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Health, education and retirement incomes are central to the ACT programme, along with debt and taxes because how you raise the money for social progress has a critical impact on the outcome you achieve. Let me take you over the principles of ACT social policy and then look at the outcomes for both individuals and families.

In the world of the 21^st century, education is, as we saw earlier, of critical importance to both the individual and the nation.

Here's how we've funded education in New Zealand to date. You pay tax to the IRD. Though you earned the money, from that point on, the government owns it and they make the decisions, not you, about what you're going to get.

IRD informs the Treasury in another city skyscraper. They mull over the priorities of the Nation. Then Cabinet takes a hack at how the tax will be spent. They need a place to put their desks and chairs. The Beehive's not good enough. They want another new $100-million building.

In due course, your money reaches the floor of Parliament, where MPs try to make sure that it will be spent the right way to get them re-elected. After which it's allocated to the Ministries in another bundle of skyscrapers.

Until, at long last, having paid the salaries of 'all of those very important people' and completed a journey through the pipeline of one, perhaps two, thousand kilometres, a greatly reduced little bundle of notes is finally delivered to your own local school, half a mile from your place.

You could, in practice, accomplish the same result if you put your hat on, and took a ten-minute walk.

Into that thousand-kilometre pipeline, the taxpayer puts $3400 for every primary school child and $5200 for every child at high school. At the school end, what comes out is roughly $1900 per primary child, and $3050 pr secondary child. They're ACT figures, based on our own review of actual annual accounts from a typical range of primary and secondary schools.

Why not cut out the middlemen and shorten the pipeline?

If you pay the school directly yourself, they get the whole original sum, less GST. That's $3022 instead of $1900 for primary, and $4622 instead of $3040 for secondary, gains at school level of 59% and 52% respectively.

The school itself would then have access to and decision-making power over, the totality of the sum currently allocated per child, with GST as the only deduction.

ACT says: if you want a better education, fund the school via the parent not the Government. The money goes into each child's education account. It earns interest in that account, and the school draws its funding for the child from that account, not from government.

Parents choose their own preferred school, exactly as they do now. Since they pay the school direct, this approach puts the power where it should be, in the hands of the school and the parents, not in Wellington. It re-focuses education on the individual child.

ACT will therefore return to the school, via parents, the total current government education spending on primary and secondary students to their parents plus $1600 a year from birth to 5 years old for childcare and early childhood education under conditions that make the money available only for the education of the child concerned and for no other purpose.

Higher income parents will obtain that money from an ACT Government through reductions in income tax. Low and middle income parents will get it exactly the same way, to the extent that they pay income tax with an additional top-up payment from government as needed to ensure that their fund reaches exactly the same total.

Fifty percent of total current government expenditure on primary and secondary schools is set aside in the ACT budget for those top-up payments. Government top-ups will come to parents via a special account in the child's own name, available only for the funding of that child's education.

A family of four, with two children at primary and two at high school right now, after tax, family support and GMFI, earning $25,000 gets $25,147 in the hand, and a family on $33,000 gets $28,641.

Under ACT, neither family pays income tax. However, they both qualify for the maximum top-up: $17,200 a year. Their effective incomes thus rise under ACT to $42,200 in the first case and to $50,200 in the second case. Thus, at those income and family levels, the State continues to cover the total cost of the education of those families.

But the means of payment greatly increases their own power of decision, and the power of the school to arrange its affairs in the optimal possible manner for the improved education of those children. ACT will put it totally beyond question that every New Zealand parent has the means to afford quality education for every child.

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