So what IS happening with fuel tax?

First, the government announces, some time ago, that to fund more inefficient public transport, and roads that are politically driven, it will allow regional councils to levy fuel taxes on petrol AND diesel (diesel typically has no tax usually).
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Helen Clark says on the 6th that the new regional fuel taxes to subsidise public transport (and fund more roads) wont happen.
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Dr Cullen then says they will. However the government wont agree to a "full tax" immediately. He says that without a regional fuel tax in Auckland, rail electrification can't proceed. You might ask why those who would benefit from rail electrification - users and operators of the commuter rail service - can't pay for it themselves? You might ask by how much congestion will drop because of electrification? You wont get an answer.
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Now Helen Clark says it wont include transport in the emissions trading regime until 2011, so that the punitive 8c/l levy would be delayed. Note the word delayed. She also said the government wont approve a regional fuel tax as high as 5c/l, which means you might get one less than that.
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However, one thing you can be certain of - Labour will increase fuel taxes or levies. You might ask how good the "investments" are that it expects the taxes to be used on.

Reaction to rail nationalisation

Predictably, the soothsayers and faith based activists for rail are bowing their heads in deference to the mountain of taxpayers' money thrown into buying the ferries and railway rolling stock. Don't forget this is $150 of your money taken to be used on this - you might have preferred that be spent on food, health insurance or some books for your kids - no you've been forced to buy a business that will cost you more again, each year, so that a handful of companies can move their freight more cheaply.

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According to Stuff:

Mainfreight is cheering it on, after all, it will be a key beneficiary of subsidised rail freight.

Jim Anderton and NZ First's Peter Brown, both experts of regulatory economics (ha!), are wetting themselves with excitement. Peter Brown claims it "will result in improved service, innovation" though I wonder what he was drinking when railways were last government owned to think that state ownership means innovation and quality service. It was a national joke. Jim Anderton of course simply worships state ownership - remember that he will be deciding, along with other Ministers what trains you'll be forced to buy for the railways. Yes - the $665 million is only the start. It's worth noting that Air New Zealand, being publicly listed and partially privately owned doesn't have any such political interference (or subsidies) in its investment programme. However, you might wonder whether Peter Brown, whose personal policy fetish is coastal shipping - has realised the government is about to own one of the biggest competitors of the coastal shipping sector!

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Richard Prebble claims the buyback may cost as much as $3 million a day in subsidies. He may not be far wrong. He also asks if different companies will be allowed to run train services on the tracks (as is the case in much of Europe and Australia) or whether the government will run a monopoly? It's a good point. Why shouldn't someone wishing to buy their own trains run a service on the publicly owned tracks, especially now the government has bought Toll's monopoly access rights?

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The trucking industry, in the form of Tony Friedlander (ex. Muldoon era Minister of Works) of the Road Transport Forum said it was too early to comment. After all government owned rail is likely to compete with many trucking operations.

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The Greens are of course thrilled that taxpayers have been forced to buy their idol - the railway rolling stock and locomotives. It would be nice if they actually used it more though. Nevertheless Jeanette Fitzsimons is already calling for you to be forced to pay for the slowest motorised long distance transport in the country - passenger trains! It takes six hours to go by rail from Christchurch to Dunedin (without speed restrictions) four hours to drive, less than an hour to fly. It takes five hours from Wellington to Napier by rail, 3.5 to 4 hours to drive and an hour to fly. Auckland to Wellington by rail can, at best, be done in 10.5 hours, seven hours to drive and one hour to fly. Few things excite the Greens more than rail transport - it truly is a faith based initiative.

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National of course is opposing it, but wont reverse it. See that's what being in Opposition is all about - oppose a policy at the time, but go along with it when you get elected. It's called Ratchet Socialism - Labour advances socialist policies, and National can't move the ratchet back, (and has policy worthy of rat shit as a result). The claim the Nats make that it wouldn't get a good price for the sale. However, here's an idea. Don't sell it, hand out the shares to the general public. Give everyone a stake in the railways and hand over the shares. Publicly float them, see if the value is retained, and then people can bail out if they like. It wouldn't be "flogging off the assets to foreigners" it would be handing them to New Zealanders - true public ownership, though not one socialists agree with because it doesn't mean Cabinet is in control. However, David Farrar thinks there is a case for the state to own core infrastructure assets - so he wont think the Alliance is mad in seeking renationalisation of Contact Energy, Auckland and Wellington airports. Meanwhile Maurice Williamson has said National is committed to buying electric trains for Auckland. Why, except for votes?

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I'll expect ACT will advocate privatisation of it again, as it should.

