the most unsustainable environment in the world, a city, to eat the food we produce, but demand only we as food producers accept responsibility for the environmental effects of production just amazes me. If they used the same value set as they used with car driving they would be cutting back on food to save the planet, even perhaps encouraging “more foodless” days for the really righteous environmentalists. But no, they eat too much, exercise to little and abuse and blame the producer.

That’s too much for the Green Party to be advocating, but interesting none the less.  Then Pedersen, the champion of free trade and ‘go it alone’ fortitude, perseverance, self reliance makes this call for new taxes and subsidies:

One other approach is to allow New Zealanders to share the cost of Kyoto and a better environment by placing a “Green Tax” on all food at retail level. The proceeds of this tax could be used to help New Zealand food producers to buy carbon credits and compensate for property loss under the RMA. The paying and acceptance of such a tax would have the double benefit of keeping New Zealand food producers viable and still producing in New Zealand, and allowing all New Zealanders to share the responsibility. After all, European farmers are all paid a subsidy by government to carry out environmental work and a tax on food in New Zealand would allow all New Zealanders to help enhance what we all love.

Greenpeace seems gobsmacked.

Good luck back on the farm Charlie after your time here as an honorary townie.

And we need to future-proof our economy by getting the right price signals in place so that our economy becomes more efficient at using finite resources. The weird thing is that for all their new right rhetoric about incentives for beneficiaries, when it comes to using market signals to make our economy more efficient in resource use, National Labour are reluctant to offend their big business mates.

The Greens believe in internalising the true environmental costs into market signals.

That’s why today I’m announcing the first part of our approach to ecological tax shifting. I’m proposing a resource levy on all commercial water use and to use the revenue from that levy to reduce rates and income taxes.
There has been a 50% growth in commercial water use over the last decade. About three quarters of freshwater is used for irrigation of intensive agriculture and about 10% for large industrial users. As a general rule there is no price paid to use this globally valuable natural resource.

We are not proposing to privatise water or to introduce tradeable water rights. We are not proposing to charge for drinking water for humans or for stock. But if you use a public resource to make a profit then the public should be paid rental for that use.

Resource levies make sense. This is an initiative that rewards those many commercial water users that use water efficiently and puts the heat on those that waste water. It encourages efficient use of water to take the pressure off highly stressed rivers and aquifers. We are using a market mechanism to achieve an environmental goal. Tax shifting takes taxes off incomes and puts it onto resource use.

This is not an extra tax, it is fiscally neutral. This is not a tax that will put up interest rates like National Labour’s tax cuts are doing, it is as fiscally responsible as the Finance Minister used to be. This is not an approach to tax that cuts the money available for health and education nor does it lead to government borrowing like National Labour’s tax cuts. This is responsible economics and I challenge Father Coke and Mother Pepsi to follow our lead.

Mr Peters said the party also wanted the first $5200 of income tax-free. That would help the low paid and part-time workers, but also pensioners, who pay tax on their superannuation.

If he’s running short, we’ve got other policies he might like too.

Prime Minister Helen Clark, who is in South Korea, could not be contacted for comment.

I guess she hasn’t given it much thought , eh?

The Greens are continuing along in or around the 6% zone, which realistically is too low for any party to be happy or comfortable with.

The outstanding question I have about the poll is that whether the series of questions about tax cuts were asked before or after the party preference questions and whether they played any role in the poll numbers.  Actually it would be interesting to see more public discussion about the underlying methodology behind each major poll.  I’m not challenging their validity but in an environment where the media is more interested in ‘game’ stories than issue and policy stories it is surprising that the public rarely sees the raw data behind polls. I assume the Fairfax pollsters asked a series of other questions and we will see the topics that were covered in a series of stories over the next few days?

The NZIER report states the obvious – that the ETS will cost money. What a shock that keen insight is and a great contribution to the debate. We’ve all known since the Stern report roughly how much doing our bit would cost and the NZIER report added nothing to that knowledge. It’s a baldface pitch to let all businesses off the hook for their emissions and force the taxpayer to foot the bill for their mess. Hot Topic has a good post on the NZIER report so I won’t spend any more time on it. His post says pretty much all I would say anyway. It’s good.

Then there was the Cawthorne Report, commissioned by the Emissions Trading Group to scope out the environmental impacts of the ETS and recommend what further research is needed to understand said impacts. The key message from this as far as I am concerned is that agriculture comes in far too late and that this is a significant missed opportunity. The other recommendations are important and worth considering. Most seem obvious on inspection but thank god someone bothered to ask the questions!

