The Spinoff: David Seymour’s hypocrisy over drugs and poverty

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On Tuesday, as the weight-loss drug Wegovy finally became available on prescription, Act leader David Seymour renewed his call for more to be done in just about the only area of government spending he likes: pharmaceuticals. We must, he argued, consider the “whole of society” benefits from this spending, because without such analysis the state will – in his view – always underinvest.

Which would be fine, were it not for the colossal hypocrisy of his opposition to such analysis elsewhere.

Let us rewind briefly. In an interview with RNZ’s Guyon Espiner last year, Seymour argued that, when it comes to pharmaceuticals, governments could save money by spending money. Not only was a new drug good for the individual, “but it would probably increase their ability to work and pay tax, reduce the need for [welfare] benefits, reduce their admission to hospital and save money in a bunch of other ways”. Unless government did that “whole of society costing”, future spending on pharmaceuticals would be “pretty tapped out”.

This is not an unreasonable argument. The problem is Seymour’s refusal to apply it to other forms of spending – notably, those that might tackle child poverty.

In a press release last September, Seymour dismissed Treasury analysis that reaching our child poverty reduction goals – to halve hardship, in crude terms, by 2028 – would take around $3 billion a year. The last government had increased welfare spending by more than that amount yet child poverty was “virtually static”, he argued.

Seymour’s analysis is flat-out wrong: official data showed very clearly that the big welfare spending increases, notably the 2018 Families Package, led to a noticeable drop in child poverty and the number of kids going hungry. The only real problem was that, when the pandemic hit, Labour didn’t continue down the same path and do more to cushion the impact on the poorest New Zealanders.

More than that, though, Seymour’s argument ignores the fact that a genuine “whole of society” approach would commit a government to spending vast sums tackling child poverty. Early-years hardship, after all, shows up in later-life damage: children born into poverty typically have worse school results, and lower employment rates and earnings, creating a drag on economic productivity more broadly. They’re more likely to be on benefits, they experience twice the rate of heart disease of richer kids, and they require higher spending on health, housing support and criminal justice.

Economists have produced various estimates of the total cost this imposes on society. The Poverty by Design conference last year heard that researchers had put the cost at 1-2% of GDP in Britain, 3.8-4.5% of GDP in Canada and as high as 5% of GDP in America.

In New Zealand, the estimates – from roughly a decade ago – were around 3% of GDP (Infometrics in 2011), upwards of 3.5% of GDP (Analytica Auckland in 2010), 2.8-3.7% of GDP (the Expert Advisory Group on Solutions to Child Poverty in 2012), and 3.8-4.6% of GDP (the Child Poverty Action Group in 2011). Child poverty has, admittedly, fallen since then, so the lower estimates are probably the most accurate. But even today, hardship in New Zealand is roughly the same as the European average, and a 2022 OECD study of 24 European countries suggested the cost of child poverty was typically around 3.4% of GDP.

Applied to the New Zealand economy, which was worth $415 billion last year, that figure implies child poverty costs us about $14 billion annually. If we take seriously this “whole of society” approach – to use Seymour’s words – we could justify spending a genuinely enormous amount of money to slash child poverty rates. Even just the increased tax take – generated from healthier and more productive workers – would cancel out the cost to government in the long run, quite apart from the wider benefits.

The only possible counter-objection is that even if tackling child poverty is so important, direct government spending is not the way to do it. But the evidence says otherwise.

Although we can’t rely solely on the state putting more money in families’ bank accounts, it is an extremely effective form of action. Decades of evidence show that when you lift family incomes, parents generally spend it on things that benefit their children. And the results are impressive. Just US$1,000 extra a year in family income, for instance, closes up one-quarter of the achievement gap between poorer and richer kids. In long-term US research, state payments made to families decades ago show up in adults’ better health and higher earnings. The government recoups so much tax from those more productive adults that the payments quite literally pay for themselves.

Of course an anti-poverty strategy can’t rely on welfare alone. Where possible, people should be supported to earn more through paid work. But even that, the evidence shows, requires greater investment in vocational education, mental health services and other welfare-to-work supports. (We also shouldn’t forget that four in 10 poor children have a parent in full-time work; as it stands a job is not a guaranteed route out of hardship.) But when people don’t have the option of paid work – when disability rules it out, child-raising has to come first, or individuals just need help getting their life back together – then they will need higher welfare payments to support themselves and their children in dignity, and to avoid all the damage that poverty can inflict.

Not that Seymour, of course, finds such arguments persuasive. Whereas he cannot blame cancer patients for their situation, he can blame poor parents for theirs, and this harsh moral judgment overrides the investment case. As do political pressures: in his interview with Espiner, Seymour notes that his Epsom constituents regularly complain to him about pharmaceutical underfunding. And those constituents are, of course, some of the richest in the country. Taking a “whole of society” approach to funding cancer drugs is very much on their radar. Doing the same for child poverty? Not so much.

The Post: What the Sensible Adults don’t tell you about the cost of super

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One of the firmest beliefs held by elite commentators – and one of the most ill-founded – is that New Zealand Superannuation is unaffordable. It is, in certain circles, a truth universally acknowledged, an opinion not worth questioning, the ultimate proof that our political system – which obstinately refuses to deal with the “problem” – is broken.

Nor does this opinion exist by itself: it forms part of an incessant drumbeat of fear, a repeated motif that there is no more money left. The country is about to go bankrupt, children, and the Sensible Adults are here to tell you that it’s time to cut super’s cost.

The basis for all this alarm? A projection that that cost will rise from 5% of national income in 2021 to – in 2060 – a startling … 5.9%.

Hang on, you may think: that sounds like nothing at all. But surely the Sensible Adults can’t be wrong?

