Let’s have open slather on the 1990s

By   /   May 3, 2017  /   24 Comments

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I warmed to Jim Bolger considerably after his Mea Culpa moment. His government indeed was responsible for the unfortunate gutting of the unions and the massive redistribution to the wealthy under National’s failed trickle down theory.

I warmed to Jim Bolger considerably after his Mea Culpa moment. His government indeed was responsible for the unfortunate gutting of the unions and the massive redistribution to the wealthy under National’s failed trickle down theory.

In contrast Jenny Shipley has no such insights or humility as to her role in the social chaos produced by her government in the 1990s. One of my vivid memories was listening to the dulcet tones of Ruth Richardson and Jenny Shipley announcing benefit cuts in Parliament and the audible sucking in of breath. The ill-effects of the ill-fated 1991 budget reverberate 26 years on.

Shipley says defensively in her Guyon Espiner interview, “I was trying to take the welfare state off the middle class”. How much more noble that sounds than what she should have said: “I crushed the poor to serve an outdated and failed ideology.”

Let’s revisit the background.  In the mid-1980s, economists thought high tax rates on high income earners reduced their incentives to earn and save. Rogernomics was supposed to fix that. Government spending was to be cut sharply in the shift to userpays and tight targeting for social provisions and the tax scale flattened to give a low flat tax rate. While Lange had a cup of tea and moderated this a little, the problem of high tax rates was simply shifted from top income to low and middle income earners.

The snag is, the greater the amount of social assistance to be reduced as income rises, the longer is the range of income before all assistance has been bled out, unless a higher rate of abatement is imposed. A long income range defeats the purpose of welfare only for the poor, while a high rate of abatement imposes severe disincentive effects.

In advice to the incoming government in 1990, Treasury had warned:

As a general rule, the more people facing higher effective marginal tax rates [EMTR]over longer ranges of potential income, the greater the costs to society and the greater the probable loss of output.

So they were worried about the effect of overlapping abatements that mean very little is left in the hand when low income people earn a bit more- the high effective marginal tax rate (EMTR) problem .

Treasury identified high levels of benefits as a major factor preventing a more gradual abatement system and benefits were cut significantly in 1991. The Change Team on Targeting Social Assistance in 1991 was then tasked with designing a new ‘integrated’ system of targeted social assistance to solve the overlap problem of multiple targeted provisions.

The 1991 budget document ‘Welfare that works’ contained the lie that the technocrats could make tight targeting of social provision work.  They devised a complex system of Family accounts.  They drew clever diagrams like this one to show how they would make welfare only for the poor by aggregating social assistance of all kinds onto a family based ‘smart card’. When a family increased its income by a dollar, entitlement would reduce by a uniform rate of abatement. Voilà, a miracle.

Unfortunately, while aggregating assistance onto a family-based ‘smart card’, abating at one rate worked in theory, the technocrats could not make it work in practice. One of the problems was that the typical modern family did not resemble the assumed nuclear family model. Another was that the scale of assistance to be targeted, even with the 1991 welfare benefit cuts, meant assistance would be paid well up the income scale even with a very high single rate of abatement. The integrated solution that had been used to justify the low flat-tax user-pays approach had quietly disintegrated leaving the unresolved welfare mess of a plethora of high and overlapping abatements.

While one might have expected a re-examination of the basis of the 1990s reforms, instead the welfare morass has been intensified in the name of target efficiency. It is one of the major reasons that hardship rates are high in low income working families even when gross income looks to be above the poverty line.

Let’s take the example of a parent on the minimum wage of $15.75 per hour, earning $36,350 per annum. There are some Working for Families and rent subsidies but increasingly this family relies on foodbanks and loan sharks. Let’s say there is an opportunity to earn another $10,000. Once tax and ACC are paid (18.71%), Working for Families is abated (22.5%), student loan repayments are made (12%), Accommodation Supplement is reduced (25%) and KiwiSaver extracted (3%), the $10,000 has been effectively taxed at 81.21%. Furthermore, there may be a sudden drop in child care subsidies, and child support payments of between 18-30% may apply taking the rate to over 100%. Every family is in a different set of circumstances, and few will understand what is actually happening. They will know that at the end of the year despite their extra work effort they are no better off, may actually be worse off and will undoubtedly feel despair.

