It was meant to be a business as usual budget, but the pundits were left baffled. National governments are not meant to lift state support, or so the narrative goes. But lurking beneath the surprising decision to lift Working For Families payments is an indictment: the government is admitting that wages are not growing fast enough. Working For Families payments represent a subsidy for employers who don’t pay decent wages. Last year Bill English talked up a 3.4 percent wage increase for workers over three years, but that figure seems optimistic now. State support is needed to make up the shortfall.
Not only does the budget admit that state support is needed to stop working families from falling into poverty, the decision to lift benefit levels for families on welfare represents an admission that poverty has increased under the government’s watch. Yet they’ve only done the bare minimum. Benefit levels have been lifted, but they have not been returned to pre-1991 levels. The poverty the last National government created with its brutal cuts will remain. After all, $25 spread across a family of five will not do enough to cover rapid rent rises (not to mention house prices which are rising $1000 a day).
And then there are the changes to KiwiSaver. The abolition of the Kickstarter grant makes the scheme more regressive – an incentive for low paid workers to join up is now removed. If you put the $1000 Kickstarter grant into a compound interest calculator and assume a conservative 5% return over a person’s working life then the $1000 actually equals $9906 for someone who starts work today and retires in 2061. The government is actually taking from the low paid… to redirect to the low paid through Working For Families and modest benefit increases.
Taken together, Budget 2015 is an admission that the economy is not working. wages for working families are too low, benefit payments for families on state support are too low as well. But, as a political narrative, it’s a clever budget, some in the mainstream media were certainly fooled. The government is seen to be doing things about poverty – optics are all important for this government – yet in reality it’s only shifting state support to different areas. This has been the story of the National government: strong and counterintuitive optics – it professes concern for poverty – but the reality remains unchanged: poverty and inequality persists.