Competition Is The Key

act-new-zealand

Wed May 13 2009 12:00:00 GMT+1200 (New Zealand Standard Time)

Competition Is The Key

Wednesday, 13 May 2009, 1:28 pm
Press Release: ACT New Zealand

Hon Sir Roger Douglas, ACT New Zealand

Wednesday, May 13 2009

"Free marketing and deregulation are not right wing policy stances. They are the policies of those who believe in individual liberty and the availability of choice in a competitive environment." - Aubrey Begg, Labour MP for Awarua 1972-75.

It's time for New Zealanders to stop and think about what we want New Zealand to be like in 20 years. Prime Minister John Key's recent speech on the Budget set out all the areas where National would not cut Government spending and showed that his Party is willing to continue - like Labour - spending in the areas that cost the most: health, education and welfare.

I do not oppose spending on health, education, and welfare - but I do oppose spending without ensuring that it delivers value for money. After nine years of Labour, surely we have learned that spending money without getting the incentives right results in declining productivity?

The facts are clear: health spending increased 50 percent in real terms under Labour, yet doctors' productivity dropped 15 percent. Unless we get the system right, increased spending will be wasted.

While outlining the areas he was unwilling to seriously examine for waste, Mr Key essentially said we wouldn't receive the proposed tax cuts due on April 2010 and 2011.

National is meant to be the Party that advocates tax cuts and if it could deliver additional productivity gains of just 0.7 percent across core Crown expenditure, the 2010 tax cuts would be affordable. If National were to deliver both sets of tax cuts, the productivity gains would have to be just 1.45 percent.

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What does delivering efficiency gains actually mean?
It means getting more out of the resources that we put in - ie more operations, or better education outcomes.

During the 1980s, we achieved substantial productivity gains from some simple reforms - for example: the corporatisation of Tauranga Port improved services while freeing up resources for other uses. The port went from having a ship turnaround time of 12-13 days, and manned by 44 workers, to having a turnaround time of 30 hours manned by The problem with the current health system is that there is no transparency, and the general public is unaware of the actual costs of treatments. This means that it is the Government that gets to decide which treatment option is appropriate and when the patient can expect to receive it. As such, patients inevitably end up queuing for healthcare - sometimes dying while they wait in line.

Second, because the Government is unwilling to purchase healthcare wherever it is cheapest, there is a lack of competition between the public and private health sectors. If we were willing to do this, we would see costs decrease as the incentives to compete and innovate were increased.

National, however, has promised not to address health and education expenditure. It has promised not to touch student support, subsidies for small business, or Working for Families. When National tells us that tax cuts cannot go ahead, it is really saying that it places a higher priority on those things than it does on tax cuts.

The tragedy is that some of those schemes - like Working for Families - could be delivered in a positive way through a tax reduction, rather than through cash payouts to those working. The difference is the effect that it has on incentives: lower taxes encourage people to work hard and get ahead; cash payouts discourage people from seeking promotions, as the effect of abatement is such that they can be made poorer when they earn more.

"Taxes are paid in the sweat of every man who labours. If those taxes are excessive, they are reflected in idle factories … and in hordes of hungry people tramping streets and seeking jobs in vain." - Franklin Delano Roosevelt, US President 1932-45.

ENDS

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