MUST READ: Does this budget turn the tide?

By   /   May 22, 2018  /   19 Comments

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Let’s be clear, the family poverty inherited from the last decade of entrenched poor policies, sheer neglect or deliberate attacks on living standards won’t be fixed overnight. We get that. We know the PM has solving child poverty at her core, and her values and integrity are the best thing that has happened to children for a very, very long time. But CPAG is the critical friend and has to say the hard stuff on behalf of children.

CPAG has been holding budget breakfasts for 20 years to raise concern about the welfare of low income children who have been largely invisible in annual budgets. Some years it has looked like things might be improving somewhat and other years that they were going backwards.  Does this budget turn the tide?

The government has offered real hope, that this time it will be different. That we have the possibility of a true step change.

I attended the social services budget lockup on budget day. The eight ministers and the Prime Minister exuded a new energy and sense of goodwill that we have not seen for decades.

And the budget delivers much to applaud: better access for low income families to primary healthcare; housing; social services, and critical infrastructure. But does it really show a grasp of the enormity of the income and wealth gaps?

Let’s be clear, the family poverty inherited from the last decade of entrenched poor policies, sheer neglect or deliberate attacks on living standards won’t be fixed overnight. We get that. We know the PM has solving child poverty at her core, and her values and integrity are the best thing that has happened to children for a very, very long time. But CPAG is the critical friend and has to say the hard stuff on behalf of children.

Grant Robertson talked of surpluses and debt reduction to future proof the economy against shocks. We have a massive social shock of unsustainably low incomes. It is not like an earthquake that dislocates society in an instant. It has crept up on us, but is no less significant or disruptive, or less requiring of effective action.  

Of housing, incomes, health and education, housing is an absolute priority. Safe and affordable, secure, warm dry housing underpins success in the other three areas. It assists greatly in health and educational outcomes, and enables parents to have a better chance to earn in the labour market.  But adequate income is critical too.

Too many low income families just don’t have enough money for basics like food, after housing-costs are met.  The social sector reports on this crisis every day. But who is listening?

The new Families Package, disappointingly not coming in until July, will help. But this budget does not appear to have a plan to deal with the serious systemic income deficits built into our system of family assistance.

Yes, there are working groups to meet and report eventually on tax and welfare. And it is pleasing to see that the shocking squeeze National were going to impose on the working poor by lowering the income threshold of Working for Families to $35,000 has been understood and addressed by raising the threshold to $42,700. But, the rate of abatement still increases to 25 percent and there is no proper indexation promised.

Yes it is a good start for the working poor caught by vicious poverty trap but the fact is, hungry children in families ‘not in work’ can’t wait.

The Families Package promises a big boost, but it is coming in too late and will not be nearly enough for those families and children who have been neglected for a very long time – the ones right at the bottom of the heap.  

These are the children who fall not just under the 60 percent level of AHC (disposable income left after housing costs), or even the 50 percent AHC line, but are below the impossibly low 40 percent AHC.

MSD’s 2016 figures show one half of children under the 60 percent line fall below the very low 40 percent line.  This is 140,000 children (or more like 160,000 because of acknowledged problems with the survey).

We have the impression that things for this group have got worse since 2016. Over the last two years MSD hardship spending is up 50 percent for things like food grants.  In spite of this, Foodbanks like the ACM and Salvation Army, and the Wellington City Mission report ever increased demand. For example, the Salvation Army had a 12 percent increase over last year. Budgeting services; Kidscan and other charities report an ever deepening poverty picture of increased debt and food hunger and mental distress.

The new Best Start programme will help families with babies in the future but none of the 160,000 children I am talking about here get anything at all from it.

I think we get the best understanding of what is happening by asking the simple question. What would it take to lift a family’s after housing costs income from the 40 percent line to 50 percent line?  And the answer is: much more than the Families Package will deliver.

The truly shocking fact is families are falling below even the 30% line. CPAG latest analysis shows that even if families get full core benefits for a full year (and many suffer sanctions and stand downs), after paying a rent in Auckland that gives them the new max Accommodation Supplement, their AHC income is around only 26 percent of the median for a sole parent, and can be as low as 21percent for a couple with children. And the picture is not much better for so called cheaper areas.

A sole parent on a benefit with 2 children in Auckland needs another $251 a week to reach the 50% line. A couple on a benefit with 2 kids needs another $334. In July these 2-child families will get just $47 a week more in family tax credits after no increase for 6 years. The one-child family gets only $20.

The challenge that we hoped the government would pick up in this budget is to signal some concentrated spending on these families. Much of the Families Package is not about the most vulnerable- Paid Parental Leave/the Winter Energy Payment and Best Start all have an element of expensive universalism. The Family Tax Credit is helpful but it is paid well up the income scale. The tools used in the Families Package are just not suited to the task.  

