2 August 2004

Hon Michael Cullen: Speech to The Salvation Army – East City Church Function

You have asked me to explain something about my personal vision for New Zealand, and to put more of a human face on the role of finance minister and Deputy Prime Minister.

It may surprise you to learn that many politicians find these questions quite hard to answer. We find it hard to give a simple answer to the question of what were the forces that shaped their vision for New Zealand. Very occasionally there is someone who can name a single incident which galvanised their social and political convictions and set them on the path towards the curious branch of public service known as politics. For most the process is more gradual and more complex.

I am sure there is probably something in my early experience as a child growing up in London in the years after the war that could be taken to indicate that I was destined to become Finance Minister in a left of centre government in a far off country on the other side of the world. However, it is not a question that occupies much of my time.

Suffice it to say that I was part of the 1950s exodus of working class Britons (hardly a willing part, since I was very young at the time) who saw New Zealand as a land where a better future could be built, one that was not overshadowed by the privations of war and its aftermath, or by the lingering demise of the British Empire and its systems of class and privilege.

Of course, one’s roots cannot be denied, and I still have a compulsive need to follow the fortunes of Tottenham Hotspur, and a profound belief that they will one day return to their rightful ascendancy at the top of the English Premier Division. Well, at least above Arsenal anyway.

A more definite influence on my social and political vision was the education I was privileged to receive, in Christchurch first and then at Edinburgh University. My attention was drawn increasingly to social statistics and their significance in shaping history.

Amongst its many delights, statistics teaches you to beware of the unsupported anecdote. We are prone to form a view of our society based on individual cases – ‘icons’, to use a familiar and grossly overused and abused term. These are what stick in our minds, even if they are quite unrepresentative of what is happening in the community at large.

They create the lens through which we see the world and make decisions about how we vote, the causes we support, our understanding of social issues such as immigration or AIDS, and our attitudes towards people and cultures we do not know.

One of the lessons of social statistics is that it is very easy to form views that are wrong, and that an avalanche of evidence is often needed to dislodge a single prejudice. Among the little known facts of the last century and a half is that many important advances in social well being can be attributed to better social statistics, and that those who played a major role in improving the lives of the poor spent a great deal of energy documenting those lives and presenting the hard facts for decision makers to see and understand.

This was certainly an important focus of the work of Charles Booth, not to be confused with the founder of the Salvation Army, and the crusade for accurate information was carried on after him by people like Joseph Rowntree, the Quaker confectioner and social reformer, who used his considerable fortune to sponsor major studies into the living conditions of the British working class in the first half of last century.

Without the persistence of these early social statisticians, the set of policies that came together as the welfare state may never have gained acceptance. In documenting the lives that were being overlooked by those who determined public policy, they turned the heat on the political rhetoric of the day (which was largely driven by the theory of laissez-faire, or the belief that benign neglect was the best anyone could do for the poor).

Statistics allows us to have a science of government; otherwise it is at best an art, and more likely an exercise in wishful thinking and guesswork.

This was an important backdrop to my political convictions. I believe that the real goal of government is to make a difference for a large number of people and sustain that over time. We need to influence whole cohorts of the population, and whole communities with better education, better health care, better housing, and better economic prospects. We need to design policies that sustain a virtuous cycle across generations, rather than just fixing the immediate woes of iconic cases, important as that may be.

The fact is that the major advances in social well-being and improvements in mortality and morbidity that have been achieved in the last century were due, not to the advance of medical technology, but to improvements in sewerage, the raising of housing standards, improved nutrition and widespread access to basic public health services, in particular preventive programmes such as immunisation and child health checks.

There is still work to be done in these areas, although I believe New Zealanders need to be just as diligent at acknowledging our successes as we should be at assessing our deficits. We are somewhat prone to take for granted the things we have achieved, and to agonise over the goals that remain unfulfilled.

For example, despite the constant public debate around health issues, the truth is that the health of New Zealanders is improving. We see gains in life expectancy, suicide, and there has been a marked reduction in suicide rates.

We have made progress in many other areas. For example, unemployment in New Zealand is now only 4.3 per cent, which is a 16-year low, and fourth lowest in the OECD. That means that over 176,000 more New Zealanders are in work than was the case in 1999.

New Zealanders are increasingly better educated, with significant gains since 1996 in early childhood education, the educational attainment of the adult population, and the tertiary participation rate. We are working hard to create better links between our tertiary education system and the communities they serve, so that they produce the educated adult population that will form the backbone of strong communities and a strong economy.

New Zealand is also becoming a safer place to live – for example the road casualty rate has improved significantly over the last five years while general crime figures are well down.

The last few years have also seen a steady improvement in the economic well-being of New Zealanders. Since 1999 New Zealand has achieved growth totalling 21.7 per cent. If we consider that population growth over the same period was just 5.6 per cent, what these figures show is that living standards for New Zealanders have increased over that period by around 15 per cent in per capita terms.

