Month: March 2017

There is concern in New Zealand about companies bottling New Zealand water and exporting it for profit. The concern arises because the water is free. In New Zealand no one owns the water. So there is a legal minefield to navigate before charging for water could happen. This is in the context of a country where mains water, called “town water” here, is far from universal.

In New Zealand it is entirely normal for a private or commercial dwelling to; either collect rainwater in underground tanks, or pump up water through a bore hole. This is not just something for isolated life-styler properties, but is also common for properties in major towns.

The way this is charged at the moment is through the pricing of “consents” to extract the water. However these charges are seen here as covering little more than administrative costs. For instance Coca Cola pays NZ$40,000 to the local council for the right to extract up to 200 cubic metres of water a day!

Interestingly, this particular application seems to have raised the fuss it has largely because the water is being exported. There is the beginning of a coherent resentment at the way Kiwis perceive their country has become something of a plaything for the rest of the world; whether it is bolt holes for the uber-rich, over-development for tourists, or exploitation of natural resources. New Zealand is rightly proud of being open to the world, but it is also proud of its natural heritage. And maybe, just maybe, the latter will be part of a movement that pushes New Zealand First to a better performance in this autumn’s General Election, than currently seems likely.

Ben Chu has it absolutely right when he says; “elite play by a different set of rules than the rest of us“. He is referring to the Serious Fraud Office (SFO) use of its latest toy, the Deferred Prosecution Agreement (DPA). By “Deferred” we mean, of course, “never going to happen”.

It is another example of the one-sided bets that those in positions of authority are able to place. They can commit criminal acts for their own personal gain, in the knowledge that they will not be prosecuted. These are acts that you and I, mere ordinary citizens would certainly be prosecuted for. You and I do not have the protection of the crony corporatist oligarchy that runs the UK.

Ben Chu is highlighting the DPA’s recently agreed by the SFO with Tesco (false accounting) and Rolls Royce (bribery), both on a jaw dropping scale. No executives are to be prosecuted. But he might have mentioned many others; MP’s expenses (theft/fraud), Mid-Staffs NHS trust (death), Banks (money laundering, PPI miss-selling, exchange rate fixing, wanton mis-management . . .).

Is it any different in New Zealand. Well . . . Yes. There is no history here of people in power here making one-sided bets for personal gain. There are some bad decisions, such as the recently opened NZ$630m Kapiti Expressway which is actually extending commuting times due to the bottleneck created where it joins SH1! However, there is no claims that anything criminal has gone on.

Maybe this is why, with national elections due later this year, there is no sign of the New Zealand electorate expressing the kind of views that gave us Brexit and Trump.

There is something approaching a consensus that executive pay is too high, And the behaviour of Crest Nicholson shows that the corporate sector is in no mood to give an inch.

There is support for various ideas; higher minimum wage, pay ratios, binding shareholder votes . . . and more. Some voluntary. Some legislated. However, maybe now is a good time to take more fundamental look.

All the proposals that I have heard accept the fundamental basis of capitalism, as if it were some fundamental force in the universe. It is not. It is a result of the rules that we make and it is time to examine the rule that shareholders are entitled to ALL the profit that a business makes.

Value in any business derives from; capital, labour and scarcity. Scarcity would be things like; mineral rights, technology, brand, intellectual property. It seems to me that the owners of capital are entitled to a return on their capital, but a return on the labour of their employees as well?

The rules as written just now allow for labour to contract with an employer, and they get what they negotiate. The problem with that is that it is not a fair negotiation, with the glaring exception of the senior executives who are doing a prodigious job on their own behalf. How about if the profit left after the shareholders have had a reasonable return on their capital was distributed amongst the workforce. John Lewis in the UK might be a suitable model.

And why would any company do this? The executives making these decisions will clearly not be trousering quite the packets they do today if a significant amount of the profit is going to the workforce. They would need to be encouraged; and I would think that a different corporate tax structure, for a business with this kind of structure in place, would do the job. It could be entirely tax neutral, with a slightly lower tax arrangement for such companies being offset by a slightly higher tax arrangement for companies with the existing remuneration structure.

