SIMON The New Zealand Institute earlier this week released its major report advocating a compulsory savings scheme for New Zealand. The Institute is worried that we're not creating an ownership society and says we have to act now. Already both Labour and National have dismissed the proposal as being to expensive, but what are national's policies for savings and the economy. Their economic spokesman John Key is in Queenstown for the Greypower Conference and joins me now.
Mr Key on Agenda last week Helen Clark said and I quote 'this government isn't going to throw money around that it doesn’t have in fact we're simply amazed at the voodoo economics coming out of right wing parties which believe you could right now chuck vast amounts of tax cuts on the present monetary situation'. Is the economy healthy enough to sustain tax cuts?
JOHN KEY Well I think that’s a very interesting statement coming out of a Prime Minister that about two months earlier got a report from Treasury that said the build up in the state sector was so large that it's gonna cost somewhere between three quarters and a billion dollars of additional funding to fund over and above any expected costs. It was a report that said that the output coming from the state sector is low, the hiring has been indiscriminate and that there's been significant wastage of expenditure across a whole lot of programmes. So there's certainly room for tax cuts and a National led government will eliminate waste in the government spending area and in the state sector.
SIMON But Helen Clark has a point though doesn’t she with tax cuts, they're going to encourage spending and as a result there's gonna be inflationary pressure.
JOHN KEY Well the Labour government seem to have this view that when the government spends a dollar it's not inflationary but when mum and dad spend it it is. National will run a smaller government, we will be more efficient and we will eliminate waste and that will give us capacity to return money to those who've earned it.
SIMON Let's look at the tax cuts, what are you committed to, is it across the board tax cuts?
JOHN KEY Well we're going to announce them probably post the government's budget on May 19 and Don Brash will give a major announcement around that time is my estimate, but we anticipate it being a broad package across the board, we'll certainly be targeting middle income New Zealanders, low to middle income New Zealanders, but it'll be a tax package that I think will be welcomed by workers who have frankly spent five years paying 35 billion dollars of additional taxes and getting no further ahead.
SIMON The common criticism of course is that the tax cuts are only for the rich so you’re saying that there will be tax cuts for low and middle income earners?
JOHN KEY Oh absolutely, look the package is aimed at saying we have a huge amount of our workforce that earn between 40 and 75 thousand dollars a year. For all of the spin coming out of working for families a great many of them actually don’t get much out of that package and in fact they’ve sat back and gone into higher and higher tax brackets they’ve paid more taxes and they're hurting and what they're doing in response to that is drawing down more debt, and this is a country that is becoming much more indebted, it's highly risk orientated around its housing market and if we do see a slow down in housing …
SIMON We'll come to the question of culture in a moment, but what's your response, you said that people want these tax cuts, what's you’re response then to the Herald digipoll earlier this week that suggested New Zealanders don’t want the tax money they'd rather see it spent on education and health services.
JOHN KEY Oh I think there's a couple of points to that, the first is that that’s a sort of a natural response if you haven't spent a lot of time thinking about how much wastage there has been in some of those areas, particularly in the education sector where the build up in what's loosely termed as tertiary but includes polytechs and wanangas has gone from about 1.4 billion five years ago to 3.2 billion, so I mean I think when the voters actually have a look at that and examine it for what it's worth they’ll feel a bit ripped off. I think the second point is that don’t forget some people who fill out those surveys actually don’t pay tax, and so to them a tax cut won't mean a lot, but last and not least I think the way someone answers a survey and what they do when they do when they go into a polling booth when they understand the numbers, when they can see the influence and the difference it will make to their family and their ability to meet their commitments I think you might be quite surprised by their vote.
SIMON So you’re confident their tune will change in the lead up to the election?
JOHN KEY Absolutely, and we are totally committed to our tax package and we'll be delivering it and announcing it post the budget.
SIMON You've been critical of those core services, health and education, how would National change the way that we receive core services?
JOHN KEY Well I think the issue here is – I mean I'd certainly like to see in certain areas more involvement of the private sector because I think it gives parents choice, it gives competition and I think that’s very healthy.
