Never Mind The Quality, Feel The Love! Bill English's seventh Budget may be weak in terms of economic effectiveness, but politically it's a genuine sand-kicker. Labour's Andrew Little is still rubbing his eyes.
IT’S BEEN 43 YEARS since a National Party finance minister rose to deliver a Budget in which real increases to social welfare benefits were announced. In 1972, the then finance minister, Rob Muldoon, increased government spending by a whopping 16.2 percent – and much of it went to beneficiaries. Of course, the level of welfare spending in 1972 was considerably less than today’s. The unemployment rate, for example, was well below 1 percent and there was no Domestic Purposes Benefit. New Zealand’s generous superannuation scheme still lay in the future. Even so, 1972’s was a particularly generous budget. “That’s it,” Muldoon cheekily informed his non-plussed Labour opponents, “I’ve spent the lot!”
Muldoon’s cheery admission should alert us to just how different the world was 43 years ago. Economic thinking was still dominated by the ideas of John Maynard Keynes, and, as Muldoon would later quip: “Most New Zealanders wouldn’t recognise a deficit if they tripped over one in the street.” Forty-three years later, the National Party Finance Minister, Bill English, has, with considerable reluctance, increased government spending by 2.5 percent – not quite enough to keep pace with the projected rate of inflation and population growth. New Zealand’s economic performance may be one of the best in the OECD, but nobody in 2015 would dream of increasing state spending by 16.2 percent!
All of which gives the lie to those who, like former finance minister, Sir Michael Cullen, insist that John Key does not preside over a neoliberal administration. Because, what Bill English has given with one hand he has ruthlessly snatched back with the other. In 11 months’ time, the poorest New Zealanders will receive a $25.00 per week increase in their benefits – just enough to keep them from the clutches of utter destitution. But, as of 2:00pm on Thursday, 21 May 2015, the Government’s $1,000 kick-start grants to new Kiwi-Saver accounts ceased.
Which is not to say that this budget isn’t a highly successful exercise in political mollification and repositioning. In the run-up to last year’s general election, pollsters were reporting that one of the few questions registering a strong lead for Labour was about which party had the best response to the problem of child poverty. Even among National Party voters there was a clear and rising level of concern over the number of Kiwi kids living in need, and the Government’s response was generally acknowledged to be inadequate. Bill English’s budget measures will, almost certainly, have mollified these conscience-stricken voters of the Centre. At the same time they have blocked-off one of the very few remaining avenues into National territory. Labour will now have to find another way of reaching what it still insists are “soft” National voters.
But how “soft” are these voters, really? Bill English may have surprised the commentariat by increasing benefit levels, but he was careful to ring his $25.00 bounty with new and tougher obligations on sole parents. From the age of just 3 years, beneficiaries’ children are expected to be enrolled in early childhood educational institutions, while their parents go out to work for a minimum of 20 hours per week. Nothing “soft” about that!
Indeed, it was to avoid the charge that they had gone “soft on beneficiaries” (as in “soft on communism”) that Labour, for nine long years, steadfastly refused to restore benefit payments to the levels they were at in July 1991, when Ruth Richardson, in her “Mother of All Budgets”, slashed them by the equivalent of $43.00 in today’s money. No matter how many statistics the academic husband and wife team of David and Liz Craig assembled and presented; no matter how dire the evidence of real and growing hardship among beneficiary families; or even of the alarming spikes in poverty-related diseases recorded by the nation’s public hospitals; the Labour-led government of Helen Clark remained unmoved. It’s neoliberal advisers in Treasury and the Ministry of Social Development insisted that the “incentivising” gap between benefits and wages be maintained – and it was.
By 2015, however, the size of that gap had grown to such proportions that even Treasury was prepared to acknowledge that it might be time to relent – just a little. And, God knows! $25.00 per week is not a lot! Still, no one should be under any illusions that English’s minimal adjustments will do anything to loosen the bars of the cruel poverty trap in which as many as a quarter-of-a-million New Zealand children remain imprisoned.
Many years ago now, at a swanky Auckland restaurant, I found myself seated next to a well-known right-wing journalist. Not surprisingly, we ended up arguing about Rogernomics and Ruthanasia. I asked her this question: “What would you do if you were told that in order to go on receiving all the good things you currently enjoy, you would first have to consent to a person being chained up in a dungeon and fed your scraps?” Well, she hummed and hawed for a while, and then offered me this quite extraordinary reply. It would be alright, she said, because, as she became richer, she’d make sure the prisoner received more food, and that his chains were loosened, “so he could move about a bit”.
If you can be reconciled to that way of thinking, then you will have no difficulty whatsoever in both understanding and endorsing Bill English’s 2015 Budget.
This essay was jointly posted on The Daily Blog and Bowalley Road blogsites of Saturday, 23 May 2015.