Jenny Shipley wants to take the credit for her ‘brave’ leadership in smashing welfare in paving the way for Labour to do so well in the early 2000s. She deflects attention from the very poor performance of the NZ economy in the 1990s due in very large part to her government’s policies. The fact the 1990s weren’t worse, is due to the early failure of many parts of the Welfare that Works package.

Remember what she tried to do to National Superannuation? After Bolger, pre-election, promised to remove the mild income test of the surcharge, she and Ruth rammed into legislation on budget night 1991 changes that made the pension a welfare benefit. There was a tiny exemption of $80 a week for a couple before their pension was clawed back virtually dollar for dollar to ‘take welfare off the middle class’.  Before that legislation took effect they faced an angry backlash and were made to back-down and rescind the changes. Furthermore, her government’s user pays in health could not be made to work.

Her legacy is the failure of the ‘born to rule’ class to understand a single thing about the reality of other people’s lives.

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About the author

Co-director retirement policy and Research Centre, CPAG management committee

24 Comments

  1. Castro says:

    Yep, it’s all about class; there are two classes in No Zealand now, the propertied class and the underclass; thanks Shipley for laying the groundwork for a very ugly society going forward. The idea that neo-liberalism is a failure is obvious to even a primary school child of moderate intelligence; however, its devastating effects continue in the form of neo-colonial immigration and the interconnected housing market; any detractors of these tools of neo-liberalism are generally shut down with cries of “racist” or “xenophobe”, but the facts and the statistics are there for anyone to see if they cared to open their eyes and look.

    In a fairly short space of time, unless drastic and immediate action is taken, a full half of this so-called country will be of the propertied class (predominantly older and foreign) while the other 50% will be the underclass (mainly young and local) and No Zealand will truly reap the whirlwind that its so-called leaders have sown.

  2. countryboy says:

    “ I warmed to Jim Bolger considerably after his Mea Culpa moment. “

    I’d warm to the fucker too if he was on a bonfire.
    The lying, faux-vowel rounding, ‘ House of Cards-esque old punk doesn’t fool me.
    Clearly, things are coming unstuck for them. We must keep on the pressure and not get distracted.
    RIP Ma and Pa and stay strong you, the damaged, destroyed, impoverished and incarcerated.
    Lest we fucking forget!

  3. countryboy says:

    And another thing…

    I’ve worked physically hard for most of my life so far. I started lifting, carrying and digging on my family’s farm from when I was around 12 years old. By the time I was in my thirties, douglas, brash, and bolger too, spun their infamous lies and while boosting interest rates to as high as 22% they sold off our tax paid for stuff and things for their personal wealth creation. For them and their mates. Can you put up an argument against that allegation BNZ Fay/Richwhite, Gibbs, Meyers, etc, etc ? If so? Bring it here and lets go at it?

    Recently, I ruptured my T One disc and was told by a traitorous ACC Dr “ You’re days of donkey work are over.” Then he informed ACC that I had a preexisting condition. I had wear in my spine. A disease of the spine. so… No.

    Now, in my post 60 autumnal years as I struggle with constant neck/back pain I’m mindful of bolger. Bolger, the fucker who pushed out the age of retirement entitlement by five years to 65.
    Here’s the thing bolger.
    You pay me $100 K for each of those five extra years you gave me doing hard labour after 60, $17 million dollars for the 3000 acre free hold property your Bruv’s stole away from me at 18% interest as at-farm-gate profits where manipulated downwards plus an estimate of the annual income from that property from 1989 to today after adjustments at say $ 500 k a year and I too will get all fucking misty eyed at your wheedling, gutless and pathetic attempts to clean your slate before you meet your maker.

    And if you think I’m a rare case? I’m not. Do the research. The early 1990’s. Worn out old farmers sent crying to their cars, all the Banks left them with, after years of loyal service to build a first world country, taken away by bolger-ites. The revenue from their foreign exchange income earned to build our services and amenities literally stolen out from under our noses.
    Yeah. I’m fucking broken up about bolger.

    • saveNZ says:

      You make some excellent points, Country boy.

