Hon Sir Roger Douglas Speech to ACT Annual Conference; Barrycourt Accommodation and Event Centre, Parnell, Auckland, Saturday 12 March 2011.
I Introduction
Where are we?
We’re here.
And we’re swimming against the tide. We’re up to our neck in it. We’re running a cash deficit of $300 million a week, and it’s about to get a lot bigger.
And the Government’s response has reeked of cowardice. Too gutless to do the right thing.
Happy to fund reports, hold press conferences, make meaningless speeches.
Whatever it takes to avoid making any decisions that might be unpopular.
Our country is staring down the barrel of financial ruin, and all our Government wants to do is sit on its hands.
Well I, for one, have had enough.
II Reclaim Excellence
In the 80s we believed in Excellence.
Now we believe in Expedience. That means “A concern for self-interest rather than principle.”
Why?
Our politicians say we can’t catch Australia. “Too big,” they cry, “too rich in minerals.”
Well, on that logic, there’s one country we should be absolutely monstering economically.
Forget Australia.
Let’s look at Singapore
Singapore has about the same population as us. But it’s so tiny it could fit inside Lake Taupo. It’s got no minerals. And unlike Lake Taupo, Singapore hasn’t even got any water.
We should be bigger and better than Singapore in every way. But the reality is, we don’t even come close.
Our most recent GDP growth was under 1 percent. Singapore’s was over 14 percent.
In 1960, our gross domestic product was more than three times Singapore’s.
Yet by 2015, Singapore’s GDP will be three times ours.
Labour productivity.
In 2010, each Singapore job was worth NZ$182,000. Each one of ours was worth $93,000. Almost double.
How do they do it?
Because they’re led by leaders, not politicians who put reelection before the country’s best interest. Leaders who’ve had the guts to make the tough decisions.
Their government slogan gives you a clue to their standards:
Integrity. Service. Excellence. (That word again.)
Their government spends only 17% of GDP. Compared with our 43%.
They keep their tax rates low too.
Singapore’s top tax rate is only 20 cents – and you have to earn a whopping NZ$320,000 to pay that. Our top rate is 33 cents and kicks in at $70,000.
Hugely different incentives.
Singapore’s low tax rates act as a magnet to thousands of high quality immigrants, whom the government encourages to come and grow their economy.
Singapore’s cabinet ministers are the best brains in the land, so they’re natural goalsetters.
But unlike ours, they’re also goalgetters.
And their goals are long-term.
These ministers are paid a fortune, but their pay is indexed to GDP growth.
Could this explain why Singapore’s GDP growth over the last 50 years has averaged 7 percent, compared with our 1 percent?
Now here are some health numbers where New Zealand is well ahead in most cases.
That’s pretty encouraging, isn’t it? – until you realise that it’s the number of deaths per thousand people for various ages.
We also beat Singapore in such things as:
• getting cancer
• the number of hours we spend waiting at the emergency department, and in
• the number of weeks – or in our case, months – we spend waiting for surgery.
Singapore not only has one of the world’s best health systems, but also one of the best education systems.
In the last two PIRLS reading literacy surveys, Singapore rose from 15th place to 4th, while New Zealand dropped from 13th to 24th.
In the last PISA survey of reading, maths and science, Singapore was no lower than 5th for any subject, compared with New Zealand’s 13th.
Singapore’s great founding leader Lee Kuan Yew believes in “a fair society, not a welfare society.” Thus they create the conditions for the ablest to go far, so they can bring in jobs for the masses. Then they redistribute the surpluses to help the less able.
Singapore’s economic success means they can take care of their old and vulnerable. The able can get productive jobs. The sick can get treated. Their children go to great schools.
These are the hallmarks of a prosperous, compassionate society.
III A Vision for New Zealand
OK, so that’s Singapore. I’m not saying we have to become Singapore.
But I am saying we sure as hell don’t have to be poor.
So what should be our vision for New Zealand?
The first thing we need to do is chart a course for excellence. Aim high.
Defy mediocrity. Refuse to accept apathy and poverty as the norm.
We need to sweep the stage of the politicians, and replace them with leaders who are prepared to put their country’s needs before their own.
I want to quickly sketch what New Zealand will need to do to leap over Australia and catch Singapore.
First, we should ask ourselves: “What would Singapore do if they were us?”
What did they do in the 1960s, when they were kicked out of Malaysia? They were left to fend for themselves in a very tough neighbourhood.
They asked themselves the simple question, “What do we have to do to become a strong and wealthy nation?”
If they were us today, their answer would be just as simple: “We’ve got to dramatically improve our productivity.”
And how do we do that?
By increasing competition in poorly performing areas like:
• Health
• Education
• Welfare (including retirement)
• Local Government
• Regulatory environment
What would this involve?
A big shift of service provision from state to great. Give private companies the incentives to achieve excellence.
We need to start with a goal.
Government spending and tax levels should be between 20 and 22 percent of GDP within 4 or 5 years.
IV The Right Policies
To achieve this we need to put in place the right policies.
