The Post: Reckless approach to research will ensure our slow decline continues

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Productivity, as the economist Paul Krugman once said, isn’t everything – but in the long run, it is almost everything. Producing more for each hour worked increases prosperity, allows people to spend more time with their families and communities while maintaining their standard of living, and can lay the foundations for a less environmentally damaging economy.

Virtually everyone agrees that increased spending on research and development – the creation of new knowledge, products and services – is vital for that enhanced productivity. It is alarming, then, that the last prime minister to take this subject seriously was Helen Clark.

In the 2000s, she lifted the government’s funding for R&D from around 0.3% of GDP to 0.4%, an increase worth hundreds of millions of dollars. It hit nearly 0.5% a few years later but has fallen steadily since, slumping back to 0.3% two years ago.

These data come from a presentation earlier this week by Victoria University emeritus professor Jonathan Boston. Other reports produce slightly higher figures, but either way we are woefully behind the average OECD government, which spends around 0.7% of GDP on research and development.

One might think that our current ministers, who talk incessantly about economic growth, would want to dial up that spending. Not so.

Boston estimates that, on the current trajectory, state funding for R&D will fall by around 10% over four years, after adjusting for inflation. Future Budgets might alter this path: but given the current obsession with cutting spending, who would bet on that?

The previous Labour government had a target for increasing New Zealand’s total spending on R&D – including not just state funds but also business investment – to 2% of GDP. But Shane Reti, while he was still science minister, abandoned that target, dismissing it as “a slogan”.

The result is that our total investment languishes at around 1.5% of GDP, when other small economies – think Denmark, or Singapore – spend literally twice as much. To catch up with them, and become the modern, dynamic, innovative nation we always say we are, we would need to invest – across government agencies and businesses – another $6 billion a year.

And it’s not just economy-focused research that’s being downgraded. This week three senior climate scientists warned that, even as the damage from climate-change-induced floods was ramping up, funding to better predict such disasters was winding down.

Researchers need to examine the compounding risks from a warming atmosphere, rising sea levels, melting snow-packs and extreme rainfall events. But funding for that kind of inquiry has been axed, with no obvious replacement.

Last year, the Government’s budget cuts forced the removal of Earth Sciences New Zealand’s specialist climate modellers, a team of people who established how global trends would play out here. The obvious risk is that we end up flying blind into a world of growing disasters.

Dr Lucy Stewart, who heads the association representing Kiwi researchers, estimates we’ve lost a staggering 700 scientists in the last couple of years. Andrea Bubendorfer, a former Callaghan Innovation staffer, has even claimed to have seen ex-scientists suicidal and financially destitute, their jobs disappearing with nothing to replace them.

Others have gone overseas, in many cases never to return – because what would they return to? They know this Government doesn’t truly value research, and that it’s far from certain its successors will shift the dial.

Continuing its attacks on science, the Government has barred humanities scholars from applying to the $78 million Marsden Fund, the resources of which were vital to social science research in this country. Marsden-backed projects had examined crucial questions like why young people don’t vote, how to better understand men’s mental health, and which reforms could improve sexual consent.

The fund had also supported research into ethical approaches to AI – the kind of inquiry that, as technology increasingly dominates our lives, will only become more important. Even people like the New Zealand Initiative’s Michael Johnston, who thinks the Marsden Fund backed some “silly” projects, believe the solution was greater scrutiny – not a wholesale attack on the social sciences.

The Government’s intellectual vandalism is, in short, cutting investment in research that could support the economy, help us understand looming disasters, and build a better society. Too many ministers, it seems, don’t believe in science (certainly not when it’s inconvenient to their agenda), or are ideologically biased against state investment.

Too many New Zealanders, meanwhile, remain stuck in the old “No.8 wire” mentality, believing – and praying – that innovation will arise from lone individuals pottering in sheds, when increasingly it comes from state-supported industry clusters and large-scale centres of excellence.

The Government will, accordingly, suffer little political damage from its reckless cuts. And as scientists disappear overseas, natural disasters compound in unexpected ways, and our standard of living continue to slump, Kiwis will be left sensing vaguely that something is wrong, without ever really understanding why.

The Post: The unelected officials and how they’re defying our councillors

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You may be startled to learn, dear reader, that the contracting-out of public services is for unelected officials, not elected politicians, to control. So too the question of whether councils pay their staff properly or not.

The latest story to suggest something is badly awry in our public bodies came this week, as The Post reported that unelected staff at Wellington City Council are apparently refusing to respect a resolution by councillors to investigate bringing services like cleaning back in-house.

Officials appear determined to instead press ahead with giving the cleaning contract to a private firm, telling The Post this is an “operational” matter. In other words: back off, politicians.

Unsurprisingly, Unions Wellington is threatening a judicial review if staff don’t respect the resolution, noting in a letter that outsourcing often fails, and issuing a reminder – obvious enough, one might think – that officials’ job is “implementing the decisions of the local authority”.

The incident is all the more alarming because the council has form here. Last decade, officials tried to argue it would be “illegal” for councillors to lift the pay of traffic wardens, cleaners and the like by mandating the Living Wage.

Pay policies were for officials to determine, supposedly. The Living Wage campaign had to roll out the big guns, in the guise of former Victoria University law dean Matthew Palmer, to make it clear to officials that they were totally out of line.

That he was right is demonstrated by a decade’s worth of experience, in which the Living Wage has not exposed the council to conspicuous illegality but has, instead, improved the lives of some of the city’s lowest-paid workers.

