To quote a former Labour Prime Minister you’ll need “a cup of tea and lie down” after this one.
Yesterday Matthew Craig challenged on Facebook a sentence in my last blog in which I stated the current Labour led coalition ‘has no intention whatsoever of doing anything significant to reduce the gap between haves and the have nots’ . He then offered “ an incomplete list of just some of the things this Labour led coalition has achieved/is working on, in order to ‘reduce the gaps’, and help make this country a better and fairer place to live in”
Fair enough, I accept the challenge . After all in these days of fake news none of us should just accept anything anyone writes at face value, so bear with me as I go through Matthew’s list of what he says are the Labour Coalition achievements (some of which a Labour pamphlet left in my mailbox also listed)
But let me start by being clear about what I mean about “the gap between the haves and the have nots”
It’s about asset wealth. Because through the neoliberal way we run our economy people make money not simply by working and earning income but by sitting on their assets ( such as their houses) which go up in value largely through no effort of their own.
And therein lies the problem. Because the longer we allow people who DO have assets to get a tax free ride on the rising value of the assets they own, then we give them a huge ongoing advantage over those of us who don’t own our own house or farm or whatever. So day by day New Zealand is becoming a very unfair society .
The last time NZ Stats measured wealth distribution in our country they found the richest 10% of households in our country own 60% of the wealth and the bottom 40% own just 3% of it.
THAT’s the gap I’m talking about and because no big economic adjustments have been made to tax the wealthy and reduce the tax burden on lower income families ( eg. like taking GST of food) then that gap, I say, is very likely to be continuing to grow under the current government . Certainly it won’t be shrinking and THAT’s the big problem our current government is avoiding.
Matthew Craig however thinks I’ve got it wrong so bear with me as I go through the list of what he sees as the Labour led coalition’s achievements. I’ll quote him and then comment.
“$5b Families package (families up to $75 week better off)”
This is not as generous as it sounds .The package increased the “clawback” rate of Working for Families to 25 per cent once the $42,700 threshold is reached.
Here’s a quote from Associate Professor Susan St John of Child Poverty Action
“It will be common for families earning over $48,000 to lose 30 cents in tax, 12 cents in student loan repayment, 25 cents in Accommodation Supplement, and 25 cents in Working for Families, from every additional dollar. It feels like having a 92 per cent tax rate”
“Best start payment for new parents”
Is part of the Families package (see above) and does not apply to children born before the start date and therefore cannot address the plight of many of those under the 40% poverty line.
“Eliminated secondary tax”
Yes and a good thing too because we now live in the neoliberal “gig” economy where many people can’t make ends meet by just having one job.
But here’s the problem. Many minimum wage working families with two earners will already be at or above a combined household income of $42,700 after which every extra dollar earned means a 25c loss of Working for Families and a 25c loss of any Accommodation Supplement.
So unless the government does something about that “clawback” rule then lower income families are not going to be able to “get ahead”
“Raising minimum wage to $20 by 2021”
Good decision but not good enough. The minimum wage is It’s currently $17.70 per hour -good luck trying to live on that – and $20 by 2021? I’m picking the rise cost of living will have demolished any real benefit by then .
I’ve seen some economic modelling that suggests that if Labour had not introduced neoliberalism in 1984 and National had not undermined collective bargaining the current minimum wage would be around $35 per hour
“1 years fees free tertiary education”
Great. A step in the right direction but until ALL tertiary education is free then today’s young people will not get the advantage I received in the pre- neoliberal days when I left University virtually without debt- which of course allowed me to save for a home and become one of the haves . A progressive government would do this immediately – as Scotland has done.
“Market studies around petrol/food prices to give commerce commission greater powers”
“Market studies” don’t effectively reduce the gap between the rich and the poor because any action that is taken on, say, controlling the price of petrol is a benefit to rich and poor alike
“Provincial growth fund boosting industry/employment in regions”
Great idea from NZ First and as a fan of Keynesian economics I’m really warm to the policy of the government priming the financial pump to create jobs. But let’s take a quick look at how this is policy is actually being managed by Shane Jones
$1 Billion a year allocated Yes?