1) Tax
• 0 percent tax for all full-time workers up to around $35,000.
• Flat rate beyond $35,000.
• Look at replacing company/business taxes with a tax on assets (1-2 cents in the dollar would suffice).
Singaporeans pay 0 percent tax up to NZ$21,000, then 2 percent up to NZ$35,000.
And as we’ve seen, they’ve also greatly flattened their tax rates. Imagine having to earn NZ$320,000 before you pay 20 percent tax!
Like Singapore, we should let the poorest in society take care of the basics of life before paying tax.
That’s true compassion, and it works for Singapore.
Making the tax system fair has been the key to Singapore’s dramatic growth.
2) Health
• Move from a mainly-public to a mainly-private model like Singapore’s.
• Introduce personal health savings accounts and catastrophic insurance for claims over $10,000.
Singapore has had this model in place for a long time. They spend a mere 3 percent of GDP on healthcare, compared with our 9 percent.
If we switched to this model, we could cut Government spending by around 6 percent.
3) Education
• Money follows the child
• Total parental choice at school and individual choice at tertiary level.
• Replace Ministry of Education with a board of directors.
• Property company to ensure competition
It’s interesting that in Singapore children from disadvantaged backgrounds do well academically. Of students in the bottom third socio-economic bracket, about half score within the top two-thirds of their Primary School Leaving Examination.
Why can’t we do that here? Of course we can. Education is the best tool we’ve got to lift children out of poverty – we’ve got to get it right.
4) Retirement
• Move away from the unsustainable model of pay-as-you-go.
• Establish individual retirement savings accounts for all New Zealanders.
Both Singapore and Australia have moved to get superannuation under control. By bringing in individual savings accounts, they’re now in a much stronger financial position than New Zealand. These accounts have greatly boosted the level of savings in both countries.
5) Welfare
• Replace existing benefits with a minimum income scheme for working families.
• Time limits on benefits to avoid long-term dependency.
• Re-education programmes to help unemployed get jobs
We need to move quickly to make sure the able-bodied are doing productive work and are relying on themselves, not on the state.
In the words of Lee Kuan Yew:
“The fundamental issue is, we must not demotivate people. Once we demotivate them and they feel it is an entitlement – “Society should look after me. I am born, you are the government, you have to look after me” – then we are in trouble.
“You are born, the government has to provide conditions for good healthcare, good housing, good education. You must strive. What you make of yourself depends on you. We can’t equalise everybody’s results.”
6) Regulations
• Get rid of remaining tariffs.
• Cut through red tape (i.e. get rid of monopoly control within the professions).
In Singapore they understand the benefit of open markets. They don’t have mineral resources, so their only choice is to attract businesses and wealth through open and deregulated markets.
Their prosperity is a testament to such freedom.
7) Immigration
• Open up immigration – get skilled people in.
Lee Kuan Yew says, “If we do not have immigrants and foreign workers, the economic opportunities would pass us by”.
In fact, he says immigration is the most important factor in Singapore’s success. Getting skilled workers is crucial for our growth too.
8) Reform Government asset ownership
• Extract maximum long-term productivity from state assets.
• Where New Zealanders would benefit economically and socially from assets being transferred to the private sector, we should do it.
There’s no need for the Government to own large assets. A recent World Bank report confirmed that overall growth would dramatically improve and social outcomes would be better if some assets were run by private companies with incentives to provide top service.
V Conclusion
Such a programme would guarantee New Zealand a great future.
In conclusion let me say this.
I hold the same ideals I always have.
In fact, every party in Parliament claims to share essentially the same goals when it comes to the wider welfare. National, Labour, and the Greens are all wedded to the current system.
The problem with the status quo is that it’s all about power. Politicians control who gets an operation, where kids get educated, and how much super you receive.
I share the goal of equal opportunity for all. But I have a different way of achieving it.
It is often with the best of intentions that we have made the worst mistakes.
Look at the way the State tries to help Maori. No one can disagree that poverty falls hardest on Maori. But government’s response, over generations, has done nothing but lock Maori into dependency.
Only when we’re willing to look forward and devolve control of money to individuals, will we deliver solutions to the problems Maori and others face.
The great irony is that the very paternalism that stripped Maori of individual autonomy and self-determination in the past, is today seen as the solution to Maori problems.
When you look not at the goals of the welfare state, but its actual performance, the results are depressing.
In the last 80 years we’ve grown much wealthier. Yet there are more on welfare now than ever.
We’ve created a system that gives options to those who can afford them, while denying choices to those who most desperately need them.
We’ve created a system that taxes and regulates opportunities out of existence for most people, and drives many into poverty.
We’ve created a system that creates two classes of citizens.
And at the same time, the solutions put forth in Parliament are more of the same. More health spending, more education, higher taxes on the wealthy.
Remember, if we always do what we’ve always done, we’ll always get what we’ve always got.
What 80 years of political control has achieved is a larger welfare budget, more people on welfare, and barriers for those at the bottom to actually get ahead.
When are we going to stop buying the bullshit and wake up?
