The Post: Governing by gut instinct: when science surrenders to ministerial reckons

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Sometimes common sense can be catastrophic. Take Transport Minister Simeon Brown’s insistence that all-day speed limits around schools are unnecessary, since midnight drivers aren’t going to crash into kids. Sounds sensible, right?

Wrong. Auckland Transport research shows that of the deaths and serious crashes occurring within 400 metres of the school gate, 85% happen outside drop-off and pick-up hours. Schools, after all, sit in the heart of their neighbourhood: children, parents and other community members are crossing local streets all day long.

Auckland Transport’s modelling found that a permanent 30kph limit on school-adjacent roads, combined with other changes, would eliminate 54 deaths and serious injuries city-wide every year. It would also deliver $9 in wider benefits for every $1 spent. Lowering speeds only during drop-off and pick-up times saved a mere three deaths and serious injuries annually, and returned just 20c for every $1 spent.

Brown’s option is, in short, a colossal waste of money, and will allow 10 times more deaths and serious injuries than the alternative. That’s disastrous in itself. But it’s doubly damning for a Government supposedly in love with data.

In retrospect, the coalition agreements’ loud insistence that decisions “will be based on data and evidence” can be read as prospective virtue-signalling: a gesture emptied of actual meaning. Parts of the Government seem, if anything, to be at war with science.

Brown recently eliminated the position of chief science adviser to his ministry. And no wonder: the last incumbent, professor Simon Kingham, argues that “no science adviser would tell them [ministers] that the policy they’re pursuing at the moment is sensible”.

Brown isn’t alone. The Department of Conservation has also jettisoned its chief science adviser. As of July, over 200 government science roles were on the chopping block.

Data and analytics teams, which evaluate departments’ programmes, have been cut at the Ministry for Social Development and elsewhere. The Budget even snuck through a 40% reduction in state support for the prime minister’s chief science advisor. Nothing says “we love science” like hacking back the budget of the person most responsible for presenting you with hard evidence.

Elsewhere, Wellington’s $451m Science City project, designed to turbo-charge innovation, has been scrapped. Even past National policies, like the $68m-a-year National Science Challenges, aren’t being renewed.

Concurrently, ministers have made a swathe of deeply unscientific decisions. Children’s minister Karen Chhour is putting a military-style “bootcamp” framing around programmes for troubled youths, when almost all the evidence says bootcamps don’t work.

Construction minister Chris Penk wants to wind back new home-insulation standards – even though they’ll cut heating needs by 40% and have overwhelming industry support – because a few “builders and developers in Tauranga” told him they added $50,000 to construction costs. But government-by-anecdote always falls flat: actual modelling shows the standards cost more like $2000– and can even reduce the price of building, if implemented intelligently.

Penk’s efforts pale in comparison, however, to the shambolic policies perpetrated by Associate Health Minister Casey Costello. She’s cut taxes on heated tobacco products despite there being clear evidence that such items are more toxic than vaping – indeed they may be as bad as cigarettes – and no solid evidence that they reduce smoking rates. Her much-touted “independent” advice, released on Thursday, was a random collection of largely outdated articles and opinion pieces, many unrelated to the product in question.

All this must be deeply embarrassing to the ministers still committed to data-driven policy. Education Minister Erica Stanford’s curriculum changes, for instance, are broadly based on evidence that teachers need greater clarity about what they should be doing, and better learning materials.

But even those policies have been funded by cutting schemes to raise teachers’ Māori-language skills, which have powerful qualitative support (though not yet quantitative data). Herein lies one of the Government’s flaws: its commitment to evidence is far weaker than its purely ideological belief that public spending must be cut back to 30% of GDP.

The problems deepen as one moves further away from the centre. ACT and New Zealand First ministers are particularly prone to privileging ideology and governing by gut instinct.

So far, the flagbearer for evidence-based policy has been the “social investment” approach, which will – in theory – use data to work out which programmes best help vulnerable people early in life, and shift funding accordingly. But it got just $51m in this year’s Budget, and is yet to make any measurable difference.

For the moment, social investment seems to be coming a distant second to ministerial reckons. This has real consequences: not just for our day-to-day lives, but for the very state of our democracy.

One of the biggest drivers of sagging trust in governments, according to a recent OECD survey, is their tendency to ignore evidence. If social investment, or something like it, doesn’t arrive very soon, any good intentions this government still has could disappear in a spiral of mistrust.

The Spinoff: Here’s what’s at stake in the Labour tax debate

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An essentially arcane subject for ordinary folk, tax has taken on a symbolic – indeed, almost existential – dimension in the modern Labour Party. To some members, the 2023 “captain’s call” in which party leader Chris Hipkins ditched a wealth tax proposal has become an emblem of betrayal. Restoration of a radical tax policy is thus essential. 

For others, talking about tax is a vote-loser, distracting the party’s attention away from the more meat-and-potatoes concerns of the median punter. Yet others would like to see tax reform, but of a more modest nature. 

What, then, are the different taxes being debated – and why do they arouse such passion? As with the Bird of the Year competition, there are a staggering array of options, each with its own doughty champion. Almost all the public chatter, though, concerns two main contenders: a capital gains tax (CGT) and a wealth tax.

The mainstream option: a CGT

New Zealand is virtually the only developed country that does not systematically tax capital gains – that is, the income people make selling assets like investment properties and shares. No one has ever satisfactorily explained why we remain a holdout, although it may be related to the fact that two of our most sacred pastimes – buying investment properties and farming – can generate relatively little income day-to-day, and rely heavily on massive untaxed capital gains at the moment of sale.

Powerful vested interests, in short, have traditionally opposed a CGT. And Labour has reason to be wary of this debate. It campaigned on a CGT in 2011 and 2014, and although that wasn’t the reason it lost both elections, successive party leaders – Phil Goff and David Cunliffe – got tripped up when asked about it in debates. It also formed the backdrop to the party’s recent psychodrama in which Jacinda Ardern put a CGT to a tax working group in 2017, lost the argument through being unable to defend her own policy for two years, and then ruled it out during her political lifetime.

