Labour set itself a lot of aspirational targets during the last election campaign. Driven more by desperation than direction, those targets are proving to be a heavy weight around their necks now. A promise to end homelessness in four weeks pre-winter 2017 was always going to be foolish, 100,000 houses in 10 years backfired brutally and plans to reduce child poverty have barely scraped the statistical margin of error.
Two years into a five-year Families Package, costing over $1 billion annually, all Labour has done is demonstrate what I will say for free; big government doesn’t work. A forecast 3% increase in benefits on April 1 will not make a difference, just as National’s $25 benefit increase in 2015 didn’t.
Social welfare is how New Zealanders refuse to accept that anyone should be completely destitute in this country. The point of welfare is to guarantee that when life throws you a curveball, the Government will ensure you and your children will have somewhere to live, food to eat and electricity. If you are completely dependent on social welfare then I don’t think it is unreasonable to consider yourself to be living in poverty. That will never change while you are welfare dependent and increasing weekly payments to beneficiaries will lift nobody out of poverty.
This larger than normal increase is the result of the Government linking benefit payments to the average wage, instead of the Consumer Price Index. Normally a 1.5% increase in benefit payments would be the result of a CPI adjustment; using movements in the average wage is the reason for a 3% increase this year.
Using two equity (percentage of children living in households earning less than 50% of the median wage before and after housing costs) measurements as poverty measurements has shown a 1.6% decrease in pre-housing costs numbers and a 2% reduction in post-housing costs numbers. On the other hand, using figures that measure material hardship (multiple indicators including footwear, electricity and the ability to pay to visit a doctor) show an increase of 0.4% of children living in such households. In any case, it is decimal academia barely worth mentioning were the persons making up the statistics not so important.
There is more significant data outside of the reporting requirements of the Child Poverty Act that paint a clearer picture of the impact Government policy is having on low income New Zealanders.
The Government started whacking tobacco smokers with CPI+ 10% excise tax increases in the 2011-12 financial year. The data available only extends to the 2017-18 year though the annual Health Survey won’t be far away. In 2011-12, 25.9% of the bottom quintile (the bottom 20% on the deprivation index) were daily smokers. That’s 172,000 people each annually paying $1742 tax in today’s dollars. In 2017-18, 23.2% of the bottom quintile (173,000 people) were daily smokers, but their annual tobacco tax bill had grown by 79.39% to $2986.85 per person.
Without the foreign-buyer ban and the nonsensical plan to build 100,000 houses over ten years, Labour’s housing policy looked reasonably solid. Unfortunately they’ve only tried to implement the stupid bits, resulting in a 142% increase in the social housing waiting list in the previous two years, while rents in Auckland have increased 15% on average in the previous four years. Emergency Housing grants have nearly doubled from 2018 to 2019. Low-income families spent 27% of their income on average on housing in the 90’s but now accomodation eats up 55% of their income.
What they’ve failed to tackle are the fundamentals of the housing market which strangle supply while demand continues to grow. The Rural-Urban Boundary around Auckland, which has been proven to increase land prices 2km inside the boundary by 700% compared to 2km outside the boundary. ACT demonstrated in the 2017 election that, were the boundary to be abolished, there would be room to construct 660,000 more residential properties in Auckland, stabilising housing affordability and growing the pool of ratepayers to sustainably fund infrastructure.
The problem for low income working families and beneficiaries isn’t one of income; it is the accelerating price of living. An extra $10 a week to reduce poverty is low resolution thinking. Removing school fees, providing lunches in schools, electricity subsidies in the winter and a handful of coins makes people more dependent on the state. Allowing house market corrections, reducing excise tax on cigarettes and slashing income and company tax returns responsibility and power back to individuals.
A dollar taken from your wallet, run through a bureaucratic washer, picked at by policy rats and spent on ‘reducing poverty’ will never create the economic impact that a dollar spent by you does. The Provincial Growth Fund is just one of many tools this government has developed to prove it. $3 billion and 2 ½ years later, Shane Jones’ slush fund has created 1922 jobs (616 full-time).