Coronavirus: Sir Roger Douglas says house building and spending cuts key to fixing Covid-19 shock

Monday, 4 May 2020

Sir Roger Douglas believes the Government has bailed out big corporations at the expense of poorer households.

Former Labour Finance Minister Sir Roger Douglas says the Government should use the coronavirus crisis to attack economic privilege and reduce inequality.

But, unlike his contemporary Labour colleagues, Douglas said this should be achieved by reducing stimulus spending, including on things like the wage subsidy and infrastructure building.

The Government’s current policies, in particular the wage subsidy were “unfairly advantaging big business and the professional elite”, he said.

Douglas said this money would be better directed “towards assisting the newly unemployed – namely workers, their families, and small business owners”.

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The comments come in a discussion paper co-authored with Professor Robert MacCulloch of Auckland University.

Douglas told Stuff his paper was about reducing handouts to big businesses and dealing with entrenched inequality and poverty.

The theme of the paper was better targeted spending and debt reduction.

The most radical proposal was to “identify, and eliminate, unnecessary spending, privilege, and waste” from the Government budget totaling $15 billion.

This would mean cutting or reprioritising 18 per cent of the last budget. That's roughly the amount spent of superannuation each year.

Finance Minister Grant Robertson is no ally of Roger Dogulas.

Douglas was particularly critical of the way that large businesses with healthy balance sheets had been claiming the wage subsidy, which has now paid out more than $10b.

He singled out The Warehouse and large law firms Simpson Grierson, Bell Gully and MinterEllison in particular.

“Why haven’t they been required to fend for themselves and their businesses?

“Why, when the good times suddenly come to an end, have they gone cap in hand to the Government?”

Former Minister of Finance, Roger Douglas, in 1984, holding a locked briefcase containing the master copy of the budget. The economic changes that followed caused job losses and widening inequality.

Douglas said it was an example of “the old maxim rendered true — there is never someone more socialist than a wealthy capitalist in a time of crisis”.

The paper argued that spending should be far better targeted and it should be paid to employees directly, rather than to their employers.

Douglas proposed that an employer and employee should each notify the Government that the business is struggling and the employer about to be made redundant. The employer can then sack the employee or furlough them.

The Government will then assist that person with special, targeted payments for their mortgage or other expenses, topping up any existing benefits they may receive.

He was also critical of the idea that New Zealand might build its way out of Covid-19, saying that a crisis is no reason to build infrastructure projects that make no economic sense.

One area where there should be increased stimulatory spending is housing. In this area, Douglas described something like a supercharged KiwiBuild paired with planning reform and a shared-equity scheme.

Douglas said the key to getting housing right was “making a large quantity [of houses] available”.

The Government had to go into section development, while making sure land was released for building by reforming planning laws. There was plenty of land out there, but not enough capital to develop it.

Low-income people could be helped into housing through a shared-equity scheme, where the Government would take on part of their mortgage.

When asked how his state-backed building scheme would succeed where KiwiBuild failed, Douglas said it was a matter of getting the right people involved to notch up big productivity gains.

He pointed to what the Government was able to achieve with state asset sales in the 1980s.

Douglas said he was particularly worried about the sustainability of New Zealand’s superannuation.

“I think NZ is in a lot more trouble than in the 80s. If we don’t deal with it, we’re going to be in deep trouble,' he said.

Douglas's ideas are unlikely to find much favour in the current Cabinet.

Last year Robertson was even asked whether he would follow Douglas's example and resign after presiding over a budget that was leaked.

Robertson responded, 'In my life, I have made it my ambition not to follow what Roger Douglas does'.