To just increase the  Family tax Credit (as they have done) as a means to help the very poorest runs up against the problem of horrendous fiscal cost. To contain costs, the clawback may have to be tightened imposing the damage of high effective marginal tax rates on the struggling working poor.

New thinking is needed to move away from the failed ‘paid work is the answer’ mentality that has created a depth of family poverty most New Zealanders, if they understood it, would find utterly unacceptable.

There are a number of changes that the government can make immediately without waiting for the Welfare Expert Advisory Group to report. Suggestions are found in The CPAG paper: An analysis of the effectiveness of policies for children in the worst poverty in 2018 available here

 

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About the author

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

19 Comments

  1. CLEANGREEN says:

    Like the mycoplasma bovis scandal; – what was in this budget was ‘a little too late’ to be effective.

  2. Sam Sam says:

    Is this a sign of “Peak Indoctrination” by NZ’s $80,000 a year Ivy league academic institutions, where liberal professors out number conservative professors by a ratio of 18-1? #AUT where neoliberals sharpen there teeth.

  3. Obersver Tokoroa says:

    Let’s never admire Capitalism

    It is difficult for people to understand just how deliberate and nasty John Key and Billy English were as they set about destroying ordinary citizens in New Zealand.

    It took them 9 short years. Education under extreme distress. Nursing the same. Because they cannot afford the rental costs. English is so proud of that.

    John Key forbade any infra structure maintenance. Foreigners were given open slather of course. Not Kiwis.

    Grant Robertson is getting the blame. Simon Bridges is screaming his incoherent diatribes. Amy Adams is wrapping herself up in fantasy.

    The one reassuring thing is that Jacinda Ardern and Grant Robertson are not doing a mother hubbard – and spending every penny they can find.

    Irrespective of ethnicity, people who need help are getting lots of assistance right now from this Government.

    Reason suggests that you keep sufficient funds available for fixing the terrible mess of the Capitalists.

    Capitalists are Dogs.

    • Strypey says:

      “It took them 9 short years.”

      No it didn’t. Key’s regime was indeed a blight on our country, in a multitude of ways. But blaming 30 years of neo-liberal policy on them let’s their predecessors off the hook too easily. Clark’s government left most of the neo-liberal reforms of the 1980s (Labour) and 1990s (National) in place.

      It’s taken 30 years to fragment our society to the point where people experience smug satisfaction instead of horrified compassion when they see their fellow kiwis sleeping in doorways or begging for change. It would take more than 6 months even to begin turning this around, even assuming the new government are up to the task. I live in hope, but I’m not holding my breath.

    • Marc says:

      And they allowed in a few hundred thousand new ‘residents’ to ‘share’ the land and resources, and demand their share of the ‘services’ to be delivered. It is a poor performance for any government and any country, where ‘growth’ can only be achieved by ever so growing the population, by turning every one against each other as competitor, and by selling stuff from one to the other, in a trickle up kind of way.

      And most just keep shutting up, and run and run, within their hamster wheels, are you getting ahead yet, Kiwis???

  4. Siobhan says:

    Any payments to the poor and struggling, for anything, children or heating, will be undermined by rent increases. Particularly in the regions which are now the hot spot for rent increases.

    No one in poorer areas will be better off, or be any more able to pay for heating.

    That’s just a fact.

    But then I do not believe these are the people that Labour is really reaching out to. Its more something that will make middle class home owners feel slightly better off, and like ‘something’ is being done to help the less fortunate.

    Personally I find the idea of calling $500,000 homes ‘affordable’ is sending a message to the struggling classes that they are not actually an important part of Labours vision of society, that they are excluded from what the rest of us consider ‘normal’.
    Sure, build the houses, its a help, of course.
    But call them what they are, the first step on the property ladder in a ‘market’ that is considered sacred in this country.
    A market that has, and will continue, to render a massive social/economic divide in this country.

    • Obersver Tokoroa says:

      Hi Siobahn

      It is true that no poor person will afford a $500.000 home. But then very few middle class can afford $1,000,000 home.

      Teachers, Nurses and Doctors could aspire to a $500.000 home. But only if their income are raised and transport improved.

      The Government will also be building more houses. Which should produce something of a competitive market when it comes to Rentals. The more houses built, the less the landlord can screw out of them.

      But I would hope a cap will be placed on all rentals. There used to be – from about 1915 until Margaret Thatcher removed it and let the Landlords skin the poor alive.

      Simon Britches will Scream. Amy Adams will spit even more nonsense. Paula will order more deadly canapes.

  5. LOLBAGZ says:

    saccharine socialist selflessness siren’s specialized sophistry

  6. Andrewo says:

    This article seems to imply there was no poverty in NZ before the previous government was elected. That’s strange!

