Saturday, December 2, 2023

Tapping the public purse for good or ill

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There’s a helping hand, and then there’s the hand that helps itself to public funds.
Farming had a licence to continue to operate under covid restrictions, and no jobs were at risk – and yet there were farmers who received wage subsidies meant to protect vulnerable jobs, Steve Wyn-Harris says.
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The day I began farming in my own right in 1985 coincided with the removal of agricultural subsidies.

The Lange Labour Government had won the 1984 election and inherited a bankrupt economy, so had little choice but to make massive changes.

The traditional party of the right, National under Muldoon, had strayed far to the left with a highly regulated, government-controlled, inefficient economy. Things weren’t going well.

Muldoon had brought in agricultural subsidies to appeal to his rural support base and by 1984 these payments amounted to more than 30% of pastoral farmers’ income.

Just writing that seemed so unbelievable that I’ve checked my memory and found two academic papers to support it.

Farmers were heading quickly in the direction of farming to maximise their taxpayer-funded income rather than increasing their profits in the markets.

Labour, the traditional party of the left, came in and surprisingly embraced free-market reforms and what was to be labelled neo-liberalism.

When it announced that agricultural subsidies were to be removed as one measure to try to save the NZ economy, all hell broke loose and many once personal-responsibility, free-market, right-wing farmers demonstrated in the streets to show their displeasure.

But to their credit, many of our agricultural leaders agreed that we had strayed down the wrong path, and supported these measures – to much hostility from some of their support base. Sometimes inevitable, rational policy is not popular.

Where the freeing up of our economy was unfair was that it took many years for other sectors of the economy to be deregulated and opened up to competition.

We’ve spent subsequent decades on the world stage morally pointing at our stance and advocating for the removal of agricultural subsidies elsewhere and an opening up of other regulated economies for the benefit of all.

This advocacy has helped get many trade deals over the line, but much protectionism has remained.

In the current world political environment, the swing towards free trade and open markets appears to have gone as far as it might for the time being as countries begin to look inward again and governments succumb to voter pressure. The United States under Trump is a good example.

I watched in disbelief as many in the rural sector helped themselves to the wage subsidy two or three years ago.

This was a high-trust model designed to protect jobs in industries that were unable to function under the restrictions of lockdown to control covid.

Farming had a licence to continue to operate, unlike many industries. Given the extreme shortage already of capable and competent shepherds, milkers and other farmworkers, no one on a farm was ever at risk of losing their job due to the lockdowns.

And this at a time when we were receiving record prices, although admittedly with great difficulties getting killing space due to the restrictions on the meat plants.

I see there is a trickle of prosecutions for wage subsidy abuse, and watch with ongoing interest.

Farming operations in the right place or in the know have been getting very large subsidies to plant out natives and undertake environmental work, which does make the world a better place but disadvantages all of those others who had already done it themselves from their own pocket or haven’t been able to access those same subsidies and face fully funding the work themselves or not doing it at all.

The payments to those hit by the cyclone are a genuine gesture by the government to give some small help to those who have suffered devastating losses and is more of a moral support than anything.

Calls from varying sectors and across the political spectrum for much more massive taxpayer support to help fix private businesses is more problematic.

What the government should be doing is everything in its control to get the roading infrastructure up to speed as fast as possible in these regions hit badly by the cyclone. 

And future-proof that infrastructure and supporting infrastructure, like electricity and telecommunications for future inevitable events.

Labour has become accustomed to using public funds to support private businesses in need and I don’t recall hearing National or ACT talking the hard talk to their support base that this is a dangerous path to continue down.

The public purse might be the biggest in the land but even it has its limits.

But one way or another, it’s a conversation that needs to be had.

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