Elizabeth Kerr looks deep inside Budget 2016 to find...not much. There's big new taxes for smokers, but nothing for wage earners. IRD's computer builders are winners, but there's not much for housing

Elizabeth Kerr looks deep inside Budget 2016 to find...not much. There's big new taxes for smokers, but nothing for wage earners. IRD's computer builders are winners, but there's not much for housing

By Elizabeth Kerr

Is that it?   Are you sure there is nothing else under the tree for me?  

Budget Day.  It bears all the anticipation and excitement of Christmas morning, but this year I can’t help but think we all were left holding business socks and hankys.  Sure, both are useful and I know I should be grateful but where were the toys?  

“Santa, I’ve been good all year and my list clearly requested something fast and shiny….. maybe some tax cuts, a building developers grant maybe, and some extra incentives to save for retirement.   We have after all had a good year... surplus you said”.   But nada, nothing.   Unless you are on the receiving end of social services you can expect this year to be same-same.

So what does it include this year? 

National are sticking to their story with the focus being on growing our economy, investing in health, education and infrastructure.   There isn’t too much in here that we weren’t told about in the lead up to the announcements which is a bit disappointing to be honest.   Some of the things that stick out for me are as follows:

Economy

  • Clearly the biggest winners are those receiving $411m for science and innovation. 
  • $257m for tertiary education and apprenticeships programmes
  • $94m for regional economic development
  • Any surpluses over the next 5 years will be used for paying down of debt to 20% of GDP in 2020 so that we can handle another GFC or natural disaster.  
  • An ambitious growth target of 2.8% by 2020.  (Yes please!)
  • Sucks to be in dairy, but total exports increased by $200m which is good.

Public infrastructure

  • $883m investment into schools with 9 new schools and 480 new classrooms, two school expansions and rebuilding of 3 schools and Kura.
  • Hidden inside infrastructure spending along with schools and bridges is $857m for a new tax computer system over 4 year (totalling $1,421b).   Does anyone else find this amount slightly eye-watering for essentially just an IT project?
  • $115m for road projects in Gisborne, Marlborough and Taranaki and $19m for a national bio-containment laboratory.
  • Tourism - a $45million package over 4 years.  (not bad).   Our lucky tourists are going to be wowed by $12m of brand new toilets and car parks.   Extra lucky are those that like cycling as they will benefit from the $25m investment in upgrading and extending the bike trail.   But something is missing here!!   Cruise - where is the investment in our growing cruise tourist numbers?   Why isn’t there anything set aside for this industry which shows no signs of slowing?   Sorry cruise… maybe next year.

Housing

Nothing exciting here.   They are sticking by their view that the reason there is a housing crises issue, is because there is not enough land.  I can’t help but feel it’s a slow train crash this one, but lets see them woo us back over to their side in next years pre-election budget.

However there is still $36m going into the warmer, drier healthy homes initiatives and $100m to free up underutilised Crown and in Auckland.

Social Investment

There is no denying that child abuse is too high, that people are living in cars, and we have a no emergency housing left.   But lets take a moment to say Halleluiah that 40,000 fewer children now live in a benefit dependent household…and the number of people on benefits is the lowest its been in 8 years, saving over $12billion.   Crime is also down 16%.   But it doesn’t end here and there is more spending being allocated to this area.  

  • $200m to support vulnerable kids and $384m to reform the CYFS system.
  • $50m to reduce long term welfare dependence.
  • Whanau ora received $40million for 2500 more families.   (That is exactly how it is written in the Budget documents.   Inferring that is $16,000 per family?)
  • $20m to reintegrate prisoners returning to the community.
  • $258m including 750 additional places in social housing and 3000 emergency housing places.   This is on top of recent social housing announcements this week.

Health

  • Too bad if you’re a smoker. Never have those patches looked so good seeing as there is a 10% tax increase expected every year for 4 years. 
  • $73m towards primary healthcare and continuing of free GP visits for children until 13years.
  • $169m for disability support services.
  • $15m to support air and road ambulance.
  • $12m to improve access to mental health services.
  • $39m to roll out a national screening programme.   This was also allocated for last year but news of when and how this bowel screening programme will look is still to be advised.

Environment

The ambulance is at the bottom of the cliff for the environment with the Budget focus on cleaning up after ourselves:

  • $100m over 10 years to clean up our waterways and $21m & $16mm respectively to eradicate pests and invasive wilding pines.

