Most of the reaction to the 2016 Budget has been predictable. Government supporters laud it as one of the greatest things since sliced bread, while the Opposition bemoans it as do-nothing, and as always the interest groups lament that there is not enough in it for their particular constituency. The racist xenophobes continue to ignorantly insist it is all the fault of rampant immigration. All so predictable, all so tedious, and ultimately all so pointless.

Any Budget by any government, left or right, is a balancing act between what Ministers would like to do in  their own portfolios; their parties’ priorities; and, what the Minister of Finance thinks he can pay for. Every now and then, a budget provides scope for standing back a little and looking at overall policy requirements in a particular area.

There is such an issue in the 2016 Budget. In recent years, successive governments have struggled with how to fund new innovative medicines that are expensive and may not be able to be funded within PHARMAC’s existing budget and criteria. The debate over the breast cancer drug Herceptin in 2007-09 was one such example. The upshot was that the government made specific funding available for Herceptin in 2009. That intervention was not seen as especially successful, and so, when the issue of the melanoma drug Keytruda arose earlier this year, the government took a slightly different approach, confirmed in the Budget, of providing more funding to PHARMAC which was then able to fund the similar medicine, Opdivo.

However, both these examples raise a broader issue in the context of the new and innovative biologic medicines likely to become available in the next few years, that will not only have a profound effect on the treatment of many currently life-threatening conditions, but will be extremely expensive. As things stand at the moment, PHARMAC would be forced to play another game of catch-up, harnessing its resources as best it can, and hoping for more funding from the government to enable the medicines to be made available to New Zealand patients. And, in all probability, it will continue that way until the next such case arises, and so on. It is neither satisfactory, nor sustainable.

We need to be developing a strategic overview of what medicines are likely to be becoming available in the years to come; what is a reasonable expectation of which of these medicines New Zealanders might expect to have access to; and, how that might be funded. In some cases, there may be other medicines available that could be cheaper and just as effective, while in other cases it might be that the particular medicines are not of as much value here as might be claimed elsewhere. And we also need to be brave enough to determine the point at which long standing medicines should be moved on, either to a part-charge regime, or to no subsidy at all, because they have been replaced by newer products.

At the present time, we have no such overview, and, as the Herceptin and Keytruda debates show painfully, governments have been left to react, when it is often too late. A more proactive approach focused on what are reasonable expectations for New Zealanders to have of the national medicines system would enable governments and PHARMAC to prioritise spending better, and would give patients a certainty they lack presently.

The limitations of the current system have been clearly exposed and when in government both the major parties have struggled to accommodate the demands being made. (Part of the problem is that when in Opposition both parties have promised everything to everybody on the medicines front and then become hoist by the own foolish petard when elected to office. As recent events show, that puerile pattern seems likely to continue.)

A more strategic approach would prevent repetitions of that hypocritical tomfoolery, but, more importantly, would give New Zealanders a greater level of certainty than they enjoy now.

 

    

   

  

 

 

 

 

New Zealand’s more than half-century of muddle on housing policy is finally catching up with us. Since the 1950s, successive governments have viewed housing through a very basic lens: maintaining a supply of public housing stock to meet the needs of low income families, and, until the 1990s, using government institutions like the old Post Office and the Housing Corporation (and its predecessor the State Advances Corporation) to finance low interest loans for young couples to buy their first homes.

The two were a simple policy that ensured a steady stock of basic style largely conformist homes would be available in the burgeoning suburbs. They all looked pretty much the same, and were designed to cater for the standard New Zealand family of the time. However, as the dynamics of what National in the 1950s and 1960s used to call our property-owning democracy began to change in terms of family structure, urban development, and lifestyle demands, the political parties were slow to adapt. For National, housing was still about the pursuit of the property-owning democracy, even if rising inflation in the 1970s and the boom in property prices since meant the dream was able to be shared by fewer and fewer people. For its part, Labour has remained trapped in the time warp of Michael Joseph Savage and colleagues shifting furniture into the first state house in 1937. State housing is still a badge of honour for Labour politicians – I recall feeling distinctly uncomfortable when I was a Labour MP that I could not join the boast of having been brought up in a state house!

