Addressing hardship better than measuring manufactured poverty

May 28, 2015

A few years ago a newspaper asked Oamaru clergy to comment on poverty.

One vicar said that he came from South Africa where hundreds of people shared a single cold water tap which made it difficult for him to comment on a town where people drove to the food bank.

The dictionary defines poverty as the state of being extremely poor.

The measuring class—people with tertiary education who spend all their time telling us how much misery there is in our community  have manufactured a new definition – 60% of the median income.

By that measure poverty could only be solved by taking everyone’s money and redistributing it equally and ensuring it stayed redistributed equally for ever.

While gross inequality can be a problem, making the rich poorer will not address the causes of, nor provide a longterm solution to, the problems of the very poor.

This is why Finance Minister Bill English took a swing at critics of the government on ‘poverty’:

“The term ‘poverty’ has been captured by a particular idea of how you measure poverty and a particular solution to it. That is, you measure it relative to incomes, and the solution is mass redistribution.”

Those who use the term “poverty” and “child poverty” in this way have been “admirably open” about their objectives, Mr English told the meeting but it is not a view the government shares.

“We are not addressing that phenomenon. What we are addressing is absolute levels of hardship. That is someone not having enough to live, and we don’t think that is worse just because someone else has a bit more.”

Incomes are only one part of what keeps people at the bottom of the social heap, he says, and other factors matter more.

“What we are addressing is what I think is the kind of communal or moral dimension and the worst examples of it are not purely about poverty. They are about ways of behaving, and I don’t think poverty is an excuse for serial criminality or beating up your kids. But those are parts of the ways of behaving of parts of our community, in my view sometimes made worse by the way the government deals with some of these problems.” . . .

It is not often a politician talks about the moral dimension and that should not be taken to mean that moral problems are the preserve of the poor.

But when Northland GP Lance O’Sullivan says children will be better off away from their homes and the social dysfunction in them, the problem of hardship is not just a financial one.

When National came to government it took an actuarial look at welfare and uncovered the longterm costs of it.

Those costs were both financial and social which is why reducing dependency and addressing real hardship are so important.

It doesn’t matter what you call it, the problem is whether or not people have enough which in turn begs the question how much is enough?

Regardless of the answer, the solution lies in addressing real hardship, as this government is doing, not by manufacturing poverty by redefining it in a misguided attempt to solve it through redistribution.


Budget changes will benefit children – Dr Lance O’Sullivan

May 24, 2015

Northland GP and New Zealander of the Year says the Budget announcement of more money for beneficiary families and the requirement to seek work when the youngest child turns three is a good move:

Dr O’Sullivan says in the Northland communities he works in, the kids of beneficiaries are often better off out of the home because they’re less exposed to social dysfunction.

“Now that could be alcohol, drug abuse; that could be violence; that could be mental health problems; that could be problems with incarceration,” says Dr O’Sullivan.

He says putting those children into childcare during the day ensures they have some good role models early on.

“I think we should be able to expose them to positive environments, keep them warm, safe and dry and give them a learning opportunity that will prepare them for school. I don’t believe we should waiting until they’re five.” . . .

Home ought to be the safest place for children.

Parents ought to be the best teachers and role models but tragically for too many children they aren’t.

Dr O’Sullivan sees them and knows that these children will be better away from their homes, if only while their parents are at work.


Business as usual with surprises

May 22, 2015

The Budget which was expected to be boring was a business as usual one with surprises.

The business as usual bit is continuing focus on the careful management of public money and getting back to surplus without the slash and burn approach which past governments took.

The big surprise was an increase in benefits, above the normal adjustment for inflation, for the first time in more than 40 years.

Even the opposition was struggling to oppose that and balancing the increase is the requirement for sole parents to seek work once their youngest child is three and increased work obligations for those on job seeker benefits helps.

Dene Mackenzie says Bill English has pulled off a master stroke:

He pushed his political opponents off stride by announcing social spending better than anything Labour did during its most recent nine years in Government.