If you’re one of the 670,000 Gold card holders – you’re all good with an extra $41million to provide certainty (or buy your votes) for the coming year.

The only people putting on the party hats and toasting champagne from this Budget are those public agencies who now have more funding support to do what is already expected of them.  

From my perspective this years Budget is very much focussed on the drivers that lead people to needing support from social services in the first place; and the way they are doing this is by boosting our economy to support itself and by boosting the social services we already have.   

There is nothing in my view for the hard working folk who pay their bills on time and expect to have something left over to play with.   Those people just need to walk away, there is nothing under the tree for you this year, but a vague promise of income tax cuts in the coming years provided surpluses continue.

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55 Comments

"..just an IT project"

Oh the ignominy of working in IT.

There's not that much to it right, plug in a few cables, a monitor here and there, install something from a DVD and away you go. How can it cost almost a billion...

as our IT guys tell us when we have a problem, turn it off on on that will fix it

only 95% of the time - the other 5% you have to leave it 30 seconds!

or the other fix they use
check the leads give them a wiggle

Probably could build the same thing in Wordpress for $20K...

I think we all know on past experience of large government IT projects it won't end up costing $857m, it will cost double or triple that once it is finished, if it gets finished!

Well you don't think the growth IT industry needs is just fall out the sky do you Munes?

Maybe the IRD should quiz Auckland Council how they spent so much money on so little. ie A case study on how not to do a project. Oh and that teachers payroll one too. And the electricity markets IT spend. Actually come to think of it, NZ has quite a history of ridiculously expensive IT projects doesn't it. Police? Something there too?

At the end of the day IT is like the film industry, churning out each reboot of an existing theme as a major production ...

but this is a Business Transformation programme (major production a la George Lucas or Peter Jackson) so now it's going cost NZ tax payers plenty. Each consultant alone will earn at least as much in a week as much as the maximum Paula is willing to pay a homeless family to 'Get out of Dodge'. And they're only the bit players...

Hmmm... 'get out of Dodge', must call Peter, sounds like a great idea for a new movie!


At the end of the day IT is like the film industry, churning out each reboot of an existing theme as a major production ...

Iterative development is fact of life for all engineering disciplines. Products are improved through a large number of small incremental changes. Writing software is like writing an essay, with a first draft, second draft to constantly improve and adapt it ad infinitum. As a consequence it is never "finished".

The "major production" part is just a matter of how much time you leave between delivering something to the end customer.

In this day and age competent software teams keep this to an absolute minimum. I currently work on a system where downtime is measured in millions of dollars per hour. We deploy to production several times a day. Small release, small risk.

Math Elizabeth ???. "Whanau ora received $40million for 2500 more families. (That is exactly how it is written in the Budget documents. Inferring that is $1.6m per family?)"
it would be good if Whanau Ora money was actually spent on families. But it just gets sucked up by the service providers.
The most famous was in Dunedin where the cops recorded the gang applying for Whanau Ora money, to finance a drug deal. The mob got the money !! But the cops got the mob. Some are still in jail but for the drugs, not for the money.

..cops recorded the gang applying for Whanau Ora money..

LOL. Rolling out Sir Humphrey excuse number four:
"It occurred before certain important facts were known, and couldn’t happen again."

Or maybe even number three, if you are feeling a little playful:
"It was a worthwhile experiment, now abandoned, but not before it had provided much valuable data and considerable employment."

KH Check your Math, its $16000 per family , $8000 will be lost in overheads $4000 will get 1/12th of a case worker (1hour a week) $4000 will be available for debt relief/grants/essentials

I'm wounded Jimmy. It' was Elizabeth's math not mine. I was pointing it out.
As for your figures I think those are very optimistic about how much will result for families. For the organisation who gets the money there will be Kaumatua fees, Koha, Hui not dui, and a trip to Paris for the trust board. The families won't get anything.

A "could not care less about housing" budget.

The Nats have enough votes out of AKL as long as property values don't go down. The one spending item that would make all the difference in AKL is in the government's hands. The way to free up land is not a talkfest via the National Policy Statement or kicking the can endlessly on unnecessary RMA reform. It is extending their own motorways now.

Where is that high priority spend going? Poor quality regional investments that will draw the waverers back from NZ First's arms.

It's a government for a few of the people and "Yah boo sucks" to everyone else.

Taxpayer is already spending 2 billion a year on housing subsidies; how much more do you want?; it only seems to inflate house prices.