Maybe we need other changes as well, but Capitalism is failing and we do need a fundamental re-think.

So it has happened. UKIP’s only MP has left UKIP. Those who wilfully misunderstand UKIP may say that he was forced out because he was not racist enough. The truth is more mundane and rather sad.

Douglas is MP for Clacton, which is one of three Westminster constituencies that are in the geographical bounds of Tendring District Council. I was a UKIP member on Tendring District Council. I have met Douglas on many occasions and I have a decent feel for what the rank and file Ukippers in Clacton wanted from their party. My sadness is that, overwhelmingly Douglas and the UKIP membership want the same things.

And what they want is a fair crack of the whip for everyone in the United Kingdom. Yes – that involves leaving the EU [obviously]. And – Yes it involves reducing the numbers of immigrants. It definitely involves reinvigorating our democratic processes and ending the crony corporatist government that has mis-governed the UK until now. It involves taking back control not only from Brussels, but also from Westminster. Government needs to be held to account by servants of the people in a way that does not happen at the moment.

One of Douglas’ favourite aphorisms was that it was the role of an insurgent party to change the political landscape, so that it was in the political self-interest of your opponents to make good decisions. He did that in spades with Brexit. Yes – of course we owe Nigel Farage a huge debt for his tireless service. And – Yes, of course Nigel Farage should have been knighted by now. However, it was Douglas that scared the wits out of David Cameron by leaving the Conservative Party and joining UKIP. Without that action there would have been no referendum promise from David Cameron!

We will have to wait and see how Douglas influences the political landscape in future. However, now would be a good moment to remember that Douglas Carswell alone gave us the Brexit referendum. And we should all be mightily grateful for that.

 

Apple NZ has paid no tax in New Zealand for over a decade. It pays tax in Australia instead. There is no suggestion that Apple has broken any laws. The story has been covered in both the UK, in The Guardian, and in New Zealand, by Stuff. Incidentally, most of Apple’s profit in Australia and New Zealand is diverted to Ireland.

What caught my eye in this story was the response of Deborah Russell, a senior lecturer at Massey University’s school of accountancy in Palmerston North in New Zealand. She expressed the view that it would be surprising if the New Zealand government could compel Apple to pay tax in New Zealand, saying; “I think Apple is bigger than New Zealand – they’ve got tremendous resources to fight back. Every time a government comes up with a new way to rein in these multinationals, clever tax accountants come up with a way around it. That’s essentially their job.”

Really? The UK is hamstrung for now by its membership of the European Union. However New Zealand ought to be able to require any company to pay tax on it New Zealand business. If they avoid tax on their profits, through any one of a range of profit/cost transfer schemes, then it would be relatively simply to tax them on their sales in New Zealand.

Let’s hope Ms Russell’s views are not shared by the New Zealand government and, indeed the UK government in due course. If governments start with a supine and defeatist attitude, the multinationals will continue to ride roughshod over the best interests of the societies within which they operate.

Stuff runs a story today about the “time we lose stuck in peak time traffic”. This reports on Tom Tom data that compares the time for journeys made in rush hour compared to the same journey made in free flowing traffic. For Wellington commuters the result is an extra 72%. That amounts to an extra 20 working days a year – a 4 per cent increase from last year

So much, so normal. It was the response from the “Wellington City Council transport strategy and operations portfolio leader Chris Calvi-Freeman” that caught my eye.

He is quoted as saying “The 72 per cent extra time means that traffic is flowing fine in the middle of the day. If people have no choice to commute in peak hours, or are foolish enough to drive in that time, they are going to be stuck in traffic, because they are traffic.”

I cannot imagine the responsible councillor in a major UK city offering this response. In the UK we have always tried to build road capacity to cope with peak-time demand, only to find that demand rises to fill the available capacity.

This difference derives in significant part from New Zealand having to fund infrastructure for a land mass the size of the UK with 7% of the population / tax base. In New Zealand the concept of “we cannot afford it” is politically acceptable. The fact that it is not in the UK is a major reason why, after seven years of “austerity” the UK is still running a budget deficit of around 5% of GDP, whilst New Zealand runs a surplus. The New Zealand approach seems entirely sensible and actually more grown up to me.