Economist accuses Govt of ‘union-bashing’

Press, 30 June 1982, Page 2

Economist accuses Govt of ‘union-bashing’

The key to lowering inflation was in the Government's own hands, but it had decided instead to do "a bit of union-bashing," said Mr Alf Kirk, the economist for the Federation of Labour, in Christchurch yesterday.

'-The wage-price freeze announced by the Prime Minister (Mr Muldoon) was a political move, he said. Mr Muldoon was in trouble with his party and this was an attempt to weld it together before it "did a Titanic."

Mr jKirk was speaking to about 400 union representatives during a meeting at the Repertory Theatre.-organised by the. F.O.L. and the Combined State Unions. Mr Kirk said there would have been a drop in inflation this year because of a fall-off in import prices and because of the L low increases in wage settlements negotiated last year. -

The F.O.L. had rejected ■ the idea of a wage-tax tradeoff earlier this year because it would have been unfair on workers. If the proposal had gone ahead, everyone would have had the benefits but, only workers wouldhave paid for it. The wage-tax trade-off would have been only part of a Budget package.'but Mr Muldoon would not tell the F.O.L. any details about the package. Mr Kirk said the F.O.L. had also doubted the benefits of the proposed trade-off. Figures had shown that the deal would have cut inflation

only 1 per cent or I.s”per cent. ' The 15 months spent .discussing the deal were nothing more than a charade, he said. Mr Muldoon, had only been trying to get the unions into a position where he could “kick them in the head again.” He wanted an issue in case any early >elec,tion was called.' ■

Unions wanted genuine tax reform, a minimum living wage, and adequate levels of health, education, and social welfare spending. They also wanted the right to take cases for interim cost-of-living adjustments to arbitration between award negotiations. The Government’s response had been the wage and price freeze. The freeze was unfair on

workers because their wages and salaries had been frozen at an eroded level. Most had not had a pay rise since last November or February, by the time the freeze was lifted it would be 18 to 24 months since they had had an increase. while prices would be frozen for only 12 months.

It was also unfair on workers because the price freeze was virtually impossible to police. Many items, such as fashion clothes, were exempt from the freeze.

"You can imagine the television ads in about three months: ‘Hi. I'm .Pierre Cardin. introducing my new fashion range of children's school uniforms." Mr Kirk said. Workers would have to receive a 50 per cent tax cut, or else they would have been "done” because of the wage freeze. There was no way the Government could afford to make ; a reduction of this size.

Outlining the background to the F.0.L.-C.S.U. campaign against cuts in living stand,-, ards, Mr Kirk said New* Zealand had a progressive tax structure under which people who earned more, paid more tax.

The system had been eroded, however. In 1971, workers paid 49.3 per cent of the income tax paid in New Zealand. By 1981, they paid 68 per cent. Companies paid 29 per cent of the tax take in 1971, but only 11 per cent 10 years later. There had been a shift in

the tax burdens from companies to workers of about 18 per cent. This was partly because there were more wage earners, but it had also been caused by fiscal drag — as workers got pay increases, the proportion of tax they paid got higher.

Companies, on the other hand, paid a basic tax rate of 45c in the dollar, he said. Some companies did not pay tax at all because of tax loopholes and export incentives.

One example was Fletcher Holdings, which had a $33 million profit in the year to March, 1981. The company received a tax refund of almost $8.5 million, said Mr Kirk.

While there had been a .shift in the tax burden from companies to workers, there had been cuts in services provided by the Government, he said; Health spending had been cut 2 per cent between 1975 and 1981 and education spending had been cut 3 per cent. During that time Government support to industry had increased from 6 per cent to 11.1 per .cent.

Mr Kirk said the Government’s aim to reduce spending 3 per cent across the board was "economic nonsense."

The Government wanted the cuts to reduce the overseas deficit. The high deficit represented "the escalating cost of buying” votes for last year's General Election.