The Ministry of Business Innovation and Employment reports that maybe – maybe -10,000 jobs have been created throughout the regions so far and they reached that figure in a very questionable way
They totalled the number of jobs that every Provincial Growth Fund applicant PROMISED in their grant application ( not checked up on and DELIVERED) then they added one job for every feasibility study the Provincial Growth Fund was undertaking – that’s because you have to hire somebody to do a feasibility study.
So we don’t know the actual numbers – just what applicants promised – and if you think about the level of income of people (eg accountants) who are employed to do feasibility studies it’s not your rural and small town low income earner is it?
As yet, then,for the large amount of money being spent on this scheme we are not seeing a significant closing of the gap between the rich and the poor.
“Making all rental homes warm and dry”
This is not a policy unqiue to this Labour led coalition . It began with the Greens pushing for it under a previous National led coalition and I applaud it.However, while warming up houses may make renting more comfortable and improve the health of children in low income families it does not reduce the asset gap between the haves and the have nots.
“Stopping sale of state house/building more state houses “
Oh I really think Matthew you need to look into the deplorable Glen Innes situation Yes they are building new state houses but they are continuing National’s neoliberal policy of virtually erasing the existing community to sell a lot of state owned land to wealthy private owners to build executive homes . Evicting low income families from solidly built state homes instead of infilling vacant land breaks up family and friend support networks and doesn’t reduce the gap between the rich and the poor.
“Kiwibuild making housing more affordable for low-middle income earners”
No. Analysis from Housing Minister Phil Twyford’s own ministry shows that two thirds of first home buyers wouldn’t be able to comfortably afford the first lot of $579,000 KiwiBuild houses. (Source )
The problem is the gap between stagnant wages and the rising cost of land and building .Many teachers for example cannot see themselves being able to get into a home of their own for many, many, years if at all.
“Extended paid parental leave”
Yes – this makes life better for families but again does not significantly reduce the gap between the rich and the poor because it’s universal. Rich parents and low income parents both get it
“Reduced/made free cost of GP visits”
I assume Matthew you meam free for children . Yes . I advocated for this in 2011 in my documentary ‘ Inside Child Poverty’ . National started bringing it in and Labour extended the age because, compassionate reasons aside, all parties realised it makes good long economic sense to keep kids out of hospital .
Again because its universal – rich parents get the advantage of it as much as poor parents do , so while a really worthwhile idea it doesn’t significantly lower the gap between the haves and have nots
“Winter energy payments”
Again because it is universal those pensioners who don’t really need it get it as much as those who depend on it and so it doesn’t shrink the wealth gap
“Banned letting fees”
Yes -a good thing. But as long as rents are high compared to income it doesn’t solve the problem of rich folks making untaxed wealth in the long term by owning ad eventually selling their rental properties
“Restarted Superfund contributions “
Good. Again though it’s universal so doesn’t reduce the wealth gap.
“Mana in Mahi apprenticeship scheme introduced”
Very worthwhile initiative . Getting a job is the first step to being able to support yourself and a future family. BUT – as long as the amount of income you earn from working keeps falling behind the rising cost of housing (because asset owners get a tax free ride) the working folk can never get ahead
“Extended brightline test to 5 years”
The Brightline test was begrudgingly introduced by National and yes extended by Labour . But as long as property continues to give better long term untaxed returns than say saving your money in the bank or investing in a business then property prices will continue to rise faster than wages increase.
So the gap between those who have assets and those who don’t will continue to grow and our society will become more and more unfair.
“Banned foreign buyers from housing market”
No. It’s a partial ban Foreigners with NZ residency status will still be able to buy homes, as will Australians and Singaporeans ( because of our free trade agreements) Anyone holding a resident visa, that has been living here for at least a year including at least 183 days in the past year, is still be able to purchase a home.
Foreigners are also able to buy new apartments in large developments and multi-storey blocks bought off plans.
