A new income insurance policy shaped by business and union elites, with little broad public consultation, would see Labour tarnished and our democracy degraded, warns Dr Simon Chapple

Opinion: The Government’s social unemployment insurance discussion paper proposes introducing a very specific scheme in 2023 to partially replace a person’s wages for a period of time following a redundancy (and, possibly, in circumstances of sickness, too). Funding is to be based on a levy on earnings.

It’s now spending a short three months asking members of the public what they think of this $3.5 billion scheme.

The proposal was developed behind closed doors by the Government, in association with Business NZ and the Council of Trade Unions. The development process raises serious issues about how our democracy functions and how best to develop enduring, robust policies in the best interests of all New Zealanders.

Good democracy is not simply about electing a bunch of politicians every three years and letting them represent us in the interim. It’s also about engaging and consulting with all New Zealanders on policy change in a respectful, equal, open-minded and transparent fashion—what’s often described as participatory democracy. The bigger and more controversial the change, the more important good process is, as there is more to lose for getting it wrong.

The way the social insurance scheme has been cooked up falls well short of good, let alone best, practice.

Some might argue the Government has consulted and encouraged participation in this discussion document via the inputs of Business NZ and the CTU – the “social partners”. However, neither peak business nor union organisations are representative of New Zealand employees or businesses.

Business NZ is, inevitably, dominated by the interests of big business, and the CTU covers about 12 percent of employed people.

Furthermore, CTU membership is disproportionately weighted towards advantaged white-collar middle-class workers, largely employed by government, such as nurses, teachers, public servants, and university academics. Inevitably, the CTU tailors its concerns to these interests. And of course, this “social partner” participatory process cuts out most New Zealanders who are not business owners or in a job.

In addition to degrading the wider democratic political landscape by limiting policy development to business and union aristocracies, not engaging broadly and with an open mind when developing a new policy creates a high risk of “group-think”. That strongly raises the chances of it being difficult to correct policy errors.

One might hope that these sorts of problems might be ironed out in public responses made through the unfortunately truncated consultation process the Government has determined for its discussion document. Yet, it is hard to believe problems will be ironed out.

Basic human psychology—cognitive dissonance—greatly limits the ability of those driving this process, and clearly already committed to a very specific policy idea in public, to back out of firm positions. From a more diverse and open-minded range of perspectives, hard positions already committed to might look less persuasive, perhaps ill-considered, or even irrational.

There are other important ways in which the proposal degrades democracy—in this case our representative democracy. Voters chose their representatives according partly to the policies they present to the public in their election manifestos. In its 2020 manifesto, Labour offered detailed information on its welfare and tax policies. But the 2020 manifesto didn’t even mention social insurance. Not once. The reasons are unclear, but it means there is no positive manifesto mandate for the scheme.

Moreover, manifesto problems surrounding social insurance are not simply with omission—they are with commission. The social insurance proposal breaks two clear Labour manifesto commitments: to no new taxes and to simplify the income support system. A levy on earnings to fund the proposal is unambiguously a new tax. Adding a new layer of social insurance obviously makes our income support system more complex.

Lastly, in terms of the announced timetable, there is an intention to introduce the social insurance scheme before the 2023 election, rather than allowing the public to endorse or reject Labour over it at the election, before serious costs are incurred. As well as further limiting democratic accountability, that rate of change is incredibly rushed for such a major policy shift.

Why act so fast? The only answer can be politics, rather than good policy making. The discussion paper compares the proposed changes to ACC in terms of size and importance. But ACC involved a Royal Commission, the broadest, most non-political approach to consultation and policy development, as well as eight years passing from the start of the Royal Commission in 1966 under National to legislation in 1974 under Labour.

Regardless of what happens to social insurance, Labour’s legacy here is likely to be a regrettable undermining of trust in the democratic process and further unnecessary politicisation of our income support system. The consequence of such a poor process has already been a distinctly mixed public reception for the plan, which in many commentators’ eyes—across the political spectrum—is a deeply flawed one, for various reasons.

For the eye-watering sum of $3.5 billion, New Zealanders deserve better from their government.

Dr Simon Chapple is Director of the Institute for Governance and Policy Studies in the School of Government at Te Herenga Waka - Victoria University of Wellington.

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