Now, though, Hipkins’ post-election policy reset has put it back on the table, alongside a wealth tax. Of the two, it is the more mainstream option, as can be seen by yesterday’s endorsement from the head of ANZ, Antonia Watson, and the backing of groups like the chartered accountants’ peak body. 

A CGT is easy to explain: people pay tax on the income they make selling assets, just like others pay tax on their salaries and wages. It cannot be especially hard to administer, given that virtually every other developed country does so. Politicians do have to choose how high to set the tax – it can be levied at a flat rate, at varying rates but lower than conventional income taxes, or exactly the same rate as those income taxes – but this is not a stumbling block per se.

Estimates vary, but probably 70% of a CGT would be paid by the richest 20%. Perhaps its most obvious drawback, though, is that it isn’t retrospective. If, for argument’s sake, a CGT was introduced in 2027 and someone sold an investment property in 2030, they would pay tax only on the increase in value in those last three years. 

That, in turn, means a CGT would generate “only” hundreds of millions of dollars in its first year, and not reach its full revenue potential – estimated at around $6bn – for a decade. Labour would have to withstand the brutal hand-to hand combat required to pass major tax reform – but without much immediate pay-off. To get around this, it would need to find some way of “bringing forward” the revenue, effectively borrowing against the promise of a future income stream.

The radical option: a wealth tax

Whereas a CGT targets the profits people make from selling an asset, a wealth tax is levied on the assets they still own. Over a certain threshold – say, $5m for an individual – any wealth they hold is subject to a low-rate annual levy – say, 1%. In this example, someone with assets (after debts) of $7m would pay a levy of 1% every year on the $2m they hold over the threshold; their tax bill would be $20,000.

Before Hipkins tossed them out, proposals for such a tax had been worked up by officials in 2022-23 under the supervision of revenue minister and general tax enthusiast David Parker. His inspiration was, and remains, the celebrated French economist Thomas Piketty, whose central insight is that accumulated wealth typically grows at 4-5% a year (through interest, dividends, rents and so on), rapidly outpacing the 1-2% rate at which wealth grows for workers. The only way to restrain this galloping inequality, Piketty argues, is to tax upper-end wealth directly.

In the 1990s, a dozen European countries had wealth taxes, though most had been so riddled with exemptions – for farms, family businesses and so on – that they earned little revenue and were easily abolished. That said, countries like Switzerland and Spain still have them, as do various Latin American states. Closer to home, the Greens have advocated a wealth tax since 2020. (Before that, they were CGT fans.)

Wealth taxes get their revenues from the wealthiest 1%. Under a CGT, by contrast, that 1% can afford not to sell their assets, and can then pass them on tax-free to their children. (To avoid that problem, a CGT would have to be buttressed, further down the line, with an inheritance tax.) 

A wealth tax would generate its estimated $4bn instantly – one major advantage compared to a CGT. It does, though, involve greater complexity. Every major asset has to be valued annually, which for family businesses can be especially challenging. Critics argue it would also cause the wealthy to flee overseas; although the Treasury has estimated that just 3% of New Zealand’s wealth would be lost, this would remain a politically potent line of attack.

The tax also potentially creates problems for people with large assets but no immediate cash-flow from which to pay the levy: think farmers hit by Cyclone Gabrielle, or the owners of highly valued startup companies. There are technical fixes for these issues, but they are not always easy to explain, or popular.

Nor, necessarily, is the tax itself, which lacks the simple “income is income” justification of the CGT. Parker sometimes describes the wealth tax as a “capital income tax”, as it effectively assumes that – following Piketty – the rich are generating income worth 4-5% of their wealth every year, and the 1% annual levy is, in essence, a 20-25% tax on that income. Whether the public would find that compelling – or even comprehensible – is another question.

And as it stands, a wealth tax sounds like the more confrontational, more radical option. If businesspeople as a whole remain ambivalent about a CGT, they positively hate a wealth tax. (This is a good or bad thing, depending on one’s point of view.) Comms-wise, advocates point to positive polling and the fact that 99% of people wouldn’t pay it. Critics say the polling numbers collapse once the public understands what the tax actually involves.

A subplot: switch or no switch?

One potential selling point of the wealth tax is that its $4bn revenue could be used to slash income tax rates for ordinary New Zealanders. This would, though, leave Labour without extra revenue for a thousand other things, notably health and education. That could be generated via other levies, but whether the party wants to enter 2026 with a panoply of tax options is debatable.

One final option: do nothing

Wending its way through the party’s labyrinthine internal process, the debate over tax will continue at least into next year. The party could, of course, dodge the issue by campaigning in 2026 on no new taxes. But this would run into serious political problems. Internally, many party members are furious about the tax climb-downs of recent years, and a do-nothing stance may no longer be tenable. Externally, the party would face the same problem as with the tax switch: no extra revenue for public services. Labour would, in essence, have to campaign on spending the same amount of money as National but doing it better – something that, given the now-entrenched perception of its incompetence in office, is likely to be a hard sell.

One final caution: the cake, not the recipe

Although for some activists, a tax is an end in itself, that is not how the general public sees it. According to pollsters, ordinary people worry about – and want more funds for – health and education. They do not often think about tax in the abstract, or necessarily even connect it with public services. Talking too much about tax, rather than the services it funds, runs the risk of trying to sell people a recipe for a cake rather than the cake itself.

The Post: How a capital gains tax could help fix the economy

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The fundamental flaw in the New Zealand economy, I have come to think, is that we’ve never married our pragmatic, “number 8 wire” mentality with a long-term investment mindset.

We’re good at fixing things without a fuss, making the best of what’s there, building machines out of scraps left in a garden shed. What we’re not good at is planning, establishing a shared national vision, making investments that have a long pay-off. Number 8 wire can patch up a broken piece of kit; it can’t build a new national grid.

We also work harder, not smarter. The average Kiwi labours for 1748 hours a year, against 1415 for the vastly richer Dutch. That’s 333 hours a year – nearly a whole working day each week – of extra work. We get by on the sweat of our brows rather than the speed of our thought.

