The true believers will nod in agreement. Government’s spending is too high and taxes are too high. Cut the first even more than the second and we will be speedily on the way to the Nirvana of a return to surpluses and fiscal rectitude, despite COVID. All that is needed an incentive for the poor to work while social insurance is the answer to middle income unemployment.
“This election and Covid-19 present New Zealanders with an opportunity to change their future and create a fair, modern employment insurance scheme,” says ACT’s Employment Spokesperson, and third-ranked candidate, Nicole McKee”.
Some bits of ACT’s reasoning are fair enough when they say
“Short-term job loss is likely to become a feature of modern life as work becomes more fragmented and people move in and out of jobs more frequently. “Our welfare system is due for a serious overhaul. It imposes a one-size-fits-all solution that works for no-one. It fails people trapped in long-term dependency… It fails to address the realities of a modern economy.”
But ACT’s propositions are to further reduce the welfare safety net, and their “fair, modern employment insurance scheme” is a chimera designed to deceive. There is no gender analysis, no moral hazard analysis, and no distributional analysis. It sits inside their dry as dust economic policy of tax cuts and spending cuts and balanced budgets reminiscent of Ruth Richardson on steroids.
Rather inconsistently Act proposes “Income tax rates remain unchanged” and “ 0.55 percent of the tax paid would be allocated to a ring-fenced employment insurance fund.” This fund would insure 55% of previous earnings up to gross earnings of $109,000. Lucky the few who can point to a consistent income for two and half years because only they can enjoy a full 26 weeks insurance support.
“On the loss of employment, a taxpayer can claim 55 percent of their average weekly earnings over the previous 52 (or fewer) weeks. The maximum yearly payable amount is $60,000. Insurance can only be claimed for one week for each five weeks the person has worked, up to a maximum of 26 weeks per claim. Someone who has worked continuously for only one year could claim up to ten weeks’ employment insurance.”
According to ACT the ‘worthy’ working middle class must at all costs maintain their superiority- as they have “paid high taxes for years” When they lose work “they get little back in benefits” and what a huge calamity it would be for them to drop to the existing unemployment benefit and face “the stigma associated with welfare created by long-term beneficiaries who have made it a lifestyle choice.” That phrase “a lifestyle choice” reveals the heart of ACT.
Oh the faux outrage now that the middle class discover how miserable the welfare system actually is. How could they possibly be treated as if they were just a ‘welfare beneficiary’? How appealing it might look that ACT can come to the rescue. How predictable all this is to a weary welfare sector unable to make any progress on the fundamental issues of welfare reform with the Labour coalition government.
Let’s go back to that average wage earner on $69,000 paying $13, 720 in tax. Do they currently really “pay generously into a scheme that does not support them adequately if they unexpectedly lose their job”? In an ACT fantasy world all taxes are theft from hard-done by workers so it costless to reallocate or ‘ ring fence’ some of the existing tax as if that tax is not needed for health, education, security and the myriad of other things the state provides.
A mother recently returned to work or someone who has recovered from illness or accident on redundancy will use up their employment insurance entitlement, if they have any, very quickly. Doubtless, they and others whose insurance runs out will be so, so grateful to ACT when they discover that
“ they can move to Jobseeker Support and Electronic Income Management would apply. (Under Electronic Income Management, a benefit is issued on an electronic card and restrictions on alcohol, gambling, and tobacco expenditure apply.)”
Wait a minute isn’t ACT the right-wing libertarian party? Are they seriously considering monitoring freedoms of the displaced they pretend to defend?
Th social insurance scheme is supposed to be fair “because people get paid out in proportion to what they pay in, rather than a flat benefit rate regardless of their outgoings or previous tax contributions.” But that tax money has already been spent. To make this operational it can apply only for future contributions and is hardly the answer to the immediate COVID crisis
“Our scheme would also be fiscally-neutral, paying for itself with automatically adjusted premiums and savings on benefits.
Hang on a minute- what are these savings on benefits? If we didn’t have the COVID recession we still would not have a stash of unspent tax revenue. Just who are the “many independent economists” that were consulted and have been used by ACT to imply endorsement?
Make no mistake this is pure ACT policy. Any apparent generosity to middle income workers will be paid for with fiscal austerity. Reading the background document we find benefits will be slashed. The COVID increase of $25 per week, the winder energy payment, Best Start and KiwiSaver subsidies will all go as will benefit changes in Families Package and the WFF increases. With other moves SAVINGS of $7.6 billion are expected by 2024.
Be afraid be very afraid.