Russia and the airlines – not the conspiracy you think

Russia Today (sometimes referred to as Kremlin TV) does not have a widespread reputation as a fair and balanced news source. But occasionally if they say it’s raining, you might want to check outside to see if you need an umbrella.

So there is some interest in its reporting of ‘Black Swan’ author Nicholas Taleb’s suggestion that the UK government should let Richard Branson’s Virgin Atlantic airline go bust, rather than bail it out.

“Planes will fly w/new owners!” as he succinctly put it.

Alert readers will recall that Point of Order raised this very point last week, less directly and with more technical verbiage naturally.

RT also reported (with ill-concealed glee) some nastier bits – quoting Taleb on Branson as “a tax refugee” who “walks around virtue-faking with [the] TED [and] Davos crowd”.

And made the unevidenced allegation that the airline industry had been hugely influential in preventing governments from halting flights from China in the early stages of the epidemic.

But back to the meat of it – should governments ‘bail out’ businesses and, if so, how.  The same question which arises from the global financial crisis back to the demise of Mosgiel Woollen Mills in 1980 (and before then to be clear).

The orthodox view is simple and principled.

When a complex entity is short of cash because of a crisis, but viable, you can provide loans at a penalty interest rate, that will be paid back.  In general terms, this is what happened for quite a few of the big US banks (leave aside the murkier case of the dodgy mortgage lenders). It’s at the heart of central banking practice and done well, provides support at a price, rather than a moral-hazard inducing capital bailout.

Of course the owners get the upside on recovery, and, if the liquidity is cheaper than the market, a bonus.  And historically those with the best political connections or visibility tend to get the most generous consideration.

If the business is not currently viable, there is a procedure to resolve the competing claims and distribute the losses.  It’s called bankruptcy. If possible, a working business is plucked out of the wreckage by new owners.  

This is what Taleb refers to.  This normally means writing down the value of the shareholders to near-zero, concessions by workers and bankers, and restructuring the business to new patterns of demand.  Note that if Mr Branson keeps his airline, the last two are likely to happen anyway.

And it’s more or less what happened with General Motors during the global financial crisis, except that in that case the government ended up chipping in an extra $11 billion, which helped reduce the pain for the auto workers and the company’s creditors.

To extend the analogy, the capital bailout of an airline by a government without a formal restructuring procedure will probably mean an even bigger increase in government debt (for us all to pay back through later ‘austerity’) in order to reduce shareholders’ capital losses and minimise the concessions which workers and creditors need to make.

This is somewhat different from the rest of us chipping in to help workers whose income has just fallen off a cliff.

But at the time it’s rarely so simple or principled. The politicians who make these decisions and the people who benefit from them are often keen to obscure the difference between temporary support eventually repaid and capital transfers.  Even now when the numbers are added up, who would have thought that Morgan Stanley got the former and GM the latter?

So Mr Branson’s airline – and indeed airlines more generally – are starting to look like a good test cast for who might get favourable consideration at the expense of the rest.

Social welfare has shrunk as a portion of total govt spending – but that’s before Covid-19 upset the figures

We were checking out the cost of our social welfare system, when  government responses to the Covid-19 pandemic made nonsense of all our old concepts of government assistance.

The virus has turned everybody – by the looks of it – into state beneficiaries and has  significantly raised government spending projections.

Never mind.  We will go ahead anyway and show what we found when we compared social welfare spending in the six months ended December 31 2019 with social spending 20 years previously.

The comparisons were made using data dredged from the Financial Statements of the Government of New Zealand.

Among our findings, corporate welfare beneficiaries were doing much better than 20 years ago – in terms of their slice of government spending – before the virus triggered much greater injections of government assistance.

The other big change from 20 years is the proliferation of social welfare programmes recorded as transfer payments in the financial statements (see table below). Continue reading “Social welfare has shrunk as a portion of total govt spending – but that’s before Covid-19 upset the figures”

Blogger sees red at Green co-leader’s urging the handout of dole money without question

Green Party co-leader Marama Davidson was mentioned in despatches during the week, in a post which dealt with MPs’ air travel expenses.

We mention her again today because of her eagerness to have taxpayers become more generous to the unemployed, no matter – apparently – how feckless or disinclined to find work they might be.

Our earlier mention of Davidson and the Greens was triggered by Taxpayers’ Union data, gleaned from the latest Parliamentary expense disclosures, which showed the list MPs from the Greens (on average) are spending more than a third more than Labour’s equivalent.

Average air travel spending for non-ministerial list MPs by party:

Greens – $9,816
NZ First – $8,059
National – $7,332
Labour – $6,499 Continue reading “Blogger sees red at Green co-leader’s urging the handout of dole money without question”

Spending monitor seeks better deal for taxpayers but a blogger begs for bigger boost for beneficiaries

Whoopee!  A pay rise.

No – to be precise, a rise in the national super which is paid to some of the team at Point of Order.

Super was mentioned in the boost to benefits announced yesterday by Social Development Minister Carmel Sepuloni.

Fair to say, this boost did not go down well with the monitors of public extravagance at the Taxpayers’ Union.  The indexation of benefits to wages means taxpayers are treated less fairly than ever, they say.

Martyn Bradbury, on the Daily Blog, is critical too – but his grouch is that the government has been much too stingy.

Point of Order checked social spending as a percentage of total government spending in the latest six-month Crown financial statements.  We were surprised to find it is a smaller portion of than it was 20 years ago.