Grotesque over-reach is not limited to local officials, however. Central government agencies will rarely defy politicians explicitly, but they are perfectly capable of slow-pedalling policy they don’t like, delaying it in the expectation – often successful – of outlasting their minister.

They can also abuse their superior knowledge vis-à-vis politicians and, as a departmental CEO once admitted to me, carry on obstinately with previous work programmes even when a government changes.

At this point, it is tempting to start up talk of a “shadow” state, of “cabals” of unelected officials running the show and using politicians as their puppets. But there is fault on both sides of the fence.

It is hardly uncommon for ministers to ignore sound advice, insist on ill-conceived pet projects, bully officials and micro-manage initiatives. Back here in Wellington, former councillor and 2022 mayoral candidate Paul Eagle had to apologise for labelling officials “the Gestapo”. Many elected members overstep their bounds, bombarding staff with requests that pay no heed to the difference between governance and management.

The truth is that the relationship between politicians and officials is badly in need of repair, at all levels of government. Public servants often see political leaders as ill-informed and reactive, indulging the public’s worst impulses; for their part, elected members sometimes regard the bureaucracy as a left-leaning “blob” that imposes its own agenda.

At the heart of a restored relationship must be a public service that is transformed in two directions, simultaneously tougher and more pliable. Officials need to rediscover the art of genuinely free and frank advice; junior public servants often describe being told by their superiors not to put up certain arguments because “the minister won’t like it”. A ministerial advisor once told me he had to ring up agencies and tell them not to pre-censor material, because his office actually did want to hear all the options, even unpopular ones.

To give that more holistic advice, officials – at whatever level – will need to be better-resourced, benefiting from greater professional development, deeper specialist knowledge, less of the constant hopping from agency to agency, and enhanced job security for departmental CEOs so they can more readily speak truth to power. AI can help with the brute work of collating information and getting more quickly to the heart of the matter, albeit the more ambitious claims about its capacities should be treated with caution.

Part two of the transformation, though, is that, once its advice has been digested, the bureaucracy needs to be quicker and more effective in delivering whatever the politicians decide, however hare-brained that might be. No slow-pedalling, no subtle subversion. The sanction on politicians must come from the electorate, fallible and inattentive though the latter often is.

That’s a lot for any organisation to manage: change in one direction is hard enough, let alone two at once. But needs must.

And the responsibility for change doesn’t lie solely with officials. The conditions under which they work are set largely by the other partner in the relationship.

If, for instance, agencies are nervous about giving free and frank advice, it is because too many ministers have made it clear this can be a career-limiting move. The problems with officials start, ironically enough, with politicians.

The Spinoff: The government’s fuel crisis package looks weaker with each passing day

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They say two out of three ain’t bad, but Nicola Willis’s fuel crisis package will be doing well to achieve even that. 

Of its oft-repeated aim to be “timely, targeted and temporary”, only the first point – a rapid response – has inarguably been achieved. As the Iran war drags on, the chances of its being truly “temporary” look slight. But it is the “targeted” element that is looking especially unsound, as the list of groups excluded grows ever-higher.

The true meaning of the word “targeted”, after all, is not “given to a small group of people” but “given to the right group of people”. And that does not seem to be the case here.

The package delivers an extra $50 a week to the 143,000 households who receive the In-Work Tax Credit (IWTC), a Working for Families payment notionally designed to defray the costs of employment. There’s no longer a requirement to work 20 hours a week to get the IWTC; Labour removed that six years ago. People are, however, still ineligible for the IWTC if they receive a benefit. 

Yet many beneficiaries are also workers. On Jobseeker Support, for instance, people can earn $160 a week before their benefit starts getting clawed back, and somewhat more before it is fully “abated”, in the jargon. 

The clawback rate, though, is 70c in the dollar, discouraging further effort. Many people are left in an intermediate zone, working but still receiving part of their benefit. They won’t get the IWTC – or, evidently, the extra $50 a week. So the fuel crisis package doesn’t even reach every low-income employee driving to work.

And even if they’re not commuting, people on benefits may still need to fill the tank. Willis’s government has strengthened work obligations, requiring beneficiaries to turn up for more Work and Income appointments and job interviews. Ministers, in short, are asking people to do something that often involves more driving, but will not reimburse them for the extra cost of that driving. 

And as the New Zealand Council of Christian Social Services (NZCCSS) pointed out in an open letter to ministers, the fuel crisis doesn’t show up only in the price of fuel. Firms will pass on those costs in the form of higher grocery bills and other charges. And that hits non-workers just as much as workers.

Being part of Working for Families, the IWTC is also available only to parents. Those without children, whether on benefits or off, will miss out. Yet they too drive, whether to work or elsewhere.

The package’s exclusions keep piling up. The government has already admitted that half the children in material hardship – those, that is, living in families routinely going without the basics – will miss out. Again: “targeted” this is not.

The package is also somewhat self-defeating. Two of this government’s chief aims are to lift school attendance and to “encourage” (some would say “force”) beneficiaries into paid work. Yet the failure to help many poor families will leave those households struggling with the fuel bill for school runs and job appointments.

Another disadvantaged group is people with disabilities. As the NZCCSS points out, these households are especially reliant on transport, and often cannot use buses and trains. Rather than making life easier for them, the government is excluding Supported Living Payment recipients from the package – even as it reduces fare subsidies for the disabled community’s Total Mobility scheme.

Finally, the package excludes care workers without children, even though they can rack up huge fuel bills driving around looking after people in their homes. These are also the women denied pay equity by the abrupt cancellation of claims last year.

