Wednesday, 17 April 2019

In my Newsroom Column last week about the proposed Capital Gains Tax I wrote that "Notwithstanding her own strong feelings in favour of a comprehensive capital gains tax, [the Prime Minister] needs to recognise the depth of public opposition and reject the Tax Working Group’s recommendation outright. Otherwise, as the Reid Research poll shows, she risks the real possibility of the public rejecting her just as forthrightly. ... While there are times when Prime Ministers with considerable political capital can afford to spend some to push through some visionary change they feel strongly about, this is not one of those.  The continued pursuit of a comprehensive capital gains tax is just not worth it. The sooner it is buried, the better - for the country, and for the government."

Well, credit where credit is due. The Prime Minister has done just that, so congratulations to her. But while the Capital Gains Tax is dead, there are a number of intriguing questions that remain.

In her announcement, the Prime Minister reiterated her personal support for a Capital Gains Tax, but made it clear the proposal lacked the support internally and amongst the general population to make the tax a viable option. She further said that although having campaigned for a Capital Gains Tax at every election since 2011, Labour would no longer do so, nor implement one, so long as she is leader. It is an emphatic rejection of the nearly $2 million Tax Working Group that spent about eighteen months considering the issue.

But while the public and the business community may be relieved at the Prime Minister's announcement, there is still the problem of the Greens to deal with. Some weeks ago, one Greens co-leader was saying the government would not deserve re-election if it failed to introduce a comprehensive Capital Gains Tax, while the other was saying that the Capital Gains Tax was only the start of a major tax attack on the wealthy. Both have been properly humiliated by the government's decision, and must be left wondering about their futures, not to mention their now non-existent credibility. In the wake of the announcement, there were Green Party activists on social media blaming it all on New Zealand First, and saying that it reinforced the need to elect a Labour/Greens government at the next election, that would be not reliant on New Zealand First, so would be able to introduce a full Capital Gains Tax then.

However, those activists have overlooked, or were unaware of, the Prime Minister's admission that her personal support notwithstanding, the very idea of a Capital Gains Tax is stone cold dead, so long as she is leader of the Labour Party. So, unless the Greens know something about the Prime Minister's future leadership intentions that no-one else seems to know, they are left yet again whistling naively in the wind. 

The next question relates to the role of Sir Michael Cullen. Leaving aside his $1,000 a day pay rate, he was simply too partisan to be a credible independent chair of the Tax Working Group. His comments after the announcement that the "biggest losers" from the government's decision were the National Party because "this was how they were hoping to ride to victory and Mr Peters has shot it out from underneath" them. Those comments reinforce how utterly inappropriate it was to have someone as hopelessly partisan as Sir Michael chair the review, and that that alone probably entrenched public opposition to the Capital Gains Tax. And it also raises the question of whether the Tax Working Group's recommendation of the most draconian and pure Capital Gains Tax in the world was not a clever political ploy all along by Sir Michael to achieve precisely the outcome he referred to above. If he really was the staunch previous opponent of Capital Gains Tax he portrayed himself as (although I clearly recall him testing the water for one during the 2005-08 government) who better to lead the charge for one now, knowing all along it would be defeated, not by the government’s opponents, but from within the government itself? 

As for New Zealand First, the outcome has reinforced the perception that it is they who pull the government's strings, not the Labour Party nor the Greens. The notion that the Prime Minister is but Mr Peter's plaything has been there for some time, and is frequently offered as the explanation for why she tolerates the irresponsible conduct of Minister Jones, when other Prime Ministers, like Helen Clark for example, would although have fired him a long time ago. Her plaintive acknowledgement that although she still supports a Capital Gains Tax, the rest of New Zealand does not, and there is not agreement within her government simply strengthens that perception.

The Labour Party finds itself in a peculiar position following its announcement. On the one hand, it is almost certainly broadly in step with public opinion, which is no bad thing, and unlikely to do its overall standing any great harm. However, it will be two very grumpy groups, for whom the Capital Gains Tax has been a long cherished envy-laden idealistic dream, that it now has to placate. First, are the unions,  leftish social advocacy groups,  and the Labour Party's core activists; and, the second is the Green Party and its supporters. Bringing both of them back into the fold so that they campaign strongly for the return of Labour-led government at the next election now becomes a major political priority for the government. Ironically, the teachers may be unexpected beneficiaries - if Labour now has to deliver something dramatic to its core supporters to show it still retains "the faith", what better than a hefty teachers' pay settlement to keep the branches going and the activists knocking on doors in election year? Otherwise, with Capital Gains Tax abandoned, Kiwibuild foundering, and nothing too much else happening, there may be precious little left for the “true believers” to hang on to. 

Or else, the Prime Minister could simply decide to stare them all down on the basis they have no other political home to go to. Just like John Key did to National voters for nearly nine years. After having been so critical of the Key Prime Ministership, stealing his playbook would be the ultimate u-turn! 

   


Wednesday, 10 April 2019

National's unsuccessful attempt to get a Parliamentary inquiry into PHARMAC is a classic case of shooting the messenger. PHARMAC is a procurement agency, charged with securing the nation's supplies of medicines and medical devices. But it is not, and was never intended to be, a policy agency.