Of course it only inflates house prices - most of it is the accommodation supplement that goes straight to landlords, making houses more expensive (improves yields) and rents more expensive for those not on the supplement. Don't take my word for it - read the report by the productivity commission. I think building houses would be the only way to phase it out - and that's not on National's agenda.

No thank you, the motorways are congested enough as it is, the last thing we need is to extend them further into the countryside and encourage more people to drive into the city. Or did you mean widen them? I don't think putting aside $20 billion dollars for that will work well with the paying-down-our-debt mantra

looking foward to the extended rail trail, i was intending on riding next year but might wait now until it gets closer to queenstown

It is a Contractors' Budget, goodies for OBN.

"Does anyone else find this amount slightly eye-watering for essentially just an IT project?"

100% agree! Lets not forget that it will overrun its budget as well.

Put that money into simplifying the tax system instead. Then we wouldn't need a $1billion IT systems to run it.

.. simplifying the tax system..

You might be forgetting the civil maxim; "It's more expensive to do things cheaply."

I agree with that, but like I said simplify - not cheapen.

"Social Investment

There is no denying that child abuse is too high, that people are living in cars, and we have a no emergency housing left. But lets take a moment to say Halleluiah that 40,000 fewer children now live in a benefit dependent household…and the number of people on benefits is the lowest its been in 8 years, saving over $12billion.".

The only reason there are now fewer children living in benefit dependent households, is because criteria to be on 'the benefit' have been changed. Same as criteria for being on the housing list have changed. This was just a way from MSD and Paula Bennett to massage the numbers. There is more poverty in new Zealand, not less. More families on the bread line, not less.
The 'saving' of 12 billion is manifesting itself in more people living in garages, on couches, or in emergency accommodation.
Your' 'deep look' was not deep enough, or at least not crtitical enough.

There is a one in ten chance of delivering a large scale IT project on time and on budget:
For business leaders, the decision to embark on a large-scale IT initiative (that is, one with an investment of more than $10 million) is often fraught with angst. Their worries are justified. According to one large study, the chances of delivering such a project successfully—on time, on budget, and with the desired technical objectives met—are roughly one in ten.
https://www.bcgperspectives.com/content/articles/technology-business-tra...

As an IT person I see this very clearly as a budget problem.

not a governance problem?

Well, not to an IT person Elizabeth (lol).

I would have put a smile to show it was a joke but the site doesn't to like those.

ahhh i get it now lol.

In my previous life IT projects were my bread and butter believe it or not.

Well you should know that IT people are the very salt of the earth in whom can be found no guile. It couldn't possibly be us, could it?

My sentiments exactly :)

No, it's all about the willing belief in impossible things.
"If only we had a new IT system, life would be wonderful".
"A new IT system will save money".

A new IT system will replace inexpensive clerical staff who know how the system works with a lot fewer highly paid IT staff who before long will have no idea how it works as the people who understood it have left. The system will be more complicated because it can be and will get exponentially more so with time.. Because the costs are hidden it appears cheaper but really the full replacement costs and maintenance costs are not identified. Productivity will decline.

Better to spend half the money on slashing the quantity of regulation to one tenth of its current size and therefore eliminate the need for a complex bespoke system.

Roger, Roger, Roger - you have it all wrong.

We don't have to know how it works, we just need enough skill to sign the eventual outsourcing contract to India.

You make it sounds like complication isn't a kind of improvement.

And of course the costs are hidden, how do you think we got the project over the line?

Productivity *might* decline, but this is neither here nor there. What matters is after the figures have been though out computer system the report will show a significant increase!.

As for this fantasy of "slashing regulation?!?!" .. (splutter).. It's governments only tool. It's life blood. It's very raison D'etre!

Quite. Darn, now I'm trying to believe in impossible things. Silly me. I had to laugh at the teacher's pay project and the 33 million special bonuses the teacher's unions had managed to amass over the years, the permutations of which defied the processing power of a planet specially created for the purpose.

As a non-IT person I have seen it both ways.

IT clearly understating costs to secure a tender.
Budget owner consistently changing mind until original tender looks nothing like final system.

Either way the result is the same, an ineffective system costing more than the original budget.

Sorry Noncents, it was a joke. Having identified myself as an IT guy I *had* to blame the only other variable Roger gave.

