Jordan Carter: Reflections On Orewa II

So now we have the speech, and the media coverage, and it is as it was expected to be - a speech about the welfare system. Rather than buying into Don's framing of this issue, my intention in this post is to go through some of the deeper issues lying behind the speech. These can loosely be described as Labour's record, the impact of social change, National's inconsistencies, the gap between welfare and work, and finally the miasma of despair Brash is trying to cast over the country.

Reading this, bear the following point in mind. It is important to locate debates about a party's perspective on welfare issues in the wider social and economic context, and with reference to the party's wider policy framework; without doing so one risks ending up detached from reality. The picture painted here shows that while elements of Don Brash's analysis make sense when taken in isolation, the sum of them, in context, adds up to a deeply dysfunctional approach to New Zealand's social and economic development.

Labour's Record

Since 1999, the number of people on income tested benefits (e.g. sickness, invalids, unemployment related and DPB) has fallen from 387,542 (32,868; 51,239; 193,435 and 110,000) to 316,092 (45,569; 71,639; 89,884 and 109,000). This is a decline of 71,450 or 18% in a little over five years.

This progress is encouraging, because Labour's mission is to ensure that everyone who is able to work has the chance to do so. Employment is an essential component of people's own self-respect, and the social participation represented by work is a real benefit - to people working as well as to society as a whole. It is significant progress from the 1980s and 1990s, where people were being thrown on the scrapheap and left to rot on benefits - which, to add insult to injury, were then cut from tolerable to near-subsistence levels.

Employment, full and part time, has risen by 230,000 which has been a large part of the driver for the falls in people on welfare. It's worth noting though that the growth in employment has been greater than the fall in people on welfare - the labour force participation rate has increased, and falls in the number of people on the DPB and unemployment benefits have been somewhat counteracted by rising numbers of sickness and invalids beneficiaries. I will come back to those below.

I am not sure that Don Brash's target of getting the rolls down to 200,000 is viable - even if we got to full employment with nobody on the dole (not likely) that still leaves about 225,000 people on health-related benefits or the DPB - but it is not a bad thing to aim to reduce the number of people stuck on welfare. The problem with the Brash prescription is that it won't achieve this, at least in part because New Zealand is not the same country it was in the 1970s (thank goodness), the subject of the next section.

A final remark about the above: it is a record that speaks for itself, and is something for all Labour people to be proud of. National left more people on welfare in 1999 than it found in 1990. The fifth Labour Government will not be repeating that failure.

The impact of social change

One of the interesting points of Brash's speech is that he seems to think that life (or the welfare state, at any rate) began in 1975. Many of the references to figures in the speech compare current numbers with those present in 1975. The interesting points to explore are the numbers on DPB, invalids and sickness benefits. We all know the story of unemployment, which was stoked by Labour in the 1980s, exploded under National in the 1990s, and was still stuck at 7%+ in 1999. We are down to 3.8% and some think this will fall further (to best in the OECD) when the December 04 figures come out. It's easy to agree that unemployment is not the biggest issue here, and Brash agrees with this - he does not focus on it in his remarks.

Our society is a very different place to what it was in 1975. Look at the DPB, a then newly introduced benefit to allow women (and now men, too, who are bringing up children) to get away from violent and abusive relationships, and to bring up their kids with some dignity and comfort. For the first time ever, under Labour, the number of people on the DPB is beginning to fall, thanks to better case management and so on. Brash murmurs the conservative critique - that the DPB creates welfare queens, that it destroys families - but I do not think he really believes it.

It's a simple cultural change. We no longer expect people to stay in abusive relationships. As a society, we decided 30 years ago that it was better for people to be free of such things, and raising their children with the assistance of the community. That thought still holds among the majority of Kiwis. If there is abuse, and I do not doubt that some small number of people probably do see the DPB as a lifestyle choice, the question is how to best deal with a tiny minority of cases. Winding back the clock and trying to re-create a white-picket-fence New Zealand that no longer exists isn't the way forward.

The other aspect of social change is the rise in numbers on sickness and invalids benefits. There are a large number of factors driving this increase.

Deinstitutionalisation of mental health patients is a big one. So is the increase in the retirement age to 65. The aging of the population is another one. Greater recognition of health issues in the workplace is another. Once again, there is probably some abuse, but that is being countered by better case management. Brash's specific suggestions should be canvassed (where they have not already been tried and shown to fail), and if they have merit they could be adopted. The substance of what he is proposing would make very little difference to the numbers, which I'll come back to.

Brash's views on these are consistent with a more conservative turn in his mindset. I don't think he has the measure of New Zealand's electorate on this matter, in the same way he was wrong on civil unions. We are a liberal people, like it or not. That is the society we have built in these islands and that is how most of us want things. We could probably dramatically cut the number of people on sickness and invalid benefits, on the DPB - and it might save some money. It would destroy lives, though, and they matter more than money. Yet Brash claims to be on a mission to save lives. How does one reconcile these inconsistencies?

Nationally Inconsistent

Without a doubt, one of the most interesting things in the speech are the inconsistencies between various strands of National thinking that are now beginning to emerge. Some examples:

Cut/increase spending: National's making lots of noise about tax cuts. This welfare policy is bloody expensive in its implications. You can't spend money twice. Big policy commitments like this alongside others in health and education, combined with the recent flip-flop on the NZ Super Fund, sharply reduce the room for tax cuts - but I see no backing away from these. You can't cut taxes without cutting spending - so what else is going to be cut, if National was elected?