Under the national medicines strategy, Medicines New Zealand, which has underpinned the medicines policy of successive governments since I developed it in 2007, there are three very specific objectives. First, that medicines are safe, of high quality, and are effective; second, that New Zealanders have access to the medicines they need, regardless of their individual ability to pay, and within the government funding provided; and, third, that the choices made about medicines, the ways the system delivers medicines, and the ways individuals use medicines result in optimal outcomes.

In pursuit of those objectives, since 2007, under both Labour-led and National-led governments 420 new medicines have been funded; 500,000 more people have been receiving subsidised medicines; and, PHARMAC’s budget has been increased by almost 56% - from around $650 million to $985 million. However, there are still significant issues about the overall level of funding; the time taken to fund new medicines; the effective proactive use of medicines; and, the role of clinical trials.

Whoever forms the government in the future, the overall size of the PHARMAC budget is unlikely to change substantially. There are primarily two reasons for this. The first is obviously fiscal. New Zealand has had bad experiences in the past with an uncapped approach to pharmaceutical expenditure – the laxatives and antihistamines blowout in the late 1980s, which triggered the start of what was to become the PHARMAC model in 1993 is worth recalling. Aside from the lesson of the need for firm budgetary control that example also highlighted the desirability of removing individual product funding decisions from political influence, unlike in Australia, or Ireland, for example. In my time, and to some extent to my surprise, my discussions with Health Ministers from around the world always showed some envy for the New Zealand approach and the role PHARMAC plays.

An original aim of the medicines strategy was to bring about a change in attitude, which for too long, and in too many cases, with often tragic results, had seen medicines treated as the back stop –  in other words, when all else has failed, medicate. That attitude has to change, if more effective use of medicines is to be made.

However, there are currently two broad obstacles to be overcome. Medical specialists themselves remain wary of their established forms of treatment being disrupted or replaced by medicines. While that is understandable from a professional standpoint, it can lead to perverse outcomes, both for the patient and the health system generally, where a medical intervention is persisted with, when a medicine might be the more effective treatment.

With regard to the medical profession, there is still a need for closer integration with pharmacists, to ensure both that medical practitioners are best informed about the availability and capability of new medicines; and that they getting the best possible clinical advice about their potential. The relationship between medicine and pharmacy is still too hierarchical – it needs to become much more equal and horizontal, if we are to make the most of every point of care, and achieve truly integrated health care. 

Alongside this is the constant worry of governments about the rising costs of new and innovative medicines, and how they can possibly be afforded for the population. At the OECD Health Ministers meeting which I attended in 2017, there was strong condemnation across the board from countries as different as Japan (probably the most vehement of all), Norway, Britain, and most of Europe about the high costs of medicines, and the prices being demanded by Big Pharma. Only the USA was prepared to defend those costs.

The role of clinical trials and the time taken to fund new medicines are arguably the most critical issues facing the medicines sector at present. New Zealand is in many ways an ideal environment for clinical trials – robust regulatory systems, and a convenient population size. Changes in 2007 (by me, as Minister of Revenue) to the tax treatment of research and development had in mind encouragement of clinical trials of new medicines.

Informal preliminary discussions had indicated an interest amongst some pharmaceutical companies in pursuing clinical trials under such arrangements, yet none eventuated. It was very much a lost opportunity, and the tax credit was abolished by the National-led government (with my vote opposing the change) in early 2009.

The time taken to fund a new medicine is unacceptably long. All applications for funding new medicines are first reviewed by PHARMAC's expert Pharmacology and Therapeutics Advisory Committee (PTAC), which then makes a recommendation to PHARMAC. However, although PTAC’s clinical efficacy processes are generally robust, they carry no automatic expectation that a medicine once approved should be funded. And herein lies the problem. PHARMAC funds new medicines as and when it considers that to be a budget priority, regardless of any urgency in a PTAC recommendation. Sometimes, that can take years, by which time a newer and better medicine may have emerged, thus starting off the process all over again.

An unintended consequence of the funding approach of the last three decades under the PHARMAC model has been that the procurement agency has also become the policy agency. It has become the norm for politicians and health bureaucrats to defer to PHARMAC on all matters pharmaceutical, on the grounds that these are clinical decisions that should not be subject to political influence. While it is perfectly understandable, and in many cases the correct thing to do, when taken to the extreme, it leads to an abdication of government responsibility that should be addressed. It has led to the current situation where PHARMAC has become not only the procurement agency for pharmaceuticals and medical devices, but also the de-facto policy agency deciding what medicines New Zealanders should get.

What is currently missing is a plan of what range of medicines the New Zealand population might reasonably expect to have access to and how these should be funded. The Ministry of Health needs to step up here and take a more active role, alongside the clinical experts, the pharmaceutical industry, and community advocates to answer that question and prepare a plan accordingly to inform both future Government funding decisions and PHARMAC’s procurement strategy. And the Minister of Health, who seems to be making a virtue out of not talking to anyone, needs to come out from his shell and become more actively engaged. 