We also “sweat” our assets, extracting the most from ageing machines rather than investing in new ones. Our infrastructure spending “gap” is estimated at around $100bn.

Even if our infrastructure spending is now about average, we have years of under-investment – especially the “lost decades” of the small-government 80s and 90s – to make up. And what we do spend, we spend poorly, owing in part to a stop-start investment programme that, once again, stems from the failure to plan long-term.

Compared to our OECD peers, we don’t invest in either plant or people. When it comes to capital investment – including machinery but also software, intellectual property and the like – we have a woeful record.

According to a report from the now-defunct Productivity Commission, South Korea’s capital per worker was, in 1970, a mere 15% of ours; by 2019, it was almost 50% higher. We’ve long been falling behind. Our investment in research and development (R&D) is also lacking, even if it did increase under Labour.

On the people side of the ledger, we currently permit 12% of children to grow up in poverty. The permanent scars of that early hardship will drastically limit their lifetime ability to be productive workers and entrepreneurs. In Finland just 3% of children are poor: the country enjoys a stronger workforce, and is richer as a result.

Another under-investment story: we don’t properly fund the retraining and skills schemes that can help people move from welfare to paid work. Our spending on such programmes is well below the developed-country average – roughly half the Finnish rate and a quarter of the Danish.

We need, in short, a little less sweating and a lot more investing. Sadly the government doesn’t seem to have got the memo.

Its cuts to investment have been sweeping, and rapid. Social house-building by both community providers and Kāinga Ora has ground to a halt. Scrapped completely is Labour’s plan for a $450m Wellington-based “Science City” to drive R&D and blue-skies thinking. Even Steven Joyce’s old National Science Challenges are being allowed to lapse with no evident replacement.

While the government didn’t inherit a strong economy, its cuts seem to be making things worse: GDP fell 0.5% in the year to June, driven by a construction slowdown, among other things. Yet in this year’s Budget, infrastructure spending is projected to fall sharply across the coming years.

None of this helps turn around our under-investment calamity. Which is where a capital gains tax (CGT) – once more under consideration by the Labour Party – might come in.

The case for it is strong: earnings from selling assets – that is, capital gains – should be taxed just like earnings from salaries and wages. Income is income.

According to OECD data released this week, the absence of a CGT allows many high earners here to pay just half the tax they would at Australian, American or British rates. A New Zealander on $330,000, earning half their income as capital gains, pays a 14% tax rate overall; their equivalents in those three countries pay 28%.

We’re letting our high earners get away very lightly. By contrast a CGT would, a decade after its introduction, bring in around $5.9bn, according to the best estimates.

The tax’s defect, though, is that it applies only to gains made after it is brought in, so it takes a while to gather speed. In the first years, it would bring in ‘just’ hundreds of millions of dollars, and couldn’t solve every immediate social problem. Extra funds for health, welfare and education would have to be found elsewhere.

CGT revenue could, though, be earmarked for a slow-building investment in our shared prosperity: increased R&D credits for firms, for instance, or a Kids Kiwisaver scheme that creates an asset base for poorer children. A sensible-looking move with the additional merit of actually being sensible, such investment is exactly the sort of thing that – underpinned by a proper long-term plan – could put our economy on the right path.

The Spinoff: Has David Seymour ‘saved’ school lunches – or enshittified them?

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You mightn’t think that giving kids free lunches would be “one of the most direct ways to tackle intergenerational poverty”. But that’s what Ragne Maxwell, principal of Porirua College, thinks it is. And that’s what, in her view, remains under threat, despite the National-led government’s claim to have “saved” the free school lunches programme.

The scheme, a signature Jacinda Ardern achievement, currently feeds 220,000 pupils in the poorest quarter of schools, with potentially far-reaching consequences. “Food is the first, and best, medicine,” says Maxwell’s fellow principal Jason Ataera, who runs nearby Tairangi School.

And it’s a much-needed intervention. New Zealand data shows that children who frequently go without food are, when it comes to school results, four years behind their well-fed peers.  

Fortunately, international research finds that school food programmes lift pupils’ marks. They leave children more alert and better able to learn, and physically and mentally healthier. The schemes also create “lifelong educational and health benefits”, according to the Public Health Communications Centre. “[The] improvement in diet quality and broader taste preferences, through exposure to new foods, translates to improvements in children’s mental health, dental health, and reduced risk of chronic diseases later in life.”

Most participating New Zealand schools report higher student attendance, improved behaviour, and rising achievement rates. The latest research shows that children in Ka Ora Ka Ako, as the lunches scheme is known, are “more settled and able to engage with classroom activity and learning … the programme is having a profound impact on the wellbeing of learners.”

Act leader David Seymour, though, has long opposed the scheme, and hinted at a desire to scrap it entirely. Faced with furious campaigning earlier this year, the government announced in early May that it would retain the scheme. But it would cut the cost by around one-third, removing $107m from its $323m annual budget.

Recently released tender documents reveal how this is supposed to work. Until now, schools have been funded to either cook the lunches onsite or use an external caterer of their choice. Under the new system, this arrangement will continue for children in years zero to six, the core primary cohort. But for intermediate and secondary pupils, the ministry will issue centralised contracts for caterers to deliver mass-produced “heat and eat” meals. 

This system, designed to reduce the per-meal cost from around $6 to $8 currently to just $3, could – the tender documents hint – be rolled out to all children from 2027 onwards. The documents also suggest nine “example meals”. Although one is a tuna sandwich, the others are basic but reasonably appealing hot meals: “hidden vegetable butter chicken”, “vege-loaded mac n cheese”, “Mexican rice & bean burrito”, “savoury mince with roasted seasonal veges”, “teriyaki chicken” and so on.

One big problem, though: the government doesn’t know if caterers can deliver what it wants. A March briefing paper, seen by RNZ, admitted officials had not “market-tested or otherwise analysed the proposed $3 per head price. We do not know whether sufficient supply exists to offer lunches to the specified standard at this price across the full range of schools.” Even if it does, officials have already admitted that the cheaper meals may be less nutritious than the old ones.

