The budget - funded by workers, controlled by the bosses

Jared Phillips reviews some aspects of the 2008 budget and the response to it from a Marxist perspective

The qualification threshold for the top tax bracket has changed from $60,000 to $80,000, which provides some relief for the middle class,which is where Labour draws its support from. The media has seized on the fact that this might help prevent middle-New Zealand’s political migration to National. Those earning an annual $80,000 will have a weekly after-tax increase of $28 in Ocotber. For working people the tax cuts provide little relief. For those earning an annual $20,000- $30,000, after-tax weekly income will increase by $12 in October. Social Issues reporter Simon Collins has noted that in terms of percentage changes, lower income earners are in fact receiving bigger cuts with a 5.7 percent cut at 20,000, a 3.3 percent cut at 50,000, and a 3.6 percent at $80,000. While this percentaging won’t provide any comfort for those living on the hardest incomes and receiving lower dollar-amount tax cuts, it does help illustrate that increased incomes and wages, not tax cuts, have more relevance for the restoration of real incomes, and that this budget has done nothing to lift the abysmal income of beneficiaries.

The income for this year’s budget

The three biggest sources of government income are firstly income taxes, secondly GST, and thirdly corporate tax. Of the $61.9 billion income for 2008/2009, these categories account for $48.7 billion.
The income taxes are drawn overwhelming from the working class and the working class shoulders the burden of GST. On the consumption side GST is paid disproportionately, in terms of percentage of income, by the working class. On the production side the capitalist class escapes GST by passing off the costs through the lifting of prices. Corporate tax is also drawn from the working class. The working class produces the profits from which companies pay `their share’ of taxes. The working class generates all government income but has little to no democratic control over how it is spent.

Funding the state apparatus and the capitalist class

Through taxation, capitalist governments are able to fund reactionary institutions of the state apparatus that are used against the working class in New Zealand and internationally, for example, the police, the courts, the prisons, and the army. This budget delivered $3.1 billion for Law and Order and $1.7 billion for Defence. The budget also includes a great deal of corporate help and corporate welfare. The Business Herald - one of the mouthpieces of the New Zealand ruling class - has identified several highlights for business including, reduction of tax related compliance costs and tax impediments to the offshore expansion of NZ companies, $168million extra over the next four years for workplace training, $138.9 million in operating funding and $26.1 million in capital to support New Zealand businesses operating internationally, a further $8 million for the beachheads programme for New Zealand interests in India, China, and South East Asia, and another $8 million for the ‘Better By Design’ programme, apparently to ‘help companies improve competitiveness by integrating design in to all aspects of their business.’ Capitalist government spending props up the resources of the people that rule society as well as the instruments of capitalist power.

Funding social services

The two largest areas of spending are typically Health and Education. Of the 2008 budget’s $61.9 billion expenditure, $12.6 billion has been has allocated to health and $10.5 billion has been allocated to education. A contradictory process determines social spending. On one hand during economic downturn, in the long-term, capitalist governments are required to severely limit this social spending in order to stop drains on profits. On the other hand there are generalised expectations and pressures from workers and other sections of society for health, education, and welfare needs to be met. In order to meet these basic expectations, and therefore be able to maintain a social equilibrium, capitalist governments must continue spending in these areas, albeit totally inadequate spending. The $9.2 billion delivered for Social Security and Welfare is totally inadequate and means that there are no improvements in sight for beneficiaries and other disadvantaged sections of the working class, this reflects the entrenchment of neo-liberalism and lack of social weight and pressure that the lower echelons of the working class are able to apply. It also reflects increasing class gradation and the current lack of solidarity from the secure sections of the working class to the lower sections.

Wasteful spending

Another aspect of this budget is unwise or wasteful spending. The $690 million buy-back of Toll rail, which includes direct corporate bail-outs has been criticised, as has the $47 million refurbishment of Government House (the media has reported that for the some amount, over three thousand hip operations could be performed). While such things are an example of government waste, it is also important to keep in mind that the idea of preventing waste is dominant in society’s of scarcity that cannot provide an abundance of things that satisfy human needs. In the long-run this type of waste is nothing in comparison to the kind of achievements that can be made by unlocking the social surplus created by workers - i.e. everybody who needs an operation could receive one if society was organised. Therefore, the waste aspect should not form the major criticism of the budget, as it does for some people.

Section of union leadership is critical

A small but important element of the union leadership has responded critically to the budget, with two union leaders making dissatisfaction public. In his Herald On Sunday column, Unite Union’s Matt McCarten made the point that Labour had thrown away its last opportunity to do something for the poor before the next election. Referring to beneficiaries he commented, ‘They got zilch - again. Quite frankly I was appalled’. He noted that Labour’s Minister of Social Development Ruth Dyson said - only a few weeks before the budget - that beneficiaries are worse off under Labour than they were under National. Laila Harre, secretary of the National Distribution Union, was quoted saying ‘It’s as close to the Nats as they (Labour) can get - leaving plenty of room for Green Party and Maori Party differentiation’.


Hard times coming

With the continuing stagnation of incomes and wages measured against inflation, it is obvious that even worse times are coming for beneficiaries and the working poor. Many people take an incorrect view that such conditions lead to working class militancy. However,the experience of neo-liberal change in New Zealand has in fact consisted of working class demoralisation. This budget is yet another sign that Third Way governments are continuing the neo-liberal agenda and are actively sidelining the poor and working poor who are superfluous to the needs of capital. The only antidote is working class unity and organisation, independent of capitalist parties.

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