Talk tough/act soft: For all the big rhetoric, the policy proposals Brash mentions are not going to deliver the outcomes he seeks. They just don't add up on the numbers. If you really want to get benefits down to 200k people, there is probably only one way to do it: time limits. National hasn't gone there; it's too hard politically. So is revealed one of the deceits in the policy.

Welfare/wage gap: One of the specific proposals is to allow people into working situations without the protection of employment law. It is evident from NZ experience and from labour market economics that such casualisation that REDUCES AVERAGE WAGES. That is not consistent with his desire to increase wages - his only alternative is tax cuts, which he cannot deliver because he is now getting into double-spending of the surplus.

There are others. Probably one of the most fascinating ones is the way he couches his speech in terms of it being a great moral calling to save people's lives. National's policy, as John Armstrong identifies in this morning's Herald, is tinkering at the edges. If they actually believe what Brash is saying, they'd be proposing much stronger measures. If they don't, then this is just a political game. I suspect the latter is the case. Focus groups indicate this issue might be a goer, and so he is hammering on it with fine words but little substance. In contrast, Labour is delivering in one of the implicit areas that Brash proposes as a remedy, mentioned briefly above - the welfare/wage gap.

The Gap between Welfare and Work

Most people agree that there is a need to have good incentives in the labour market for people to get off benefits and into work. There are two main approaches to delivering this. One is to cut benefits. The other is to increase the benefit you get from getting a job. Labour is strongly in favour of the latter. National, from Brash's speech, is still into the former to an unhealthy degree.

Brash doesn't like Working for Families. Working for Families delivers very big improvements in the incomes of people who move from welfare into work, and makes the transition easier too.

The only way Brash could match this with his focus on tax cuts would be to cut income taxes so much the whole state sector would be starved of funds. You're talking about tens of billions of dollars of tax cuts, to deliver something a more targeted approach delivers for far less. How that is consistent with spending more, I do not know.

It's an underlying philosophical difference that does deserve to be highlighted. Labour believes in getting people into work by making work pay, and by ensuring jobs are high wage, secure, high productivity etc. National believes in getting people into work by cutting their benefits, casualising work place relationships and so on. Their whole workplace law framework is last century, and focuses on cutting costs and casualising labour rather than investing in productivity and encouraging collective involvement in working life.

Of course, you could argue that this is just part of Brash's essential meanness of spirit - which seems an appropriate place to conclude.

A Miasma of Despair

It is the job of Opposition parties to create conditions where they can get elected. One of the only ways they can do this is by generating discontent and a sense of grievance about the current government, and by holding out hopes of a better future should they be elected to power. They need to be careful they don't stoke ambitions too high, for fear of not meeting them, but that is the basic pattern.

You can see this logic at work with the speech Brash gave. With Orewa II, just as with Orewa I, Brash is trying to tap into those areas of our national life where there are some senses of injustice. In retrospect, welfare was his only possible choice this year. He cannot complain credibly about the economy; about foreign affairs; about unemployment; about falling crime rates; about our growing cultural achievements; about improvements in the public services; about better transport and infrastructure provision. All those areas are moving ahead.

In short, life is getting better in New Zealand, and people know it. The UMR survey discussed a few weekends ago in the Sunday Star Times makes great reading for New Zealanders, and bad reading for opposition politicians. This is a great place to be, and it's getting better - people know it and more important, they feel it too. Trying to fight that is like stopping a juggernaut; the effort to turn around those positive feelings about where our country is at is not a simple one.

That is why he has to focus on those areas where there is any sense of grievance. He has done that with race and with welfare. On the first, he definitely scratched an itch. On the second, I suspect he has done less well.

Why?

Mainly because the facts are less on his side. Last year, he articulated a view where the elite consensus had become out of touch with the community. Even the PM admitted that. There was a big gap between where politics had taken the Treaty, and where the community had followed. The repercussions of that played out in the most significant political event of 2004, the formation of the Maori Party. They will reverberate for the rest of our history, for better or for worse.

This issue is different. Labour's reforms have seen fewer people on benefits. The community at large does not have the same sense of irritation with a situation that is clearly getting better. Times are not tough and people are not begrudging those on benefits, except for the most egregious of examples of flouting the point of the welfare system.

Even more so than last year, Kiwis want a positive vision of the future. After 20 years of heartache, of constant change, of perceived pain without gain, things are finally looking up. The massive increase in Kiwi music and the economic boom have contributed to a sense I have never felt in my 17 years here - of confidence, of daring, of taking risks and of aiming once again to be the best. Concern with community and engagement with some of the symbolic aspects of our national life are growing again.

These are developments driven by values Labour is profoundly in tune with. The modern Labour Party has the broadest and most diverse reach into Kiwi communities of any political movement. We are everywhere and we draw every point of view into government. We are not "mean" but nor are we "soft". We are not stuck in a dead ideology that was tried and failed last century. We're the party of progress, of middle New Zealand values and priorities - and people know it.

We are where New Zealanders are, and in the most simple terms, that is why we'll be elected to a third term in government later this year. National's living in the past, and Orewa II confirms it. Brash has done nothing more - or less - than I expected, but winning formula it is not. And for the sake of the nation, I can say "thank God for that" with every bit of meaning the phrase can contain.

ENDS

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