Friday 2 June 2023

Memo to Hipkins: Taxpayers' Money is Not Free

Everyone is demeaned when governments hand out money as if it is free. As Bryce Wilkinson explains in this guest post, we are demeaned daily by Labour's endless litany of handouts...

Memo to Hipkins: Taxpayers' Money is Not Free 

buy Bryce Wilkinson

When I was a lad in the 1950s, I absorbed from adults the notion that it was shameful to be reduced to applying for a state handout. Self-reliance was virtuous. It respected others.

Reading the Prime Minister’s speech to his party faithful last week was a salutary lesson in how attitudes have changed. Today, making handouts more freely available is virtuous, self-reliance is in the past.

Hipkins’ speech extolled Labour’s litany of handouts. He mentioned paid parental leave, free school lunches, increased benefits, free subscriptions, free public transport, free early childhood education and much other spending and a raft of subsidies for this and that.

I counted over a dozen such spending items. Each might make sense if taxpayers’ money is free, but it is not free and the speech ignored the question of overall value-for-money.

When it comes to government handouts, what is free to the user invites waste.

To pick up a prescription medicine is one thing, to follow the prescribed treatment is another. Expect more unused pills in households’ medicine shelves.

As the late Milton Friedman famously quipped, “there is no such thing as a free lunch”. Price is one thing and cost is another. Someone must pay for the lunch because food is scarce.

When the ancient Romans subsidised bread, some fed it to pigs because the price was so low. Some of the wheat from conquered Egypt was wasted.

Taxpayers work long and hard to earn the income that is taxed. They go without worthwhile things to pay their taxes.

All governments should hold themselves responsible for ensuring that their spending provides commensurate value for taxpayers. Taxpayers are not geese to be plucked with a minimum amount of hissing.

Taxpayers are already paying vastly more in taxes than Labour told them to expect back in 2017. Under its electioneering fiscal plan, it proclaimed that its policies would only increase Total Crown tax revenue for the five years ended June 2022 by $10.2 billion. We now know the actual increase. It is $29.3 billion.

The full cost is much greater. That is because Labour’s planned five-year spending increase of $11.7 billion was much greater at $65.3 billion. The extra borrowing represents deferred taxation.

Take a bow Mr Hipkins.

Everyone is demeaned when governments hand out money as if it is free.

* * * * 
Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, and also the Director of the Wellington-based economic consultancy firm Capital Economics. Prior to setting this up in 1997 he was a Director of, and shareholder in, First NZ Capital. Before moving into investment banking in 1985, he worked in the New Zealand Treasury, reaching the position of Director. Bryce holds a PhD in economics from the University of Canterbury and was a Harkness Fellow at Harvard University. He is a Fellow of the Law and Economics Association of New Zealand.

His post first appeared at the NZ Initiative Opinion page.

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