So both main parties are hostage to their history when it comes to modern housing policy, as the current debate painfully shows. Spurious arguments between the two about whether people with foreign sounding names are to blame, or whether government agencies are up to the mark in meeting the needs of the genuinely homeless are just fiddling at the margins, and continually miss the fundamental point. Their past gives little confidence in their ability to develop the solutions we so desperately require.

Yet the problem is a simple one. We are not building enough houses to meet the needs of our growing population, be they immigrants, New Zealanders returning home, or whatever. And the shortage of available houses is pushing up their price, first and most dramatically in Auckland because that is where the biggest group of our population lives, but more latterly in other parts of the country as well. Nor is it restricted to buyers alone. Many people are discovering that as the equity in their home increases, it is increasingly attractive for them to leverage off that to acquire investment property, and the cost of servicing mortgages on those properties is in turn affecting the level of rents being charged. The consequent spiral seems upward and accelerating.

Some have proposed a capital gains tax as the silver bullet to resolve this logjam, but, in fact, such a measure would be likely to have precisely the opposite effect. It would slow up the property market to the point of gridlock, because no-one would be prepared to sell a property for fear of incurring the tax. No wonder both the major parties have now ruled out the idea.

So the only credible policy response is the simple but obvious one of building more houses. That means central and local government working more closely together to ensure more affordable and accessible land is freed up for development; it means more collaboration with the building industry and the banking sector to ensure house construction programmes are well-managed and that a boom-bust mentality does not take hold, and that young families can be financed into them. Part of that may include income related lending ratios overseen by the Reserve Bank. But the bottom line is pretty clear – we cannot go on with the muddle in housing policy we have now. The paradigms of the last 50 years have to change and rapidly. And if that means a few shibboleths have to be overturned, so be it.

However, that would remove the bones of sniping political contention and establish instead a focus on achieving real solutions. Unfortunately, based on the past 50 years, neither of the two main parties is likely to be that bold, or constructive.

 

 

The revelations from the Panama Papers have dominated the news this week. As a result, the foreign trust tax regime has been placed under intense scrutiny, and while no king-hits have yet occurred in respect of New Zealand, it is a virtual certainty that there will be changes to the disclosure rules for such trusts listed here, and more active oversight by the Inland Revenue Department than has been the case previously.

But the Panama Papers release raises another and potentially far more significant issue than their particular content. In recent years, the world has seen the Wikileaks revelations orchestrated by Julian Assange, and more recently the massive security leaks from Edward Snowden. The Panama Papers add an additional element, not seen in the earlier cases. Rather than just one crusading journalist (Snowden’s Greenwald, for example) being the vehicle by which the information becomes public, investigative journalists from hitherto competing media are now combining to produce a coherent and thorough narrative and analysis of the welter of material they have sifted through. (The release this week was the result of work by the international body representing investigative reporters, a German newspaper, and television, radio and newspaper journalists locally.)  We can expect the pattern of these types of revelations to intensify, and with it, the level of media co-operation we saw in this instance to become the norm in the future.

(This is not to encourage the proposed APN/Fairfax merger in the least – the risks of news being channelled through a single source are a major threat to freedom of expression in an open society.)

Rather, the issue now splits into two distinct aspects. First, how do governments deal with the likely new normal of the mass release of data they may be simply unaware of, and certainly not expecting, in a way that is credible and gives citizens an assurance that they are on top of the issues being disclosed? No doubt around the world this issue is front of mind for many governments right now. One part of the solution is likely to be more global co-operation, both in resolving issues that emerge, but also in terms of trying to get on top of, or at best perhaps stay abreast of, the next round of mass revelations.

And that raises the next (and arguably most important) issue thrown up the Panama Papers. How is the protection of individual privacy fitted into all this? On the one hand, it is reasonable that no-one, or no organisation, or government, that has behaved illegally  should be protected from disclosures of this type. Indeed, they should be exposed and held accountable. But equally, individuals who have done nothing wrong have a right to expect their privacy to be protected. And that is increasingly a far more difficult, yet pressing proposition. As it happens, this week is Privacy Week, and, as the author of the Private Member’s Bill some 25 years ago that became the Privacy Act, I have a special interest in this. The digital world has introduced challenges to individual privacy that were inconceivable in the early 1990s and public concern about the protection of its privacy is as high as ever.