Mr English will continue to be criticised by opponents for not delivering his prized surplus this year, but spending $790 million on a package to help children in some of New Zealand’s poorest families was a touch of genius.

The package included more child-care support for low-income families, a $25-a-week increase in benefit rates for families with children, an increase in Working for Families payments to low-income families not on a benefit, and increased work obligations for sole parents on a benefit.

”This package strikes a balance that offers more support to low-income families with children while ensuring there remains a strong incentive for parents to move from welfare to work,” he said.

He also made it difficult for his political opponents to make any meaningful criticism by lifting benefit rates by more than inflation for the first time since 1972.

The Finance Minister has always been the social conscience of National, right from the days when he was a member of the party’s ”brat pack”.

At political conferences more than 20 years ago, he talked about ensuring a ”truck driver” from Balclutha could earn enough to feed and house his family. . .

The increase to Working for Families at the lower end of income ensures the truck driver and any other parents in paid work will be better off than those on benefits.

I don’t support WFF for families earning well above the average income but can’t think of a better way to ensure there’s a decent gap between income from benefits and low paid jobs.

The Budget at a glance is here.

I was listening to talkback on my way home from Christchurch last night. The cut in the $1000 kickstart for Kiwisaver wasn’t popular but it was less likely to go to those who’d need it most and tax credits and employer contributions remain.

Border security and the risk of biosecurity breeches is of increasing concern with more travellers. Requiring $6 from departing travellers and $16 from incoming ones is a little bit of user-pays.

The Finance Minister’s speech is here.

. . . New Zealand remains one of the faster-growing developed economies, with conditions supporting sustained solid growth, forecast at 2.8 per cent on average over the next four years.

Growth matters. It means more jobs, higher incomes and opportunities for families to get ahead.

By mid-2019, the number of people in work is expected to rise by another 150,000 and the unemployment rate to drop to 4.5 per cent. The average wage is also expected to rise by $7,000 to $63,000 a year.

New Zealand’s positive economic performance, relative to others, is demonstrated by the strength of the New Zealand dollar and the very low number of people leaving for Australia – the lowest, in net terms, since 1992.

Lower dairy prices are a headwind for growth, however, and global uncertainties remain. Monetary policy easing in other countries is helping to keep upward pressure on the exchange rate.

Unusually, given our current growth, New Zealand is experiencing very low inflation.

Annual CPI inflation is only 0.1 per cent, compared to the Budget 2014 forecast of 1.8 per cent.

This is good news for consumers and workers because their income goes a bit further and they get good value for any pay rises.

Low inflation is also keeping down interest rates. The concerns I expressed in last year’s Budget about rising interest rates have largely disappeared.

But lower-than-expected prices also mean that nominal GDP – the size of the economy in dollar terms – is not rising as quickly as previously expected, despite solid growth in the real economy.

This means tax revenue is not rising as quickly either.

Compared to what was forecast in last year’s Budget, nominal GDP is expected to be $15 billion lower in total over this year and the next three years, and tax revenue to be $4.5 billion lower in total over the same period. . .

Government’s fiscal priorities are:

Returning to surplus this year and maintaining surpluses in the future

Reducing net debt to 20 per cent of GDP by 2020, including repaying debt in dollar terms in 2017/18

Further reducing ACC levies

Beginning to reduce income taxes from 2017, and

Using any further fiscal headroom to reduce debt faster.

The Government is making good progress on all these fiscal priorities.

While expenditure is firmly under control, tax revenue – as I mentioned – is not rising as quickly as expected.

This is lowering operating balances across the forecast period, compared to Budget 2014 predictions.

But the overall trajectory has not changed. We have come from an $18.4 billion deficit four years ago to seeing steadily rising surpluses into the future.

A deficit of $684 million is now forecast for 2014/15, which is $2.2 billion better than last year’s deficit.

A surplus of $176 million is expected in 2015/16, followed by $1.5 billion in 2016/17 and rising to $3.6 billion in 2018/19.

As I’ve said previously, the Government has no intention of making spending cuts simply to chase a surplus in a particular year.