SIMON Can you be more specific with that, how would we receive them with the involvement of the private sector, give us an example.
JOHN KEY Well I think in the education area there's plenty of opportunities to have the private sector playing a bigger role. We have a very small number of students who actually go to private and independent schools in New Zealand relative to Australia. I think a lot of parents if they had the opportunity to be able to afford it and access it would welcome that opportunity.
SIMON So tax cuts for private school attendees?
JOHN KEY Well we're looking at a whole range of stuff around there, there may be different ways of distributing that, we could just look at the funding that goes to those independent schools which is currently capped at around 40 million dollars, an increase in that would reduce the fees and widen the access. I personally for one don’t like the fact that fees are going up in private schools excessively because there is such a big demand and it's becoming rather elitist and I'd rather see something that a lot more parents can choose for their children.
SIMON So what would we be seeing under a National government? Tax cuts, subsidies, vouchers, what's it going to be, what's the mix?
JOHN KEY Oh look um, Don's in the process of announcing a fairly major speech on that and I'd rather leave the details of education to him and to Bill English of course, but you know it'll be – again I think it'll be a package that’s attractive, it'll be a package that says where there's been enormous wastage we're going to eliminate that wastage and it really has been very very significant, I mean I don’t think I can over emphasise how big some of that wastage has been and I think the public understand…
SIMON Where are you going to cut it, where is the wastage going to come out?
JOHN KEY Oh well, certainly in that tertiary area where – I mean let me give you just one statistic. When you have eight thousand people enrolled in a course for sing-a-long songs and that is more than the entire number of apprentices and trade training taking place in that year you know something's gone terribly wrong and I think Bill English is to be congratulated for doing a great demolition job on what Steve Maharey and Trevor Mallard have been rolling out which has been embarrassing and it's caused Mallard this week to have to come out in the papers and admit himself that the wastage has been there all along and it's been undertaken by a government that just doesn’t care…
SIMON We'll leave the political point scoring to one side for the moment, but earlier you touched on the savings culture or the lack of it in this country. You have of course indicated that tax cuts are necessary to get people to save, how are you going to get them to adopt this saving culture, how are you gonna get them to save rather than spend?
JOHN KEY Well let me make two points and that is that if you go and have a look at the evidence around savings the New Zealand Institute presents the point that it's universal, that all New Zealanders suffer from a savings issue. Actually I'd contest that point, higher income New Zealanders do save in a multitude of ways but they certainly do save.
SIMON Probably because they can.
JOHN KEY Well that’s exactly the point. The point is that people earning 35 and 40 thousand dollars and trying to bring up a family are not saving, not because they're not aware of the issue, they can't afford to, they're having to make real choices between some daily commitments. So I mean my view would be the number one thing we can do to enhance savings is in fact grow wage rates for New Zealanders, that doesn’t mean that we're not cognisant of the fact but I think there are things you can do in terms of changing behaviour, and I think the Institute makes some very good points and we're looking at ways to grow workplace savings to allow easier access and to make the behaviour cultural change take place in New Zealand.
SIMON Give us some examples.
JOHN KEY Well I think we're looking at how we can encourage workplace savings schemes and I don’t think the tax cut model into compulsory individual saving is easy to roll out, it's tremendously expensive, I mean that report indicated a cost of around four billion dollars, well that’s double the new budget spend of any budget going forward and over half of that is committed, so we can afford that option in day one.
SIMON What's the alternative?
JOHN KEY Well the alternative is a couple of things, I mean grow those wage rates. One of the things we fully support is the fact that funds currently are charged capital gains tax on equity funds, equity managed funds, and that’s a real disincentive for people to save through fund managers. The vast majority of people will save through a fund manager because they don’t have the expertise themselves and we want to level that playing field and we'll be pushing that through.
SIMON So that compared to compulsory savings schemes what is your attitude to compulsory saving schemes as a whole I know that you've dismissed the New Zealand Institute's option as being too expensive, but as a whole compulsory savings schemes.
