If minority interests are to be met, how are they to be funded?


Listener: 15 May, 2014


Keywords: Literature and Culture; Macroeconomics & Money;


Except for talkback, one thinks of radio as an audience-passive medium. Radio New Zealand (RNZ) was reminded that this is not necessarily the case at an April meeting in a packed Wellington church hall. The audience, fiercely passionate about “their” station, also saw it as an integral part of civic society. Suppose it is; an economist must ponder on how to fund it.

RNZ gets almost all its revenue from New Zealand on Air (NZOA), a government agency funded by the taxpayer. But should it? Doesn’t taxpayer funding open it up to political pressures (although to my knowledge, the pressures are not especially strong, and in any case, other media are subject to probably stronger pressures from their owners and advertisers)? What is the alternative?


Market provision may not always be ideal, but we often have to settle for second best. Newspapers might be better without advertising but their contribution is not a bad compromise. Advertising or subscriptions would not work for RNZ National and so we are stuck with taxpayer funding.


Politicians decide how much NZOA, and ultimately RNZ, gets. It is easy to cripple taxpayer-funded, civic society institutions by cutting back on the funding. In my judgment, key public programmes are suffering from excessive spending cuts (and from lousy appointments to their governing boards).


So how much should be handed over? The question would easier to answer if there were only a few institutions deserving taxpayer funding. However the market is not always a good provider. The list of where it fails includes most, or big chunks, of culture and heritage, education, environmental management, healthcare and recreation. Other spending areas such as infrastructure and social transfers involve different principles but add to the spending pressures.


Our diversified society with our different preferences complicates the pressures. That Wellington meeting would have given a big yes to spending more on RNZ but probably would have voted no to spending on the Rugby World Cup (RWC). Down at the local stadium, the responses would have been reversed. It is easy to say “both”, but the costs of all our demands are extravagant.


A central role of the Government’s Budget this month is to co-ordinate the demands, limiting them to what can be afforded. The complicated exercise is rarely explained; instead commentators highlight the spectacular and the ephemeral. At the Budget’s centre is a judgment of a limit on government spending. An important one is how much should be charged to future generations. We could fund RNZ – or whatever – by borrowing, asking future generations to pay for it. That is what the fiscal deficit is about. Another judgment is how much should be left to private decisions, how much to public decisions. That is what taxation is about.


Faced with the limit, the Cabinet has to prioritise. Usually there is a little bit more available each year so, to simplify, the Cabinet has to allocate the billion-odd dollars between the demands for new programmes, one of which might be – in effect – more reporters for RNZ. Competition between Cabinet ministers is fierce, which means their composition and competence are important; a major reason that each election is so critical.


So some ministers have been bidding strongly for more funding for NZOA, others for more on recreation and so on. Somehow a compromise is reached.


Their compromises reflect the public’s issues. Those who want more spending on RNZ may be contesting with those for the RWC, but they may also be allies for public provision of goods and services against those who want lower taxes (and so less overall government spending).


How often do we hear demands for more spending on this or that but no mention of how it should be funded? Cutting something else (which?) or higher taxation (on whom?). The Cabinet does not have the privilege of such laziness. It makes real decisions in the Budget. Unlike the public it cannot opt out. Next September you choose the Cabinet to make the decisions for you.