These are the much wider questions the Health Select Committee could usefully be inquiring into, rather than the narrow focus on the way PHARMAC operates as National was seeking. Without such a wider, more fundamental, investigation nothing much is likely to change, leaving patients, clinicians, other health professionals, pharmaceutical companies, and the general public equally unsatisfied. 


Wednesday, 3 April 2019

Anyone who tuned into this week’s television debate between ACT leader David Seymour and National MP Maggie Barry on the subject of Mr Seymour’s End of Life Choice Bill in the expectation of learning more about a controversial subject that will affect each one of us in some way or another would surely have been disappointed. Instead of witnessing an informed debate covering the vexed moral and ethical issues, the provisions of the Bill, what refinements of it might yet be required, and whether it is likely to gain the support of Parliament, viewers were subject to an unedifying slanging match between two politicians interested only in pushing their own viewpoint, and not being prepared to even consider whether there was anything even remotely meritorious in what the other was saying. Both were uncompromisingly rigid in their views, and neither was prepared to concede even a millimetre to the other.

Sadly, that display was not unusual. The contemporary failure of politics the world over has been the death of reasoned debate that has come to the fore in recent years. The give and take of hitherto nuanced and balanced argument that has been the hallmark of liberal democracy for so long has been replaced by the absolute assertion of one’s position, with no room for, or even recognition of, the possibility of compromise. From the rise of Trumpism, through to the utter humiliating farce of the daily shambles that is Britain’s attempt to leave the European Union, the result is the same. Reason and judgment have given way to absolutist intolerance.

Associated with this mounting intolerance is a new arrogance where politicians have stopped trying to explain themselves (after all, as Ronald Reagan once said explaining is losing – although as we now know, in his case, it may have been more an excuse for not remembering) and just arrogantly assert the opposite. When, for example, our Deputy Prime Minister, with a record of over more than two decades of anti-Islamic and anti-Asian speeches can baldly state that he has been consistently misrepresented, and, despite his words being on the public record, has been deliberately misinterpreted by his critics yet is generally allowed to get away with it, you know we have a problem. Or when a government promises to fix the housing and child poverty problems the country is facing, yet halfway through its term these problems are far worse than they were when it started but the government says it is making progress and things are actually now better than they were, you realise the extent to which reason, judgment, common-sense and truth have vacated our political scene.

So, in that sense, the Seymour/Barry debacle was not out of the ordinary. It conformed to a trend that has been developing over recent years, which has been steadily alienating people from the political process. It is no coincidence that as a consequence public participation in the political process has been waning. The days of mass membership political parties are long gone. Electoral studies have shown that today about 3% of the population belong to political parties, well down from nearly 25% a couple of generations ago. Not even the advent of MMP has stemmed this, with what data that is available showing that most parties, new and old, have faced declining membership over the period. And voter turnout at elections has also been falling - from almost 94% in 1984 down to just under 80% in 2017.

But the trend is not isolated to New Zealand. From a high of just over 80% in 1950, voter turnout in Britain has slipped to just under 67% at the most recent General Election in 2017. Even the Brexit referendum, arguably the most important constitutional decision Britain has faced since the 1707 Acts of Union that established the United Kingdom, attracted a turnout of just 72%. In the United States voter turnout for Presidential elections has never been high – the highest turnout of the last half century or so was about 63% in 1960 when Kennedy was elected. Trump was elected on a turnout of about 55% in 2016.

These figures will all continue their steady deterioration if the current sorry state of politics remains. And, sadly, all the signs are that it will. Liberalism, with its hallmarks of reason and tolerance, is in decline the world over, with no real signs of an early resuscitation. As The Economist observed recently, liberalism, which has been the world’s most enduring and successful political theory of the last 400 years is now disintegrating. Tellingly, it makes the point that “people are retreating into group identities defined by race, religion or sexuality. As a result … the common interest has become fragmented. Identity politics is a valid response to discrimination but, as identities multiply, the politics of each group collides with the politics of all the rest. Instead of generating useful compromises, debate becomes an exercise in tribal outrage. Leaders on the right, in particular, exploit the insecurity engendered by immigration as a way of whipping up support. And they use smug left-wing arguments about political correctness to feed their voters’ sense of being looked down on. The result is polarisation. Sometimes that leads to paralysis, sometimes to the tyranny of the majority. At worst it emboldens far-right authoritarians.”

Elements of all this can be seen in the Seymour/Barry debate, and in a manner of contemporary political actions in New Zealand and elsewhere. It is powerful food for thought in this country as we contemplate the lasting impacts of the Christchurch Mosque killings and how our society might change as a consequence. The need for a new national tolerance for diversity of race, belief and opinion has been frequently stated as an early necessary step to take. This week’s Seymour/Barry slanging match on an important social issue showed our current political discourse has degenerated into nothing more than “an exercise in tribal outrage”, and what a long road we have yet to travel to restore respect, tolerance and reason to the centre of our political stage. Only then will the coming generation of New Zealanders feel confident that they can renew successfully meaningful engagement with the political process so that we build up afresh a tolerant and open society not afraid to face up to its challenges.