JOHN KEY Well look I get asked that question quite a lot and the answer I give is this New Zealand has compulsory saving for superannuation, it's called New Zealand Super, you don’t get a choice of taking out that component from your taxes, so every New Zealander gets that and one of the reasons we're back to New Zealand Super Fund was because we are firmly committed behind New Zealand Super and its parameters. So every New Zealander has a base level of savings, the issue here – or access to New Zealand Super. The real issue here is is that enough and the answer is no when people are living longer and wanting to do more, and so whether that second element of savings realistically should be a compulsory element I'm much more sceptical over because you'll be forcing compulsory savings on to some people who've already got quite a lot of savings indeed and I think that doesn’t make sense, I think what you've gotta do is go and have a look at low to middle income New Zealanders who can't save because they don’t have enough income, look to lift their wages but also I think you can do some targeting around that area to get them in the ownership society and give them a stake in our country's future.
SIMON NBR yesterday reported you as saying you economy lacks the capacity to grow any faster without inflation. What's you’re solution?
JOHN KEY Well the very simple solution – that was a comment that came off Alan Bollard post his March 10 rate hike and Dr Bollard made absolutely the correct point which is when you have huge capacity constraints around infrastructure particularly roading, but even in terms of skilled workforce you can't grow because you've got no room to move and we can't sit back and say we're gonna put up with Auckland and Tauranga and Wellington having traffic jams which are so inefficient that businesses are going broke or having to over resource on the back of it, so you've gotta build capacity and you've gotta spend more money, it's one of the reasons why Don came out last week and said we're gonna spend 2.1 billion dollars on additional new roading in the next six years because New Zealand needs that if it's got any hope of growing without it being pure inflationary.
SIMON Doesn’t that contradict the message though that you’re sending to the public, you’re saying you guys save but we're gonna spend so that we can make money?
JOHN KEY Oh well not at all because – you've gotta go back to this tax package and say we are planning to roll out our tax package firstly in a timely basis, no one is arguing that we're gonna roll it out if inflation's above the top end of the band, I mean I think all tax, significant tax packages that have been announced by previous treasurers have always had that caveat around them and we will not drive up interest rates on the costs of our tax package, if we have to wait a little bit of time we will, but nevertheless my view is that don’t forget we will be reducing the wastage in government spending, we will be reducing programmes, we will be reducing staffing where we think it's over supplied and for every dollar that we save or we don’t spend in the way going forward that this government intends to, you can probably give back through tax cuts quite a bit more because not a hundred percent will be consumed.
SIMON From Queenstown National Finance Spokesperson, John Key thank you very much for making time for Agenda today.
SIMON John Key's comments on tax.
BRYCE I think he's gonna find there's some sympathy out there, there is an argument for tax cuts I think. In various surveys you get the answer back all the time we'd rather the spending go on health and education but the key argument is do you trust the government to spend it in the right areas. In Hamilton we've got parents of children mowing lawns at their secondary school because they can't afford the fees, now if I thought my money, my tax money was going to abolish school fees and that sort of thing hey then maybe I would support that, but then you see the argument the eight thousand learning to sing songs at Wananga and various things like that, hey I don’t support that, I don’t think the majority of New Zealanders do, but it's a matter of trust and a matter of getting the right money going in the right areas.
SIMON We're not gonna hear any end to hip hop tours in Wananga are we? I mean these are gonna be brought up all the time about government profligacy.
KATHRYN Well there's a clamp down going on now by Labour but it's a little late in the piece isn't it, just a few months out from the election. There's no doubt it's an area where National has had some success. I think the tax cuts debate is one that National has to have and it has to go hand in hand with the we can trim excessive public spending. What John Key has to do at a time when budget forecasts are tightening is show that there is room for tax cuts and that’s where he's saying look I reckon we can trim half a billion off the public service or public spending just by getting rid of waste. If he can't demonstrate that then he can't demonstrate room for tax cuts. The danger for National is that Labour portrays this as being about cutting health and education spending not about cutting waste, so there's going to be a very intense political battle over whether there's room for it or not.