      Sadly like out taxes, ACC is routing the system not to pay out to claimants under the fake ‘pre exisiting’ claims. The ACC doctors get extra money if they ‘get people back to work’. Fuck them!!!

      As for the government policies taking over your family farm with those crippling interest rates. I don’t blame you for being incredibly angry.

      This idea you work hard and grow prosperous does not work in the modern world. There are people out there waiting for circumstances to take all.

      Somehow the world now values traders like John Key that have more and more money and power and connections for trading pieces of paper.

      Those that produce goods or food are just worthless citizens with plenty more available who can do it cheaper, and throw them away if they get sick.

      Just found out today that one of my relatives who has been working in hospitality on minimum wages for 8 years at the same firm, has been changed to a zero hour contract, when the firm was sold. I thought they were banned!

      Not a very healthy society. Not a very healthy environment.

    • Sam Sam says:

      The whole series apologises so hard it makes toilet seats blush. I suppose thats why in part i prefer Hard Talk. Any one with even a cursory knowledge of history ught to be skiptical of these muppets

    • WILD KATIPO says:

      I have no mercy on those treacherous saboteurs either , – and equally am not impressed and have no time for their ‘latter day tears of repentance ‘ as well.

      As far as I am concerned they used their position to commit grand scale theft of this country’s wealth. The Commons wealth.

      To see Bolger sniveling his tears about ”How we were so wrong ” makes me sick and even more vengeful , – I would as sooner be more satisfied to see Bolger , Shipley , Douglas, Richardson and others AND members of the then Business Roundtable shedding their hypocritical tears and consoling themselves together behind prison bars for the remains of their natural lifespans for what they did to the people of this country.

      AFTER they were asset stripped and their ill gained proceeds from the THEFT of the Commons returned to a consolidation fund to be held for the repurchasing and reinvesting of SOE’s.

      That would be the least we could do to honour our own servicemen on ANZAC day who died fighting Fascism and in particular – NAZISM.
      ………………………………………………………………………………………..

      Think that’s a strange thing to throw into an article about Bolger?
      ………………………………………………………………………………………..

      THEN BLOODY READ THIS ! , – FROM HUGH PRICE :

      New Right Fight – Who are the New Right?
      http://www.newrightfight.co.nz/pageA.html

      • Andrea says:

        “consoling themselves together behind prison bars for the remains of their natural lifespans for what they did to the people of this country”

        Let them be on a single person’s job-seeker’s benefit -from which they have to pay an ever-rising rent for their unheated, uninsulated, mouldy den, plus all basic utilities and food, and contribute to the wages of their supervisors. Let them have the choice – eat, freeze, sleep under the eaves – or five to a car, if the rent falls behind. Medical care is optional and may be delivered by a practice nurse later rather than sooner.

        Re-education is required and extortionately priced in line with market rates for international students. Student loans can be repaid by doing mindless work on a zero hours contract. No concessions until at least half has been repaid and the interest rate will be pegged to the highest-charging credit card. Enjoy! bubbas.

        And totally strip them of parliamentary privileges: the cheap travel and vast pensions, among other perks. Gently lower their hopes and expectations to come into line with the general population of cash-strapped seniors and other beneficiaries who have no show of improving their cashflow. No visits or phone calls – unless they can pay. Just like real folks.

        (Oh dear. I must be getting soft… Time was I might have suggested export to North Korea, but that’s a little harsh.)

  4. saveNZ says:

    Yep, I though Bolger did not come across as that bad. At least his vision was ‘a decent society’. Unfortunately he was PM under an ‘austerity’ government that did not work. At least he denounced neoliberalism, although in the Catholic stance of having as many children as possible he seemed to support massive shifts in immigration.

    With climate change upon us, I think that the west having less children and with higher academic achievements, rather than this idea of the more people who compete against each other. Technology is taking jobs, so there are no jobs for people. A lot of care jobs, will be taken by technology.

    People are destroying the environment all around the world for short term economic gain aka ‘growth’. The Catholic idea of some sort of average density of people all around the earth does not take into account preserving natural sites like the Amazon and places like NZ that have high bio diversity. The best thing the west could do for other countries, is to stop conflicts and get real about climate change.