All up, it is hard to avoid the impression that a government already making life hard for the lowest earners has decided to double down, leaving those households out of the response to a crisis that affects everyone. Nor are ministers convincing when they say beneficiaries are already covered by a 3.1% inflation adjustment coming on April 1.

That is, first off, an adjustment for past inflation, not the current shock. Second, Child Poverty Action Group research shows beneficiaries with children are often $100-200 a week short of the income required to meet basic and social needs. They were underwater even before this crisis. Third, beneficiaries and other low earners typically face worse inflation than others, according to Statistics New Zealand, because staples rice in price more quickly than luxuries.

Extending the government’s package would, of course, cost money, and as we are running a deficit, that money would essentially be borrowed from private investors. That, in turn, risks adding to the annual $9 billion interest bill on government debt.

But not acting also adds costs. Many low-income Kiwis are barely coping, and the failure to support them through this crisis risks tipping them into outright collapse: relationship break-up, addiction, homelessness, other dysfunction. Child poverty already costs the country an estimated $17bn a year in long-term health costs, weaker school results, and lower productivity. The long-run consequences of leaving so many families unsupported could be far greater than any extra costs from borrowing.

The fuel package also reminds us of our repeated failures to build resilience into our social and economic structures. Our reliance on expensive foreign fuel would be lower if we had more EVs on the roads, better public transport, and more renewables. Firms would be less able to pass costs onto the rest of us if they faced more competition in sectors like groceries, energy, banking and insurance. 

We didn’t make this crisis, but we left ourselves wide open to it. And, as ever, the costs of that failure will fall hardest on those least able to bear them.

The Post: EVs may get middle-class welfare – so what?

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Does New Zealand want to be like Russia? That’s the question the Government is raising as it consults on whether to abolish the clean car standard, a policy that levies fees on imports of high-polluting vehicles. This would align us with the only other OECD nation not to have a standard for vehicle emissions: the murderous kleptocracy that is Vladimir Putin’s Russia.

Even if National probably won’t scrap the standard, the mere contemplation of the act is mind-bogglingly bad. It puts us out of sync with the rest of the developed world: just look at Australia, a country we often try to align ourselves with, which is toughening its fuel standards and seeing emissions fall.

The oil crisis has also revealed the Government’s wider policies to entrench fossil fuel usage – scrapping subsidies for EVs, hiking road user charges (RUCs) for those vehicles, and making public transport more expensive – to be a colossal own-goal. New Zealanders are waking up to the brutal reality that the petrol they put in their tank – and, by extension, our $8 billion annual importation of fossils fuels – is a systemic weakness, one that leaves us vulnerable to overseas shocks.

That’s the way the fossil fuel industry likes it, of course. As the British columnist George Monbiot recently argued, oil can only be extracted in limited locations by highly capitalised companies, allowing a small number of mega-players to make mega-profits.

Solar panels, by contrast, can be placed in almost every community. Not only are renewables green, they’re democratic – and resilient. As Drive Electric’s Kirsten Corson puts it, “Sunshine, water and wind don’t get stuck on a boat in the Strait of Hormuz.”

The last major oil shocks, in the 1970s, were – ironically – the impetus for the first big global push on vehicle efficiency. We must likewise use this shock to wean ourselves off fossil fuels as rapidly as possible.

And we would be far better placed to do so if the Government hadn’t scrapped the clean car discount immediately on taking office. A logical counterpart to the clean car standard, the discount helped Kiwis buy low-emissions vehicles, putting the “(re)bate” into the clunkily titled “feebate” system.

It was hugely successful, boasting benefits two-to-three times its costs and being projected to cut 3-9 mega-tonnes of emissions by 2050. EV sales jumped to one in four.

Now, they’ve slumped back to one in 10. Our roads would plausibly boast tens of thousands more EVs – every one of them insulated from the oil crisis – if the discount had remained.

National loves to deride it as “middle-class welfare”. But such attacks are way off-target.

The feebate scheme was to be cost-neutral over its lifetime, as penalties on high-emitting vehicles – often paid by the wealthy – cancelled out payments on EVs and hybrids. And for all the talk of Tesla subsidies, the scheme’s most popular vehicle was the relatively modest Toyota Aqua hybrid, which received twice the grants made for the Tesla Model 3.

Overall, the biggest claimants were people buying vehicles worth $10,000 to $20,000. Technically “middle class”, perhaps, but hardly living the high life.

And the wider truth is that some “middle class” subsidies are unavoidable. Given the urgent need to restrain runaway climate change, we need policies that change behaviour quickly.

Because EVs create large spillover benefits to us all – lower emissions, less pollution – there’s a clear case for subsidising purchases. And when one looks at countries that have shifted away from fossil-fuel cars – Norway’s sales are now almost 100% EVs, while China has hit one-half and Britain and France one-quarter – they have all done it through subsidies.

National argues such subsidies are now irrelevant because new EVs are so cheap. But people still aren’t buying them in the same proportions as in 2023, a fact that probably has as much to do with psychology as economics.

People love a discount and a bargain. That fact, plus supportive RUC policies and general government positivity towards EVs, will have boosted feebate-era sales.

Another reality: even if brand-new $30,000 EVs are just as good as $30,000 fossil-fuel cars, most Kiwis can only afford something like $5000-7000 for a used car. And the second-hand EVs at that price often have inadequate range for busy families.

To get more second-hand EVs into the hands of ordinary households, we need a cascade effect from better-off people buying them new then on-selling them a few years later. Again, subsidies can do that.

What form that could take now is up for debate. The political will on the left is unclear.