Actually I think you are right. A much smaller budget might force a reduction in complexity. The chance of success goes up if you spend less than 10 million. What is so difficult about setting up a database these days? Presumably they are planning on needing an awful lot of floppy drives or something.

Work expands to fill the time available.

Fair enough :-) it is something I hear quite often in my job.

It's difficult with big government transformation projects because they want the whole thing costed up front. It's an impossible task.

It helps to eat special mushrooms to be able to believe it can be done.

A bunch of the money will be probably spent integrating bits of the new system with bits the old system as the incrementally migrate it over in manageable chunks.

"is that it?"

I know what your'e trying to say, Ahhh ...yeah,... thats it. (FOTC)

Regarding the tobacco tax increase. There's a significant negative impact to communities populated by the smoking lower socio-economic class that comes from siphoning money out of their pockets. Those guys have already been hit hard by wealth divide effects of post 2007 monetary policy. Perhaps we'll start to see inverse gentrification of some areas of Auckland.

I hear you. But do you think, that there is any possibility of .. Well, you know that they might perhaps have a think... Maybe to um, reconsider, shall we say, some of their choices?? Actually not many of their choices.. To be fair, in fact, just one of their choices really. I mean in light of.., you know.. the health thing. And now the cost of course.

Of course, we don't want the price of things going through the roof for the poor. I mean, of course not! That's one things I think almost all Kiwi's could agree on. But you know. Not just for themselves even.., not to harp on about the health thing, but some of those smoking things sound pretty awful. Imagine tongue or mouth cancer, I mean can it get any worse??<?I> No no,, I was thinking just for the sake of their families and loved ones you know. Perhaps they could, have a wee think maybe. Just consider it I mean. You know, giving up smoking.

I know what you're thinking, dictating other peoples lifestyle, preaching at people etc etc.. but you know. It's just a thought.

No question of putting pressure on people, of course.

Yes I hear you too. I just don't think it's as simple as that. I don’t see a linear correlation between tobacco price and societal benefit. You get unintended consequences – second order effects. For example, many people will choose to feed their habit rather than their kids. The added financial hardship will likely increase domestic violence and put additional pressure on social services. There’s also a high correlation between certain mental illnesses like schizophrenia and tobacco smoking. Those unfortunate people will certainly experience great financial hardship as a result of this policy. In terms of the general economy, the lower socio-economic smoking classes tend to spend most of their disposable income and therefore a greater tobacco tax will be detrimental to certain local economies.

Why continue to just sting tobacco though? There's enough evidence that alcohol and now sugary/fatty foods have similar and significant adverse consequences to the wider community.

Checkpoint with John Campbell 5.00 -6.30. Decent news and discussion on the Budget. I'm getting to really love this programme. I run it on the telly, because it's radio with some pictures. Really great without all the phaff of the glamour news. Campbell has got out of the rut he was in as well.

".. because it's radio with some pictures.."

Brilliant idea!

Thanks Ralph. Have you noticed the news on the real telly. Most of the video is not so relevant. example will be something in Iraq. Short commentary with some vehicles on a brown landscape. And the images were not filmed with the story but came out of the library.
With Campbell on RNZ, they do slot in lots of stills and video. But only when relevant.
And the whole thing is so not slick visually. They value content first. Magic.

I wish John Campbell had his own political party. I'd vote for him.

IRD....may have a new Multi-Billion Computer System....."eventually," ....but will it ever...."Eventually".......catch the Tax Avoids, of which our Budget Makers are the biggest help in aiding. and avoiding. the true culprits....in the land, if not the World.

The Tax rules should be simple..."avoid at your peril".

"Not avoid if able...cos we make the rules."

Let us all start with a simple home based rules...even a few simple New Zealanders can follow...(not Tax Accountants Avoid., plus they are Tax Deductible.)

Then apply them to all and sundry and make em enforceable World Wide, or no Big..deals.

Computers are cheap...it is either right or wrong, never ambiguous, unless made so..

People are the problem, not the Computer System.

They either work or they don't. But the rules have to be clear.

If programmed correctly and rules are made simple. So simplify the rules.

Spending a few billion to get it all wrong...waste of the Bleedin Taxpayers Money.

Yet again.

"too bad if you’re a smoker. Never have those patches looked so good seeing as there is a 10% tax increase expected every year for 4 years". But as New Zealand has signed the TPPA is it going to be sued for passing legislation that will affect the bottom line of the a tobacco companies? Or do we have to ratify it for that to happen? Or don't agreements have to be ratified?

.