And while contractors will be paid to cook and deliver the meals to the school gates, Seymour has cut all funding for the actual food service: the microwaves schools will have to buy to heat the meals, the staff to oversee the process and deliver the state-mandated food safety plan, and the composting and packaging disposal afterwards. Any school that wants to keep cooking its own food will face an even larger bill, probably in the tens of thousands of dollars a year.

Not only does Seymour’s scheme subtly shift costs from central government to schools: it also risks damaging the very thing that makes the programme work. Maxwell says it has drastically cut children’s intake of things like fizzy drinks and pies, and led to fewer fights started by “hangry” kids. Porirua College has even shifted its lunchtime to 11.20am, so that pupils spend more of the day with full stomachs – and high concentration levels. Of the recent improvements in the school’s performance, she says, “the biggest single factor would be the school lunches”.

Even more importantly, lunch becomes an opportunity to talk to pupils about healthy eating choices. Reframing a conservative talking point, Maxwell says: “You are not just giving them fish, you are teaching them about fishing.” 

Couldn’t she do that with the butter chicken and burritos that the centralised providers may deliver to the school gates? Not necessarily. Quite apart from the cuts to service costs, Maxwell’s great worry is that the centralised providers simply won’t do what her school’s kitchen does: tailor meals minutely to what her children want to eat. And then the scheme’s most crucial benefits could fall apart.

Porirua College cooks its own meals in part because, Maxwell says, it constantly hears from other schools about the “poor” quality of meals from cost-cutting contractors. And it’s the local tailoring that changes the eating habits of kids who grow up seldom if ever tasting nutritious food. 

Accompanied by fruit and yoghurt, Porirua College’s meals are “attractively presented”, Maxwell says. “This is what’s luring kids into eating things they’ve never wanted to eat. You are talking about intergenerational issues … The kids are learning that healthy food can be delicious, and these are meals they could [in future] cook for their own children. It’s an absolutely magnificent intervention.” Conversely, one foil-wrapped container of butter chicken per child is not going to generate the same enthusiasm – nor the long-term behaviour change.

The careful tailoring of meals has also cut food waste to near-zero levels. On a typical day, Maxwell says, there’s nothing more than “a little scraping [of leftover food] at the bottom of the bin”. The danger is that Seymour’s great centralised “money-saving” exercise will actually generate more waste. As Ataera bluntly puts it: “If you start serving crap, you are going to create the problem you are trying to solve.” In recent years, the term “enshittification”, denoting the gradual degradation of many aspects of modern life, has taken on a certain currency; the fear is that the school lunch scheme will fall victim to the same trend.

If the government wanted efficiencies, Maxwell says, Porirua College’s experience – and the profit margins she hears external caterers enjoy – would suggest more in-house provision was the way to go. For his part, Ataera gave a speech last month warning that the new system might have been designed to work so badly that schools would give up on it: “We have been intentionally underfunded to cause schools to have to close the programmes, and [politicians] can pretend it was the schools’ decision.” Those fears notwithstanding, he’s currently trying to keep an open mind – but the outlook is not encouraging.

The Post: University cleaners demonstrate the case for the living wage

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“Even when they are sick, they go to work, because they have bills to pay.” Sarah (whose name has been changed to protect her identity) is describing the situation for her fellow contract cleaners at Victoria University. And they don’t even always earn enough to eat, Sarah tells me when we meet in the university’s Hub. “[Sometimes] they just don’t eat lunch. I go to the Salvation Army [foodbank] to bring them noodles or other foods.”

This raises serious questions for the university, which will on Monday debate a proposal to pay its cleaners the living wage – but also for the whole country, as we awake from the long economic nightmare than has been Covid and the cost-of-living crisis.

Mortgage rates are falling, inflation is expected to hit 2.5% early next year, and unemployment will soon peak. Through the current gloom, spots of blue sky can be glimpsed.

We can’t assume, though, that this recovery will reach every corner of the nation. Wealth doesn’t just “trickle down”: the 1980s reforms, for instance, delivered grinding poverty amid sudden affluence. Only with specifically redistributive policies will wealth be evenly shared.

And share it we must. One child in eight lives in hardship, growing up in a household unable to afford basic things like heating their home or buying decent clothes and shoes.

Of those poor children, four in 10 have a parent in full-time work. A job, by itself, is not a sure-fire route out of hardship.

These issues can be seen, in microcosm, at Victoria University. Sarah says many of its cleaners have, as their base rate, the bare minimum wage, $23.15. Assuming 40-hour time-sheets, after tax and with top-ups, that comes to around $830 a week.

Workers often have families, and the median Wellington rent for a three-bedroom house is $790 a week. No wonder the sums don’t add up, even with Working for Families and accommodation subsidies. Cheaper rent is available outside Wellington city; but commuting then pushes up petrol costs.

As well as coming into work sick, or using foodbanks, some cleaners – Sarah says – are forced to ask Work and Income for emergency grants. The costs of low pay are effectively passed from the employer to the taxpayer.

All this forms the backdrop to Monday’s Victoria University Council meeting, where student representatives will urge the university to commit to working towards paying the living wage rate of $27.80.

The rate is calculated to allow families to exist with a little more dignity and comfort than the bare-bones minimum wage allows. Several universities already pay it to directly employed staff and – in AUT’s case – contractors. (As do government agencies.)

Currently, union organisers estimate, Victoria has perhaps 500 directly employed staff, and another 160 contracted cleaners and caterers, earning under the living wage.

In 2021, the university’s chief operating officer, Mark Loveard, said Victoria had “made a commitment to the living wage” and was “phasing it in”. Since then, of course, the university’s financial woes have been well-publicised.

It did, however, make an $8.4m operating surplus last year (boosted by one-off items); as with the wider nation, the talk is of a gradual turnaround in fortunes.

And no-one is asking the university to pay the living wage tomorrow. The request is merely to “work towards” it: to investigate the exact cost, the phasing-in options, and the likely trade-offs required.

Union organisers estimate it might cost $900,000 a year for directly employed staff, and another $400,000 for contractors. Even that would be just 0.2% of Victoria’s $546m revenues.