Some experts would reinstate the fees and discounts, but leave out politically sensitive vans and utes. Others would subsidise the big corporate fleet purchases that get on-sold within a few years, creating that much-needed second-hand market.

The accusations would no doubt switch from “middle-class welfare” to “corporate welfare”. But so be it. This may just be what we have to do, for the planet and for our own security.

The Spinoff: The poll numbers that could spell death for National

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Polling of this kind normally spells electoral death. No government in the last 35 years has survived once most New Zealanders have come to think the country is “on the wrong track”. Yet this is the situation in which Christopher Luxon finds himself. Contrary to the promises of his 2023 election campaign, he has never been able to convince a majority of New Zealanders that the country is “back on track”. 

Such poor polling has put an end to the hopes of three of the last four governments. Since 1991, pollsters Talbot Mills have – in various guises – asked the public a simple question: is the country on the right or the wrong track? And the results trace a fairly regular pattern.

For much of the 1990s, the public was relatively content under the reign of Jim Bolger, National’s “Great Helmsman”. But things went south soon after he formed his 1996 coalition with Winston Peters, and in the run-up to the 1999 election, as much as 62% of the population thought things were on the wrong track. The coalition promptly lost power.

By the early 2000s, Helen Clark’s Labour government was enjoying similarly rosy ratings – until the global financial crisis hit and people tired of her party’s direction. In the middle of 2008, over half the population were picking “wrong track” over “right track”. Clark lost that year’s election.

Her successor, John Key, and his lieutenant Bill English bucked the trend, in the sense that they kept the country in a good mood right up until – and during – the 2017 election, rendering Labour’s triumph that year all the more remarkable. Famously, though, that positivity did not last. 

After sky-high pandemic-era ratings, reaching almost 80% approval at one point, Labour’s popularity crashed amid the cost-of-living crisis. By September 2023, over half the country felt matters were on the dreaded “wrong track”. And so they turfed Labour out.

So it is a big problem for Luxon that, aside from a very brief honeymoon, his government has consistently elicited a “wrong track” reaction from around half of all voters. Its ranking briefly rallied earlier this year, perhaps reflecting summer vibes and the first evidence of economic recovery, but it is unlikely that this lasted. An early March poll from another polling firm, Freshwater Strategies, had the “wrong track” vote on 55% and rising.

What does all this mean for the election? Clearly, the case against the government has been well established: the opposition parties have convinced the public that the government is favouring landlords and tobacco companies with tax cuts, unfairly targeting Māori, and failing to fix the economy. The rest of the time, the opposition has sensibly refused to interpose itself between Luxon and his public, letting his perceived charisma deficit do the job.

Normally, this might be enough to spell doom. Oppositions don’t win elections, as the saying goes: governments lose them. But normally it takes more than three years before the electorate feels the politicians they are evicting have had enough time to prove themselves. New Zealand hasn’t had a one-term government since 1975, and even then matters might have been different if Norman Kirk hadn’t died. Before that, one has to go back to 1960 to find a single-term administration.

No doubt this is partly why, despite the country’s appalling mood, most polls give the coalition at least a 50-50 chance of being returned to power. Negative sentiment is locked in a battle with the natural desire to allow a government more time.

That leaves the left needing to lift their vote share by another few percent. And that is not going to happen of its own accord. Although it now looks unlikely that a vigorous economic recovery will come to National’s aid, it is equally unlikely that the economy will significantly deteriorate, especially if Donald Trump rapidly walks away from his war in the Middle East.

Some left-wing NGOs, meanwhile, are trying to lift voter turnout, especially in light of the government’s moves to make registration harder. But it would be unwise for the left to pin too much hope on a massive surge in enrolments. Efforts last decade to locate the “missing million” of voters bore little fruit. And if people are to be convinced to vote, they have to feel like they’ll be voting for something.

If the left wants a chance, it needs to channel the ambient public anger embodied in the “wrong track” results – channel it, and turn it into hope. The Greens and Te Pāti Māori, whatever form the latter takes, will undoubtedly supply ideas and inspiration. The big question mark, as ever, concerns Labour.

The party is not unaware of the need to give voters something to cling to, some policy offering beyond a minimalist capital gains tax and a Future Fund that invests in Kiwi start-ups. The “small target” strategy of not getting between Luxon and his unadoring public has only so much road to run.

The party’s view, however, is that, given current economic turmoil, it’s not yet clear how much money any incoming government will have to play with, and consequently what a responsible opposition could promise. Nor does it think that, political obsessives aside, most voters are tuned in enough to hear what it has to say. Which may well be the case. But the result is that everyone is left guessing as to whether the party, and with it the wider opposition, can capitalise on the public’s foul mood.

The Post: Sorry, conservatives, there is no magical money tree

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As an English literature grad, Finance Minister Nicola Willis knows a good phrase when she sees one. So it was no surprise this week to hear her attack her opposite number, Barbara Edmonds, for supposedly believing in “a forest of magical money trees”.

The prompt for this bon mot was Edmonds’ refusal to commit to paying the ostensible $12.8b cost of restoring the pay equity settlements that the Government so brutally and illegitimately swept away last year. The phrase “magical money trees” thus assumes its place in the pantheon of Willicisms, alongside the “cosy pillow fight” she thinks the big four banks are having as they rack up mega-profits without actually competing with each other all that much.

Yet what has her Government done to stiffen bank competition? Essentially zip. Contra the principles of good literature, function has not followed form. To employ a different metaphor: there is political theatre aplenty here, but rather less substance.