The surplus target has been successful in applying greater discipline to government spending.

That discipline has turned the Government’s books around, and the fiscal outlook remains very positive. . .

The government can, and should, control its spending and the disciplined approach to it that has been taken since National came to power in 2008 is the major reason New Zealand is doing as well as it is.

The government can influence the environment which helps the income side, but sustainable growth comes from the private sector.


Quote of the day

May 22, 2015

. . . An enormous gulf has opened up between what used to be the core Labour voter, particularly in provincial regions, and the metropolitan elites, with their state-funded salaries and public sector pensions. The consequence is the current generation of Labour politicians are stumped when it comes to enunciating policies for the delivery of a better life for working people.

There is now a fundamental unease in the NZ population the collectivism inherent in the original concept of the welfare state doesn’t necessarily deliver the results originally envisaged. It is based on evidence the safety net the welfare state was intended to provide has been turned almost into a lifestyle for many who spend years on benefits. Now when the Govt says testing for spending effectiveness (in welfare programmes) will be core to the new processes it is introducing, and funding will be re-prioritised to providers to get results, Labour doesn’t seem to have an answer, or an alternative. . . Trans Tasman


More of what’s working not boring

May 21, 2015

Several commentators are criticising today’s Budget for being boring.

Boring in the sense of no surprises is good for Budgets.

We should be grateful the days when everyone stocked up on fuel and fags then sat round the radio listening to the Finance Minister add taxes here and give out subsidies and other taxpayer largesse there are long gone.

But a Budget that delivers more of what’s working for New Zealand shouldn’t be written off as boring and the programme being built on in successive Budgets is working.

NBR editor Nevil Gibson writes of a Budget success story we don’t hear about:

One of the biggest contributors to the reduction in the budget deficit is the money not being spent on welfare.

It’s a success story you won’t hear much about as opposition parties insist a rise in the welfare budget is a better measure.

But, like the ACC reforms and its lower fees, the savings in welfare benefits are like a tax cut for all other taxpayers. . .

The reduction of people on benefits pays dividends in financial and human terms.

The reduction in benefit numbers since the reforms began in 2012 and the projections are described as “startling” by an Australian commentator, Rick Morton. 

His column quotes figures that show the number of years people will spend on benefits has fallen 12%, worth 650,000 years of benefit receipt in the next five decades.

“Two-thirds of this is due to a reduction in the number of people who will gain benefits and one-third is a reduction in the time they will spend on those benefits,” Mr Morton writes.

“From $NZ86 billion, the future liability of the welfare recipients shrank to $76.5 billion in 2013 and to $69 billion last year, largely on the back of economic factors such as inflation.

“But $2.2 billion of the reduction was attributed, in a report released earlier this year, to the ‘effectiveness’ of the policy, which is measured by fewer people getting access to benefits and more people leaving them.” . .

Lindsay Mitchell notes the success in reducing the number of teen pregnancies:

. . . To be demonstrating prevention-success alongside support for the diminishing number who do become teenage parents is a political dream. 

Stopping people going on to welfare and getting beneficiaries from welfare to work are two of the best ways to alleviate poverty.

Whatever further measures to address the problem of poverty are announced in today’s Budget, the significant reduction in the long-term financial and social costs of welfare are anything but boring.

An email from the National Party yesterday made these points:

  1. 194,000 new jobs created since the start of 2011 under National – that equates to around 120 new jobs every day.
  2. We’ve turned the Government’s books around – the deficit peaked at $18.4 billion in 2011 and now we’re expected to be back in surplus next year, a year later than the target we set in 2011. We’ll still be one of the first developed countries to be back in surplus after the global financial crisis.
  3. This will be the type of Budget a responsible Government can deliver when it’s following a plan that’s working.
  4. Budget 2015 will contain $1 billion in new spending. It continues to support New Zealanders and help families while responsibly managing the growing economy and the Government’s finances.
  5. The Government will continue building on what we’ve put in place to address the drivers of hardship. This approach is working – there are now 42,000 fewer children in benefit-dependent families than three years ago. So our spending will make a difference to those who receive it, while at the same time we respect the taxpayers who pay for it.