And there are offsetting benefits. A recent Cambridge University research paper, The Case for Living Wages, finds the salary boost typically leads to lower staff turnover, reducing recruitment and training costs.

Enjoying better health and feeling more valued, staff are often “more motivated and productive”, the researchers find. Four out of five employers say “work quality” has increased.

Given this evidence, the arguments against the living wage lack force. It is, admittedly, a slightly blunt instrument: but any route to addressing disparities within an institution must involve raising low wages. The university already “tops up” cleaner wages, so it is hardly tied to paying “market” rates. And a governing body doesn’t overstep boundaries if it directs pay strategies: when Wellington City Council managers argued as much in 2013, they were rapidly proven wrong.

Helping torpedo their arguments was the legal scholar Matthew Palmer, a former Victoria dean of law. For myself, as a current (honorary) staff member, and indeed a proud Victoria graduate, I think the living wage’s benefits are worth pursuing.

Sarah, unsurprisingly, agrees. “To be able to top up their family [budget], to be able to save for their children’s Christmas, [for funeral expenses] if someone dies … It would make such a big difference for the cleaners,” she says. “It would be a dream come true.”

The Spinoff: Can an election really be fair if one party has four times more money than the other?

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Our elections are not fought on a level playing field. That’s the inescapable conclusion from the first-ever look behind the veil of secrecy that has traditionally shrouded the finances of our main political parties.

Until now, parties’ accounts have largely remained confidential, on the basis that civil-society bodies are entitled to a fair degree of privacy about their activities and levels of funding. But under a law change brought in by former justice minister Kiri Allan, they now have to publish their annual accounts.

This brings New Zealand in line with countries like the UK, who have long mandated such publication on the grounds that, given parties’ crucial role in political contests, there is a public interest in knowing how well-resourced they are and where they spend their money. Such transparency is, in any case, business as usual for parties like the Greens that have been publishing its accounts for years.

So what do the accounts show us? Most obviously, a massive resource imbalance between our two biggest parties, National and Labour. On pretty much every financial measure, the right is smashing the left.

Take, for instance, the relative financial states of health of the two parties as they entered an election year. At the end of 2022, Labour had assets of $3.5m – not bad, one might think, but less than a quarter of National’s $15.8m tally.

The disparities continued into 2023, when National’s revenue of $11.2m was exactly twice Labour’s total. That was in large part thanks to a record haul of donations from wealthy individuals. National spent even more than it earned – around $15.6m – but the resulting $4m deficit (after accounting adjustments) was easily absorbed by its enormous balance sheet. Labour, by contrast, couldn’t afford to run that kind of loss, and spent less than half its rival’s total, around $7m.

Elsewhere, National outspent Labour on staff salaries by two-to-one ($2.2m versus $910,000). And when it came to the most crucial figure of all, 2023 election campaign spending, the same old disparity cropped up: National’s $7.6m budget was nearly double that of Labour’s $4.3m. 

This figure is crucial because it is sometimes believed that the parties spend roughly equivalent amounts contesting an election. The confusion arises because, until now, the only figures officially reported have been the amounts lavished on advertising in the three months prior to the election, the one part of campaign spending that is rigorously limited (and indeed subsidised) by the state.

Election expenses, though, go far beyond the adverts that run on billboards, in newspapers and on social media. Successful campaigns require paid staff and strategists, near-constant polling and focus groups, travel and venue hire budgets, volunteer coordinators, and the creation of ever-larger and more sophisticated voter databases. Then there is the advertising that parties run before the three-month election campaign – the “regulated period” – officially begins.

Although vast pots of money cannot turn around a fundamentally flawed campaign, even National strategists like David Farrar admit that parties “always want more money than less, because it gives you options”. The latest international research also suggests parties with bigger war chests generally win more votes: one large study of French and British elections found that “an increase in spending per voter consistently improves candidates’ vote share”. National’s ability to vastly out-spend Labour, on a nearly two-to-one basis, implies that our elections are not a fair and even contest.

This imbalance looks set to continue. Revenue-generating assets are one foundation of future prosperity, and National’s accounts record $2.3m in “investments” and $2m in “investment property”– the latter underscoring its reputation as the party of landlords – while Labour’s equivalents appear to be $660,000 and $0, respectively.

The parties’ reliance on big-money donors also appears to be a permanent fixture. National, once reputed to have hundreds of thousands of members, now declares just 23,000, who between them generated a measly $160,000 in revenue. Labour does not state its membership, but its revenue line for “levies, membership and affiliation”, some of which is union-derived, totals $750,000. While evidently more substantial than its rival’s sum, this still comprised just one-tenth of Labour’s 2023 revenue. All of which points to a future in which parties’ ability to compete for votes hinges substantially on their success in attracting wealthy patrons.

There is an alternative, as my Victoria University colleague Lisa Marriott and I recommended in our 2022 report Money for Something: capping donations from individuals at around $15,000 a year, and using tax credits to incentivise donations up to $1,500. This would shift the funding of political parties away from large donations from a small number of people, and towards small donations from a large number of people. 

This would reduce opportunities for undue influence and help level the playing field between parties. Elections would become, to a greater extent, contests of ideas, not money. Last year’s Independent Electoral Review made largely the same recommendations, as did a report this month from the Helen Clark Foundation. The intellectual consensus for reform is growing; whether anything changes, though, is another matter.

The Post: Profound incuriosity mixed with hypocrisy a potent mix

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To lose one child, as Oscar Wilde might have observed, is a misfortune; but to lose 200 looks like carelessness. And that’s the situation in which the associate housing minister, Tama Potaka, finds himself.

Earlier this week he marked the milestone of 1000 children having left emergency housing. Around half those kids now live with their parents in social or transitional homes; another 300 are in private rentals. So far, so good.

The whereabouts of the remaining 200, though, are a mystery. And detective Potaka is – well, he’s not on the case, actually. “I’m not worried that some are now homeless,” he told Stuff’s Glenn McConnell this week. The kids are out of emergency housing, and that’s all that matters.

It’s not the first time this government has seemed incurious about the outcomes for its poorer citizens. Last week, welfare minister Louise Upston admitted she didn’t know what happened to welfare recipients when their benefits got cut. Are they being plunged deeper into poverty and despair? She isn’t sure.

