Opinion: The Government must harness the power of tax

Grant Robertson, Minister of Finance.
Grant Robertson, Minister of Finance. Photo credit: Lloyd Burr/Newshub.

Richard Wagstaff is President of the New Zealand Council of Trade Unions (NZCTU). With the Government's budget coming up on May 17, he weighs in on what the Government should do to keep public services running.

OPINION: In just over a fortnight Finance Minister Grant Robertson will reveal the new Government's first budget. I don't envy him.

With the wave of optimism that swept Jacinda Ardern's coalition Government into power came very high expectations for her 'Mr Fix It' Finance Minister.

On the 17th of May, Robertson will be under intense pressure to deliver the urgent maintenance and repairs so many sectors are crying out for. Restoring vital funding for health and education, building desperately needed homes, bringing urgently needed jobs back to the provinces and re-staffing community police stations are the urgent funding needs New Zealanders voted for.

But there are many other smaller spending priorities - like increasing the number of labour inspectors - that are just as important for New Zealand.

None of these are 'nice to haves'. They're pretty much just things we need keep our communities functioning.

Richard Wagstaff, President of the NZCTU.
Richard Wagstaff, President of the NZCTU. Photo credit: Supplied

What's making Robertson's life harder are all the hidden costs coming out of the woodwork. The unexpected billions needed for health services, including toxic rotting buildings, the $200 million for school buildings that are so rundown they're unusable, Human Rights Tribunal underfunding and the immense cost of dealing with our decrepit water infrastructure are just some of the costs that have appeared on the horizon post-election.

We can't even guess what the inquiries and working groups tasked with untangling this mess are going to uncover. So many of the services we need for our modern society have been undervalued, underfunded and neglected. They are starting to unravel.

Robertson hasn't made his job any easier with his own Budget Responsibility Rules - hung around his neck like the proverbial albatross. Clearly he is going to commit to emergency spending on schools, hospitals and human rights. He can fight those immediate fires with cash in this Budget.

But while he can keep patching things up in the short term, not long after that he's faced with the reality his own Tax Working Group warns - "If the Government is to continue providing healthcare and superannuation at current levels, then the level of taxation will need to increase, or spending on other transfers or publicly provided goods and services will need to fall."

More revenue or fewer public services. It's pretty stark. If the Government doesn't find more money and free itself up to use it, then we'd better get used to worse healthcare, fewer police, poorer education, slower justice and more dangerous roads. Or we can choose to protect the quality of life we value by restoring vital funding.

Day by day, as the real economic legacy of the last Government is exposed, it becomes clear that the much-hailed path to surplus was a conjuring trick wrought from rotting hospitals and run down services.

Someone had to pay for National's tax cuts for the wealthiest New Zealanders and their blanket reduction of corporate tax. This has cost us around two billion dollars more a year than they even expected so far. Their promise to cut even more if they'd managed to get back into power doesn't bear thinking about.

No matter how clever Robertson is with this budget, no matter how rosy the short-term economic forecasts are, neither he, nor anyone else, can beat basic mathematical facts.

If we don't increase revenue we can't maintain the public services we have now, let alone make them better. That means more tax, and it means discarding the budget rules that block access to funding.

It doesn't have to mean more tax on ordinary working people who are already doing it hard.

The Government can be far more creative than hiking taxes on low and middle incomes.

It could focus on pollution taxes, multinational company tax avoidance, more progressive taxation or the closing of any number of loopholes available only to the wealthiest few individuals.

The last Prime Minister was fond of saying there are no money fairies at the bottom of the garden.

We agree.

Funding public services isn't some magic trick. This Government can deliver better by harnessing the power of tax, and deal with the very real problems the last one swept under the carpet.  

Richard Wagstaff is President of the NZCTU