Food prices? Blame government

If ever you wanted to witness the catastrophic effects of government intervention in markets you need only see the international crisis around food prices. The primary reason why food prices have been increasing is demand from middle income consumers in India and China. This increase should easily have been accommodated by a free and open global market for food production. Demand increases, prices rise and this should encourage production in the commodities most sought after. Farmers and wholesalers of such goods would make good profits they can reinvest in growing more, and doing so more efficiently. Consumers benefit as this dynamism and entry into the production market helps keep prices from increasing too rapidly.

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Well it would work that way, but for the European Union, US federal government, Japanese government and other agricultural protectionists.

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Many have blamed the new found fetish for biofuels. They are partly right. Now biofuels are meant to be good because their production absorbs the same CO2 produced when they are burnt, and can replace oil. Sadly, whilst biofuels may have a future, governments in many countries have started subsidising them, making it more economic to grow corn and wheat for fuel rather than food. Half of the growth in crop consumption is due to biofuels, and that would not have happened had the US, EU and the like thrown bad money at it. Rather than letting oil companies choose to invest in the best options for more energy, there has been massive diversion to biofuels - the result is higher food prices. If biofuels were not subsidised they would face the same pressure on prices that oil (and food) has, making their economics more questionable and helping ensure that the balance of agricultural production is not leaning towards fuel.

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The biofuel agenda has been promoted by environmentalists such as the Green Party, keen to mandate compulsory targets for biofuel production. As much as they may wish to plead that it should be "sustainable", the vile meaningless buzzword of the 21st century, the truth is simply this - Government incentives for biofuel production increase the price of food. Environmentalists who want the state to encourage biofuels are doing so at the cost of food - simple as that.

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However, the new fad for biofuels may, at least, have a future. If left well alone, biofuels may well become important, but will be competing with hydrogen fuel cells, solar energy, wind energy, nuclear and dare I say it, new sources of oil.

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There are two far bigger concerns around the trade in food that are hindering, enormously, the ability of the food sector to respond to increases in demand.

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The first can be quickly addressed, these are the failures of the developing countries in the form of price controls, import controls, domestic monopolies and the like which have existed in many of the countries most suffering from the increases in prices. The price controls on food have restricted the economics of food production in those countries, and restrictions on imports have also hindered supply. Deregulating the import, export, production and sale of food should be a priority so that the right signals can be sent to increase production, and for food exporting countries to enjoy the windfall to encourage them to invest in producing more. Sadly the socialism of countries like Venezuela, keeping food prices down, has exacerbated the situation.

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However, for all of these failiings (and in many countries these barriers are being dismantled out of necessity), nothing beats the abject catastrophe created by the European Union, USA and Japan with agricultural protectionism.

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Liam Halligan in the Sunday Telegraph attacks, quite rightly, the French Agricultural Minister Michel Barnier who claims, without a hint of irony, that the EU Common Agricultural Policy (CAP) is a "good model". Model of what?

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Millions will happily protest against so called US imperialism, and have no doubt about it - US agricultural policy is only slightly better (and the Democratic Party led Congress is now pushing through another Farm Bill to spread pork to the feather bedded US farming lobby), but who protests the multi billion dollar distortions and disasters that result from the EU's CAP.

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Let's review what the CAP actually does.

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For starters it inflates the price of food in Europe by imposing tariffs, quotas and bans on food imports from countries outside the EU. It does this to protect inefficient European farmers, and so hurts European households by making them pay more than they need for food. The knock on effect is that efficient food producers outside Europe get poor access to that wealthy market, hindering their production in favour of the small, energy intensive subsidised farms of Europe. So the CAP first favours the less productive against the more productive, and European consumers pay more, whilst disadvantaging others.

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Secondly, the £33 billion per annum in subsidies - yes £33 billion - is poured into the farms that already have a protected market, so they can produce. Ah, you cry, but if they didn't produce wouldn't the price of food go up? Um hold on, part of these subsidies is to pay farmers NOT to produce, much like in the US. This trick was to eliminate over production, caused by the protectionism and subsidies in the first place. So yes, the EU pays for farm land to be unproductive, as does the US federal government. Be nice to end that straight away so that farm land might be more profitable used AS farm land than as a source for a welfare cheque - but no the French government says "it is a model". However, what is truly destructive about these subsidies is how they decimate food production elsewhere in the world, you see the CAP subsidises exports of inefficiently produced European food to the rest of the world.

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The result? Agriculture in many developing countries has been stunted by the EU's exports of its highly subsidised produce undercutting efficient production elsewhere, whilst shutting its own doors to imports.

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As Halligan says "the CAP, along with other Western subsidies, has delayed the cultivation of, and investment in, vast swathes of potentially fertile land across Africa, Asia and Latin America. And it's this land which should now be supporting the large-scale commercial production of the food these regions - not to say global markets - so badly need."