There is no money for a lolly scramble budget and even if there was that would be wrong.

A business as usual budget might be boring to some but it’s working for New Zealand.

 


Sobering stats

May 8, 2015

Finance Minister Bill English gave some very sobering statistics during question time yesterday:

Of course, the Government is focused not just on savings this year; we are focusing on intergenerational savings. If we resolve problems in complicated families and struggling communities, then we will be spending less in the long run. For example, 1 percent of the children born in 1990 had contact with Child, Youth and Family before the age of 5. They had parents who were in contact with the corrections system and had been in households supported by benefits for most of their lives. Thirty-six percent of people with these three factors will be on a benefit at age 35. So you know that pretty much from when they are born, compared with 9 percent of the general population. Almost 5 percent of this group will be in prison at the age of 35. Some of these individuals will cost around $1 million each, just in corrections, Child, Youth and Family, and income support costs , and that represents significant misery in families and communities. We will continue to change things in order to change their lives.

This is why the government has taken an investment approach to welfare – spending more in the short term to help people off benefits and into work which will improve their lives, those of their children and pay social and financial dividends in the medium and long term.

Unemployment is still too high at 5.8 %, but the employment rate has reached an all-time high of 69.6%.

. . . “This is the greatest share of New Zealanders we have ever seen in the labour force. The largest increase came from 20 to 34-year-olds, who accounted for nearly half this year’s increase,” labour market and households statistics manager Diane Ramsay said.

Over the year to the latest quarter, the number of people employed increased 74,000 (3.2 percent) while the number of people unemployed fell 1,000 (0.6 percent), as measured by the Household Labour Force Survey. . .

That’s the fourth highest in the OECD.
New Zealand National Party's photo.


Better results not ideological obsessions

April 30, 2015

A new funding system for people with disabilities was the subject of this exchange at question time yesterday:

CARMEL SEPULONI (Labour—Kelston) to the Minister of Finance: Is the Productivity Commission report released yesterday indicative of a Government agenda to privatise the welfare system?

Hon BILL ENGLISH (Minister of Finance): No. It is indicative of a Government agenda to get better results for people who really need them. We are happy to debate the kind of toolset that the Productivity Commission has laid out, but I would like to signal to that member and to the Labour Party that we are focused more on getting better results and less on their ideological obsessions. What we are doing is building a system that allows Governments to invest upfront in personalised interventions for the child, the individual, or the family for a long-term impact, and to track the results of that investment. The Productivity Commission has produced a framework that gives the Government a wider range of tools. It has been heavily consulted on with the social service sector to a draft form, and now it will be further consulted on before it gives us a final report. But I expect at the end of that that the Labour Party will be out of step with pretty much everybody by sticking to its 1970s models.

Carmel Sepuloni: Does the Minister intend to establish a voucher system for social services in New Zealand?29 Apr 2015 Oral Questions Page 11 of 15 (uncorrected transcript—subject to correction and further editing)

Hon BILL ENGLISH: Yes. We are under way in establishing a voucher system particularly for people with disabilities. It is called Enabling Good Lives. It has been broadly welcomed by the disability sector. I suspect that the mass adoption of it by the Australian Government in the form of the National Disability Insurance Scheme is going to put a lot of pressure on New Zealand to further develop a sophisticated voucher system for people with disabilities. The reason why is that it gives them some choices rather than being subject to a system where the Labour Party tells the providers—

Mr SPEAKER: Order!

Jami-Lee Ross: What progress has the Government made in delivering better outcomes from social services?