Whether we feel 15 per cent better off is another matter.

A recent study by the Growth and Innovation Advisory Board into New Zealanders’ attitudes towards economic growth showed that Kiwis rate quality of life and the natural environment above employment prospects, business opportunities and increasing personal wealth.

There is strong support for economic growth. However, New Zealanders do not necessarily buy into traditional growth messages. Many feel they have been burned in the past when ‘growth’ came at a cost to the environment or to their quality of life; or when it turned out that its benefits were captured by a small number of people whose living standards increased with ordinary New Zealanders appeared only to tread water.

So a key question when we look at our recent growth record is how well this growth is distributed through the population.

The answer (thankfully) is that is has been spread widely. Economic growth has been translated into real increases in incomes across the workforce. It has also been translated into things such as enhanced parental leave and holiday provisions, lower student loans, and cheaper doctors visits.

And, over the next few years, that growth will enable us to implement the most significant recasting of the tax and benefit system for low to middle income families that has been seen for decades.

This is not the occasion to go into the detail of the Working for Families programme. However, it is important to understand its impact. Using a poverty threshold of 50 per cent of 1998 household median income adjusted for inflation, Working for Families is forecast to lead to about a 70 per cent reduction in child poverty in the next three years. If we use a higher threshold of 60 per cent of median income, Working for Families is forecast to lead to about a 30 per cent reduction in child poverty by 2007.

Living standards will improve among almost all families earning under $45,000 a year, and a significant number of families earning $45,000-$70,000 a year.

I am not suggesting that all is rosy. We will not overcome a social deficit built up over decades in a few years. However, these are the kind of social statistics that will start to matter. They are what will make a difference for many New Zealand families, especially those who are under considerable strain and finding it hard to achieve a balance between life and work.

They are the kind of statistics that I entered politics to see.

The study of social statistics was part of my career as an historian. The best-known justification for the study of history, of course, is what the philosopher, George Santayana, famously said: that those fail to learn the lessons of history are destined to repeat them.

That is in fact only a half-truth. Although my opponents in National seem determined to try, not everyone gets the opportunity to repeat the mistakes of the past. You have to be in power to do so. It is the combination of ignorance of history and political power that is the most dangerous.

Conversely, understanding history without taking action to learn its lessons is something of a waste of talent. That is an observation that I am sure fits in well with the tradition of social activism of the Salvation Army. The Army has always taken the view that abstract, disengaged theology is not worthy of the name.

So for me that the logical progression from teaching history was to move into politics and to attempt, in a small way, to make it. In 1981 I become the MP for the mainly working-class electorate of St Kilda in South Dunedin, and immersed myself during the week in debates over policy and during the weekend in the nitty-gritty problems of my constituents.

It was the end of the Muldoon era, the era of government freezes on wages and prices, of unemployment rates which were quite unprecedented, the Springbok Tour and nuclear ship visits. It was not a happy time for New Zealanders of all ages and backgrounds, and in parliament there was the sense of an old and tired administration who were at a loss to understand how to improve things, but who fiercely held on to power and refused to pass on the torch to a new generation.

It the painful end of one political and social vision, a vision that went beyond the personality of Sir Robert Muldoon and encompassed a broader nostalgia for the simple world of the 1950s and 1960s, before Britain entered the common market, and when New Zealand nearly topped world rankings in living standards almost without effort.

(In fact, as any historian of the period can tell you, the 1950s and 60s were a time when a great many social changes were churning beneath the calm exterior of life in New Zealand. Events such as the 1951 waterfront dispute revealed how much the apparent social harmony was in fact largely a veneer.)

My time as an MP has coincided with the breakdown of that old vision and with it the breakdown of a longstanding consensus around how social and economic power were shared in New Zealand. Many New Zealanders still feel that as a loss; although more will acknowledge that the consensus was only ever partial, and than many New Zealanders were locked out and disempowered.

In 1984 when the Lange Government came to power, I was appointed Senior Government Whip (a job that is not quite as exciting as it might sound); and then after the 1987 election became Minister of Social Welfare and Minister of War Pensions, with a number of other responsibilities in finance and health.

With the recent twentieth anniversary of the election of the Fourth Labour Government there has been a flurry of conferences and retrospective articles. I do not want to add to that commentary.

It is enough to observe that it was a difficult transition in New Zealand’s history; and we made heavy weather of it at times. Those on the left had to learn that social and economic progress is not simply a matter of class struggle between capital and labour. Those on the right were given the opportunity to engage in some rather unfortunate experiments in market-led policies, especially attempts to introduce pure market approaches into social services like health and housing.

What we learned is that there are some things that markets are good at. Moreover, markets are very important to society, because they deal with efficiently with the supply of many essential goods and services and provide encouragement for innovation and investment and discouragement for poor service and poor value.