Willis isn’t wholly wrong, though, about Labour’s pay-equity dilemma. The party is rhetorically committed to lifting injuriously low pay rates in taxpayer-funded, female-dominated industries, but can’t say where it will find the money.

Nor, given its commitment to only minimal tax increases, is it clear how it would do so. National isn’t the only party with a potential non-alignment between rhetoric and reality.

One weakness in Willis’ argument, however, is that because the Treasury cannot or will not show its working, no-one outside the institution knows if the $12.8b figure is kosher.

There is also, to deploy yet another literary term, a wider irony here, because it is Willis’ side of politics who currently show the greatest faith in the existence of magical money trees.

For some years now, right-wingers have insisted that the government is running out of funds, and the only solution is for individuals to pay for more things from their own pocket. Privatisation and user-pays will somehow increase our means as a nation, magically allow us to afford more nice things.

But simply shifting the burden of payment from government to individual – from taxation to user-pays – doesn’t create extra money. It doesn’t enlarge our means. It just changes the method of payment.

Take public-private partnerships (PPPs), which enable governments to avoid borrowing money upfront for a hospital or other edifice. Instead, a private-sector consortium borrows the cash, carries out the construction, and gets gradually repaid by the state as part of a 30-year maintenance contract.

This is supposed to allow our “cash-constrained” government to deliver more infrastructure, but in fact does nothing of the sort.

For one thing, companies always pay more to borrow than governments do, because they’re at greater risk of default. So, where a government might pay $30m in interest charges on a $1b building project, a company might easily pay $40m.

And of course it recoups those extra costs from the government when it gets repaid. Using PPPs, in short, actually reduces our means, compared to the tried-and-tested method of government just paying for things itself.

PPP proponents claim that such costs are offset by the preternatural efficiency of private-sector consortia, but evidence for this – what’s the phrase? – somewhat magical view is in short supply. The Transmission Gully PPP, with its famously poor chip seal, is a case in point.

In truth, the only “advantage” of PPPs is that they allow governments to briefly look like they’re borrowing less than they really are, because the consortium pays the upfront cost. Again, they’re all appearance and no substance.

Any increased reliance on private healthcare – whether full-scale user-pays or just contracting-out operations – would also suffer from magical thinking. The public health system may be creaking. But user-pays would not just be a disaster for poor people: it’d also be colossally inefficient.

In the privatised American health system, where every profit-driven hospital and insurer fights each other and tries to refuse patient claims in order to raise revenue, the money wasted is greater than the entire budget of Britain’s National Health Service. The wasted funds would also cover the healthcare costs of every American without insurance.

Nor is there any evidence that contracting-out operations will work well. Far from magically creating money, in short, the private sector will often waste it.

The right’s habitual response is that our government is already at the limits of what it can tax and borrow, so we must look to user-pays. But our overall tax rates are far lower than those of more economically successful European states. Meanwhile, Treasury boss Iain Rennie, no-one’s idea of a spendthrift leftie, recently pointed out that our government debt levels are “low” by global standards and the state should be borrowing more to rebuild hospitals.

Privatisation and user-pays, in short, are anything but a magical money tree, despite what some conservatives may think. Indeed they look much more like a nightmarish money pit.

The Spinoff: Our alarming rates of child poverty are entirely avoidable

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The good news: child poverty rates didn’t really change in the first year of National’s policies. The bad news: child poverty rates didn’t really change in the first year of National’s policies.

Setting aside the minutiae of year-on-year shifts, statistical artefacts and political posturing (more on which later), Thursday’s data release confirms one alarming truth. As a country, we are willing to have around 12-14% of children – that is, somewhere between one in seven and one in eight – live in poverty. 

Early-years poverty has measurable, and dreadful, impacts, confirmed by survey after survey: worse health, right across the life course; worse school results; wasted talent and diminished prospects. Nonetheless, our politicians accept child poverty rates three times worse than those that affect children in other countries, or indeed pensioners in our own fair land. Our alarming rates of child poverty are entirely avoidable – and yet we continue not to avoid them.

We do so even though child poverty was doubled by Ruth Richardson in her Mother of All Budgets, and has been a subject of national concern since at least the GFC. Campaigns by NGOs last decade, amplified by Bryan Bruce’s documentaries and John Campbell’s reporting on kids’ empty lunchboxes, culminated in a 2017 election debate in which both Bill English and Jacinda Ardern pledged to lift 100,000 children out of poverty.

Ardern then passed the 2018 Child Poverty Reduction Act, one of the laws closest to her heart, and made initial inroads. The Families Package, which lifted both benefits and Working for Families payments, helped cut the number of children in families below the poverty line from around 185,000 in 2018 to 135,000 in 2022. This measure captures all the families who are living on less than half the typical household’s income – an internationally accepted measure of poverty.

Unfortunately, as is now well-worn, the cost-of-living crisis, and the failure to implement another Families Package, saw child poverty rates rise again. In the 12 months to June 2024, the last period in which Labour’s policies still held sway, child poverty was back up to around 150,000. This was still a net reduction, of around 35,000 overall – but not a very big one, and far short of the target Ardern had set herself. 

This week’s data release, which covers the 12 months to June 2025, is effectively a report on the first year of National’s policies. It shows there are still nearly 150,000 children in poverty – roughly the population of Tauranga, or enough to fill Eden Park three times over. Essentially nothing changed in that first year – on this measure.

There are, however, many different ways one can attempt to define what counts as “poor”. As well as recording families’ income, statisticians can ask them which basic items they are going without. On that measure, generally known as material hardship, Ardern again enjoyed initial success, cutting the rate from around 150,000 to 120,000. But the rate increased so much post-pandemic that, in the 12 months to June 2024, there were 160,000 children in material hardship.

