Labour, shackled by NZ First, has been too conservative on welfare reform. Rod Oram says we should thank the Green Party for its bold proposals to address income support and tax.
You might be one of the 1.6 million Kiwis who received a weekly wage subsidy during lockdown. Or you might be one of the 800,000 people who receive a superannuation payment once a fortnight. Given my age, I’m better off from both.
We are the beneficiaries of a social compact which dates from our Social Security Act of 1938. It makes this a civilised society in which to live. The money we receive ranges from useful to essential, depending on our personal circumstances. Better is the security it brings and the anxiety it allays. Best of all, the support is simple and guaranteed.
So, thank you fellow taxpayers – I’m still one – for the money; and thank you, Government, for delivering it to me.
In stark contrast, some of you may be poorly paid or unemployed now, or were once. You know the fear, frustration and discouragement our social security system can generate. Even if you’ve always earned well, you might have heard from others, or can imagine, the shortcomings of the system.
Many people are affected. Each year more than 630,000 people receive payments from the welfare system. In addition, 345,900 families receive a tax credit because their income is too meagre to support them. Some of them also receive payments from the welfare system.
The failings of the current programmes were described by the Welfare Expert Advisory Group in its final report last year:
“The current system is based on conditionality, including sanctions, and is tightly targeted, with inadequate support to meet even basic needs. The experience of using the system is unsatisfactory and damaging for too many of the highest need and poorest people. We heard overwhelmingly during our consultation that the system diminishes trust, causes anger and resentment, and contributes to toxic levels of stress.
“There is little evidence in support of using obligations and sanctions (as in the current system) to change behaviour; rather, there is research indicating that they compound social harm and disconnectedness. Recent studies recommend moving away from such an approach towards more personalised services. For the welfare system to work effectively to deliver the new purpose, principles and values we conclude that mutual trust between parties is essential.”
The group’s 11 members, led by Cindy Kiro, a public health academic and former Children’s Commissioner, laid out a set of principles for fundamentally redesigning the system to restore a fair and beneficial balance to the social contract. Based on those principles, they made 42 recommendations.
But a year later, the Labour-led government has made no reforms. It has only added staff, made some minor changes and modestly increased benefits. It is not the bold reformer its Labour predecessors were. Quite the contrary. Its conservatism is compounded by NZ First’s obstructionism. With only eight weeks to the election, Labour has yet to show the courage and conviction it needs to shed its NZ First shackles.
Thus, the Green Party did us all a great service last weekend by announcing its Poverty Action Plan with a Guaranteed Minimum Income and other substantial reforms at its heart. Our Newsroom story on it is here and the Greens offer this summary with a link to its full report.
In the first phase by April 2021, the proposals offer, for example, an income of at least $325 a week for anyone not in full-time work, including students; improvements in universal child support; and replacing Working for Families with a simpler Families Support Credit based on the number of children, with a higher abatement threshold and lower abatement rate to encourage people to earn more.
In the second phase by 2023, the Guaranteed Minimum Income would develop further and ACC would become the Agency for Comprehensive Care. This will ensure injured and disabled people are well supported; and ill people become eligible for its services too, including income benefits.
The Greens cost the full reform programme at some $12 billion a year when fully implemented by 2023, roughly half for the GMI and half for the ACC reforms.
By comparison, superannuation payments this financial year will total some $12b, while the Covid wage subsidies will have cost a similar sum for the few months they are running.
Such a simpler, fuller and more caring social support system would significantly overcome the strains, inequities, fears and lack of resources in the current system. It would give people more help, time and energy to get ahead and improve their lives. There is ample evidence for that from home and abroad. The Welfare Expert Advisory Group cited it at length.
Crucially, this is not a sunk cost or an obligatory spend to try to preserve some semblance of society. It is an investment in people and in our social cohesion. If people have better skills, education, income, health and well-being, many of them will contribute more to society. Conversely, if we continue to neglect them we are all the poorer in social, cultural and economic terms.
Of course, income support alone won’t turn around people’s lives. As a society, we must also invest in much better training, education, healthcare and housing. Then those people helped by the improved social support system can participate more fully in those rewarding aspects of life.
Above all, this is a matter of human dignity and social justice. People with these needs have just as much right to support from the rest of society as do those receiving wage subsidies or superannuation payments.
Wisely, the Greens have proposed how to fund the Guaranteed Minimum Income and ACC changes. They would add:
– A 37 percent tax bracket for incomes over $100,000 and a 42 percent bracket on incomes over $150,000, which would raise an estimated $1.3b a year
– A wealth tax of 1 percent a year on personal net assets over $1m (net of mortgages) and 2 percent a year on net assets over $2m, which would raise $9b a year.
– A 3 percent revenue tax on digital services from companies such as Facebook and Google, which would raise some $55m a year.
Modelling done by the Parliamentary Library for the Greens shows that only 7 percent of income earners would pay tax in one or both of the two new brackets; and only 6 percent of people would pay the wealth tax.
Those are remarkably small cohorts. They are testaments to how comparatively little wealth we generate from our economy, even with rampant asset inflation in housing and land. Yet, we have one of the longest work weeks among developed countries. In other words, ours has long been a low productivity economy, hence our low GDP per capita, which ranks 27th in the OECD.
Economic reforms in the 1980s and 1990s made our economy relatively efficient. But if we want to be wealthier in economic, social and cultural terms we need more reforms. This time it’s about helping people make more of their own skills and ambition. The Green’s proposals are a first and essential step on that journey.