    Charity and overseas aid seems to have become a networking opportunity and bargaining point, rather than to do social good.

    Also having watched the series with all the PM’s, everyone claimed apart from Shipley that their government was bankrupt and they ‘had’ to do the welfare reforms.

    Shipley just wanted to do them for the fun of it, just like seizing power from Bolger so she could get rid of that middle class welfare that left her cold. Interestingly she also used her family a lot in the interviews as missiles (the protesters scared my son, not why would you let him watch TV with the protests on). She obviously liked having kids living in fear.

    Sad that the first unelected women PM did so much against families – especially women and children.

    Shipley and the others, do not realise that the taxes are actually paid by the people as an insurance scheme among other things.

    Citizens pay in, but the right wing types who forget this and are disgusted for expecting taxes to be paid out.

    The neoliberal discourses want to support trusts and businesses who increasingly do not pay much taxes but require subsidies or given public resources like water and minerals, instead of the taxpayers who pay them. This is why there is world wide growing anger and social unrest at what politicians have done and how out of touch they are.

    Too many Shipley’s in power around these days. But the idea of more competition for people aka immigration is also out of favour. And the left need to understand that or else the right will get the votes.

    In NZ it says a lot that migration is at record levels, but we have a pitiful refugee quota. It is not about need for people, but about an ideology of competition on resources and a ponzi scheme to pretend all is well as more houses and cars and cornflakes are sold to more people, At the same time, the time bomb is getting bigger – there are less jobs, less houses, longer transport times and less money for welfare.

    Financially it does not work, hence our growing debt levels.

    • Susan St John says:

      You are right- Shipley and others have no concept of taxes as insurance. Hence she is offended that she does not pay full price for her GP visits when sick. The welfare state was never just about the poor. Middle income people face huge uncertainty and social insurance is the only way they can be protected from many uninsurable risks.

  5. Jack Ramaka says:

    Shipley rolling Bolger was a major coup for the Neo Liberals and the National & ACT parties, in the process they severely disrupted NZF who had won 17 seats at the first MMP Election.

    Shipley then dug the knife further into NZF when she enticed NZF MP’s like Tau Henare to jump ship/waka and got into bed with her at the National Party.

    They would have been swinging from the chandaliers at the National Party Headquarters.

    • WILD KATIPO says:

      Bolger was a gutless pretender who agreed with the new far right ideology who only pretended to ‘ soften’ his stance to prevent mass resistance and social meltdown.

      There is no doubt he would have sought to remain in power and implement neo liberal reform in more stealthy increments – or even leave it up to a future govt to continue – yet as it turned out – that was effectively what happened when Shipley rolled him.

      They are BOTH despicable ex New Zealand politicians.

      They are BOTH worthy of the label of being the social pariahs that they have become.

      AND BOTH of them , – adhered to THIS ideology :

      New Right Fight – Who are the New Right?
      http://www.newrightfight.co.nz/pageA.html

      Treasonous, treacherous filth.

  6. Jack Ramaka says:

    Roger Douglas, Jenny Shipley, Ruth Richardson and the Mont Perelin Society has a lot to answer for the state of the New Zealand Economy Today. Neoliberalism was ideologically driven economics which transferred wealth from the State into private individuals and families pockets.

    State Assets owned by New Zealanders, us the taxpayers were often sold for a pittance of their true market value under somewhat dubious sales arrangements to colleagues of Government Ministers ?

  7. Jack Ramaka says:

    Roger Douglas, Jenny Shipley, Ruth Richardson and the Mont Perelin Society has a lot to answer for the state of the New Zealand Economy Today. Neoliberalism was ideologically driven economics which transferred wealth from the State into private individuals and families pockets.

    State Assets owned by New Zealanders, us the taxpayers were often sold for a pittance of their true market value under somewhat dubious sales arrangements to colleagues of Government Ministers ?

  8. bert says:

    National and deregulation destroyed industry in my hometown of Thames in the 90’s. The Thames hospital is the main employer there now. The two timber mills, car assembly plant, meat works which gave employment, housing and vibrancy to a once thriving community, have all disappeared as we know it. Replaced by Two Dollar shops, and the ever decreasing occupancy of the Goldfield shopping Mall.