“Rebuilding neglected/sub-standard schools/classrooms “
Good and necessary – but again it is neoliberalism with a slightly softer face and does not reduce the financial gap between the haves and the have nots because it’s a universal infrastructure spend
“Rebuilding severely run-down hospitals”
Good – but again doesn’t reduce the wealth gap as everyone rich or poor can access a public hospital
“Nurses pay boost”
It was a begrudging payment . It didn’t come from a socialist heart .Robertson didn’t just wake up one morning and think “Nurses are underpaid I really must give them a pay boost.” Nurses had to strike and strike again for it” It was collective action that won the day no Labour’s economic policy
“Negotiating significant teacher pay/conditions boost”
Again it being done begrudgingly . It’s being achieved by collective action by the unions. Not through an economic policy that deliberately sets out to promote the collective good over individual wealth creation.
“Introduced 100s new police”
I’m sure property owners will be relieved because most crimes for which people are jailed are against property not persons. When folk are deprived of the right to make a legitimate living they turn to illegitimate means. Having to have more police is actually an indictment on an economic system , not something to be proud about
“Curbed gun ownership rights”
Yes – good. Should have happened 22 years ago when the Thorp report came out and both Labour and National governments had the opportunity to implement it.Gun laws unfortunately have nothing to do however with the reducing gap between the rich and the poor
“Banned offshore oil and gas exploration”
Good for the environment . But without a government a funded job replacement scheme for those being made unemployed by such legislation how will this reduced the gap between the haves and have nots?
“Banned single use plastic bags”
Again great for the environment but not using plastic bags is not a solution to the unfair wealth gap in our country
“About to introduce a wellbeing budget, a world first”
Yes. I’m really keen to see how Robertson thinks a fair society can be funded by the economics of selfishness
“Re-establishing culture of dignity/kindness for beneficiaries”
Good. I hope it’s working. Have you tried to live on a benefit? Unless you introduce measures to redistribute the nation’s wealth, beneficiaries are going to continue to struggle no matter how nice the people at the MSD are
“Setting 10 year child poverty reduction targets”
Which they are not meeting. Matthew you should read this paper by Assoc Prof Susan St John and Yun So
“Increasing tax credits for innovation”
Again a good idea – but you have to have a minimum R&D expenditure threshold of $50,000 per year. How will this improve the lives of the 40% of us who own 3%.. of the wealth?…oh wait. Trickle Down theory. If wealthy people get a tax cut of up to $120 million (the cap) for being innovative then we’re all going to be better off. Do you really believe that?
“Increase Maori development projects”
Do you mean as part of the Regional Development Plan Matthew ? If so I covered that above. If not Please give a reference.
“Cracking down on multinational tax avoidance”
Great idea but not a Labour led initiative – rather its an international one .While the Taxation (Neutralising Base Erosion and Profit Shifting) Bill was introduced in December by the new Revenue Minister Stuart Nash, it is not a creature of the current Government.
It was constructed by officials under the previous government as part of the global push by the rich countries’ club, the OECD, to curb the aggressive tax planning available to companies that operate across borders.
So it’s not a Labour initiative. It’s really just going along with what the OECD wants and the EU is putting in place.
Will it make a significant difference to the gap between the rich and the poor ?
We’ll have to wait and see how effective the legislation is, how well it is put into operation , how much revenue is collects and more importantly how that wealth will be redistributed because if it goes into, say , roads and not housing then it won’t address the asset wealth gap.
In short I see a lot of shuffling of money that already exists I our economy by this Labour led coalition and to repeat I can see no significant moves to redirect untaxed wealth from the asset rich to the overly taxed asset poor
So no Matthew, I have not “been sleeping “ as you suggest I’ve been consistently trying to address the nightmare that is neoliberal economics and the effect it has been having on the lives of ordinary New Zealanders since Labour introduced it and Natoional put it on steroids.
And no I haven’t been misleading anyone ( which you also suggestted ) as I hope the above fact check illustrates.
Bryan Bruce is one of NZs most respected documentary makers and public intellectuals who has tirelessly exposed NZs neoliberal economic settings as the main cause for social issues.