    In fact outcomes for Maori and Pacifica steadily improved during the ten years of National government.

    I suspect that whilst Jacinda’s heart is in the right place, her head is all over the place: I expect no improvement for the poor in the coming three years because so far Labour’s policies have been negative for them. All I see is virtue signalling.

    The regional petrol tax will impact the poor more than the rich

    Free first year student loans are a gift to rich families

    The end of oil exploration in Taranaki will wipe out thousands of jobs, and thousands of salaries will cease to support local communities

    Don’t expect any poor people to get kiwibuild houses: They will be bought by rich people and flicked off a few years later for a tax free profit.

    • Maama says:

      Andrew please tell us how Maori and Pacifica improved during the past 10 years?

    • Strypey says:

      AndrewO, I agree there was poverty in Aotearoa before 2008 (see my reply above), but it got significantly worse over the last 10 years by any meaningful measure; wages relative to inflation, number of homeless, real unemployment (see Frank’s articles on the misleading ways this has been measured of late), health outcomes, life expectancy, the prison muster, mental health, and so on. I don’t remember reading about leaking operating theatres in public hospitals, even under Bolger’s government, but they have been a shocking feature of the last 10 years.

      “In fact outcomes for Maori and Pacifica steadily improved during the ten years of National government.”

      Is there any possibility you are speaking from the perspective of the 9.9%, the new aristocracy in the US UK, and other neo-liberalized societies, who owe much more to privileges they inherited than they care to admit?
      https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/

      • Andrew says:

        Strypey

        Overall NZ has become wealthier since 2008 and income inequality has remained fairly constant:

        http://archive.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-progress-indicators/home/social/income-inequality.aspx

        During the from 2008 to 2017 National increased the minimum wage from about $12/hr to about $16/hr whilst at the same time retaining the previous government’s ‘working for families’ program.

        After the hiccup of the 2008 GFC unemployment trended down to the point that now there are more jobs than willing workers by the long way.

        In fact the actual policies of the Clark and Key governments were almost indistinguishable. And now you’re seeing that the current government will do little different than the Key government, despite all the outlandish promises.

        I agree there is a housing shortage and this started rearing its head early in the Clark era and has gotten steadily worse since. But note that it is largely an Auckland problem not a New Zealand problem. The causes can be laid at the feet of Auckland Council: An overly expensive and bureaucratic consenting process plus zoning restrictions for the building of new suburbs.

    • This article seems to imply there was no poverty in NZ before the previous government was elected. That’s strange!

      In fact outcomes for Maori and Pacifica steadily improved during the ten years of National government.

      Andrew, please provide evidence of that claim so we can assess the validity/merits of your assertion.

      In fact, former Dear Leader John Key disputes your assertion;

      Prime Minister John Key has acknowledged that the “growing underclass” he promised to tackle in 2008 has probably grown further – rather than decreased – during his first term in government.

      Mr Key made the concession yesterday when asked about progress with the underclass, saying it depended what measures were used but recessions tended to disproportionately affect low income earners and young people.

      He said he had visited a number of budgeting services and food banks “and I think it’s fair to say they’ve seen an increase in people accessing their services. So that situation is there.”

      ref: https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10759869

  7. Michelle says:

    Andrew you really are either a dreamer or a spinner the gnats = more Maori in prison both men and women. More Maori dying prematurely because they didn’t get to see a specialist until it was too late, more Maori homeless, more Maori dying from all the cancers and other non- communicable diseases. More Maori leaving for Aus, more Maori Not in education employment or training and the list can go on I suggest you stick a pipe in it( your mouth )casue you don’t know what the f..k you are talking about hence why our people voted in numbers for change.

    • Observer Tokoroa says:

      Yes Michelle – Slimy eels cultured by Simon

      Andrewo is doing the Capital Twist. Filling his guts while the poor die at his feet. Ask him what he has ever done for the lowly !

      He is a version of Amy Adams. Billy English. While John Key plays golf.

    • CLEANGREEN says:

      Michelle;

      ANDREW is both a dreamer or a spinner for the gnats

  8. Mark says:

    I was born disabled, Im currently married to someone who works, because of that simple fact, I get no help, assistance or support, not even to find employment.
    Discrimination is rife in this country, I walk into interviews, their face changes and its always a no, I’m sick of this. I have given up trying.
    I wrote to my local MP – David Clark and its approaching 3 months since I sent that email explaining the difficulties I face and still waiting on a reply, have sent a similar one to Disability Issues too, no reply there either.

  9. Marc says:

    If Susan still has hope in Jacinda, she cannot be helped, as I suggested before, this train journey has long lost the station, only ruthless protest may work now, all else is a total waste of time:

    https://www.youtube.com/watch?v=cI4zdX_2I0k