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So the EU, followed by the USA (and don't doubt Hillary Clinton and Barack Obama will keep this going, McCain's opposition to "pork" spending may hold some hope) and Japan (on rice predominantly) have stunted and hindered food production elsewhere by propping up their own inefficient agricultural producers. The insanity of the CAP is such that the more efficient dairy farmers in the UK can't benefit from record dairy prices because of quotas of production within the EU - what rational agricultural policy prevents your farmers from making money from high commodity prices, but ensures your consumers pay more than that for what they buy?

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The CAP was originally about two things - ensuring European farmers had adequate incomes and food security. The latter is a nonsense, given the UK used to consume virtually all of NZ's food exports until the 1970s, and international trade in food with record prices will help ensure food security. The former is even more of a nonsense. The CAP stops European farmers from realising the benefits of high commodity prices, whilst simultaneously hindering production elsewhere. If there were ever a time to remove agricultural subsidies and trade protectionism for agriculture it is now.

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The clear message to Brussels, Washington and Tokyo should be plain and clear. It is time to dismantle your pork barrel laden agricultural protectionism. That means abolishing subsidies so that production isn't distorted in favour of inefficiency, and abolishing tariffs, quotas and bans on free trade in agricultural commodities - so that your own consumers aren't paying over the odds.

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Agricultural subsidies are the invention of socialists and economic nationalists, the truly economic braindead. They are immoral, destructive and a cancer upon the world of food production and trade. Nothing would assist in addressing food shortages more than dismantling these abominations, and meanwhile the enormous money saved might just be a boost to the flagging European, US and Japanese economies. Farmers in these countries need to be told - as prices for dairy, meat, wheat and rice are at record levels - you should stand on your own feet. Meanwhile, it would be nice if the EU's budget was halved and taxpayers got their money back.

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As is said by the Economist, ever the friend of free trade:

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"Defenders of the CAP and other rich-country farm policies cannot have it both ways. They cannot demand more money when prices are low, and then ask for extra protection when they rise. High food prices further undermine their already rotten arguments for support, and offer a golden opportunity to dismantle rich-country farm protection"

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The environmentalist new left movement is propagating a new form of snake oil called "food sovereignty". The UN Rapporteur on the "right to food" Jean Ziegler, a supporter of Cuba's agricultural policies, is a cheerleader for this.

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It's about time that these economic fraudsters were exposed for what they are. Their philosophy is literally killing people, and it is impoverishing farmers throughout the developing world. The time is now for all those who give a damn about food to call for a complete liberalisation of agricultural trade. Nonsense like so-called fair trade and the like should be ignored for what it is, a distraction.

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Meanwhile blame the environmentalist movement for biofuels, along with agricultural protectionism (although socialists and economic nationalists are equally to blame here). However there isn't much hope, with Sarkozy's administration talking about "community preference" as a new form of protectionism, and both Clinton and Obama pushing anti-trade agendas. S0 when will those who claim to care about poverty speak up against agricultural corporate welfare?

Did you want to buy a railway?

Well it isn't a question - you own one now according to the NZ Herald. Clark and Cullen have taken $665 million of your money and have bought a dog. The private sector didn't want it, but now you have it - lucky you. It is another one of those investments that doesn't actually generate a financial return - funny that.

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You see the government's competency is astounding given its record on this.

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First it paid $81 million for the whole Auckland rail network, even though Treasury valued it at best at $20 million. The shareholders of Tranz Rail paid out a special dividend of around $50 million directly because of that purchase - that's YOUR taxes going to Tranz Rail shareholders' back pockets.

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Then it paid a nominal $1 for the rest of the network, and started undercharging Toll (as rail operator) to use it. $10 million a year undercharging, coming from YOUR taxes. The beneficiaries being Fonterra, Solid Energy and several forestry companies and freight forwarders - because your taxes should subsidise their freight shouldn't they??

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Since then it has poured more taxpayers' money into the network. As I blogged about before:

- At least $450 million to upgrade the Auckland rail network (track, signals and platforms) from 2005;

- $100 million per year for six years from 2007 to upgrade Auckland and Wellington rail networks;

- $25 million in 2008/09 and again in 2009/10 to upgrade the national rail network;

- $100 million upfront in upgrading the national network from 2003, and $25 million annually from 2004 to 2007.

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Now it has said that "The Government will now avoid paying subsidies to third parties and we also avoid the on-going disputes over the implementation of the National Rail Access Agreement that had the potential to destroy value in the business and erode the morale of the people who work in it."

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*cough* Bullshit! The subsidy wont be going to Toll, it will be going to rail freight customers and rail ferry customers implicitly. It is reducing freight costs for timber, coal, containers and milk - that's it, by subsidising them - these are third parties. You see railways aren't exactly carrying just air.