Actually, as it turns out, they are. Their own, more alarming calculations typically fail to account for the multi-billion-dollar contributions the Super Fund will soon be making, not to mention the extra tax all those old people will pay.

Economist Bill Rosenberg, writing a few years back, pointed out that once those facts are incorporated, the estimated cost of Super in 2060 drops from 8% of national income to the 5.9% quoted above. And that’s on current settings, including eligibility at 65.

Ah but, the Sensible Adults say, you’ve forgotten about the dependency ratio. The total cost increase may be small, but a declining number of working-age people will each have to pay a skyrocketing amount.

Again, though, Rosenberg has a riposte. More pensioners will be counterbalanced by fewer children, so the number of non-working-age people sustained by each working adult in 2060 will be not much different to what it was in 1972. (Many people, moreover, will work past 65, easing the burden on younger adults.)

Nor is this a rogue interpretation. The Retirement Commission established last year that our pension spending is the eighth lowest of 38 OECD nations. Claims about super’s unaffordability, the commission concluded, are “not supported” by hard facts.

Still, the Sensible Adults insist, our retirement age remains ridiculously low. Again – alas! – inconvenient truths intrude. We already have a higher age of eligibility than 70% of developed countries, the commission found.

And, contra elite opinion, the point of super is not to give people the same “fixed” period of retirement they got in the 1980s. It is, rather, to provide a retirement that is as long, as comfortable and as secure as we, with our increasing national affluence, can afford.

There are, of course, other demands on the state’s budget, health spending chief among them. One could then ask: even putting aside the confected panic about the public finances, is it still wise to spend billions of dollars more on pensions, especially when some recipients are earning mega-bucks? Couldn’t we somehow free up cash for other purposes?

First off: if one did want to limit super’s cost, raising the retirement age would be absolutely the worst way to do it. That discriminates deeply against manual labourers and others with broken-down bodies, just hanging on till they hit 65, not to mention Māori, Pasifika and other workers with shortened lifespans. No-one has ever developed a convincing scheme for early super access on medical grounds.

A fractionally more sensible approach to cutting super’s cost would be to means-test it. Economist Susan St John has a conceptually elegant solution: over-65s who are still working would face a significantly higher tax rate on their labour income unless they give up their super.

The problem with this, other retirement experts think, is that politically it boils down to much the same thing as the “surcharge” levied in the 1980s and 90s, a policy so detested that it contaminated the whole idea of means-testing.

A means test only on wage income, moreover, wouldn’t capture retirees enjoying large capital gains or huge wealth holdings. But it would encourage assiduous tax avoidance, the artificial rearrangement of people’s financial affairs, and the deployment of armies of accountants.

The loophole could, theoretically, be closed by testing people’s assets as well as incomes. To which one can only say: good luck dealing with the radioactive political fallout from that.

And the loophole, ironically, points us towards a better answer. If we had comprehensive taxes on capital gains or wealth, much of which would be paid by the elderly, the richest over-65s would effectively cancel out the cost of their super payments.

Super could then remain universal, a payment more likely to protect the poor because even the rich would fight to preserve it. There’d be no expensive state apparatus to administer means-testing, no gaming the system, no troublesome edge cases.

Neither a capital gains nor a wealth tax, of course, is politically perfect. But still they might be the most logical solution to the super conundrum.

The Spinoff: The Greens have broken dramatically with the James Shaw era

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Back in the mists of time, in the dim and distant past – in the year 2017, in other words – Grant Robertson proudly announced something he called the Budget Responsibility Rules. If elected, he proclaimed, a Labour-led government would largely maintain National’s financial settings, capping day-to-day spending at about 30% of GDP and infrastructure-related borrowing at 20% of GDP. 

The rules would have kept state expenditures well below those of comparable European countries. Rather than being economically justified, they were pure politics: an attempt to reassure swing voters that Labour was a financially prudent party.

The rules – which Labour adopted in government but then rapidly relaxed – were hotly debated at the time. The Green leadership team, however, willingly signed up. (Well-placed sources even argued they had originated the rules.)

The party’s leaders were, for their troubles, castigated by former MPs like Sue Bradford, who accused them of conforming to a neoliberal orthodoxy. But Bradford would, I suspect, have been delighted with the scenes that unfolded at the Wellington Museum on Tuesday, as Chlöe Swarbrick launched a new Green fiscal strategy under the heading of “Real economic responsibility”.

The Greens had already signalled a fresh radicalism with May’s “alternative budget”, which envisaged an extra $25bn in taxes, most of it supplied by the wealthiest 1%. This would have lifted New Zealand state spending to western European levels: at last the social-democratic nirvana was beginning to take shape, in Green policy papers at least.

Those taxes were designed to fund government spending on day-to-day services: teachers’ salaries, payments to the long-term ill, GP consultations. But, in orthodox economics, governments also borrow money to build long-term infrastructure that will be around for generations: schools, hospitals, wind farms. 

In return for borrowing this money from the private sector, the government pays interest over many years. This deal allows it to build things now that it otherwise could not, if limited by its current reserves of cash; it also ensures that future generations, who will benefit from that infrastructure, pick up part of the tab.

New Zealand commentators and policymakers, however, have long taken a peculiarly constrained approach to such borrowing. Partly this reflects a vague memory of the 1980s, when successive administrations played a little fast and loose with the public finances; partly it reflects the enduring influence of small-state thinking. Either way it has constrained state borrowing to levels well below those seen in other nations now or New Zealand in the past.

This fear-laden atmosphere surrounding public debt also shaped the choices made by people like Robertson and his Greens economic counterpart James Shaw. Nor has that atmosphere really dissipated: dire warnings about the government “going broke” are everywhere, and even some progressives fret about state borrowing.