In National’s first year, that rate rose still further, to nearly 170,000. Why the “material hardship” measure has followed a slightly different track to the “income poverty” one is a puzzle even to hard-core statisticians. 

Regardless, the rise in the former has allowed the government’s opponents, including Labour and the Council of Trade Unions, to claim that child poverty is worsening again – even though, on the first measure, it is essentially unchanged, and the official Statistics New Zealand verdict is that there has been no “statistically significant” shift on any of the various measures.

This politicking around the numbers is hardly unusual. When in opposition themselves, the right-wing parties cherry-picked and misrepresented data with gay abandon. The figures themselves are, in any case, subject to uncertainty, being often revised later on. And there is only so much that can be read into a single year’s data.

We should, instead, zoom out from the morass of contested statistics and ask ourselves more fundamental questions. The first is: how can we reconcile a verdict of no “statistically significant” change in child poverty with the destitution we see all around us, and with the reports of Auckland homelessness doubling under National?

For one thing, some of the data in this week’s release goes back to June 2024, and is thus nearly two years out of date. The statistics also fail to register changes in the depth of misery. A family may have slid from just below the poverty line to near-total destitution, but from the point of view of these statistics they were poor then and they are poor now.

In addition, and regardless of who is to blame, the rate of child material hardship – the number going without basic items like heating and decent clothes – has risen from around 120,000 in 2022 to 170,000 last year. We are witnessing misery that has built up over multiple years.

The second fundamental question is: what can be done about this? While a fuller answer awaits another day, we should recall that – as above – good policies can have immediate effect: the Families Package helped lift 50,000 children out of poverty in short order. And that was even though Labour’s anti-poverty strategy relied too heavily on things the government could change with the press of a button – benefit and tax-credit rates – and too little on other key policies like higher wages and cheaper housing.

Recall, too, that in countries like Denmark, child poverty rates are just 4-5% – roughly one-third of ours. Hardship rates for New Zealand’s over-65s are, similarly, just 4-5%. The latter stems, in part, from the decision to set New Zealand Superannuation at two-thirds of the average wage, a level calculated to keep most recipients out of poverty. (Albeit that relies on homeownership rates that are now declining.)

Poverty is not inevitable, in other words. Such wide variation across countries and age brackets tells us it is a matter of policy – of, in short, choice. Those who care about the issue must remind voters and politicians, in an election year, that this choice remains one of the most crucial the country faces.

The Post: Beyond the petty politics, can social investment actually succeed?

Read the original article in the Post

One of the last Labour government’s strategic missteps was to basically mothball Bill English’s social investment approach.

The approach, in its ideal form, uses data to identify early interventions that could help struggling individuals – then puts families and communities in charge of how those programmes are delivered. The aim is to shift funds from under-performing schemes to better ones, tackle deep-seated social problems, and save the state money in the long run.

Sounds hard to dislike, or so you might think. Yet many on the left have a knee-jerk reaction against it.

Partly this is because social investment is a National Party creation. Partly this is because, in its first iteration under politicians like Paula Bennett, it became an excuse for kicking people off benefits as quickly as possible. And partly this is because its proponents are probably over-optimistic about how much “data” can tell us and how precisely we can ever determine whether something “works”.

Nonetheless, Labour’s decision to put social investment into suspended animation was the policy-wonk version of petty politics. But then so too was National’s decision to – in turn – scrap Jacinda Ardern’s “well-being” approach.

Despite what their respective partisans might say, the two approaches are broadly aligned. Both attempt to see individuals and families holistically, understanding that they need to flourish on multiple fronts (“domains”, in the jargon) if they are to be truly well.

Both seek to more rigorously evaluate which public schemes will support that flourishing. Both attempt to move beyond GDP as the predominant metric of success.

The petty alternation of “social investment” and “well-being” has, in short, only obstructed our collective attempt to establish how the state can more effectively spend its multi-billion-dollar social budget. Matters haven’t been helped by the furore surrounding Andrew Coster and his forced resignation as the first head of the rebooted Social Investment Agency.

Nonetheless the agency’s work ploughs on – and might even endure a change of government, whenever that occurs. While the left hasn’t fully reconciled itself to social investment, many Labour MPs at least grudgingly accept its worth. One told me they think the left “just has to do social investment better” than National does it.

What that might look like is an intriguing question. Last week I shared a stage at the New Zealand Economics Forum with Graham Scott, the head of the advisory Social Investment Board, and Rachel Enosa, who runs The Cause Collective, one of the new agencies that will commission services in the family-centric Whānau Ora scheme.

In his remarks, Scott put less emphasis on data and evaluation, and more stress on the desperate need to improve the way government delivers services to communities. Too often, the experience of people on the ground, especially in the regions, is of government agencies acting in a high-handed manner, failing to talk to each other, and delivering the services that they have predetermined families need rather than the ones those whānau might value most.

The Social Investment Agency is, instead, exploring something called community commissioning, which aims to allow local groups to come together and put in bids for pools of money that can be spent in much more flexible, community-driven ways. While not entirely without fishhooks, it’s a promising approach, one that’s consistent with Whānau Ora and potentially congenial to the left.

If there’s a problem with social investment, it’s probably the narrowness with which some view it. In my own remarks to the forum, I highlighted the ground-breaking but hugely challenging research of an American economist, Megan Stevenson, whose work assesses the latest evidence on criminal justice schemes, covering everything from employment programmes for ex-offenders through to bootcamps.