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So why buy it? What about the concerns about road maintenance, pollution and congestion?

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Well this is all terribly funny. At a time of record fuel prices, the claims about the efficiency of rail over road would apparently be so self evident subsidies wouldn't be needed - and of course they aren't, since the railways ran happily without them for freight from 1988 till 2003. The difference is the government, as rail owner, wont charge Toll the full price of the cost of rail maintenance. So either rail is very fuel efficient (and conversely has lower environmental impact) or it isn't, or isn't enough to make up for the enormous fixed costs of having lightly used tracks. Not so sustainable now is it?

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So what about road maintenance? Well Road User Charges recover the costs of highway maintenance from trucks attributable to trucks. They get revised regularly to respond to those costs, so they aren't being undercharged (on average). Funny how the government will undercharge trains on its tracks, but not trucks on its roads. An argument can be made that trucks on local authority roads should pay more, instead of ratepayers paying for these costs, but these roads rarely compete with rail for most freight.

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So what about pollution? Well the government's own study indicates that the environmental impact of long haul road freight is sometimes the same or less than that of rail, and vice versa. It is route dependent, so is not as simple as the Greens preach it is.

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and congestion? Well rail freight will do next to nothing to address that, and passenger services in Wellington seem to be getting upgraded quite happily without government ownership of the operations. You're deluded if your think that the Auckland rail upgrade, which will serve locations where only 12% of Aucklanders work, and largely see a shift from bus to rail, will reduce congestion.

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and if that doesn't convince you remember this:

- In 1982 the government wiped what was then $100 million worth of debt from the Railways Department to restructure it. In today's dollars that would now be roughly $250 million.

- In 1988, the government wiped another $350 million worth of debt from the Railways Corporation to pay for the Think Big rail electrification which was a sunk cost and unprofitable project;

- In 1990, the government wiped $1 billion worth of debt from the Railways so it could start with a clean slate, the second time in eight years.

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No amount of ridiculous cargo cult worship of railways will get over the fact that this is a dog of an investment. The main freight customers should have been left to buy it and run it as a business, and if the government wanted the roads and railways to be on a level playing field, it could have run the highways as a business and even, shock horror, sold them.

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Instead the government pours taxpayers' money into poor quality exhorbitant road projects that are environmentally gold plated (like the Waterview extension and eventually Transmission Gully), and makes you buy a railway to shift traffic from the roads it wont manage on market principles.

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oh and you might ask why all the socialists and environmentalists didn't buy rail shares when they were available.

Wishart's all too obvious smear

Now Ian Wishart's book is akin to Nicky Hager's - it is political with the motive of bringing down the political party (and leader) he dislikes.

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I have no time for Helen Clark and her politics. I wouldn't care to defend her and have never voted for Labour whilst she has been leader. I find her a control freak, statist and willing to regulate and tax whenever she sees fit - she sees the state big, growing, embracing and using education and the media to reshape the country in her vision. It isn't a vision of enterprise, freedom and diversity, but a vision of partnership - where the state never lets you go.

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However, Helen Clark's private life is another matter. I know enough to have my own opinion about her marriage and relationships, and frankly her sexuality is irrelevant to me. It does concern me that she chose to dedicate her life to politics, if only because it shows a passion for power - over others - that is cold, calculating and unfriendly towards individual freedom. Woe betide those in the way of Clark. She faced several challenges, in particular being the most hated Health Minister in recent history, then she knifed Mike Moore after the 1993 election to claim the leadership. Subsequently she saw Labour achieve its worst ever election result in 1996 with only 28% of the vote, but came back to win three elections in a row - albeit at all times with the help of Jim Anderton, Winston Peters and Peter Dunne to retain power.

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Wishart wishes to destroy her political career by the shock horror revelation about her marriage. What is disgusting is what a vacuous wasted effort such a revelation is, although Wishart can sell books, so do pornographers.

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Wishart could have brought down the Clark administration by having some real stories about conflicts in Cabinet and Caucus, some of the policies that nearly made it but were carefully avoided, and some of the debacles such as letting Air New Zealand fall so it could be nationalised. He could point at the government's record and see why growth has been stunted so much by the Clark administration.

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No, it was beyond him (and wouldn't sell as many books) to undertake serious analysis, he was into muckraking.

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Psycho Milt at No Minister has eloquently written about what it is all about. "This is where we get a good look into the psyche of the right-wing ranters who fill comments threads with vile abuse whenever the subject comes up (which it does with regularity, right-wing bloggers being what they are). What makes Clark and Davis “gay” is that they don’t fit these guys’ (well hell, you almost always are, and you know it) view of what a “real man” and a “real woman” should be like. "

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So now that Ian Wishart has played being News of the World, let's get down to some real reasons you shouldn't vote Labour.