    No use importing cheaper cars if you have no employment and income to buy them.

    • WILD KATIPO says:

      We charge and convict individuals who cause harm to others … especially if it was willful harm.

      However, these criminal neo liberal saboteurs get away scot free,… just like Whittal did at Pike River…

      This shows the extent to which these criminals distort and manipulate our laws and and our political system with impunity. It is high time we have a written and easily accessed Constitution . It is high time a definition of neo liberal ideology was formally constructed and the methods – such mechanisms as the removal of trade tariffs – were made illegal.

      THAT ,… following the warrant , arrest , and then court trials on retrospective charges of economic sabotage and grand theft of the Commons wealth for pecuniary gain.

  9. Mike in Auckland says:

    Yes, thanks for reminding us, Susan, we see a different world we live in now, where so called ‘health advisors’ for MSD push the agenda that sick and disabled must work to get better, and they get paid mega bucks, by the way, I wish some would care to inform themselves about this disgusting truth:

    https://nzsocialjusticeblog2013.wordpress.com/2017/05/01/msd-releases-oia-info-on-dr-bratts-and-other-senior-health-advisors-high-salaries-nearly-4-years-late/

    https://nzsocialjusticeblog2013.files.wordpress.com/2017/05/msd-releases-oia-info-on-health-advisors-salaries-nearly-4-years-late-post-30-04-171.pdf

    https://nzsocialjusticeblog2013.files.wordpress.com/2017/04/m-s-d-o-i-a-rqst-ddr-mab-pha-rha-training-salaries-anon-11-06-2013.pdf
    https://nzsocialjusticeblog2013.files.wordpress.com/2017/04/msd-o-i-a-request-dds-mabs-training-ltr-fr-d-power-c-e-w-mab-table-anon-12-07-13.pdf

    https://nzsocialjusticeblog2013.files.wordpress.com/2017/04/ombudsman-l-donnelly-complt-36xxxx-msd-o-i-a-advisor-salaries-fin-dec-hi-lit-12-04-17.pdf
    https://nzsocialjusticeblog2013.files.wordpress.com/2017/04/msd-oia-rqst-fr-11-06-13-advisor-salaries-bratt-hawker-rankin-revision-released-11-04-17.pdf

    https://nzsocialjusticeblog2013.files.wordpress.com/2017/04/msd-o-i-a-rqst-11-06-13-advisor-salaries-bratt-hawker-rankin-revision-email-hi-lit-11-04-17.pdf

    So senior health advisors get paid over 200,000 per year to ensure sick and disabled get moved off benefits, is that not wonderful?

    But their whole ‘evidence’ is flawed, from the word go:
    ‘Blaming the victim, all over again: Waddell and Aylward’s biopsychosocial (BPS) model of disability’
    http://journals.sagepub.com/doi/pdf/10.1177/0261018316649120

    Tom Shakespeare, Nicholas Watson, Ola Abu Alghaib

    SAGE Publishing – 2016

    Downloadable here:
    https://ueaeprints.uea.ac.uk/58235/1/1351_Shakespeare.pdf

    “ABSTRACT”

    “The biopsychosocial (BPS) model of mental distress, originally conceived by the American psychiatrist George Engel in the 1970s and commonly used in psychiatry and psychology, has been
    adapted by Gordon Waddell and Mansell Aylward to form the theoretical basis for current UK Government thinking on disability. Most importantly, the Waddell and Aylward version of the BPS has
    played a key role as the Government has sought to reform spending on out – of-work disability benefits. This paper presents a critique of Waddell and Aylward’s model, examining its origins, its
    claims and the evidence it employs. We will argue that its potential for genuine inter-disciplinary cooperation and the holistic and humanistic benefits for disabled people as envisaged by Engel are
    not now, if they ever have been, fully realized. Any potential benefit it may have offered has been eclipsed by its role in Coalition/Conservative government social welfare policies that have blamed the
    victim and justified restriction of entitlements.”