But first, the announcement. Continue reading “Spending monitor seeks better deal for taxpayers but a blogger begs for bigger boost for beneficiaries”

Child poverty – the depressing data the government’s spin doctors have not been braying about

New Year is a time for predictions to be made by commentators bemusingly confident they can foretell what the year ahead will bring, and for last year’s predictions to be checked.

On her blog today, Lindsay Mitchell has gone back a bit further than January 2019 to check on a prediction she made in September 2017  that Jacinda Ardern would increase child poverty if she became Prime Minister.

So how has that turned out?

On 7 of 9 measures introduced under the Child Poverty Reduction Act, to June 2018 poverty had increased. That’s fairly out-dated data now and not a particularly useful measuring stick.

But also now known is that children in benefit dependent households rose between June 2018 and 2019. Continue reading “Child poverty – the depressing data the government’s spin doctors have not been braying about”

It seems more welfare costs will be heaped on taxpayers but Sepuloni is stingy when asked for details

Social Welfare Minister Carmel Sepuloni was far from generous with details, when questioned in Parliament yesterday about her government’s policy intentions regarding solo parents and the burden they heap on taxpayers.

We are not much clearer – as a consequence – about what further changes are likely based on proposals from the Welfare Expert Advisory Group. Or how much more taxpayers will be expected to cough up to care for the children of welfare beneficiaries

But the suggestion that the government should do something to discourage solo-parent beneficiaries from bringing more children into the world was treated with disdain.

In response to a report from the Welfare Expert Advisory Group, the Government in May announced it will remove the benefit sanction which penalised solo mothers by up to $28 a week if they would not name their child’s father.

The amount that beneficiaries can earn through employment before their benefits were cut was increased at the same time. Continue reading “It seems more welfare costs will be heaped on taxpayers but Sepuloni is stingy when asked for details”

It helps to be targeted, when the govt sets out to improve the wellbeing of a few vulnerable citizens

The word “targeted” – when the Government brays about its spending decisions – can camouflage a great deal.

In the case of “targeted social support funding for 450 Manawatū-Whanganui whānau“, announced during the week, it camouflages the government’s emphasis on ethnic considerations. 

The statement was issued in the names of Social Development Minister Carmel Sepuloni and Whānau Ora Minister Peeni Henare, who said the expansion of an iwi, community and government initiative will improve the wellbeing “of 450 of our most vulnerable Manawatū-Whanganui families”.

But it appears that non-Maori – no matter how desperate their plight or how vulnerable they might be – aren’t too high on the list of the 450 selected to have their wellbeing improved.

This impression was strengthened when the Ministers said:
Continue reading “It helps to be targeted, when the govt sets out to improve the wellbeing of a few vulnerable citizens”

A Green dilemma – trying to square govt support for families with the degrading environmental consequences

With Green Party support, the Government will remove a disincentive to the population growth that experts reckon is the number one contributor to the degradation of the global environment.

Social Development Minister Carmel Sepuloni announced the removal of the disincentive among changes to the country’s welfare system (but just a few, for now) in response to the report from the Welfare Expert Advisory Group.

The government will remove the benefit sanction which penalised solo mothers who did not name their child’s father, the fellow who should be picking up the tab for raising the child – or his fair share of it – that resulted from a procreative romp in the hay.

Taxpayers – lucky us – will take over this responsibility. Continue reading “A Green dilemma – trying to square govt support for families with the degrading environmental consequences”

Great PR for a caring PM – but benefactor’s name has been buried in awards change

Back in the days when a government agency’s name clearly signalled what the public could expect from it, we had a Department of Child, Youth and Family Services which in 2005/06 proudly reported the first William Wallace Awards would be made to four young people during Foster Care Awareness Week in October 2006.

Fast forward to November 2018.  The agency has become Orangi Tamariki (Ministry of Children in small type underneath) but when nominations for the 2018 awards closed (15 – 20 awards were available this year) they were still called the William Wallace Awards.

Many young people in care have overcome significant barriers and gone on to achieve great things. These awards honour these outstanding young people, and provide help for them to pursue their dreams of tertiary, vocational or leadership training. 

Any young person in care – or who has recently come out of care – can win an award. And anyone can make a nomination

But hey.  We have a caring, nurturing Prime Minister and – shazam!

The William Wallace Awards are being renamed …

The Prime Minister’s Oranga Tamariki Awards.

Betcha that has given Jacinda a nice warm glow.

The benefactor whose estate has provided the awards over the past 12 years or so won’t be entirely forgotten. Two William Wallace Scholarships are being retained as part of the new awards. Continue reading “Great PR for a caring PM – but benefactor’s name has been buried in awards change”

Child-welfare question: can non-Maori really cope more comfortably with officials who remove their kids?

Radio New Zealand has been airing concerns about social services being “so complicated that Māori families are having their children uplifted because they don’t know their rights”.

The report taps into a gathering of about 70 Māori support workers and lawyers at a workshop in Hamilton to learn about the legal rights of families “who come to the attention of Oranga Tamariki”.

We suppose this refers to families who trigger state interventions in response to (a) reports officials have received about a family and (b) increasing social pressures to deal with child abuse.

Many of those at the workshop – professional people by the sound of it rather than families directly affected by these interventions – complained that the system is complicated, confusing and biased, and that it is contributing to the alarming rates of Māori children in state care. Continue reading “Child-welfare question: can non-Maori really cope more comfortably with officials who remove their kids?”