There is, in fact, a fine National Party tradition of not knowing about such things. In the early 2010s, Upston’s predecessor Paula Bennett also got “tough” on welfare recipients, dispensing sanctions – full or partial cuts to people’s benefits – at a record rate.

Although quick to claim victory when welfare rolls began falling, Bennett was remarkably incurious about what had happened to the people she pushed off benefits. It wasn’t until her Labour successor, Carmel Sepuloni, had taken office that we got the full picture.

Official research then revealed that the falling welfare rolls were “mostly” due to a strengthening job market. And even then, nearly half the people who’d left welfare were back on it 18 months later, cycling in and out of low-paid work, low-value study and benefit receipt. Around the same time, research by UK charities was showing that sanctions “increase hardship, destitution and foodbank use as well as damaging physical and mental health”.

Profound incuriosity about such issues would be a problem for any government. But it is especially hypocritical for one that has so much staked on delivering better results than its predecessor.

In opposition, National ridiculed Labour for claiming that increased outputs – more programmes delivered, more money spent – signalled increased success. Labour’s $2b boost to mental health services was a classic case. That, as the Nats rightly pointed out, wasn’t an ultimate outcome, a result, a victory.

What would true success have looked like? More people getting the treatment they needed or, indeed, being free from mental illness. And that, famously, did not eventuate.

Widely proclaiming Labour’s “failure to deliver”, National took this talking point and wound it into their rediscovery of Bill English’s social investment approach, which promises to measure whether state programmes achieve results and then shift funding from the least successful to the most.

For that to work, though, National would have to be measuring outcomes. And the evidence of the last fortnight strongly suggests it is not.

Sanctioning people, and reducing welfare rolls, are not outcomes, they’re just outputs: changes in administrative numbers. If people leave welfare only to live in ever-deeper poverty, or make themselves a burden on their family, or resort to crime, their lives have got worse, not better.

To know if welfare reform works, in other words, the government would need to know what happens to former beneficiaries: whether they end up with higher incomes, sustainable and fulfilling work, and – most importantly – higher levels of life satisfaction and purpose.

Getting people out of emergency housing is also not an outcome. People being sustainably housed is. And, in fairness to Potaka, it looks like that has been achieved for some children. But he can’t claim victory for the others unless he knows where they are.

This issue is all the more serious because, following his decision to tighten the criteria for entry into emergency housing, the number of people rough sleeping in Wellington has significantly increased, according to local charity DCM. The two may not be correlated, but there’s a high chance they are.

More kids may have parents living on the street: the opposite of success. And I’m hearing from multiple NGOs and philanthropists that more people are seeking their help because state aid has become harder to get. Again, this isn’t success, just a shifting of the burden from one balance sheet to another.

A final irony: if 500 kids and their families have moved into social housing, that can only have come about because a staggering 3453 new public homes have been opened since December last year. But that’s not an achievement to be claimed by National, which has brought state-housebuilding to a shuddering halt.

Those houses were all commissioned, constructed and paid for by Labour. A triumph of delivery, you might say. But that is yet another fact that National has little interest in knowing.

The Spinoff: What happened last time we had a beneficiary crackdown?

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When asked earlier this week what happens to welfare recipients who have their benefit removed, social development minister Louise Upston said she wasn’t sure. There is, though, evidence from the past, because New Zealanders have been here before, and have kept the receipts.

A tough line on beneficiaries, after all, follows a National election victory just as night follows day. In 1991, Ruth Richardson slashed benefits by around one-fifth of their value. In the next National government, John Key’s welfare minister, Paula Bennett, sanctioned tens of thousands of beneficiaries – cutting their payments, essentially – in an attempt to force them off welfare and into paid work. Over 80,000 were sanctioned between July 2013 and September 2014 alone.

Bennett was not especially interested in finding out what happened to people afterwards. But others, fortunately, were. When Victoria University master’s student Alicia Sudden interviewed beneficiaries in 2016, she encountered many who found Work and Income’s punitive approach degrading. One said it “made me feel anxious that I would be doing something wrong all the time”. Another woman had her benefit cut for missing a Work and Income appointment because she had had to see her doctor urgently.  

Many of those Sudden interviewed had come off the benefit but returned relatively quickly. And this finding was borne out by a large-scale 2018 report on the impact of Bennett’s reforms. More people had moved from welfare to work in 2013-14 than in 2010-11, before the reforms, but that was “mostly due to the improved labour market”, the report found.

It also showed that, of those leaving the benefit, nearly half – 45% – were back on it 18 months later. Many had moved into low-paid, precarious work, or seasonal jobs, or study for low-level qualifications – and found themselves rapidly back on the benefit. Churn, in short, was high, even in a booming labour market. 

Other research has questioned the assumption that people’s lives will automatically be improved by paid work. Evidence reviewed by the 2019 Welfare Expert Advisory Group (WEAG) found that although, in general, employment improved beneficiaries’ mental health, low-paid and stressful work could have the opposite effect. Over the ditch, researchers on the Household, Income and Labour Dynamics in Australia survey have come to more or less the same conclusion: certain kinds of work are worse than being on a benefit.

Along similar lines, research by another Victoria University master’s student, Leah Haines, found in 2021 that the wellbeing of poorer mothers “is not systematically improved by employment”. Nor is this wholly surprising, given that childcare is often inadequate, the shift into work creates costs (for new clothing and transport needs, for instance) not covered by wages or government support, and jobs can be inflexible or precarious.

Also harmful are the widespread sanctions applied in welfare crackdowns, typically involving a benefit being cut by 50% or 100% for a set period of time when recipients fail to meet certain criteria. All welfare systems, unless they hand out no-strings-attached cash, will involve sanctions at some point. But there is a contrast between Labour’s limited use of them as a last resort and National’s more full-throated, first-resort approach. The latest crackdown does, admittedly, introduce softer sanctions – having Work and Income manage beneficiaries’ incomes, or compulsory community service – that can be used before benefits are cut partly or wholly. But it nonetheless envisages more punishment as a general principle.