Some may argue whether there is anything of value in the release of the Panama Papers. Of course there is. At its most basic, they prove again that no-one should presume to be above the law or legitimate scrutiny. Aside from that, and the prospect of change to the rules around foreign trusts in New Zealand as an immediate likely consequence, the release has also served to focus afresh on individual privacy and its legitimate protection in the age of mass data. Privacy is a fundamental right every citizen should be able to enjoy, yet it is not provided for in our Bill of Rights. And there are still those politicians threatening to “amend” the Privacy Act if it does not meet their needs for more data agglomeration. One way of giving citizens confidence about the protection of their privacy in an era of widespread (and often legitimate and beneficial) information sharing would be to include the right to privacy in the Bill of Rights.

That would not stop, nor should it, the whistleblowers, but it would certainly protect the innocent. And that is the balance we must strike.

                    

  

 

 

 

 

The debate about the melanoma drug Keytruda is an important one, with some very familiar elements to it.

At its most basic level, the question is should or should not Keytruda be funded by Pharmac so that affected patients can potentially benefit from it. So far, Keytruda has been registered by Medsafe, the medicines regulator, as a pharmaceutical product that can be legally prescribed in New Zealand. Its clinicial efficacy has been confirmed by PTAC, the pharmacology and therapeutics committee which advises Pharmac.

The problem is that Pharmac has declined to subsidise Keytruda as yet, partly because of its high cost, partly because the manufacturer has not sought to have it funded, and partly because it has apparently been keeping an eye on other new medicines that may become available in this space, and which may be as, or even more effective, as Keytruda is reported to be. Only this week Medsafe approved a second melanoma drug, Opvido, which, although very expensive, Pharmac has agreed to fund from July, presumably becasue it considers it likely to more effective than Keytruda.

But basically the issue is a funding one. If there was more funding available to Pharmac, the argument goes, it would be more likely to be able to fund drugs like Keytruda. While the government’s announced injection of $124 million into Pharmac’s budget over the next four years to fund new medicines will undoubtedly help in this regard, it is not necessarily the end of the argument. In one sense, it could be argued that more funding could make the circle a more vicious one and increase the intransigence of rapacious pharmaceutical companies to hold out for the best prices for their products before making them available. That is clearly unacceptable, but it is not something over which governments have much control.

All of this goes to the heart of why we have a medicines funding system like the Pharmac model. It used to be the case that the government simply paid whatever price the drug companies demanded for new and existing medicines, and was effectively held to ransom by them, in the interests of providing free low cost medicines to patients. The very notion of part-charges to help meet some of these costs was strongly resisted as not the way we did things in New Zealand, further increasing the power of the drug companies to demand the price they wanted. That was clearly unsustainable. Equally unsustainable was the proposition that governments should be left to decide what medicines should and should not be made available on the basis of what they could afford to pay. So the current medicines registration system, including the development of Pharmac, as the independent medicines purchaser and price negotiator, was established. This system has generally worked well over the years, and despite the specific noise from time to time about particular medicines, there is no general political appetite for fundament change to it.

While the system is largely free from political influences, which means medicines decisions are based primarily on medical efficacy, a fundamental problem still remains. The power of the international drug companies means they can still effectively hold countries over a barrel on the prices they will accept for their products, which means that some medicines are simply too expensive for countries like New Zealand to afford. The issue with drugs like Keytruda and Opvido, therefore, will often come down to the deal that Pharmac can negotiate.

However, the answer is not to meekly surrender to the drug companies’ demands and pay their prices, as all that will do is encourage them to become even more obstinate when it comes to new and more innovative medicines, with a potential for more patients to be denied access to them on affordability grounds. Rather, just as countries have grouped together to break down trade barriers through multilateral free trade agreements, like-minded countries should consider working in concert to break down the stranglehold of the international drug companies by an international pricing mechanism which ensures that potentially life-saving medicines are available to those that will benefit from them, not just those who can afford to pay for them.

Otherwise, the Keytruda debate is likely to be but one among many yet to come. Science is giving us the power to conquer illness and disease as never before. It is surely the responsibility of nations to ensure that power is captured for the good of their peoples, not just the profits of the multinational drug companies.     

 

 

New Zealand’s tax system is generally well-regarded. In part that is because of our focus on a broad base, low rate approach to personal and corporate taxation, and in part it is because our system is relatively easy to comply with as a consequence.