Times, though, have changed: the sense of a country crumbling at the edges has strengthened, likewise the urgency of the climate crisis. Institutions like the National Party and the Treasury seem caught between two worlds, tolerating higher debt levels than seemed possible in 2017 – 40% and 50% of GDP, respectively – but constantly portraying it as a negative force, one liable to ruin the country at any given moment.

There were no such qualms apparent on Tuesday, however, as the Greens made it clear they were willing to challenge the conservative narrative – and challenge it not with empty rhetoric, not with mere assertions, but with a fairly forensic dismantling of what Swarbrick called the “straitjacket” currently placed on public investment.

Packed with graphs and citations, her new fiscal strategy envisages government borrowing – to fix our failing infrastructure and tackle climate change – at around 55-60% of GDP, roughly three times the level backed by Robertson and Shaw. Borrowing could, the strategy argues, go far higher still. It justifies this by finding multiple flaws in the current orthodoxy.

The first target is the Treasury’s belief that we need to keep borrowing low because we might at any time be hit by an economic shock so huge that it costs the government 40% of GDP – around $160bn currently – to fix. This, as Swarbrick pointed out scornfully on Tuesday, assumes we need to be ready for “two Covid-19-size shocks occurring simultaneously, or more than 23 simultaneous Cyclone Gabrielles” – a wholly unnecessary level of insurance. 

Second, the Treasury’s analysis – by its own admission “very conservative” – assumes that the interest rates our governments pay on their borrowing will significantly outpace economic growth, weakening the state’s ability to “grow” its way out of debt. Yet interest rates have, over the last 30 years, been only marginally higher than growth rates.

Equally importantly, the Greens’ new analysis hones in on a “fundamental asymmetry” in how we think about public investment (which is what state debt really is). The Treasury’s models meticulously count the interest paid on state borrowing, while failing to properly capture two things that strengthen the case for investment: the damage done by not spending money, and the benefits that occur when it is spent. 

Decisions, in other words, are systematically weighted against extra investment. As Craig Renney of the Council of Trade Unions often points out, the Treasury can tell you exactly how much it will cost to build a new hospital, almost down to the brick – but not how much it had cost the relevant region, in lives degraded and shortened, to not rebuild it for decade after decade. Nor does the Treasury properly quantify the benefits – in improved health, lives and productivity – once said hospital is completed.

As the Greens’ new strategy argues, official forecasting covers – at best – the short-term economic benefits from government investment, missing things like “productivity gains from investments in health, education, infrastructure, and R&D, which emerge and diffuse over time”. While, in short, we have over-emphasised the supposed dangers of borrowing too much, we have been consistently inattentive to the dangers of borrowing too little. 

Right now, given the desperate need for state investment in our crumbling infrastructure, it is under-borrowing – not over-borrowing – that is economically irresponsible. That, at least, is the message the Greens want to send. Their radicalism is not one that seeks to overturn every last principle of orthodox economics: there is no suggestion, for instance, that printing more money is the solution to all our woes.

What the Green Party displayed this week is a carefully calibrated radicalism, one that delights in demonstrating that others – principally, the Treasury and the National Party – have been doing orthodoxy wrong, and that even the current financial rules leave far more room for manoeuvre than they have realised. “The things the Green Party are putting on the table are entirely credible,” Swarbrick carefully noted at the launch, “and will be recognised as such by international debt markets.”

The latter is an interesting point. The fiscal strategy argues that international lenders care far less about the percentage of state debt than they do about the economic fundamentals, and that no one is going to downgrade the credit rating of a country that is effectively strengthening its infrastructure, lifting skills and making itself more climate-resilient.

Even if that is so, the argument does rely on extra state investment being well spent. Our infrastructure woes stem not just from under-spending but also from our extraordinarily inefficient approach to building things. A lack of tradies, not state funds, is arguably the biggest constraint on new construction. And plenty of extra cash has been pumped into the education system in the last two decades without noticeable results.

How to get the machinery of the state working better is, in short, an entirely separate question, one which the Greens – and, in their defence, most people – have not yet fully confronted. It was evident on Tuesday, though, that Swarbrick had her sights set on a different problem. “No area is treated with more mysticism than economics,” she declared. “That’s where the real power lies.” And that’s where the Green agenda for change is now clearest.

The Post: Biggest obstacle to tax reform? A lack of ordinary Kiwi anger

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Are you having a nice recovery? The question was first asked back in the 1990s by the Wellington musician Don Franks, whose satirical song of the same name pointed to colossal inequalities in a nation supposedly returning to growth.

“Are you having a nice recovery? Is your champagne chilled just right?” he sang. “Or are you scratching to find something to feed your children tonight?”

The same question could be put now, when more than 500,000 New Zealanders are forced to use food banks but the Rich List, as announced this week, has just topped $100 billion, up $7b in the last year alone. Complaints, however, are puzzlingly muted.

On RNZ’s The Panel, chef Martin Bosley did note there was something “a bit tone-deaf” about celebrating extreme wealth when so many ordinary folk are struggling. Even his fellow panellist, former ACT MP Heather Roy, was moved to remark that we are “leaving a lot of people behind”.

Yet there is no sign of mass unrest. Why not? Well, for one thing, New Zealanders just don’t harbour any great dislike for the wealthy in the abstract. A decade’s worth of polling on economic disparities makes this clear: broad-brush attacks on “the rich” simply don’t land.

New Zealand’s Rich Listers, by and large, know how to fit in. They are remarkably good at maintaining a low profile, keeping controversial opinions to themselves, and not making themselves conspicuous objects of derision.