    Other links:
    https://ueaeprints.uea.ac.uk/58235/

    http://eprints.gla.ac.uk/120085/

    http://forums.phoenixrising.me/index.php?threads/dns-%E2%80%98biopsychosocial%E2%80%99-basis-for-benefit-cuts-is-%E2%80%98cavalier-unevidenced-and-misleading%E2%80%99.45109/

    COMMENT:

    We can continue lamenting the symptoms, but push the true evidence, the facts and take them to bloody court, for every flawed decision they make, 24/7, as that is the only way to deal with MSD and their hatchet doctors and the upper echelons of nasty managers and whosoever works for their BS ‘investment approach’.

  10. Mike in Auckland says:

    For beneficiaries with health conditions it is much worse than Susan even describes above, you are often not taken seriously, you are considered to be a potential malingerer or fake person, when you apply for a benefit for health reasons and disability, even when presenting a medical certificate from your doctor.

    But MSD relies on flawed and misrepresented information, when they talk about “evidence”:

    https://nzsocialjusticeblog2013.wordpress.com/2015/08/09/msd-and-dr-david-bratt-present-misleading-evidence-claiming-worklessness-causes-poor-health/
    https://nzsocialjusticeblog2013.files.wordpress.com/2016/09/msd-dr-bratt-present-misleading-evidence-on-worklessness-and-health-publ-post-19-09-16.pdf

    It is beyond belief that nobody in the useless media and public bothers to scrutinise this BS.

    Other also relevant information on the misuse of scientific information can be found here:
    ‘In the expectation of recovery’, Faulkner, Centre for Welfare Reform, Scrib:
    https://www.scribd.com/doc/308613502/In-the-Expectation-of-Recovery
    (criticism of wrong use of the biopsychosocial model, Aylward et al)

    • Mike in Auckland says:

      As I noticed before, most that should take notice, do not bother, rely rather on MSM misinformation and anecdotal BS talk and NeVER inform themselves, so the ones that suffer at the hands of MSD and WINZ are mostly ignorant and misled by poorly advised advocates, and deserve nothing else than what they get, being denied entitlements, I see and hear it every day, Kiwis are simply THICK and up themselves.

  11. Mike in Auckland says:

    Bolger is catholic, so is English, maybe the words of the present Pope Francis are causing some of them to consult their own conscience?

    He is rather unconventional, the Pope, he has little time for injustice and the rich, so there you go.

  12. Stuart Munro says:

    I’m not sure about Bolger – But I’m glad he has discredited Neo-liberalism. For the MSM there is no longer any excuse for the spineless grovelling that characterised their response to Key.

  13. mosa says:

    Enough New Zealanders supported this programme to return the National party to government two times in a row and with 44% the largest party in 1996.

    Sure there were protests and pressure from some and when it came to the anti union legislation Bolger and the others knew what effect it would have on workers rights and wages but they had a mandate to implement it.
    The same conservative National voters applauded the campaign of destruction waged against Helen Clark until her government was brought down and installed ” honest ” John to the leadership and no matter how corrupt Key was they kept voting for the status quo.

    The lie perpetuated in the 90s was “we have an economic recovery”( but only for the few.)

    It’s the same narrative now which you will hear every night from the political commentators , started by English and Joyce “we have a growing economy” which is benefiting who exactly ? the usual suspects of course.

  14. Historian pete says:

    While we are into insulting National and ex National M.P’s, have you noticed the re-invention of Murray Mcculley.Apparently some P.R spin doctor boffin from the National Party,presumeably high on fly spray,has dreamed up a new persona that has Murray portrayed as the “Prince of Darkness”. Keeping in mind his fiasco with The Saudi farm,and his fawning grovelling to the U.S Empire state terrorist Fourth Reich I would suggest “Prince Jackass” would be more apt. I would also put him forward as this years candidate {I intend to confer this award annually} for” the Monica Lewinsky award for abject grovelling beyond the point of duty “.The recipient receives complementary knee guards.

    • Luc Hansen says:

      I think you will find Herr Gerry will outdo McCully on the grovelling front, as already demonstrated by his fawning attitude towards the fascist State of Israel.

    • Mike the Lefty says:

      But it seemed that McCully was only a monster when dealing with his own staff. In other words a bully.
      To foreign powers he was a cringing groveller.
      He didn’t earn the nickname “Mouse McCully” for nothing.