SIMON Yeah and of course that’s a question of application of funds. The Official Information Act request from the Herald last week revealed 750 million to a billion dollars a year in core public sector wages didn’t it, and now we also found out this week that the government occupies more than half the real estate in Wellington.
BRYCE National believe that there can be cuts in bureaucracy and if they can achieve that they're on to a winner, but like Kathryn says the government's gonna try and say hey it's all about the services.
SIMON It's all about the delivery of the service.
KATHRYN Don’t forget a large part of that wage increase for example was a substantial wage increase for nurses and who in the public is going to say that they weren't happy to see finally some movement in that sector, it's going to be about who can portray the argument is about waste and who can portray the argument is being about you’re gonna stop the good investment we've made and services that desperately needed it. It will be the nub of the political battle this year.
BRYCE And I think too you’re going to see in the next few months, the nurses' wage rise as big and perhaps as deserved as it was it's going to – there's a pressure on right through the government sector now to it not maybe get to that sort of level but to get very high wage rises and that’s just going to add to the bill and it's going to add to the disharmony building up.
SIMON Budget on May 19th is going to be fascinating. What did you make of what John Key said about private schooling?
BRYCE It's an interesting one, I don’t know that that’s a big election issue. Yes there is a big push for private schooling and a lot of people do believe that their children are going to be better served by being in a private institution. I met with a Principal a couple of weeks back who was telling me that the waiting lists at his private school in Hamilton are extensive and growing, you can't get in there unless someone pulls out, but is it an election winner, I don’t know unless they refer it back to the problems in the state sector schools.
KATHRYN It's a good argument to help shore up National's core vote and Don Brash has certainly signalled something in the way of tax relief or whatever for those who are prepared to spend on their children's private education, but perhaps one that is targeted at National's core vote and not that big centre ground it's got to try to eat into.
SIMON But is the big centre ground now about hey we're having our lifestyle choices and wider delimited by this government, I want choice back?
KATHRYN I'm not convinced of that Simon if you’re talking about the fullness of the centre ground, I think that those surveys do hint perhaps that people want good strong public education services and health services, but as I said this will be right at the nub of election arguments this year.
BRYCE I go a little bit against Kathryn there, I think there is ground for parties to make gain in the centre area, but no one is doing it well enough, there isn't the point of difference, National hasn’t shown that no one has, and until people put the stake in the ground no one is going to come out of the pack.
SIMON What about the reaction to the New Zealand Institute report both Cullen and Key criticising it as being too expensive you can understand it from one side, perhaps the other – compulsory savings scheme?
KATHRYN Well I think National's problem with it – the compulsory savings scheme simply is not on the agenda for either party and won't be, I think what is going on now though is that National will find it's behind the eight ball on their workplace savings schemes, that’s going to be in this budget, something along the lines of when you take on your job you’re going to be offered an automatic component of Super in your salary and you’re gonna have to opt out, choose to opt out rather than opt in. Labour also looking at the tax treatment of those Super Funds, so yes National is right to focus on savings but it's a little bit behind the pace at the moment and it will not go down the compulsory route, neither of the major parties will.
BRYCE It's definitely one of those issues that you can see National having to back flip on if the government gets this through and it comes out in the budget, and they're going to have to say well actually it's not that bad a system after all like the Super Fund but we'll just tweak it a little bit, you know I think Labour has got the high ground on that one.
SIMON Thank you both.
SIMON D Well just when John Tamihere thought it was safe to go back in the political waters his views have come back to bite him. The off the record on the record debate about his Investigate Magazine interview and subsequently what someone called a Clayton's apology provided plenty of fodder for the Opposition this week. Simon Pound's been reviewing who said what to whom and he joins us now.
Who said what to whom Simon?
SIMON P Well it is a very interesting case. I met Wishhart yesterday at the vineyard where them meeting took place to try and examine circumstances of that interview. He had this to say about what was on the record.
Simon: "Did you at the beginning of the interview tell him that it would be on the record?
Simon: Did you tell him whether it was going to be a profile piece or a question and answer interview, or how the interview would appear?