There is no New Zealand equivalent of Australia’s Gina Rinehart, an ultra-combative mining heiress who wants to slash minimum wages and slates her fellow Aussies as work-shy slackers. Our nearest equivalent might be the toy magnate Nick Mowbray, possessor of a $10b fortune and some really quite reactionary views. But even he has nothing like Rinehart’s profile.

Our business tycoons also benefit from glowing media coverage, constant deference to their opinions, a raft of other accolades. And there is, of course, nothing wrong with people working hard, building useful businesses and enjoying at least modest rewards. But there is much more – and, in a sense, much less – to the Rich List than that.

For one thing, property-based billionaires make up – alongside investors – the largest share of the Rich List’s Top 10 – hardly a sign of an innovative, cutting-edge, export revenue-generating economy. And while the list is far from uniformly dynamic, it is conspicuously dynastic.

According to an analysis I carried out a decade ago, and which I doubt is much changed, roughly four in 10 of the fortunes have a large intergenerational component. The Spencer family business was passed on from the previous generation; the Masfen investment empire is now run by the founder’s children; the Gough family fortune is multi-generational.

Given that these firms have not been driven into the ground, their inheritors are presumably smart and hard-working; but so are children growing up in poor families who don’t have multi-hundred-million-dollar opportunities fall into their laps.

Moreover, the rewards – even when tied to individual effort – are often excessive. A successful business generally relies on hundreds of staff; in days gone by, stronger trade unions ensured that a greater share of company revenue went to those frontline workers, and the country as a whole benefited. Not so today.

Anyone who has accumulated wealth, what’s more, has done so by drawing deeply from a collective pool of resources: government-run hospitals, taxpayer-funded roads, state-supplied courts and police. The traditional way in which that pool is replenished is through people paying a decent amount of tax.

Not so today’s wealthy. As the Inland Revenue has established, our Rich Listers pay just 9% of their income in tax, less than someone stacking shelves in a supermarket and half the rate of middle New Zealanders. Nor is this surprising, in the world’s only developed nation not to levy a capital gains, wealth or inheritance tax.

Such facts have not, however, registered with most voters. People who observe focus groups tell me that New Zealanders’ overriding opinion about tax is very simple: they pay too much.

This is not a relative view, a sense that they pay too much because someone else is paying too little. They just think they pay too much, full stop.

Ordinary Kiwis are strikingly not angry about Rich Listers’ low tax rates. That’s partly because no-one really knows about the Inland Revenue research, or can properly absorb its findings, and partly because there are – as above – few domestic figures to which people could easily attach their anger.

Kiwis are very willing to believe that overseas firms or investors aren’t paying their way. But although that’s true – tech-giant tax evasion costs us hundreds of millions of dollars a year – this pales into comparison with the under-taxation of our home-grown rich. Until that fact registers, though, the lack of any domestically oriented anger robs pro-tax advocacy of the fuel it most needs.

The Spinoff: Ruth Richardson’s state honour is a slap in the face for the poor

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In the early 1990s, two Porirua preschoolers burned to death when their state house was set alight by a candle their family had begun using after the power was cut off. They had been forced to this extremity by a National government that, obsessed by “market forces”, had decided to remove their housing subsidy and require them to pay market rents instead. This sharp rise in costs had left them unable to pay their power bill; hence the candle.

Labour MP Graham Kelly caused an uproar in parliament when he attributed these deaths to National’s policies – but even allowing for imponderable factors, like whether a candle falls over or not, he was in the broadest sense right. Policies that target the poor always have consequences in the end. And no one targeted the poor harder than Ruth Richardson, who on Monday was made a Companion to the New Zealand Order of Merit.

Alongside the market-rent reforms, Richardson is most notorious for the 1991 “mother of all budgets”, which cut the benefits of some of the poorest and most vulnerable New Zealanders by up to one-quarter. In a move familiar throughout history, she decided that the burden of tackling New Zealand’s (admittedly severe) budget deficit was to fall disproportionately on the poor, rather than those better able to bear it.

The result was immediate: a doubling of the number of those living in the most extreme poverty – that is, on less than 40% of the typical income – from 4% in 1990 to 8% two years later. Most policies are much slower to show their effects; Richardson is among a select few who can claim to have doubled poverty overnight.

The effects of this stark rise, quite apart from the pain and misery inflicted on families, have spread right throughout New Zealand. Food banks used to be virtually unknown in this country; in the 1990s they became commonplace.

Unable to afford to heat their homes, or indeed pay the rent, multiple families began living under one roof, enduring the cold or huddling together for warmth. Mould and damp proliferated.

Diseases like rheumatic fever, long since eliminated in other developed nations, flourished in these conditions, wrecking childhoods and ending lives prematurely. A sharp uptick in the hospitalisations of children for medical conditions – from 50 per 1,000 to 70 per 1,000 – began in 1992, just after Richardson’s budget. While she was not, of course, the sole author of these misfortunes, she undoubtedly wrote much of the script.

Child poverty leaves scars that later affluence never really erases. Children born into hardship have, in adulthood, twice the rate of heart conditions of those born into wealth. They also have far lower reading scores and educational results.

Quite apart from being devastating in their own right, these deficits create colossal financial costs: the annual bill from child poverty in this country is estimated at anywhere between $12 billion and $21 billion. This is particularly ironic because Richardson’s legacy on the right is one of financial rectitude: she is seen, in particular, as the author of the 1994 Fiscal Responsibility Act, which aimed to improve the transparency and long-term management of the government’s accounts. But not only is this relatively small beer compared to the appalling damage poverty inflicts on people’s lives, the long-term economic costs of increased hardship are an example of massive financial irresponsibility.

