Sunday, April 26, 2020

Frank Newman: Straight talk - Oh dear: Deborah Russell

Deborah Russell is the Labour MP for New Lynn. She is apparently, a tax expert and a well respected academic - respected by whom is not clear. 

These things she may be, but based on her comments about the collapse of small businesses she does not seem to have much comprehension of what it’s like to run a business and nor does she seem to have much empathy with people who actually contribute the wealth that she and her colleagues consume.

I presume the point of her comment was to state that there will be some people who are so hopeless at running a business that they have not been able to build up short-term resilience against an adverse event. She does not seem to appreciate those businesses are relatively few, and she is well off-the-mark to even think out loud on that issue in the midst of a nationwide shut-down.

Someone who claims to be a tax expert should understand that all businesses require revenue to survive. That may be an alien concept to a cotton-wool socialist who in November last year said she would like New Zealand to be "the most equal country in the world – full stop… I want to aim for real, radical equality because I think that is how you get a decent functioning democratic society".

As a tax expert, she should also know that there are many reasons why a business may not have the resources to operate without income. If that's a bit hard to grasp, Ms Russell might like to imagine what these past four weeks would have been like had she not received her taxpayer-funded salary. I expect she would have enough money tucked away in the taxpayer subsidised super scheme to not be affected, but others are not so fortunate.

As a tax expert, Ms Russell will also be aware that all of the costs of collecting GST, PAYE, and so on that fund her salary is paid by businesses and small business feel the burden of that cost and unproductive time more than others.

Perhaps Ms Russell should also be reminded that as an MP she adds zero income to GDP. MPs produce nothing and for the last four weeks have continued to receive a very attractive salary while workers in the private sector have taken pay cuts, some have lost their jobs, and businesses have lost huge amounts of money. Those businesses are not bleeding money because they are poor operators. COVID-19 is not of their making, and it’s the government, of which Ms Russell is a part, that has decided to "go hard" and close the economy down.

Deborah Russell is said to be a shining star in the Labour Party and she does have a senior role as chair of Parliament's Finance and Expenditure select committee, which would suggest her star is, or was, on the rise. For that reason, it is more important that she take the time to consider that everyone benefits from a strong business sector, including government because the politicians in power grab 28% of the profits to not only spend on things that matter like health, welfare, and education, but also on their numerous pet projects – many of dubious merit. As a tax expert Ms Russell should have been able to figure that out by now. 

She could even consider the merits of lower taxation as an economic stimulus, but that may be simply too far-reaching for some-one who preaches radical equality. Or what about reducing MP salaries to the average wage? But then wasn't it the pigs in Animal Farm who proclaimed, "All animals are equal, but some animals are more equal than others". 

Frank Newman, a writer and investment analyst, is a former local body councillor.


Mark Hubbard said...

Back in the days of my own blogging I often crossed swords with Deborah.

But particularly on her 'celebration' of the demise in our courts of one of the greatest historical protections taxpayers once had from the rampant tax state, namely the Westminster Principle (and she doesn't have a clue about running a business in the real world; indeed keeping aside David Parker who had some hand in the formation of A2, there is no experience of running business at all in this cabinet). Anyway, if you're interested on the demise of the Westminster Principle:

Ross said...

The surprising thing was she seemed to forget about Air NZ desperately needing a large cash injection within days of problems occurring, Stuff are now grovelling for donations, Bauer NZ pulled the plug on their business in NZ, Burger King went bust --none of those are small businesses.

MikeV said...

Deborah Russell doesn't understand the types of people who start small businesses. She is an academic turned politician so I guess this is understandable to a certain extent, however she is surely capable of thinking things through. Firstly people who start a business are optimistic entrepreneurs, the very basis on which our country & many others is built. When these people start to do well in their enterprise the first thing they do is try & leverage their success by expanding their operation by taking on new staff, investing in more inventory or machinery or developing new products or services. They don't say let's start putting away some money for a rainy day. In many cases this is the type of safe strategy they are advised to take by their accountants which is why they are accountants & not generally risk takers who drive the economy.
Anyone who has or has had a business knows that the path to success is taking the steps described above and generally they understand that one of the main motivators to keep improving is to stretch themselves both financially & work wise which keeps them hungry for success. The idea of having funds set aside for difficult times is risky in itself & generally a sign that the business & the owners are stale. The smart business person reaching this stage either sells up or employs younger "hungrier" risk taking people to take over the management of the enterprise.

Brian Anderson said...

Within 2 or 3 days of house arrest, I knew of 6 people who had lost their jobs, 2 architects, 2 engineers, and 2 others. I also know of one suicide since.

In my engineering consultancy, I take out 3 to 5 new job numbers a week. Since the covid mess, just one, and with not so much as an enquiry. However, I have had my GST to deal with, rent, and all the other overheads.

All of the people driving this mess are on full state salaries. Ms Adern has kindly taken a salary cut, but her employer is in no danger of going broke, and her salary will be in the bank on the due date every month. It may sound churlish to say so, but it is an election year…………… None of the people dishing the pain are suffering any at all.

If I recall correctly, about 1/3rd of our workforce is employed by the State in all its forms. All of those people will be on full pay, although very few can do very much, seeing as all state operations are shut down to essentials only. The last month has been an enforced holiday. They are in little danger of loosing their jobs.

The entire burden of this mess will be borne by private business, and by private I exclude the SOE's who are in no danger whatsoever.

The point which is missed is that in 1970 we had a ‘flu outbreak which killed 50 in 100,000. (Look on the MoH website and you can find the statistics.) Given our population was about 3.5m, it means that something like 1750 people died. I was a 6th former then, and I have no recollection at all of any undue concern in the community.

Tom Spratt said...

Well a Phd in political philosophy says it all. Educated beyond one's intelligence. A non contributing burden on the productive majority. Excellent post Mr Newman. Thank you.

Shane Compton said...

I enjoy your columns Frank, however must disagree on this one - especially with Mike V's comment regarding keeping money aside. Deborah Russell has been pilloried for simply telling the truth in that most SMEs are ill prepared for any sort of downturn. I started a small business in 1991, which grew into a medium sized international company employing 150 people. From the outset I realised the need to be sufficiently conservative in terms of keeping money aside "for a rainy day" - not because I'm any smarter than the next person, just that I'd already been through 1987 and could see what could happen. Certainly entrepreneurship is important, but no more so than risk management. While I continue to fume at the PM's needless shutdown of so many small businesses, Ms Russell wasn't blaming anyone but simply saying it the way it is. Wanting to be your own boss isn't enough to run a business successfully, as is proven almost daily. I certainly do worry how this government will get the economy going again when no one in it appears to have much of a clue about business. We can only hope they look to the private sector for assistance, rather than up their own orifices.

Auntie Podes said...

A massive 33.333% of our "work force" is "employed by the state". Well - let's put that straight for a start - not necessarily employed in actual work - even less in a productive manner - but paid nevertheless. And how many of those are deemed "essential" even by their employers? Not too many it seems. And yet they are all on full pay!
One has to wonder - WHY?
Perhaps, as a part of the brave NEW WORLD envisaged by our Commissar and her cohorts, they could start off by suggesting to these "non-essentials that we pay for, seek meaningful employment in the private sector where thet are bound to be gobbled up?