Hon BILL ENGLISH: We have made considerable progress in focusing on our customers—that is, getting to know much better the circumstances and prospects of those most vulnerable New Zealanders. For instance, a child under the age of 5 who is known to Child, Youth and Family, whose parents are supported by a benefit, and where either parent is in contact with the Department of Corrections—and there are a lot of those families; around 470 of them in Rotorua, for instance—is around five times more likely to end up on a long-term benefit and seven times more likely than the average to get to be in prison before the age of 21. In the light of that information, we feel a moral obligation, as well as a fiscal one, to act now to reduce the long-term costs, and we are not—

Mr SPEAKER: Order!

Carmel Sepuloni: Does he agree with the findings of the draft Productivity Commission’s report he commissioned that the Government faces incentives to underfund contracts with NGOs for the delivery of social services, with probably adverse consequences for service provision; if so, does he agree that greater contracting out could harm service provision?

Hon BILL ENGLISH: I agree with the first one but not the second one. The Government often does deliberately, as a result of Government policy, actually, pay less than the full cost of services, and often the users of those services need a higher level of more sophisticated service that what we currently offer them. There is no evidence at all that contracting out, as the member calls it, will reduce service provision. Sometimes that is the right way to do it. For instance, the Government owns no elderly care beds in New Zealand. It is all contracted out. That has been a bipartisan approach for many years with a highly vulnerable population. There are other areas where there are benefits from competition and also benefits from cooperation.

Jami-Lee Ross: What results has he seen from investment in Better Public Services?

Hon BILL ENGLISH: One of the first results we are seeing from taking an investment approach to public services is a much better understanding of our customers. The reports, now published 6-monthly, into the welfare liability have lifted the lid on a very complex ecosystem of dependency. Now we are starting to take initiatives in order to change the way that system works. For instance, around 70 percent of the people who sign up for a benefit in any given month have been on a benefit before. They are long-term regular and returning customers. In the past we have thought that because we found them a job once, that was the end of it. In fact, they need sustained support and employment, and we expect to be taking more measures in order to back up that initiative. But there will be hundreds of others that will involve contracting out, will involve competition, will involve the private sector, and will involve better results. . .

Carmel Sepuloni: Does he agree with the finding of the report, which he commissioned, that “Problems with contracting out are often symptoms of deeper causes such as the desire to exert top-down control to limit political risk.”?

Hon BILL ENGLISH: Yes.

Carmel Sepuloni: Does he agree that the Government needs to take responsibility for system stewardship and for making considered decisions that shape the system, including taking the overarching responsibility for monitoring, planning, and managing resources in such a way as to maintain and improve system performance?

Hon BILL ENGLISH: Yes, the Government can do a better job of what the Government does. We are still unravelling the damage done by the previous Labour Government to our social services delivery, where that Government turned it into what I would call a dumb funding system. Communities and families have an important role as well as Governments—in fact, a more important role. In fact, one of the programmes that the commission refers to is Whānau Ora, which is designed around the radical proposition that a lot of our most dysfunctional families can actually heal some of their own problems and improve some of their own aspirations. . .

This exchange shows a stark difference between National and Labour.

National is determined to improve the delivery of social services, give people with disabilities more choices and reduce dependence.

Labour which is still ideologically opposed to private provision of services even if that gives better results.

And it’s not just Labour which has the wrong idea of welfare and the government’s role in services.

Lindsay Mitchell writes on Green MP Jan Logie’s contention that social problems aren’t solved one individual at a time:

If problems aren’t solved “one individual at a time”, when it is individuals who abuse or neglect each other, when it is individuals who successfully resolve to change their behaviour, what hope? And why have role models eg Norm Hewitt to show what individuals can achieve? Why have organisations like AA who focus on each individual owning and addressing their problem; in living one day at a time to break their addiction?

Logie believes in deterministic explanations for human behaviour. Causes are outside of the control of the individual. For instance, colonisation and capitalism cause social chaos to entire groups. Therefore the largest representative collective – government – must play the major remedial role.

And she has the gall to talk about private service providers securing an “ongoing need for [their] services”.

When for the past forty odd years  government policy has been creating and increasing social problems through the welfare state.

This reinforces this morning’s quote from Thomas Sowell: Although the big word on the left is ‘compassion,’ the big agenda on the left is dependency.


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