Not that Richardson has ever been able to acknowledge as much. Interviewed by the academic Andrew Dean a decade ago, she denied her policies had resulted in any wider harm: “Over time, was there a social cost? No, there was a social benefit.”

That, then, is the person the New Zealand state decided to honour this week: someone who not only did immense damage to the country’s poorest but is also quite disconnected from the realities of that harm. The puzzle is less – as some commentators suggested – that it took so long for her to be recognised, but rather that she has been recognised at all.

Maybe, though, we should not be surprised. Over in the UK, a similar strategy of slashing government budgets and benefit payments took place under the Conservatives between 2010 and 2024. This austerity cut access to the social services on which ordinary people rely, reduced ambulance services, and sparked poverty-related “deaths of despair”. All up, it is conservatively estimated by researchers to have caused 190,000 preventable deaths.

The man most responsible for this social devastation, former chancellor George Osborne, nonetheless occupies a gilded position in British life, having moved smoothly into editing the Evening Standard newspaper and pontificating on global politics. Inflicting misery on the poor is, in short, socially acceptable as long as it is clothed in the classic establishment rhetoric of taking “difficult” choices, “balancing” the books and fiscal “responsibility”. The poor may be, as the Christians say, always with us, but that does not guarantee that their lives will ever be accorded the proper respect.

The Post: How the pay equity ‘gift from the Government’ will keep on giving

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f you’d been underpaid by $18,000 over the last few years, you’d be fuming. Which is the situation that faces Tamara Baddeley, a Napier-based care worker who – in return for her socially essential labour – is paid the princely sum of $26.94 an hour.

Visiting the elderly and the vulnerable in their homes, she lifts them out of bed and gets them showered, fits catheters and colostomy bags, and provides much-needed social support. The work is mentally, physically and emotionally demanding. And it’d be much better paid if it were done mostly by men.

A decade ago, another care worker, Kristine Bartlett, won a landmark case proving that she and her colleagues were underpaid purely because they were women. That, in turn, forced the National government in 2017 to approve a $2 billion pay settlement for care workers and pass a law enabling further pay equity cases.

Having previously followed the Bartlett case, I must admit that at this point I switched off, thinking: job done, justice served. But not so.

Although Labour amended the law in 2020 to make pay equity claims easier, and approved several large deals, a further problem loomed. The Bartlett settlement gave care workers the biggest pay rise of their life, but that boost was rapidly eroded by inflation and other factors. And when the settlement came up for renewal in 2022, Labour, under pressure to constrain spending, balked at finding the money to once again close the gap between care workers and men in equivalently skilled professions.

Hence the situation in which Baddeley and her colleagues find themselves. She estimates that, in the 1000 days since their settlement lapsed, they would each have earned $18,000 extra had they got another 20% pay rise like the one Bartlett earned them in 2017.

When I interviewed Baddeley a few years back, she was already feeling “taken for granted, underappreciated, overworked and underpaid”. And since the current Government gutted the pay equity process in the Budget, dishonestly scuttling 33 deals already underway, those feelings have only intensified.

Much of the current anger is rightly directed at the coalition, which took away an estimated $2.7b a year in future settlements for care workers, midwives and the like. According to RNZ political editor Jo Moir, ministers “don’t think they are losing” on this issue, the public having been scared by the big costs being waved around. But that looks, for the moment, like a delusion.

Polling released last week by Talbot Mills showed just 29% of people think the pay-equity cuts are “a sensible way to reduce government spending”, while 62% believe they are “putting cost-cutting ahead of fairness”. The pay-equity message wins by a two-to-one margin.

Whether that sentiment lasts, once the media spotlight has moved on, depends heavily on how well the unions and other campaigners mobilise the issue. It is, as one activist said to me recently, a gift from the Government.

It crystallises the wider discrimination that women experience, harnessing and focusing the anger of the lower paid in particular. It could replicate – even if to a lesser extent – the Treaty Principles Bill’s mobilisation of Māori. And it exacerbates two of Prime Minister Christopher Luxon’s great political weaknesses: the public’s sense that he is out of touch with the concerns of ordinary folk, and his poor polling among women.

National’s only real strategy here is to argue that the male-dominated occupations with which women are claiming parity involve utterly different work; the comparisons are thus “ridiculous”. But such comparisons are based not on an exact job match but on finding occupations with similar levels of training, responsibility and experience.

Once the public understands that, it no longer looks so silly to claim that social workers should be paid the same as air traffic controllers. Or that care workers like Baddeley should earn as much as far better paid prison officers.

The public finances, however, remain a problem. Labour leader Chris Hipkins has been careful not to promise he would restore the $12.8 billion the Government has stolen from pay-equity claims over the next four years.

He can, quite reasonably, argue that it’s unclear how National has calculated that figure. But, in light of Labour’s past failure, one might also reasonably suspect his party is reluctant to fully fund pay equity if that jeopardises other goals.

While, in short, National must take the largest share of the blame for the current situation, a deeper, more disturbing truth remains. The caring work carried out by women is often of benefit predominantly to society, rather than any individual client, and so society needs to pay for it.

But we have not, under a government of any stripe, been willing to find all the requisite funds. We have never properly valued women’s work. That is the bigger failing that goes beyond current politics, and the basic attitude that must change.

The Spinoff: A budget for machines, not midwives

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Machines, not midwives: that, according to Thursday’s budget, is what matters to the New Zealand economy.

The centrepiece of the budget, handed down with the usual pomp and ceremony by finance minister Nicola Willis, was a $1.7bn tax break by which businesses investing in “productive assets” – machinery, tools, equipment and the like – can deduct 20% of the value of that investment from their Inland Revenue bill.