Almost nothing works, Stevenson concludes: fewer than one-quarter of US schemes can boast even one positive assessment, and those that do generally prove impossible to replicate outside their initial context. Stevenson thinks the underlying problem is the search for the “cascade”: the cheap but sensationally effective programme that, by fixing one part of a person’s situation, sets off a chain of improvements that forever alters their life course.

These “cascades” are “mostly a myth”, Stevenson writes, because struggling individuals are invariably embedded in dysfunctional social contexts, living in neighbourhoods weighed down by poverty, racism, poor health and limited opportunities for work. Until those “negative stabilisers” are addressed, any small-scale state initiative is liable to be overwhelmed.

Nor is this conclusion surprising when we consider our own national history. The initiatives that really changed lives in the 19th and 20th centuries, lifting lifespans and well-being in a broad-based manner, were the big, sweeping, universal or quasi-universal state schemes: free education, free hospital care, the social welfare safety net.

Such schemes are, of course, a form of “social investment”; I’m told the Scandinavians have long used the term to describe precisely these big-picture programmes. But is our own version of social investment capacious enough to reflect this reality? That’s the multi-billion-dollar question.

The Conversation: Racing enjoys special treatment under NZ gambling laws. Why?

Read the original article, co-written with Lisa Marriott, on the Conversation

Despite the harm it is known to cause to a significant number of New Zealanders, the gambling industry as a whole is commonly defended for its contribution back to the community.

Lotto NZ, for example, must redistribute all profits from Lotto in this way. Other forms of gambling are taxed or regulated differently, but most pay back a share of their profits in some form.

Critics counter that such redistribution of gambling revenue does not fully address the harmful effects of problem gambling, or the fact that gambling itself isn’t distributed evenly across society.

So, while 63% of electronic gambling machines – colloquially known as “pokies” – are located in areas of relatively high deprivation, just 12% of the proceeds from those machines go to those areas.

But the racing industry is permitted to return almost all its profits back to the industry itself. In fact, the sector – covering horse racing and, until recently, greyhound racing – benefits from unique treatment.

The Gambling Act 2003 requires some minimum percentage of gambling proceeds to be returned to community organisations or other “authorised purposes”.

But it also states that one of those “authorised purposes” is “promoting, controlling, and conducting race meetings under the Racing Industry Act 2020, including the payment of stakes”.

The racing industry is the only sector with a specific provision in the act allowing it to return gambling proceeds to its own industry. This extends to most profits from electronic gaming machines located in TAB premises.

Of all the forms of gambling, electronic gaming machines are generally recognised as generating the most harm.

In 2025, the TAB’s monopoly on domestic, in-person betting on racing and sports was extended to cover online betting. This was intended to “maximise the financial returns to New Zealand’s racing industry and sports”.

Typically, industries that cause harm are regulated in an attempt to minimise that harm. But the racing sector, via the TAB, is now largely self-regulating.

Although a Racing Integrity Board regulates issues such as animal welfare, recent changes to the Racing Industry Act empowered horse and greyhound racers “to effectively govern their respective industries” and is “intended to provide the industry with independence from the Government”.

The racing industry also does not pay income tax. Like other gambling entities, it does pay a problem gambling levy – in its case, 0.74% of betting profits or 1.24% of profits from gaming machines located in TAB outlets.

Other gaming attracts additional levies: Lotto faces a 5.5% lotteries duty, casino operators pay a duty worth 4% of casino wins, and the levy on gaming machine profits is 20% (also paid by the TAB on machines in TAB premises).

But the racing sector no longer has to pay such additional levies on racing. Until recently, a 4% “totalisator duty” was payable on all racing and sports betting, but this was repealed progressively to reach zero in 2021.

The savings to the two betting categories from repealing the duty was NZ$14.5 million in 2024, of which $11.5 million went to racing.

This saving for the industry is, of course, a direct cost to the Crown in the form of foregone tax revenues.

The justification for the repeal was to help the racing industry become more financially self-sufficient. But levies and taxes are usually based on the nature of an activity – in particular, the harms it causes – and not the level of profit (or loss) it makes.

Under the Racing Industry (Distribution from Betting Profits) Regulations 2021, the TAB must retain just 2.5% of betting profits for harm prevention and minimisation.

The remainder is distributed to Racing New Zealand and Sports and Recreation New Zealand, in proportion to the revenues generated by racing or sports betting.

In practice, this means most distributions accrue to the racing sector. For example, total distributions of racing and sports betting profits in 2024 were around $199 million, of which $195 million (98%) went to racing and $3.5 million (2%) went to community sports organisations.

For decades, ministers of racing have gone to great lengths to protect the industry. In the runup to the TAB getting its monopoly over online betting in 2025, official documents noted that “Ministerial expectations” were one of the reasons the changes must be “implemented as quickly as possible”.

Government support for the racing sector is often justified by claims of improved employment opportunities, benefits to provincial communities and increases in the industry’s overall economic contribution.

But these arguments could be made for most industries in New Zealand – industries that do not generate the harms gambling does. State support for the racing sector generally means there will be more gambling on racing. That in turn implies increased harm from gambling.

We argue it’s time for a wholesale review of the tax and regulatory privileges that have accrued to this industry without any convincing rationale.

The Spinoff: The iwi-run savings scheme giving Ngai Tahu kids a kick-start

Read the original in the Spinoff

Although it was two decades ago, Lisa Tumahai still remembers the day she got her plastic Whai Rawa card in the mail. “That was quite exciting, and a proud moment,” she says. 

