Stuff: Budget 2021 — Labour’s years of caution are finally paying off

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Vindicated. That’s how Jacinda Ardern, Grant Robertson and colleagues will feel about the overarching strategy they’ve pursued in government, after the political triumph of yesterday’s Budget.

Their approach can be encapsulated in the phrase “radical incrementalism”, which another key government lieutenant, Education Minister Chris Hipkins, used in an interview with me some years back. The idea is to have a radical destination in mind, but get there with small steps, slowly warming up the country to the prospect of change.

I’ve always been sceptical about the approach, not least because, in the short term, radical incrementalism is indistinguishable from any other kind of incrementalism, and ministers didn’t seem to have a clear path towards a radical goal.

Some – though certainly not all – of that changed yesterday. Take the welfare reforms. Increasing core benefit rates by $32 to $55 a week won’t, by itself, radically improve the lives of beneficiaries, especially as a small amount of their other entitlements will be clawed back.

But they are the biggest benefit increases since the 1940s, the Ministry of Social Development says.

And all the Government’s changes since 2017 have lifted the basic unemployment benefit by $86 a week, or 38 per cent, according to Budget documents. In pure dollar terms, and adjusted for inflation, this undoes the infamous cuts in Ruth Richardson’s 1991 Mother of All Budgets, so long a figure of hate for the Left.

Even before this Budget, in fact, Labour probably had – at least in a narrow sense – reversed the cuts. But they didn’t shout it from the rooftops, lest the middle classes feel like the poor were getting more help than they themselves were. So Jacinda Ardern became the beneficiary’s secret friend, lifting incomes – but only incrementally.

Not that it’s radical stuff yet. The core weekly unemployment benefit may now be $315, but it’s still well short of, say, the Super rate of $435. If Ardern really wants to restore beneficiaries their “dignity”, as she said in her pre-Budget briefing, she has a lot more to do.

Even though core benefits are now just above their 1991 rates in pure dollar (inflation-adjusted) terms, the fact remains that wages have increased significantly since then. So beneficiaries will still be further adrift of wage-earners than previously, further excluded from mainstream life.

The housing crisis has sent rents soaring in recent decades, and power prices have risen alarmingly, so there’s a lot of “damage” left to undo, despite what the finance minister says. And the Budget was silent on some potentially transformative welfare changes, such as removing intrusive questions about beneficiaries’ relationships.

But Ardern has finally launched a long-overdue review of Working for Families. I can imagine her delivering on it, too, because if she can manage politically difficult benefit increases, she can manage the politically much easier task of increasing payments to low and middle-income working families.

And if the review takes a year to 18 months, the Government might be in a position to announce increases in a 2023 Budget that would – just coincidentally – be a few months out from the next election.

It all speaks to clever political management – as does the increase in benefits itself, coming as it does at a time when the public mood, according to opinion polling, has finally swung in favour of such moves, perhaps because of the shared pain of the pandemic. And those still opposed may have forgotten the increases by 2023.

The pledge to establish a social insurance scheme, providing higher temporary benefits for those who have just lost their jobs, is also clever politics, as it could – if done right – help shore up support for the welfare state among the “squeezed middle”.

Problems still abound, of course. A few weeks ago, I used this column to attack the Government’s efforts on child poverty, and while the Budget brings them closer to the right path, they are still not meeting all their key targets.

If they are to do so, they will have to keep wheeling out similar benefit packages every couple of years, I suspect. That’s what radical incrementalism demands: a constant stepping-up of effort.

And that’s hard when the Government hasn’t really challenged some of the old certainties. Wealth taxes are still too hot to touch. And ministers are still too worried about public debt. Transformative? Not quite.

But for almost the first time, there is a clear sense that the slow, cautious winning of trust among middle New Zealanders is finally paying off. Political capital has been built up, and is now being spent. More needs to be done. But it feels like a corner has been turned.