The broad consensus is that this move makes sense on its own terms, encouraging investment in the capital stock that can help boost productivity. It is, though, somewhat underwhelming: even measured over 20 years, it adds just 1% to GDP and – even more speculatively – 1.5% to wages.

More telling still was the contrast with what’s not being funded. Most obviously, and notoriously, that’s pay equity. The government has banked $12.8bn by gutting the claims currently being taken by workers in female-dominated industries who, the courts have found, are being underpaid purely because they are women. Those workers include Plunket nurses, midwives, and the care and support staff who help look after elderly and vulnerable people in their own homes.

Willis insisted money had been put aside for a much-reduced version of the pay equity process. She refused, though, to say how much, insisting that disclosure would undermine the Crown’s negotiating position – even though, in this instance, the total sum could presumably have been disclosed without making it clear to any industry how much was set aside for their specific claim.

We are free to speculate, then, that the government may have put aside just tens of millions or hundreds of millions of dollars, rather than $12.8bn, to address the historic underpayment of female workers. That, in turn, makes clear the government’s priorities. The coalition parties like big, grunty bits of kit – the sort of equipment that, despite changes in the workforce, is probably still largely owned and deployed by men – but they are not particularly interested in paying women what they are worth. 

Indeed, the annual $1.7bn cost of the business tax break is easily covered by the roughly $3bn annual cut to pay equity. It’s pretty clear, then, what matters. Machines, yes. Midwives? No.

Robbing Peter to pay Paul

Along similar lines, the rest of the budget consists of initiatives that help certain groups but only at the expense of others. It’s a familiar story of robbing Peter to pay Paul – or, given the above facts, robbing Pamela to pay Paul.

Sixteen and seventeen-year-olds, for instance, will be eligible for the annual KiwiSaver government contribution. But that contribution has been halved from $520 to $260. And even while the government is encouraging young people to save and be independent, it is telling them that, if they are aged 18 or 19, they won’t get Jobseeker Support if their parents are in a position to support them. Does this make any kind of coherent sense? Not obviously.

Elsewhere, support for children with learning difficulties gets a dramatic, long-overdue and much-welcome boost. But this is funded in part by taking, over a four-year period, hundreds of millions of dollars away from Kāhui Ako, a scheme that was producing at least modest benefits by helping teachers work more closely together, spread successes and diminish the isolation experienced by struggling schools.

Some households, meanwhile, will get around $7 a week more because the income threshold at which they start to lose their Working for Families payments is being raised from about $43,000 to $45,000. Once they earn over that threshold, though, the rate at which those payments are clawed back will increase. The state giveth with one hand, and taketh away with another. Meanwhile families earning just $79,000 will start to lose their entitlement to the Best Start payment provided during their newborn’s first year.

There are countless more cuts – adding up to over $2bn – in the budget, many of them seemingly petty: millions of dollars taken from schemes for Māori teachers, energy conservation programmes, RNZ and others. It will be interesting to see whether the government pays the price for this, in the form of story after story about the damage done by hundreds of lost programmes, or whether that is drowned out by the good vibes from the business tax break and other measures.

Ardern’s child poverty promises abandoned

The budget’s lack of basic substance is most badly exposed by its plan to tackle – or rather, not tackle – child poverty. Back in 2018, Jacinda Ardern set ambitious targets for cutting hardship, pledging to reduce from 16% to 5% the proportion of families living on less than half the typical income.

Her government got about one-third of the way before progress stalled post-pandemic. Now, National’s target is literally to do nothing: to maintain the current 12% of children living in poverty for ever and ever, amen. The Treasury’s official projection is that this target will be achieved, because – from a social point of view – this is essentially what the budget is about: treading water.

The government’s opponents will, nonetheless, struggle to lend a telling blow on this budget, because it is not really about slash-and-burn. But the longer-term trend is clear.

Despite the growing calls on the state – to tackle poverty, to address the effects of climate change, and to care for an ageing population – Willis is determined to shrink government spending as a proportion of GDP from 33% to 31%. A diminishing share of our annual income will be spent on solving collective problems.

Yes, the New Zealand government is currently spending more than it earns. But, given that the wealthiest New Zealanders pay half the tax rate of we average folk, the best way to close that gap is to increase tax rates at the upper end. Instead, we have a government that – lest we forget – is still handing out $2.9bn in tax cuts to landlords.

There we have it, then: a budget that prioritises machines over midwives, funds new schemes only by cutting other successful ones, and generally treads water. New Zealand is a country with big structural problems. It is not clear that this budget solves any of them.

The Post: Throwback Budget aiming for ‘holy grail’ target

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Tribute bands never have quite the same force as the originals they copy; and so it is with governments. Thursday’s Budget continued National’s loose homage to the state-shrinking days of the 1990s, sounding many of the same notes – spending cuts, trickle-down economics, and the diminution of collective insurance – though only as a vague, watery echo.

Conservatives will say there were no budget cuts overall: the state’s core spending is projected to rise from $142b in this year to $150b in the next. But government spending has to rise just to keep pace with inflation, public sector wage rises and increased demands for medical treatment.

The truer measure is state spending as a proportion of GDP, which tells us how much of our collective revenue we are devoting – through government – to solving our collective problems. On this measure, government spending will shrink from 33% in 2024 to 30.9% in 2029, close to the conservatives’ “holy grail” of 30% of GDP. This leaves less money, relatively speaking, for tackling collective challenges like poverty and climate change; our collective support for each other will diminish.

It has never been explained why this 30% figure is so magical. And indeed it is hard to justify.

As my columns have repeatedly pointed out, the governments that deliver the best public services in the world – services envied by New Zealanders who have been lucky enough to experience them overseas – often spend 35-40% of GDP. If we had their capital gains, inheritance and wealth taxes, we would have another $20-30b to spend on repairing our frayed public services.