While businesses can offset some of their expenses against their tax liabilities, and individuals can claim rebates for certain types of expenditures (such as charitable donations) to reduce their tax bills, as is customary tax practice in most countries, the opportunities for doing so have been reduced considerably over the last 30 years in a further effort to simplify the system. This has been despite the constant and continuing pressure on successive governments for tax breaks to encourage this or other business or community activity.

The concept of minimising tax labilities is not new. For example, tall, windowless buildings are common in certain parts of old Dublin as a reminder of the way people in the 18^th century sought to thwart the dreaded Window Tax, and the infamous Hearth Tax dealt to the fireplaces in many of the stately homes of England in the same period. Even the greatest tax revolt of all – the Boston Tea Party – was about minimising tax obligations and ensuring that where they were imposed, the taxpayers had effective opportunity for redress, hence the slogan, “No taxation without representation.” Taxing incomes is relatively new – New Zealand’s first Income Tax Act was passed in 1913, and it was not until after World War II that income tax became universal in the United States.

However, there are now clear signs that the comparative simplicity and transparency of the New Zealand tax system, under which we have basked for so long, may not be the advantage we once thought it was. Recent events like the global revelations about the tax paid by certain multinationals who are everywhere when it comes to their operations, but seemingly nowhere when it comes to their tax liabilities, and the release of the Panama Papers make it clear that New Zealand’s tax system with its emphasis on self-assessment, is being used in a way that was never intended to shelter various forms of international income. For the first time, we are having to confront the label of “tax haven”, and it is uncomfortable.

Now, the solutions to these issues are not easy, nor limited to any one country, and it would be the height of idiocy to believe that New Zealand can simply draw up its ramparts, and all the problems will go away. In a global environment, with capital flows occurring in the twinkling of an eye, it is just not that simple, and any politician who suggests otherwise is simply a liar. Any lasting solution has to be an international one, which it is why it is important we continue to work alongside the OECD and like-minded countries to achieve a viable outcome.

But that is not to say we are without steps we could take internally now, to complement the international discussions. We are justifiably proud of our network of Double Tax Agreements and Tax Information Exchange Agreements built up in the main since 2005, which give us the opportunity to share and obtain information with and from a range of countries to reduce opportunities for tax evasion. Maybe we need to apply the same disclosure principles within the New Zealand tax system, to give our tax authorities better information about who is investing money here and why, to ensure that all the relevant local tax laws are complied with fully. Our self-assessment system has generally worked well as far as local taxpayers go, but we may be a little naïve in assuming that large, foreign investors seeking a tax bolt-hole will be just as genuine in playing by our existing rules.

Tax is essentially the price we pay to belong to civil society. Implicit is the assumption that we pay our share, according to our means. In return, the state provides certain key services from which we all benefit: health, education and welfare services; public security and national defence, for example. Any perception that some are not paying their share, or worse, are actively subverting the system to their advantage, which may have nothing to do with New Zealand, other than we are a convenient shelter for income, starts to tear at that implicit national contract.

I still believe in the basis of our broad base, low rate tax system, with its relatively easy levels of compliance. Our challenge now is to ensure that in a rapidly changing set of international circumstances our ability to enforce our tax rules and ensure compliance; gather all the tax revenue properly due; and, ensure everyone pays their fair share, is not compromised. The Panama Papers’ disclosures are a sobering and timely wake-up call in that regard.            

  

  

 

 

 

 

This week I have been attending the United Nations General Assembly Special Session on Drugs (UNGASS), the first such meeting since 1998, and the first major international review of drug policy since 1998.

A great deal has changed in that time. The advent of more than 600 new psychoactive substances alone is evidence of that. So it is little surprise that more and more countries have come to recognise the failings of the "War on Drugs" which has merely seen the power of the international drug cartels increase and the suffering of innocent victims mount. The Outcome Document from UNGASS effectively buries the "War on Drugs" in favour of a greater focus on harm reduction and treating drugs as a public health issue. But, thanks to the intervention of Russia, and death penalty states like Singapore, Pakistan, Iran, Indonesia and Saudi Arabia, it does not go as far as it might have, and therefore, as I said in my statement to the General Assembly (see www.beehive.govt.nz for details) lacks a certain boldness.