Ian: No, to me again going back into my journalistic training and interview's an interview, how I use it and how I put it together at the end of the day is an editorial judgement I make, I had been planning to run it as a Q&A and I did run it as a Q&A but I didn’t see that – it wasn’t a case of covering it up from John it's just a simple case, you give me an interview I go away I make a story out of it."
SIMON P He further expanding on this when I later asked him what it was that happened when Tamihere called him after the interview.
Ian: "Five or six days after the interview there was a voice mail message left on a backup cellphone that I keep in the car for emergencies and so forth, and I didn’t get that message in fact until the Sunday the magazine was published and it basically said I think I've been a bit too frank, and I rang him back and got him obviously at the Labour Party Conference where I think he was, and explained to him that it was a verbatim interview and it was in the magazine at which point he was none too happy, basically said have a good life and hung up.
Simon: And he hadn't been aware at any point that it would have been a verbatim interview up to that?
Ian: How would I know.
Simon: But you hadn't told him that it was going to be a verbatim interview?
Ian: I hadn't made the distinction."
SIMON P See this kinda ties into the questions about when it is best practice to inform an interview subject how their answers are gonna be used, but I'd say that that’s the principal point of contention between Tamihere and Wishhart over the interview has been over the issue of whether it's been recorded or not. We put the question to Wishhart how did you place the recorder on the table and asked him to give us a relative idea of where it was in relation to Tamihere.
Simon: "So at the beginning of the interview did you tell him it was going to be recorded?
Ian: Not formally but it would have been perfectly obvious cos I took the recorder out of my pocket much like I'm doing now, switched it on like so as we were nattering away, pushing record to make sure it's recording, red light came on, little voice recording symbol comes up and continues to scroll through for the whole 70 minutes just sitting in front him going round and round and round voice recording voice recording red light on. I don’t know how many press conferences John Tamihere's been to, I don’t know how many times he's been interviewed but to suggest that that was a cellphone and he didn’t know he was being recorded is naïve in the extreme.
Simon: And this is a relative position if I were John Tamihere that’s about the position?
Ian: If you were John Tamihere that’s the relative position, it was there to his right as he sat there eating his meal close enough that I could hear his answers, it was a very noisy restaurant on the day, we had more tables in close to us then we do for this particular interview here."
SIMON D Okay we've seen how it's been set up now. That’s not the end of the story though clearly.
SIMON P No, well we had been trying to contact Tamihere during the course of the day so he would be able to respond to Wishhart's claims as to how it occurred. Tamihere declined to comment to us but later in the day a source close to Tamihere contacted us with information that there existed two tape statements from staff who'd served at that lunch that contradicted the claims that there was a recording device on the table.
SIMON D What kind of statements?
SIMON P The statements were made by two gentlemen that had served during the lunch they said that at no time during their serving Wishhart and Tamihere at that meeting did they see a recording device on the table. I spoke to one of the two waiters that I'd met earlier in the day when we went to the vineyard to satisfy myself and recorded my own tape statement from them.
SIMON D So what they're saying directly contradicts what Ian Wishhart says?
SIMON P Yes but it also brings up an interesting point because this not only contradicts what Wishhart has said or seems to be counter to it in what we've just seen it also contradicts or is counter to statements that Tamihere has made during the week on Paul Holmes' Breakfast on Tuesday where we said that he saw his phone speaking of Wishhart's phone on the table and we now have an extra story thrown into the mix, a source who's come to us saying that we've got these statements. I've received a statement from one of these waiters that has said there was no recording device, no the device that we saw Wishhart putting down on the table.
SIMON D I want to bring the panel in. Muddying the waters?
KATHRYN Oh it does muddy the waters, for me the issue for the outset has been did he know that it was going to be a verbatim interview, and I must admit when I first heard a little audio clip on the internet of the conversation going on it did not sound like that. I still lean to the side and have done all week that Mr Tamihere knew he was being interviewed for an article, his call allegedly to the Prime Minister last week that I may have been a bit frank marries up with what Mr Wishhart says. I certainly lean to the side that he knew he was being interviewed for publication but the difference is a verbatim recording allows a lot of those juicy phrases that we've heard to have been accurately recorded and therefore to worsen the article from Mr Tamihere's perspective, I remain a sceptic. However I must admit I think it was a case primarily of Mr Tamihere just going too far and later regretting it.