Finance Minister Nicola Willis likes to point out, not unreasonably, that the government’s books should balance. When it comes to current spending – hospital visits, teachers’ salaries, conservation programmes – revenue should match expenses. Borrowing should be reserved for long-lasting capital expenses – hospital buildings, rail lines, classrooms – from which future generations benefit and for which they should pick up part of the tab.

Too often, the New Zealand government has borrowed to fund current spending. But that is a problem best solved not by cutting spending, but by increasing revenue. And given that, according to the Inland Revenue, the richest New Zealanders pay half the tax rate of we ordinary folk, there is plenty of room for the latter.

Willis’ cuts, of course, are nowhere near as savage as those carried out by Ruth Richardson and the other destructive figures of the 1990s, who slashed spending from 40% to 30%, cut benefits by up to one-fifth, and doubled poverty overnight. Nonetheless there are family resemblances.

The Budget’s signature initiative, a $1.7b tax rebate for firms buying new machinery, is claimed to lift wages by 1.5% over 20 years. Not only is this a small sum, it relies – rather improbably – on benevolent employers deciding to share revenue gains with their workers.

We have seen this movie before, in the era when trickle-down economics was the dominant mantra, and it doesn’t end pleasantly: between 1984 and 1999, incomes for the poorest half of the country fell.

There is, of course, a more direct way of raising wages – especially in female-dominated industries where, as the courts have established, workers are being underpaid purely because they are women. But the government has, notoriously, turned its back on pay equity, banking over $12b in “savings” by gutting those women’s pay claims and spending the money on military helicopters instead.

Elsewhere, the changes to Kiwisaver – halving the government’s annual contribution to $260, and lifting each individual’s default contribution to 4% of their salary – send an unmistakable message that, when it comes to saving for your retirement, you are increasingly on your own. Too bad for people who – through ill health, discrimination, abusive childhoods or whatever other reason – struggle to save. And if employers effectively avoid their required 4% contribution by taking it out of people’s pay, things look even bleaker.

It’s not that there is nothing good in the Budget. Large increases to learning support and disability services are very welcome. But, owing to the insistence on shrinking the state overall, these boosts are all paid for with other cuts – to Kiwisaver, to child payments for families earning over $79,000, and to other schooling schemes.

The government claims these cuts are all to under-performing programmes. But, as we have seen with last week’s scathing Auditor-General report on Oranga Tamariki’s cuts, they are just as likely to involve indefensible, scattergun attacks on successful NGOs.

Machinery-related tax breaks aside, the Budget provides little to help build a new economy. The target of investing 2% of GDP on research and development has been shelved, and the Budget apparently contained no new spending on the science and innovation that is crucial to restoring our economic fortunes.

Such moves, however, would require hands-on government. And that – as we all know – is not the 1990s vibe.

The Post: The ‘basic dignity’ of hospice care threatened by health crisis

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Just as people should be able to live well, so too should they be able to die well. But even that basic dignity is under threat from the slow-moving disaster unfolding in our health system.

Hospices, a vital institution of care for dying people and their loved ones, face a $16 million shortfall this financial year, according to a report commissioned from consultants Martin Jenkins. Yet health officials are adamant that they have no funds available to fix that shortfall.

“What they have said to us clearly is there’s no money,” Tina McCafferty tells me. The head of South Auckland’s Tōtara Hospice, she oversees an institution that provides highly specialised medical care – not to mention emotional, social and spiritual support – for 1400 individuals and their families each year.

A decade or so back, state funding met around 70% of the operating costs for Tōtara and the country’s 27 other publicly contracted hospices. Now, in the wake of inflation, increasingly complex care demands and other costs, state monies cover less than half their budgets.

Even successful efforts to fund-raise elsewhere just can’t keep up, McCafferty says: “Every way I find to make money, there’s another layer of [state] disinvestment.”

Seasoned observers are stunned by the state of play. Our health system has always lacked cash: medical unions estimate we spend billions of dollars a year less - as a proportion of GDP - than comparable developed countries. Nonetheless, governments have generally found funding to support basic initiatives and simply keep the lights on.

Now, though, there may not even be that, as the system creaks under the combined weight of growing medical need, Labour’s ill-advised restructure, a decades-long failure to recruit enough nurses and doctors, and a National-led Government determined to shrink the state’s presence in our lives.

Last year’s Budget trumpeted supposedly massive health spending, but once inflation, Holidays Act back-pay and capital investments were accounted for, it provided just $93m extra– a 0.4% increase in operational spending – during a system crisis.

While health will notionally be protected in next week’s Budget, the Government’s obsession with cutting expenses as a proportion of GDP, coupled with increased defence spending and a refusal to significantly raise taxes, will in reality leave very little to go around. (As hundreds of thousands of female workers have just found out.)

Hence the stonewalling of the hospices. Nor is this a case of capricious officials; decisions on health spending are being made at the very heart of government.

The terrible irony of this cost-cutting is that, as is so often the case, it doesn’t even save money. If hospices have to cut back on the care they provide to people at the end of life, those individuals will simply require more hospital beds, emergency-department visits and ambulance call-outs.

Martin Jenkins estimate that the $100m spent annually on hospice care saves $108m in costs elsewhere in the health system, while easing the suffering of patients and their families in countless uncosted ways.

Whānau even recover more quickly if their loved ones have died a gentle death, McCafferty says. But for all the Government’s fine talk about social investment, such savings go largely unrecognised.

At places like Tōtara, the potential consequences are severe. “I can’t, hand on heart, tell our communities we can maintain services,” McCafferty says. “Because we can’t... If we have no uplift [in this year’s funding], we are going to have to reduce services to [people with] a prognosis of three months or less.”

