It has become hard to keep track of the corporate welfare troughs around the country into which companies dip their snouts. One challenge in some cases is to find out how much swill has been poured into them.
The Business Dictionary defines corporate welfare as government financial support for big business, usually in the form of bounties, subsidies, or tax breaks.
The Taxpayers Union, which monitors this form of wealth redistribution, a year ago released a report, ‘Socialism for the Rich’, by Jim Rose. This showed the annual cost of corporate welfare had become $1.6 billion – or $931 per New Zealand household.
‘Socialism for the Rich’ collates the costs of all the corporate welfare expenditure in Budget 2017. It shows that the company tax rate could be six percentage points lower if these favoured handouts were abolished and spread fairly across all New Zealand businesses.
Instead of rewarding profitable businesses with an across-the-board tax cut, these subsidies pick winners by directing subsidies to businesses that cannot keep afloat on their own.
The report said Budget 2017 allocated $294 million to commercialising technologies in the private sector (“socialised costs for privatised profits“) and a further $148 million to subsidise the film industry.
We suppose the 2018 update can be expected some day soon.
Forestry and Regional Economic Development Minister Shane Jones, meanwhile, seems keen to out-perform National’s Steven Joyce as a provider of state largesse.
This morning Jones dipped into the Provincial Growth Fund and announced – drum roll, please – it will provide:
* A $10 million loan to Ruapehu Alpine Lifts Ltd for the construction of a high-speed gondola on the Whakapapa ski field. This is to aid and abet the development of tourism across the central North Island.
“The project is estimated to attract 500,000 additional visitor days by 2025, and significantly increase the number of non-skiers visiting and using the mountain’s facilities.
“Building and operating the gondola will generate 150 direct jobs and potentially a further 400 through associated activities.”
* Almost $1 million ($970,600, actually) for 1,350,000 trees to be planted on private land this winter in the Manawatū-Whanganui region. The dosh will be used to plant a range of tree species on 1000 hectares of erosion-prone farm land in the region.
“We have the landowners, the land and the seedlings and the Horizons Regional Council has the right relationships with landowners in their region so a partnership of this kind makes perfect sense,” Shane Jones said.
“The regional council will work with up to 40 landowners through their sustainable land use initiative to get trees into the ground in the next few months.
“The funding will also provide for up to 20 customised forest land appraisals for landowners considering planting trees on more than 50 hectares of their land – which would result in a significant change in land use on the farm.”
Less than an hour’s drive north from Jones’ office, the Kāpiti Coast District Council had announced the outcome of a decision made behind closed doors yesterday.
Council members voted unanimously to subsidise Air Chathams to help get direct flights between Paraparaumu and Auckland off the ground again after Air NZ ended its service.
And the burden on ratepayers?
Kāpiti Mayor K Gurunathan confirmed the council would pay $150,000 over the next three years for marketing.
But the full amount of the ratepayer subsidy would not be known until negotiations with Air Chathams were completed over the next few weeks.
Gurunathan would not comment on the rest of the subsidy, but said council would try to minimise its impact on ratepayers.
This is grist for the mill of the Taxpayers Union. Spokesperson Louis Houlbrooke says:
“This is a classic case of corporate welfare. The Council has turned Air Chathams, a private, profitable business, into a charity case.
“Regular flyers like Councillors and Chamber of Commerce members will benefit, but it will be at the expense of the general Kāpiti ratepayer, who is far less likely to get their money’s worth from these flights.
“Air New Zealand clearly decided the airline was too expensive to maintain, but apparently good business sense goes out the window when it’s the council spending ratepayer money.”
On the matter of the high-speed gondola, she said if this made good economic sense, Ruapehu Alpine Lifts would be able to attract private financing.
“Instead, they’ve convinced Shane Jones to give them a cheap loan. There’s no good reason for taxpayers to stump up with money.
“Ruapehu Alpine Lifts Ltd owns both major ski-fields in the North Island and enjoys tax free status. A ski-field owning monopoly that doesn’t pay tax is the last organisation that deserves taxpayer subsidies.
“This is the same entity that, instead of putting construction of its new café out to tender, gave the project to the construction company of a board member.
“Mr Jones will try to claim this is about tourism – but he knows very well that international visitors go to Queenstown, not Ruapehu to ski. This is banana republic stuff.”
She perhaps can’t type handouts as fast as central and local governments announce them. Her comments on the funding for tree planting had not been released at the time this was posted.
Or perhaps comparatively small sums for several farmers don’t count as corporate socialism.