There are other things that markets do only indifferently, and others still that they do very badly. We have, I hope, learned some important lessons about where we need markets and where we require collective action through the state or the not-for-profit voluntary sector.

To my mind what has emerged in the last five years has been a broader vision of growth for New Zealand. Not just GDP growth, but also growth in the quality of life and the quality of opportunities that New Zealand offers to its people.

Opportunities to learn skills and push out the boundaries. Opportunities to do work that taps their energy and ambition and creativity. And opportunities to nurture families and build stronger communities.

However, there is an important lesson that we have learned from our history, and that we need to apply to our current situation. It is the lesson that good social policy and good economic policy go hand in glove. You cannot have one without the other, even for a short while. You should not, to quote an old Chinese proverb, take bricks from the east wall to fix a hole in the west wall.

Fiscal deficits and social deficits are both destructive and need to be avoided.

That is why my government has placed a high priority on managing our affairs prudently. In particular, we cannot vote ourselves a prosperous lifestyle and then send the bill to future generations.

My tenure as finance minister will, I hope, be remembered for two things:

First, managing government expenditure so that it grew in real terms, but not as a percentage of GDP. Indeed the burden of government on the economy is lighter now than it was in 1999. And that is despite all that has been achieved in increasing expenditure on health, on housing, on law and order, and on education. As a result, we have been able to get our debt down considerably, and to reduce the amount of our earnings that have to go into debt servicing.

Secondly, I hope it will be remembered for what is now known as the Cullen Fund, and what will I hope become known under its real name: the New Zealand Superannuation Fund. The Fund provides greater security for older New Zealanders in that, in years to come when the demographic bulge starts to retire, a portion of the state pension (up to a third) will be paid for by the Fund rather than by taxpayers of the day.

What both the Superannuation Fund and the debt reduction illustrate is that fiscal policy eventually becomes social policy. As any household manager can attest, getting control of income and expenditure is essential to create better options for achieving other goals.

We have also learned was the importance to every able-bodied New Zealander of the opportunity to participate in the community through work. Work is both a social and an economic good.

It was a grave mistake to allow unemployment to get the levels it did in the 1980s and 1990s. It meant that a sizeable group in our communities became disengaged from the main sources of wealth, both in pure monetary terms and also in terms of self-worth and standing in the community.

That disengagement was then inherited by a cohort of New Zealand children, and a raft of social problems has resulted.

Our Working For Families package aims to reverse some of those trends, both by improving the living standards of households with dependent children, and by a deliberate bias towards working families. Most of the expenditure – some 60 percent or so – goes to families who are working. And one of the design features of the package is that it increases the difference between the level of income to be derived from benefits and that derived from paid employment.

There has been some criticism of this aspect of the package. Some people clearly should not have to compete in the labour market, such as those with severe disabilities and sole parents with heavy childcare responsibilities. We accept that; but for most people work is the road to social involvement, a sense of self-worth, and so on.

Finally, something that we are learning at the moment is the importance of raising the skill levels across the whole population. It is not sufficient to create a highly educated elite. Instead, what studies show repeatedly is that increasing the average levels of skills in the population is what drives economic growth and social development. A 1996 International Adult Literacy Survey indicated that up to 40% of New Zealanders needed to improve their literacy, numeracy and language competencies in order to meet the demands of modern life.

We certainly need people who can work with the latest technology, and apply it to our traditional industries at add more value. But equally we need more skills at other levels, in manufacturing and construction, in farming and tourism. And we need to make progress on raising levels of literacy and numeracy.

In response, we have boosted industry training and been very successful. We are well on track to achieving our target of getting 150,000 New Zealanders learning on the job through industry training and modern apprenticeships by the end of 2005. And we are moving to incorporate foundation learning into a variety of contexts, so that adults with literacy and numeracy needs acquire those in a setting that enables them to apply what they learn to the immediate issues of work, family and community, which gives them additional motivation to learn.

It should not be a surprise to us that raising skills across the whole community leads not only to higher rates of employment but also to a stronger sense of cultural identity, reduced crime and dependency, and deeper commitments to the community, whether in terms of voluntary work or of civic responsibilities such as voting.

So my vision is for a smarter New Zealand, stronger in its sense of identity and more confident in its ability to earn its way in the world and to create a sustainable and sustainably high quality of life for all of its citizens.

I have to say, from the perspective of twenty-three years in parliament, that the last five years have moved us closer to that goal than the previous decade. There are a number of reasons why this is the case. However, one important reason, I believe, is that we have indeed learned the lessons of our history and understood the links between economic prosperity and social well-being. And having learned those lessons we have taken steps – cautiously at first, but now more bold – towards turning that vision into reality.

Thank you.

ENDS

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