That alone would represent a sharp – and hurtful – curtailing of the hospice’s mission. Even more alarmingly, McCafferty foresees a “domino” effect of service reductions at other hospices and then, if nothing changes, “a series of closures”.

This, she notes, is the exact situation unfolding in Britain, where the hospice sector is battling chronic underfunding. And the pressures on hospices here – which support nearly one-third of all dying New Zealanders – will only rise as the population ages.

The Government’s mean-spirited, Grinch-like approach will, of course, find its defenders among those who argue that the state’s coffers are bare. That, though, is a self-imposed choice.

The Green Party’s alternative Budget, released earlier this week, proposes an annual levy of 2.5% of the wealth held by couples over a threshold of $4m. This would, the party estimates, raise $18 billion for the “common good” services we all need to flourish – of which health is a prime example.

While such a levy would be unlikely to survive coalition negotiations with Labour, even a more modest capital gains tax could raise billions of dollars a year for healthcare and other services.

We have, then, a range of choices, from Greens to Grinches. And surely the latter path is a flagrant breach of our core social beliefs. Is this really what we want to become – a country that denies people even the dignity of dying well?

The Spinoff: Once again, workers pay the price in the fight against inflation

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Inflation, as the economist Geoff Bertram once remarked, is a matter of settling “distributional contests among the great classes of society”. And one way to think about those contests is this: if prices start to rise, who bears the burden of bringing them down again – companies making excess profits, or rank-and-file workers?

Yesterday’s unemployment data, in which the official jobless tally stayed at 5.1% or 156,000 people, is all the answer you need. (The underutilisation rate, which includes people who don’t have enough work, is more than twice as high, at 12.3% or 390,000 people.) If, as some economists predict and any sensible person would hope, these figures represent the peak of the current cycle of unemployment, they will be a final reminder of the fact that we dealt with the post-pandemic inflation spike by the simple expedient of putting tens of thousands of people out of work.

Since at least the 1980s and the rise of “inflation targeting”, this has been how it goes. When the economy is deemed to be “overheated”, and inflation rising too sharply, the Reserve Bank hikes the rate at which commercial banks borrow money. Those banks in turn levy higher borrowing charges on firms, which duly cut back investment, and large numbers of people lose their jobs. All this reduces the amount of money available to be spent on goods and services, and so inflation falls.

Various problems with this approach have been evident in the latest bout of inflation-related combat. One is that it has proceeded on the assumption that the major force “overheating” the economy was a Labour government spending too much money through the pandemic, just as other governments had supposedly overspent worldwide.

Inconveniently for those making this argument, there is a fair bit of evidence to the contrary. When the Council of Trade Unions looked into it a couple of years ago, they found that easily the biggest contributor to New Zealand’s inflation spike was not government spending but higher corporate profits. Some careful attempts to tease out this question globally came to the same conclusion. This was the phenomenon characterised by the economist Isabella Weber as “greedflation”: firms taking advantage of an economic shock, and exploiting their own market power, to raise prices faster than their own internal costs were increasing. (This was not an argument universally accepted, of course.)

The other obvious problem with our inflation-combating approach is that it ignores – or is overly sanguine about – the immense personal toll inflicted by job losses. As the University of Auckland economist Robert MacCulloch has shown, unemployment has a much, much larger negative effect on people’s wellbeing than does inflation. (Albeit inflation is directly experienced by a greater number of people.)

Peculiarities of New Zealand politics also mean that job losses have a greater impact here than they might elsewhere. Most countries’ welfare systems incorporate something known as social insurance, in which the shock of unemployment is cushioned by a temporary payment that is more generous than the conventional benefit – typically something like 60-80% of the person’s former salary, paid for six to 12 months.

This reduces the likelihood of catastrophic post-redundancy events such as people having to sell their house to survive. It gives them time to assess their options and potentially retrain. Above all, it prevents them from having to snatch at the first job that comes their way, whether it be a good fit for their skills or not. This is the kind of system that Labour was preparing to introduce before Chris Hipkins put it on the “policy bonfire” in early 2023.

Unable to access such support, or indeed much else by way of job-seeking assistance, unemployed New Zealanders often end up in positions much worse than the ones from which they were let go. A detailed study by Motu found that New Zealanders who lost their jobs were, even five years on, earning one-fifth less than their peers. Even if they found another job, it typically paid 15% less than their old one.

Given that this situation often implies a skills mismatch, in which people are working below the level for which they are qualified and not fully using their capabilities, there is a massive cost not just to the individual but to the wider economy. And that is even without accounting for all the other harms that often accompany unemployment, including lowered self-esteem, greater social isolation and worse health.

The damage that ripples out from this surge in unemployment, in short, will be felt for years to come. Of course the pain is not limited to employees: many small business owners have gone under, as is obvious to anyone observing the closed shopfronts on our country’s main streets.

So far, however, the large companies operating in uncompetitive markets – which are also those most able to raise prices during supply shocks and stoke inflation – have not had to feel much pain. Our supermarket duopoly remains splendidly insulated from the threat of real competition. Our – or rather, Australia’s – banks continue to report colossal profits and post margins far higher than those generated in other countries. Fletcher’s continues its near-total dominance of the markets for key building products. The insurance sector – where price rises have contributed significantly to inflation – remains highly concentrated.

There are rumblings of discontent – even among the current crop of ministers – about some of these arrangements. The supermarkets, for instance, have been threatened with even tougher action than normal. But it remains to be seen if the government will actually follow through. As it stands, then, the depressing thought is that the response to the next inflationary shock is likely to repeat the same mistakes, and that innocent workers – rather than profiteering firms – will pay the price.