Back in 2019, WEAG noted that increased sanctions had “compound[ed] social harm and disconnectedness” for parents. Overseas research comes to similar conclusions. A 2015 British report on the Conservative Party’s extensive sanctions found that “removing benefits increases hardship, destitution and foodbank use as well as damaging physical and mental health”. This extends to the children of beneficiaries, who – whatever one thinks of beneficiaries themselves – are obviously innocent in all this.

And while inflicting such damage, sanctions don’t even achieve their goal of speeding the transition from welfare to sustainable work. A 2016 review of the then-current evidence, by Britain’s National Audit Office, found that sanctioned beneficiaries may be “more likely to get work, but the effect can be short-lived, lead to lower wages and increase the number of people moving off benefits into inactivity”. (“Inactivity” is often code for “giving up on the system entirely”.) 

A more recent British report found that a sanction “leads the average claimant to exit less quickly into PAYE [regular work] earnings and to earn less upon exiting”. This is supported by 2022 Dutch research showing that threatening beneficiaries with sanctions “was still detectable in people’s lower employment and earnings [compared to those not threatened] three years later”. 

While this may seem counter-intuitive to some – how can a financial threat make people slower to leave welfare? – the answer lies in better understanding beneficiaries’ lives. The government’s mental model appears to be that if welfare recipients are doing the things that get them sanctioned – missing job interviews or Work and Income appointments, for instance – it is because they are lazy or abusing the system.

In point of fact, research suggests many beneficiaries lead complex lives beset by social forces beyond their control. They face a constant, daily struggle to pay bills, they often live in damp and mouldy houses that make them ill, their children have frequent health and behavioural issues, and they themselves are often in poor mental or physical health. 

Any sudden bill is a nightmare. Many hours each week are taken up explaining their situation to government agencies and charities. And they live surrounded by people whose equally complex lives will often suddenly impose on their own. (One beneficiary I know had to abruptly leave a contract job to rescue a friend from a domestic violence situation; such occurrences are relatively frequent for those in poverty.) Beneficiaries also live with a degree of hardship that means they may not be able to afford the petrol or the bus fare to get to a job interview or Work and Income appointment.

If they miss an interview, then, it is far more likely to be due to a sudden life shock than to sheer laziness. And imposing a sanction just adds a further element of chaos to an already chaotic life. It destabilises people even further, diverts even more of their attention to the struggle to pay bills and just survive, and limits even more sharply the time they can give to job-hunting or studying.

There are many ironies in the current crackdown. One is that Act, a supposedly libertarian party that believes people know how to spend their money better than the state does, is the biggest advocate of forcing beneficiaries to let the government manage their finances. Another is that the way to incentivise the wealthy is – apparently – to give them more money through tax cuts, but the way to incentivise the poor is to take money away from them. 

Yet another is that the government has set itself a target to get 50,000 people off the benefit even as our counter-inflation policy increases unemployment by exactly the same number. The final irony is that a government that prides itself on evidence-based policy is committed to a beneficiary crackdown that is not – as far as anyone can tell – supported by evidence.

The Post: Compulsory purchase of mall could create unrealised potential

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It takes a lot to unite the Wellington City Council right now, but the owners of Johnsonville Mall may have just about managed it. Or so it seems from the council’s threat this week to compulsorily purchase the local “eyesore” that is the mall.

This represents, at least rhetorically, a break with the habits of the last 40 years. We have long been told that the best a state body can do is to steer, not row: to create the conditions for firms to do their thing, but not act directly itself.

This is hands-off, laissez-faire government. Hence we see, for instance, ministers subsiding low-end landlords through the Accommodation Supplement rather than building state houses en masse.

This has not been very successful, and helps explain why so many things in New Zealand cost so much and work so badly. Yet steering is still the limit of our ambitions. The housing debate has been dominated by the question of rezoning land: changing – one might say steering – the places where developers can build.

That reform, much-needed, has already delivered benefits in places like Auckland. But it is incomplete: developers, left to their own devices, will not automatically provide affordable, high-quality housing. We have, comparatively speaking, neglected state housing, currently 43,000 homes short of its 1990 level (when adjusted for population growth).

So it is striking that a Wellington City Labour councillor, Ben McNulty, has majority support to commission a plan to hasten redevelopment of Johnsonville Mall, potentially including compulsory purchase. He has the backing of conservative colleague Diane Calvert, who rightly says it’s time for action “rather than just solely relying on [mall owners] Stride”.

For non-Wellingtonians, the short back-story is that the mall is a disaster: a half-empty, low-slung sprawl of neglected shops right next to a major train station, when it should be the hub of a beautiful, medium-density, low-emissions development sporting shiny new retail, revitalised public transport and affordable housing. Under Stride, the mall’s long-established owner, redevelopment is forever promised, and never delivered. “Always tomorrow” could be their motto.

It’s unclear if the council has the courage to act on its compulsory-purchase threat. But it should.

This would, admittedly, terrify right-wing economists, who believe property rights are sacrosanct. And so they should be, 99% of the time: but not always. Compulsory purchase, after all, was used – albeit controversially – to build the new Kāpiti Coast highways. And one can’t argue that roads matter more than houses.

Some might say those compulsory purchases were justified because roads can take only one route. But perfect development sites are equally rare. If we are to urgently house more people, and rapidly minimise carbon emissions, we can’t let Stride stall progress for another 20 years.

One counter-argument is that, if there were development opportunities, Stride would have spotted them far before any councillor could. But the potential here is plain to see. And the argument that all-knowing firms automatically maximise opportunities is pure market theory, not reality.

Companies will, for instance, wrongly oppose cycleways because their owners over-estimate the proportion of customers who drive. Some businesses are simply sluggish, settling for a low-risk, land-banking life. Or they may lack the cashflow for redevelopment, and be unable or unwilling to borrow.

Property firms may also under-invest when they can’t capture redevelopment’s wider public benefits: better housing, lower emissions, improved transport. If rebuilding costs $100m, say, and the commercial benefits are $105m, a firm mightn’t take the risk. But if those public benefits have an estimated monetary value of another $45m, redevelopment suddenly makes sense. And the only body that will act to capture those benefits is a public one: in this case, the council.

