2025 Taskforce: 35 recommendations to close the gap with Australia (Update 2)

Here are the 35 recommendations made by Don Brash's 2025 Taskforce that it says would bridge the income gap with Australia by 2025. The gap is currently sitting at around NZ$64,000 a year for a family of four, it says. My view is below. (Update 2 includes Finance Minister Bill English saying report opens debate, but National won't break promises) 1. Core government spending should be cut to 29% of GDP by 2012/13, which is the same as it was in 2004/05. 2. Core government spending should be reduced further after 2012/13 by capping per capita spending in real terms (ie adjusting for population and inflation) 3. The Public Finance Act should set a medium term target for operating spending, either in real per capita levels or share of GDP. 4. The government should look at further measures to strengthen long term fiscal discipline, including possibly a Taxpayer Bill of Rights or an independent Fiscal Advisory Council.

5. Taskforces should be appointed to scrutinise each major area of government spending. 6. More rigorous cost benefit analysis should be used for new government spending and for periodic reviews of existing spending. 7. Ambitious welfare reforms should reduce the 'very large' number of working age people on benefits. 8. Take early steps to lower the prospective costs of New Zealand Superannuation as a share of GDP. This could include progressively increasing the retirement age in line with life expectation and indexing NZ Super to CPI rather than after tax wages. 9. Remove KiwiSaver subsidies 10. Reform health spending via the following:

• Abolish universal subsidies for doctors' visits.
• Reduce subsidies for prescription drugs by forcing those on high wages and in good health to pay the full price up to a cap.
• Reintroduce a split between the government as funder and hospitals as providers, with private sector involved more heavily in providing those taxpayer funded services.

11. Reform educations spending via the following:

• Reverse subsidies for early childhood education
• Adopt a funder-provider model to schools, allowing new private providers to enter with all-up per student funding equivalent to that for existing state schools.
• Abolish government imposed caps on university fees
• Adopt market based interest rates on student loans
• Rationalise the non-university tertiary sector and establish universities as independent foundations
• Review the Tertiary Education Commissio, the Education Review Office and Ministry of Education to make them less prescriptive and intrusive.

12. Reduce average tax rates. Cutting core government spending to 29% of GDP would allow the top personal tax rate, the company and the trust rates to be cut to 20%. Or create a dual tax system with a top personal tax rate of 25% and a capital income tax of 12.5%. 13. Reform Working for Families to reduce high effective marginal tax rates for middle income taxpayers. 14. Make the income tax system simpler to help reduce average tax rates. 15. Sell all businesses owned by central government where competition is actual or feasible. 16. Local governments should be encouraged to sell their trading enterprises. 17. Establish an independent Crown Commercial Appointments Commission to recommend board members for all crown commercial enterprises. 18. Wind up the New Zealand Superannuation Fund to cut gross government debt. 19. Introduce congestion charges for central Auckland and other cities where a cost-benefit analysis shows it would work. Full road-user charging should be introduced where economically efficient. 20. Restore rigorous, transparent cost benefit analysis for all public capital spending with formal reviews by Treasury for projects costing more than NZ$50 million. 21. Mining under sensitive crown land should be generally permitted provided it passes a cost-benefit analysis. Mining should be done by private operators paying royalties to government. 22. Enact a Regulatory Responsibility Bill. 23. Add property rights to the Bill of Rights. 24. Improve the quality of regulatory impact analysis. 25. Establish a Productivity Commission as a centre of microeconomic and regulatory analysis. 26. Establish a taskforce to review resource management law. 27. Local authorities should take account of the differences in land prices when zoning land, with a presumption that increasing the supply of land would reduce land prices. 28. Establish a system of tradable water rights. 29. Labour law. Make the following reforms:

• Make it easier to dismiss workers and streamline procedural matters
• Extend mutually agreed probationary periods for new employees from 90 days to 12 months
• Employees earning over NZ$100,000 should be governed by contract law rather than the Employment Contracts Act
• Reduce the minimum wage to the same ratio to average wages that prevailed in 1999.
• Reinstate a youth minimum wage

30. Remove all tariffs from January 1, 2011 31. Review and liberalise foreign investment restrictions 32. Review the Emissions Trading law periodically 33. Review the Commerce Act to restore economic efficiency and long term consumer interests in the design and conduct of competition policy 34. Government should encourage the transformation of Fonterra into a conventional company with fully-traded outside capital 35. Zespri's monopoly on kiwifruit exports should be removed. My view Don Brash and his fellow commission members have written a wish list that is likely to be rejected almost completely and almost immediately by John Key. Key (and Labour) are likely to write this off as the rest of Roger Douglas' (discredited) reform plans. That's a pity. There is some useful and potentially brave ideas in here that should be picked up. I agree with the moves to a flatter tax system and restraints on government spending. The water rights trading scheme is a no-brainer. It's surprising, however, that the Taskforce has ignored the area of taxing property. There is no proposal for a land tax or a capital gains tax. John Key needs to step back and think about the longer term, or at least past the next election. He doesn't have to break any promises. He needs to show some leadership. The truly great leaders convince their followers to change direction for the better. He could distinguish himself as a truly great and brave leader by proposing reforms such these for enacting after the 2011 election. He has the political gifts and the capital to do it. But does he want to take a risk to really reform this economy so our graduates don't buy one-way tickets to Australia. Your view? We welcome your comments and insights below. Here is the powerpoint below of Don Brash's presentation. 2025tf-pres-30nov09 Here is the full Taskforce Report below 2025tf-1streport-nov09 Finance Minister Bill English said the report was interesting and raised some interesting ideas, but that the government would remain pragmatic and not break any election promises.

The Government will consider the 2025 Taskforce's recommendations and make practical decisions about them, Finance Minister Bill English says. "The Taskforce's report issued today raises some interesting ideas and challenges, which will hopefully generate constructive debate about options for improving New Zealand's economic performance. "Having steered the economy through the recession in better shape than many had predicted, the Government is now focused on getting a step change in New Zealand's economic performance over the next three to five years. "We must consider a range of options if we are to get the investment, economic growth and new jobs needed for that to happen. "Having said that, this Government is pragmatic. And any decisions about key economic policies must meet the tests of fairness and equity. "Where we specifically campaigned on doing certain things, we're not going to break our word." Mr English notes that the 2025 Taskforce is one of several review groups that have already reported to the Government or will report back in the next month or so. The others cover regulatory responsibility, taxation, infrastructure and capital markets. "As with the 2025 Taskforce, they have all gone about their work in a transparent way and encouraged public input," Mr English says. "The Government welcomes their contribution to policy debate. "We will consider their ideas - and others "“ over coming months as we work towards making decisions for Budget 2010 and beyond."