Rates Rises, Why Would YOU Care?

The Taxpayer’s Alliance has identified over 80 senior council officials in Auckland alone that ‘earn’ over $250,000 and are looking to publicize this information (1Stuff 2nd May 2020). It is surprising to hear the rhetoric coming from some of our ‘leaders’ in relation to this type of publicity (1Ratepayers Alliance 29th Apr 2020; 2Rotorua Daily Post 9th Apr 2020). Rather than congratulating such groups on the public service they are providing, the rhetoric from some officials sounds almost threatening. Do not ratepayers have a right to know who is being paid what? It is not your money? If this were a private company then the shareholders would have a right to know the senior managers’ salaries. Maybe some public ‘servants’ have forgotten whose money they are spending?

On the bright side, it is encouraging to see other public officials being more welcome of change, recognising the pay imbalance between essential workers and themselves and cutting their pay. *Note, this is actually cutting their pay, not promising donations to friends or family, or redirecting part of their salary to their own organisation. Why is this important? Because we are unfortunately in for a period of economic pain that will last some time. Our dependence on sectors such as tourism, hospitality, and International students, and the high indebtedness of our households due to having some of the highest housing costs in the world, means the economic effects of Covid-19 will last for many years to come. Thankfully - We are All in This Together, right?

If we are to spend to get out of this recession then the money has to come from somewhere. There is no point taking from ratepayers in order to cover new expansionary spending (3Stuff 24th Apr 2020). That is the proverbial taking from Peter to pay Paul. Rather than being expansionary this just takes your money and gives it to officials for them to redirect. If that redirection is merely into the pockets of high paid staff or contractors, then it is likely to actually reduce economic activity.

One Hamilton councillor has indicated on social media that increased spending at the cost to ratepayers is ‘Keynesian policy’. This is concerning as we would have hoped that the people who lead us had a greater understanding of economics. We would be more than happy to discuss with them Keynesian policy and the requirements for its success. On a positive note, if officials actually cut their pay in order to stop rates rises, and start projects that employ the many who will lose their jobs, this is a great start. While lasting salary cuts for senior public ‘servants’ will not only provide hundreds of millions to local and central government coffers, it has a second, maybe even more important benefit – empathy.

Can you truly appreciate the plight of your average citizen if you ‘earn’ over 15 x’s what they do? Maybe this is why many commentators are stating that councillor’s heads are stuck in the sand in relation to their views on rate rises (4Stuff 2nd May 2020). How can you make rational decisions for a pensioner ratepayer, if your salary Each Week is over $9000, meaning in three weeks you ‘earn’ what they do in an Entire Year?

Yet it was not that long ago that public servants were earning similar salaries to those they served (5Otago Daily Times 6th Nov 2013). So why are our public ‘servant’s’ now some of the highest paid in the world? A part of this is the remuneration authority’s use of % increases to boost senior public service salaries. The math is terrifyingly simple - if you are a pensioner on around $25,500 a year and your pension increases by 2% for the next ten years, then over that period your income would rise by around $5,600, to just over $31,000. If you are a senior council employee earning $440,000 then a 2% increase over that time equates to over $96,000 and your salary to well over half a million dollars. That pay increase alone is more than three times the total salary of the pensioner? But don’t worry it is only a small % increase right…

We therefore applaud the government initiative to rein in excessive public salaries. We look forward to a complete overhaul of the remuneration authority. Maybe if they set the maximum salary of the most senior public servants to 10 x’s the medium income of the people in their region that would be a good start. Maybe then the officials that are so instrumental in setting the laws the affect our lives will think about how the ratepayer will be affected by their decisions. Decisions such as;

Ø the compliance costs that can add upwards of $100,000 to the cost of building a house,

Ø the development of cycle lanes on a bridge coming in at almost $1 million dollars,

Ø a (yes singular) roundabout whose initial budget staff are not able to locate for our OIA, but whose costs has now blown out to over $15 million and counting,

Ø the spending of ratepayers’ money on Victoria St buildings at a price up to 56% more than the market valuation (6 NZ Herald 3rd Oct 2020),

Ø proposals for gardens and new entrances to public facilities priced at tens of millions of dollars?

This sadly is just part of a very, very long list. Of course, it is Just Your Money, Your Rates, Your Increased Rent, so why do you care?

 

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