McNulty’s colleague Iona Pannett is worried about his plan, arguing the council isn’t a good developer. But it needn’t be.

The council’s task is to purchase the site at a fair rate and, assisted by experts, draw up a master plan, delineating the broad outcomes the city desires: more retail, enhanced rail services, affordable houses. Such planning – admittedly complex – then catalyses private investment. For good urban development, British research suggests $1 of public money is needed to “crowd in” $4 of private cash. Once a master plan is out to tender, dynamic firms can do their best work: sensing retail opportunities, managing development risk.

A last counter-argument against compulsory purchase is that it has often been used to confiscate Māori land. And that’s true enough. But what if part of the new development was handed to iwi, and used for papakāinga housing or similar? An instrument of injustice could become an instrument of justice.

The compulsory purchase question, of course, goes much wider than Wellington. Every city will have a prime site where the private sector is land-banking or otherwise sitting on its hands, and compulsory acquisition could unblock progress. If the capital led the way, others might follow.

The Spinoff: Healthy homes standards worked, but many landlords are still refusing to comply

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Amidst the generalised despair about the last government’s failure to deliver on certain key promises, it’s easy to forget it had some major wins.

Take, for instance, the healthy homes standards, introduced in 2019 in an attempt to do something about the extravagantly bad quality of this country’s rental housing – something that consistently makes overseas observers shake their heads in bafflement. The standards are not especially demanding. They require only that a rental property has a fixed source of heating, is insulated where practicable, has extractor fans in both bathroom and kitchen, boasts functioning water pipes and gutters, and does not have massive holes in its walls. These are not, on any objective measure, unreasonable demands, even if some landlords treated the law change like they would a declaration of war.

But have the standards made any difference? Although objective data is in short supply, the Ministry of Housing and Urban Development does commission an annual survey of renters and landlords, the 2024 edition of which has been released to the Spinoff under the Official Information Act.

The survey reveals some good news. Nearly one-fifth of rental owners say they were compliant with the standards even before they were introduced; taken at face value, these are the good landlords, of which the country needs a far larger supply.

Even more pleasingly, the data suggest the standards have made a substantial difference. Some 84% of renters say their property has an “acceptable” form of heating installed (heat pumps, for the most part), up from 67% in 2020. Similarly, 77% of renters say they can heat their living room to a “comfortable” temperature all year round, up from 50% in 2020.

Perhaps most tellingly, the proportion of renters saying their home has a problem with damp or mould has fallen from 57% in 2021 to 44% today. The proportion citing problems with heating their home or keeping warm in winter has likewise fallen, from 55% to 42%.

When it comes to ventilation, 79% of renters report their property has an extractor fan in good working order in the bathroom, up from 64% in 2020. Similarly, 81% say there is a fan in the kitchen, up from 66%.

These marked improvements since 2020 plausibly tell us two things. One, the standards have begun to work. This is reassuring: it shows us that when the state does something, when regulation is enacted, improvements follow. Second, if there is to be further progress, it will come once again from regulation: the “market” so beloved of neoclassical economists had decades to raise rental standards to an acceptable level, and failed abysmally. 

We are, as a result, only at base camp on the mountain of rental reform. Recall that around four in 10 rentals, according to their occupants, are still to some extent damp, mouldy or difficult to heat. Within that, 6-8% have a “major” problem with mould and cold. On one measure, this proportion has not changed since 2020.

Likewise the situation with drainage. According to renters, roughly one-fifth of properties have unresolved drainage issues; within that, 10% of renters are not aware that their landlord has any immediate plans to fix the problem. 

We can also take that staple of low-grade New Zealand rental housing, the gaping hole in the wall. Just under a quarter of renters report their properties have “unreasonable” gaps and holes that cause “noticeable” draughts. Within that, in 14% of cases their landlord has no apparent plan to address the issue. Some 15-18% of rentals, meanwhile, have no appropriate source of heating, depending on whether one believes renters or landlords.

Most concerning, when landlords are asked whether they have prepared their properties to meet the Healthy Homes Standards, around 8% still say “no, not really” or “not yet”. Similarly, around 7% of landlords are officially described as being “in denial” about the legally mandated standards, a figure that is unchanged since 2020. 

What does all this tell this? If we take the issues with dampness, heating and drainage, roughly 20-40% of rentals – that is, hundreds of thousands of properties – still display some level of defects. Within this, somewhere between 8% and 15% of rentals are extremely damp, mouldy or otherwise unsafe, and their landlords are utterly unrepentant. 

Why have such problems not been regulated out of existence? A clue may lie in the inspection regime. Labour is to be saluted for one epochal shift: rather than requiring tenants to report problems, as was previously the case, Jacinda Ardern’s government gave officials the power to proactively launch investigations.

It did not, though, support this shift with sufficient resources. Two years ago, the inspectorate tasked with assessing New Zealand’s 600,000-odd rental properties boasted a grand total of 37 staff. In response to the Spinoff’s enquiries, the Ministry for Business, Innovation and Employment (MBIE) has revealed that the number today stands at … 35. 

This inspectorate, MBIE insists, has not been harmed by the new government’s cost-cutting regime, nor has it been instructed to dial down its regulatory efforts. But National hardly need do so.

Even under Labour, the rental inspectorate spent an awful lot of time “educating” landlords about the standards set out in law and very little time actually – you know – enforcing them. In the last year, rental inspectors issued 316 warnings, but took just four landlords to the Tenancy Tribunal. The result – as the survey shows – is that the very worst landlords continue to flout the law, safe in the knowledge that they are extremely unlikely to be prosecuted.

Little change can be expected from the current government. But while they are in opposition, Labour and the Greens should draw up plans for another, more comprehensive, phase of regulation. The slumlords deserve no second chances, no first warnings. One or two of them need to be put out of business, and their properties snapped up by better owners. Only then will the remaining slumlords be frightened into compliance; only then will the nirvana that most developed countries have long since achieved – a stock of predominantly warm and safe rental homes – come finally within reach.