Back in 2006, Whai Rawa was something new to this country: an iwi-run savings scheme. Its origins lay in discussions within Ngāi Tahu about how to use the $170 million from their landmark 1998 treaty settlement.

Tumahai, who had been elected to the board of Te Rūnanga o Ngāi Tahu in 2003, says Whai Rawa owes much to Tahu Potiki, the rūnanga’s chief executive at the time, and former retirement commissioner Diana Crossan, who had been working on tertiary education savings initiatives. 

Whai Rawa is, in essence, a reciprocal wealth-building scheme for Ngāi Tahu members of all ages. For adults, the iwi matches any savings they make dollar for dollar, up to $200 a year. But there’s a particular focus on children, who can be enrolled in the scheme at birth. Then, for every dollar that individuals deposit in the child’s account, the iwi contributes $4 – again up to $200 a year. Children registered before their first birthday also get a $100 kick-start. Members can then withdraw their savings for three wealth-related purposes – tertiary education, home-ownership, and retirement income – as well as in cases of hardship and serious illness.

Tumahai, who went on to chair the Ngāi Tahu board from 2016 to 2023, says Whai Rawa has become “a flagship initiative for the tribe”. Now in its 20th year, it has more than 38,000 members with $200m saved. Some $49 million has already been withdrawn for first-home purchases and the like.

The reciprocal savings partnership is crucial, Tumahai says. It ensures members are connected to Ngāi Tahu, not just “accepting a cheque in the mail”, she adds. “When you have reciprocity, you feel a great level of ownership … and pride.”

Some iwi members might prefer to be directly distributed their share of Ngāi Tahu’s wealth. “[But] I think there are enough schemes in New Zealand, creating enough beneficiaries, that we as a tribe shouldn’t go down that pathway.” Affordability can also be an issue. “I always get a lot of people saying to me, ‘I can’t afford it.’ I think we can all afford $50 a year.” People’s immediate welfare needs, she adds, can be met by the social services provided by Ngāi Tahu’s 18 rūnanga.

Whai Rawa has been “a huge success, in my eyes”, Tumahai says. Her only regret is that fewer than half the iwi’s 85,000 members have signed up. “I would really have liked to think we would be up around 60% by now.” 

That figure is also on the mind of Renata Davis, a current Whai Rawa board member. Some whānau, he notes, face “intergenerational barriers” to participating in any savings scheme. They may be disconnected from the iwi, or “disaffected” with financial services more generally.

In response, Ngāi Tahu is increasing its communications with iwi members, “trying to provide more of a helping hand than other institutions”, and seeking to lift membership. Sign-up rates for newer, younger members are higher than for older ones, Davis says: half the scheme’s members are under 25.

The scheme’s appeal is partly about “building the matauranga of our tamariki – learning about those [financial] concepts from a young age”. People used to focus on “money in the bank for a rainy day”, he says. “Now, everyone is a little bit more financial – investing in equities and all these types of instruments. This [Whai Rawa] is a doorway into that world for our whānau members.”

As well as boosting individual savings, the scheme has “huge flow-on effects” for the iwi as a whole, Davis says. Being financially secure gives people “freedom and options” about how they use their time – and the ability to contribute more of it to their iwi.

Whai Rawa’s current general manager, Sam Kellar, says the scheme is “trying to build intergenerational wealth”, consistent with a long-term Māori worldview. The iwi “wanted to give our people … a middle-class lifestyle”, lifting aspirations for tertiary education and other achievements.

Whai Rawa is a rare place of work “where we celebrate money going out the door”, Kellar adds. “Success is measured by members going to university, or withdrawing money for their first whare, or retiring a bit more comfortably.” 

Kellar says “quite a few” members have made withdrawals for both tertiary education and first home purchases. The scheme hasn’t yet hit the “trifecta” of someone making withdrawals for those two purposes and retirement as well. “But we’ll definitely celebrate that when we get there.”

One of the questions facing Whai Rawa’s managers is what makes their investments distinctively indigenous. In some respects, they have to conform to standard western financial practices. Kellar notes that the scheme is “very regulated”, being subject to anti-money-laundering scrutiny, the need for an Inland Revenue number for membership, and related strictures. 

Davis, for his part, notes that some Māori see financial investments as “risky, and inconsistent with te ao Māori values”. But Ngāi Tahu covers the scheme’s administration fees on members’ behalf, and uses only “responsible” funds, run by investment experts Mercer, that have divested from weapons, tobacco and companies that make more than 15% of their revenue from fossil fuels. (Ngāi Tahu wasn’t able to immediately say how much of the scheme is invested domestically.)

The ability to withdraw funds for retirement at 55, recognising lower Māori life expectancy, is also a point of difference. But, Davis says, the “distinctiveness” question is “something we need to continually check in with ourselves about, and make sure we are putting our money where our mouth is. We don’t want to be iwi-washing.”

The Whai Rawa board, he adds, is currently carrying out a “where to from here?” assessment. In future, the scheme could offer withdrawals for tangihanga, and make it easier for members to develop papakāinga and build on Māori land.

The scheme’s managers are also considering whether they should take a more “customised” approach and allocate funds to specific areas, Kellar says. They could even create “a financial services ecosystem” in which the iwi provided KiwiSaver, insurance, debt consolidation, financial advice and other “banking-type products”. 

Whatever the future holds, Whai Rawa’s position appears secure. Tumahai certainly remains a fan, having been a contributor to the scheme “ever since it opened” and depositing money into both her children’s and grandchildren’s accounts. Whai Rawa, she says, “has become part of our identity”.