None of this should be taken to mean that international attitudes to drug misuse are softening, rather they are simply becoming more realistic. Unlike the view in 1998, no-one, not even the death penalty states, seriously believes that drug problems can be eliminated, or the international drug industry closed down. While drugs remain unacceptable and dangerous, the issue is how effectively to deal with the consequences. Simply perpetuating a system that sees the international drug syndicates become more powerful and more victims suffer unreasonable punishments for their addiction is as crazy as it is wrong. The system has to change.

In New Zealand, we are well placed by world standards. Our opioid substitution programme has been in place for almost 40 years, and our ground-breaking needle exchange programme is nearly 30 years old. Many other countries are still struggling to make progress in both these regards. Our psychoactive substances legislation, passed in 2013, and constantly panned by simply ignorant and lazy commentators incapable of understanding it, has spared us the worst of this problem. The National Drug Policy we released last year is widely hailed as forward-thinking. In particular the steps we are taking this year to review our elderly rules regarding drug paraphernalia, and the consideration to be given over the next couple of years to the balance between minor offending and criminal sentencing is applauded. So too is the recognition that these steps are likely to lead to a full review of our 1975 Misuse of Drugs Act. And our approach to making medicinal cannabis products available to those who genuinely need them, in an environment where popular noise and sentiment far outweighs hard scientific evidence as to safety and efficacy, is seen as pragmatic and sensible.

Many who are disappointed with the Outcome Document are already looking ahead to the next major review in 2019 to make real progress. While there is little doubt that reform is needed, bold reform is not reckless reform. We need sound reform based on steady, evidence based, balanced progress that can be sustained. Through our commitment to compassion, proportion and innovation as the core principles on future drug policy should be founded, New Zealand is well placed to make a constructive contribution to the international debate, alongside like-minded countries, and will continue to do so.L

The decision to make District Health Boards, not local councils, responsible for fluoridation is an obvious one, and seems to have been well received.

Currently, just over half our population, about 2.4 million people, live in areas where the water supply is fluoridated. Shifting the responsibility to District Health Boards, and assuming all agree to fluoridate the water supply in their areas, will add up to another 1.4 million people to the numbers of those receiving fluoridated water.

The fluoride debate has been controversial for years, with no government until now prepared to advance it. At the same time, over all those years, the oral health of young New Zealanders, in particular, has steadily declined. A big capital investment in new oral health centres and mobile clinics over the last decade has started to redress the balance somewhat, but there is still a long way to go.

Although the fluoride debate has been controversial and the opposition vocal in some quarters, public opinion has been consistently, albeit narrowly, supportive of fluoridation. In recent years, efforts by anti-fluoride campaigners to force local polls have been persistent, and this has forced some councils into awkward situations. The recent example of the Whakatane District Council voting narrowly to end fluoridation at one meeting, and then voting narrowly to overturn that decision and retain the status quo at its next meeting, and the about-face of the Hamilton City Council before and after the last local government elections have been quite unedifying.

Local Government New Zealand rightly points out that local authorities are being placed in an impossible situation, especially since their only real involvement is to own the pipes through which fluoridated water is reticulated. But there are realistically only two alternatives to the current situation, assuming of course the national preference is to retain fluoridation. One option would be for central government to simply mandate that all water supplies are to be fluoridated forthwith, but this would be remarkably heavy-handed, and would shut out any capacity for people to have their say. The second alternative, and the one settled upon, is to shift the responsibility for deciding whether or not an area is to be fluoridated to the local District Health Board.

There are 20 District Health Boards across New Zealand, which immediately reduces the potential for inconsistent outcomes, given that there are a far greater number of local councils. Also, oral health (and fluoridation) is primarily a public health issue, and District Health Boards have the statutory responsibility for the promotion of the public health in their areas. So it is logical that they take responsibility for fluoridation policies.

However, it would be wrong to see fluoridation as a panacea for the oral health of New Zealanders. It is certainly an important step, but by no means the only one. It needs to be accompanied by other measures such as good oral health education for children, the promotion of healthy drinks like water, and encouraging good health generally.

The fluoridation decision nevertheless marks an important step forward in the campaign for better oral health for all New Zealanders. It will have a beneficial impact and is arguably the single most important move to be taken to secure good oral health for current and future generations.