Ministerial and business budget summit dealing with major health, skills and tax reform issues

The country’s second annual Business Budget Summit will tomorrow look for long term policy solutions to avoid a major future health cost shock, overcome the country’s critical skills shortage – and possible paths to long term personal tax reform.


Eighty business leaders and observers will call on their personal experience to provide Deputy Prime Minister and Minister of Finance Hon Dr Michael Cullen, and Revenue Minister Hon Peter Dunne with options to solve key social and economic growth issues. The tax reform one is going to drive the decision of up to 62% of voters at next year’s general election.


While eight out of 10 New Zealanders want tax reform, ShapeNZ research for the Summit, being hosted by the New Zealand Business Council for Sustainable Development, also shows overwhelming public demand for provision of health spending and ensuring social spending and equity are retained.


Research papers and presentations prepared for the summit highlight the following main issues:


Health


The country needs to find ways to avoid the huge tax cost shock from health spending which will double from $11.5 billion a year by 2050 on current trends.

Some policy discussion options include:


Pre funding (for example, setting up a superannuation-like “Cullen Fund”)
Greater take up of medical insurance, particularly by younger people, phased in over time
Introducing Personal Health Accounts, provided to individuals by Government and topped by employers in some cases, as a way to transition
Freeing up state capital by private provision of health infrastructure
Greater use of the private sector in providing services to DHBs through competitive tendering (to also try lifting efficiency and reduce waiting lists)
Using facilities here or overseas to reduce waiting lists more effectively
Placing more emphasis on firstly treating those who are employed or on sickness benefits






Personal tax reform


Short term options:


Reduce tax rates and pay through fiscal drag (bearing in mind everyone now on the average wage of $46,000 will enter the top 39c tax bracket in 10 years)
Pushing out the income limits before a new marginal tax rate cuts in, does not address our international tax competitiveness, specially with Australia
Reduce top rates to 30c to match corporate rate
Reduce top rates to 28c, and corporate rate to 28c
Increase GST to 20% to finance a single rate tax of 20c for all individuals and corporates while adjusting allowances and benefits to compensate for price rises for lower wage earners, families and beneficiaries. Maintaining Government spending at 31% of GDP
Introducing a land tax and increasing GST to 15% to raise revenue for personal tax cuts


Skills shortage


Most New Zealand businesses are no longer constrained by how much they can sell, but by a shortage of skills and capacity.


New Zealand incomes are no longer high enough to allow easy recruitment from anywhere in the world.


The summit will look at whether the country can do a better job of developing skills in New Zealand and providing support to attract talent from overseas.


It will consider if the New Zealand in response needs to:


Deal with literacy issues in the workplace and schools (40% of workers are functionally illiterate – they do not have literacy sufficient to train for skilled work)
Undertake a special major effort to ensure the large and growing Maori and Pasifika student population gains qualifications (53% of Maori boys leave school without one NCEA pass)
Focus on recruiting high quality teachers, not teacher volume
Support teachers with training post-engagement
Intervene quickly when children fall behind


Migrants


Do we:


Provide internships at work for skilled migrants to develop workplace English (the main barrier to employment according to ShapeNZ research)
Provide for a big expansion on work place literacy programmes
Streamline immigration procedures, enabling migrants to move into more skilled positions
Increase trade training at secondary school and related new academies
Align tertiary and secondary training with business needs
Promote the benefits of new technology use
Develop new training and retention strategies for use by business
Address employment law and other barriers?


The summit runs from 9am to 5pm at the Wellington Town Hall.

Details of papers, ShapeNZ research and the agenda are at www.budgetsummit.org.nz


Ends