SIMON D Recklessness and the regret that follows. What is the story with the journalistic ethics here because we've been pursuing this and there's been a lot of debate about what the appropriate conduct is when setting up an interview. How do you understand it to be Bryce?
BRYCE Well anyone that’s going to be interviewed by a journalist should be way of this fact. There is no set of rules. Now I've polled a bunch of my fellow editors this week to find out what the ethics are in their newsroom about the use of off the record and there is no consistency, and to be honest there shouldn’t be, because you’re dealing with a wide range of people and you've got various levels of contact with – some you know very well, some you don’t know very well, Joe Public you meet on the street you don’t know at all, it is up to the individual journalist and the interview subject to set the rules that they have the interview on.
SIMON D Okay, so the rules are fluid but there must be conventions and are the conventions different when interviewing parliamentarians versus the general public?
KATHRYN I think this is perhaps where Mr Tamihere has got into trouble as well. What Mr Wishhart was saying from memory certainly told us was that he never said we are on the record but his presumption quite rightly with a politician is that that is ….
SIMON D Well you say quite rightly, I spoke at length to a former member of the press gallery, a long standing member of the press gallery who said that he is adamant that the situation is that you are off the record with parliamentarians until you explicitly state you are on the record.
KATHRYN You’re bringing in another complication this wasn’t a press gallery journalist, now as journalists we are trained the starting point, and the public should be aware, the starting point is that everything is on record until explicitly off the record, but around parliament because we deal so closely with these politicians it can almost become inverted.
SIMON D So is that the understanding with parliamentarians?
KATHRYN It's not an understanding it comes down to your individual dealings with the journalist, it comes down to the trust and the relationship that you have with them and the understanding that you have with them. If he has never been interviewed by Mr Wishhart he should not presume for a second that he's gonna start on an off record basis and as a Cabinet Minister and as a politician now for five years the onus is on him to protect himself and to establish the rules at the outset.
SIMON D In the press gallery when you’re dealing with these parliamentarians behind the scenes is that implicitly off the record until it's explicitly on?
KATHRYN No I don’t accept that either. I mean you can be having a conversation about what you had for lunch for goodness sake, but as soon as you are talking about a political matter the presumption is on record, a politician will very quickly come in and say look on background I want to talk about this I don’t want to be quoted. Any journalist dealing with a remotely political matter will move to that situation very quickly, and Mr Tamihere at the very least here has been naïve, I personally lean to the side he gave every intention to give a controversial interview perhaps not to have it verbatim reported.
SIMON D So what's the message that MP's take out of this that every conversation they have with a journalist they must be wary?
BRYCE Yeah you don’t have idle chat with journalists, no politicians don’t do it, anyone else dealing with the media you need to sort out very quickly very early on what you mean by off the record. We have all sorts of conversations on off the record that mean different things, some people tell you things off the record that they want you to use but they don’t want to be attributed to it. Some people tell you things off the record …
SIMON D Whose job is it to set the terms of the interview? Is it up to the interviewee to question them and to shape them or is it up to the interviewer?
BRYCE It depends I think on how much dealing you've had with the media.
KATHRYN There are no terms Simon you can't go into an interview prescribing how it's going to be used, that’s just completely unacceptable.
SIMON Not prescribing how it's going to be used, but prescribing the areas that we're going to talk about say.
BRYCE Look I think journalists have a duty if they're dealing with naïve people who haven't dealt with the media before to at least give them the opportunity to explain what they can.
KATHRYN Okay, you might talk to a member of the public at a car accident as to what they're going through, a five year MP does not need that kind of explanation and neither do they have the right to sort of shape how that material is going to be used, they give the interview and what they say is what they're stuck with, and that’s certainly been the fallout for Mr Tamihere.
SIMON He should know better.
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