Wednesday, April 29, 2009

What Dr Cullen's valedictory ignored

Dr Cullen’s valedictory speech is the cause of much fawning from the Labour side. The best that can be said for Dr Cullen is twofold:
- He is witty and entertaining (which of course would be fine if he hadn’t had his hands on your wallet);
- He kept his less intelligent colleagues away from totally destroying the national finances. In short, despite the mistakes he did make, he said “no” a lot.

He cited tax reform, the creation of the Cullen Fund, and Working for Families as among Labour's major achievements.” On tax reform presumably he means GST. Labour certainly simplified and broadened the tax base, but it did mean people paid more tax.

However, the Cullen Fund is a very mixed achievement indeed. Yes it shows the government is better off investing taxpayers money rather than running a PAYGO pension, but it doesn’t address the fundamental unfairness of national superannuation. Everyone pays, to different degrees, but not everyone receives what they paid in, and more importantly some receive nothing because they died before they were eligible.

Working for Families extended welfare to the middle class. Instead of granting tax cuts, it targets credits and payments to people regardless of whether they earned the money in the first place. It expands the state’s role in the lives of hundreds of thousands of people, who now must be grateful that the benevolent state is helping them gain a living – it would have been cheaper, simpler and fairer to grant tax cuts.

He responded to calls about NZ being a Nanny State saying “"New Zealand is, in fact, far less of a nanny state than it was in 1981 in terms of both social and economic freedoms.”

Well hold on Michael, was that you who did that? No it was mostly the previous Labour government and National government that followed it. It was Roger Douglas and Ruth Richardson on economic freedoms, and personal freedoms? Well that depends on what you are talking about. Alcohol? Yes Smoking and drugs? No Homosexuality? Yes Censorship? No. The record is mixed, and the last Labour government did precious little to enhance freedom and a fair bit to erode it. Helen "the state is sovereign" Clark was no fan of individualism.

In the transport sector few know that Cullen essentially ran the show on the railways, and pushed for spending more on roads, largely because, with the exception of Pete Hodgson, the transport ministers were all fairly lowly ranked (Gosche was largely sidelined for example). Policy on Air NZ, railways, Auckland transport and highways funding was driven substantially by Dr Cullen. Having the purse strings means you can do that. Which of course brings me to his low points:

1. Refusing to allow Singapore Airlines to bail out Air New Zealand (by owning 49% of it), preferring to listen to Qantas which had a vested interest in kneecapping Air NZ as a competitor, and having the whole South Pacific aviation market to itself. Then “having to bail out Air NZ” when he need not have. His interference in what was then a privately owned company was palpably incompetent.

2. The ongoing fiasco over rail. Buying the Auckland rail network at 4 times its market value. Buying the national rail network for $1 and then not enforcing track access charges against the company granted monopoly access rights. Then paying 50% over the market price for “Kiwirail” when it knowingly would almost never make a return on capital. It has destroyed over $200 million of taxpayers' wealth, and counting. His own justifications, were a joke.

3. The waste of money in health. How there was next to no increase in productivity for an over 50% increase in health spending in real terms. Money down a black hole (which even he would privately admit).

4. The unnecessary “sin tax” of 39%, cutting in at the ridiculously low $60,000 which sent a signal that under Labour, successful people were to be penalised.

5. Letting the state sector grow, with little to see for it beyond more bureaucrats and policy wonks, and little improvement in advice. It soaked up hoards of mediocre university graduates in Wellington, bright eyed, bushy tailed and keen to do what they were told, without questioning the fundamental wisdom of any of it.

6. "We won you lost eat that" attitude shortly after the 1999 election when dealing with the business sector. Imagine the Nats doing that to the union movement.

So while most will miss the wit and humour of Cullen, I wont miss the fact he was Helen Clark's right hand man in taking from everyone, and being the great renationaliser when he need not have been. He expanded the welfare state, the commercial role of the state and frightened off a major foreign investor (Singapore Airlines) because of his own pig-headedness and attitude to some foreign investment. If the best that can be said is it could have been worse, it is a low threshold to cross for success.

Clark needed Cullen, he was the only person in the Labour caucus that business started to trust, and who was seen as a fairly safe pair of hands to deal with the economy (she certainly wasn't seen that way). Sadly, he squandered so much of the proceeds of surplus for more welfare, a bigger state sector and more spending on health and education, with very mixed results, that now in recession the country faces a huge deficit.

Bill English is stuck with having to the dirty work of cutting this bloated state sector down to size to deal to the deficit - that is Dr Cullen's true political legacy - growing the state so much in nine years that the Nats have to have courage to reverse his work - and you all know what Labour's reaction to that will be.


Adolf Fiinkensein said...

You forgot about his destructive intervention into the affairs of Auckland International Airport.

Libertyscott said...

Yes, fair point!