Then there was the Sustainability Council’s report, which I must say pulled no punches concerning who the major benefactors are going to be under the ETS as currently designed. I’m two-thirds of the way through it and it is definitely worth the read. Are there any reporters reading this? You need to read this report! I have personally invested a great deal of time getting to know and understand the vagaries of the ETS, and I still learned a great deal from this report. There is so much to quote, I will have to contain myself. Please forgive the excessive quoting!

The ETS has so little effect on emission levels partly because of the proposed exemptions and corporate-welfare arrangements. Two-thirds of all emissions are exempted through delayed or absent coverage, on top of which rebates are to be granted to selected sectors.

The scheme can be expected to gather in $5.1 billion during CP1, though net proceeds are just under $4.4 billion. Assessing the impact in cash terms alone, losers under the ETS pay out net about $4.4 billion to the winners. Large industrial emitters pay $0.2 billion and agriculture pays $0.2 billion, while $4 billion is paid by road users, households, and small and medium businesses. Those last three groups make 91% of the net payments but account for only 34% of the nation’s emissions.

Beyond cash costs and gains lies the question of the extent to which each sector is being overtaxed or undertaxed, relative to an equitable allocation of the burden. If notional “fair shares�? are based on the widely-accepted “Polluter Pays Principle�?, then the implicit cross-subsidies resulting from sectors not paying in proportion to their emissions can be calculated. These implicit subsidies arise from a combination of exemptions from the ETS and the gifting of NZUs.

The economically efficient way to meet New Zealand’s Kyoto commitments is to set up incentives that bring forward the required emission reductions at least cost. The ETS does not set up a mechanism for least cost abatement during CP1. It exempts entirely the sector with the largest amount of cost-competitive abatement potential (agriculture) while bringing in first, and taxing the most heavily, the sector exhibiting probably the least ability to abate during this period (transport).

The Government’s arguments for adding extra complexity and opacity to this basic design are unconvincing. The chief attribute delivered by creation of the NZU is the ability to obscure the provision of off balance sheet subsidies to favoured sectors. Take away the blanket subsidies and the rationale for the NZU vanishes.

Both National and Labour Governments have taken important stands internationally that commit New Zealand: signing the Framework Convention on Climate Change in 1992, agreeing to a Kyoto target in 1997, and ratifying the Protocol in 2002. Both major parties have accepted that a “price on carbon�? is an essential feature of any serious climate change response package. However, attempts to introduce such a price via a carbon tax or similar instrument have repeatedly been abandoned in the face of strong lobbying by major emitters and their supporters. When the Protocol came into force in January 2008, New Zealand still had no comprehensive set of climate-change policies in place – only a blueprint proposal for one.

The New Zealand Government’s failure to make progress towards emission reduction during the 1990s, and in particular the abandonment of tentative moves towards even a minimal carbon tax, reflected the vulnerability of the Government and MfE to regulatory capture by large industry, whose lobbying successfully diverted policy away from economic instruments and emission-reduction targets and into the safe but ineffective backwater of “voluntary agreements�?.

So, in a nutshell, despite the NZIER’s pleading for a full taxpayer subsidy of all of New Zealand’s dirty industries, it appears from the Sustainability Council’s report that in fact a full 66% of NZ’s dirty industries are already due to be subsidised by the taxpayer under the current regime.

What are they complaining about???

What he is arguing is that because rising oil prices are blowing the fuse on household budgets, we shouldn’t fix the fault but should instead put a penny in the fuse box and pretend that it is fixed. Rather than spend the money now on a credible alternative to the car, (public transport and other mode shifts), we should wait until it’s a real crisis and the house is burning down.

Pity is, he didn’t even think of it himself. John McCain, the US Republican candidate for President, made similar calls two weeks ago. The Key difference is that McCain was calling for a tax holiday on all excise taxes, whereas Key only wants to scrap the environmental taxes and keep the excise taxes coming in. (How else would he fund all those roads?)

In both cases our right wing candidates are pandering to their only real policy point – cut taxes. Everything else is negotiable. Both candidates are labouring under the delusion that the current spike in oil prices is just a blip, like it was in 1973 and again in 1979. Meanwhile, Bill English was on Morning Report this morning, saying that these environmental fuel taxes were based on questionable reasoning, a direct dog whistle to the climate change deniers. There is no way that Key could have made such a statement, but English can. Having committed to the Emissions Trading Scheme, National is now sending signals that it might be gone by lunchtime should they be elected.

For more on the metaphor, read this post More Coins in the Fuse Box.