Max Rashbrooke on the 2016 Budget

Thursday, 26 May 2016, 2:08 pm
Article: Max Rashbrooke

The best label for this year’s announcement by Bill English might be the ‘Bare Minimum Budget’. It does the bare minimum to defuse potential political damage in a range of areas – homelessness and health are prime among them – but almost nothing to address the country’s most deep-rooted, systemic social problems. Indeed the Budget hints that these problems may get worse.

There is, in the Finance Minister’s speech, the summary of new initiatives and the accompanying press releases, no mention that I can see of either poverty or inequality. The government clearly thinks it has dealt with the issue through last year’s $25 a week increase to beneficiary families, even though that will have only a marginal impact on the issue, since most people in poverty are $100-200 a week short of what they need.

The focus on growth – mentioned ten times in the Finance Minister’s speech – but not on inequality (which is not mentioned once) shows that the government essentially holds to the ‘trickle-down’ line from the 1980s, which is that you don’t need policies for distribution: all you need to do is generate growth and assume that it will somehow end up in the hands of people in poverty. Sadly experience tells us that that’s not how it works.

The government would object that the average wage is set to rise to $63,000 a year by 2020, a large jump on its 2008 figure. And that’s to be welcomed, although the median wage will be lower than an average pulled up by CEO salaries.

But figures for labour costs – a slightly technical area of measurement – show that the share of company profits that goes to wage and salary workers is set to decline in coming years. More of their share will be taken by the owners of capital: company owners, investors, banks and shareholders. Since those people are disproportionately well-off already, this is a recipe for growing inequality, and more people missing out on what they need for a decent life.

The government would also object that it’s announced a host of social measures, among which are:
• $100m in capital funding for more housing in Auckland
• $200m for more social housing in Auckland
• $4.2m for low- and no-interest loans to low-income families
• $111.5m to support people into employment, including $61m for the Youth Service to help 18yos and 19yos at risk of long term benefit use, $26m for targeted case management for 120,000 people on benefits, and $15m for a trial of programmes to improve the employment prospects of prisoners
• $20m to help offenders reintegrate
• $18m for the Warm Up insulation scheme aimed at 20,000 low-income tenants, and $18m for the Healthy Homes Initiative
• $96m for legal aid
• $200m for a new vulnerable children service
• $50m to reduce barriers to employment especially for people with complex health who would otherwise be on benefits
• $43m for children most at-risk of not achieving – 150,000 children with significant time spent in a benefit-dependent family
• $50m for better data and evaluation

All of these are welcome, especially the help for offenders. But most only begin to scratch the surface of what’s needed. $200m will get you just another 750 social houses, when there are thousands on waiting lists and 34,000 people homeless in one form or another. $43m for 150,000 at-risk children amounts to $1.80 per child per week, according to PPTA calculations – and there’s no increase in general school budgets, meaning extra costs will be passed onto parents.

The health sector gets another $500m or so a year – but needs $700m a year just to keep up with inflation, according to the CTU’s analysis.

And most fundamentally, this Budget does nothing to tackle poverty and the scandal of over 200,000 children going without the things they need for a decent start in life. That low income is the cause of so many of the problems the above measures are designed to address. So not only is tackling that poverty important in itself, it would have major spillover effects: research shows that boosting family income by $1,000 improves kids’ school marks just as much as $1,000 spent on schools, since parents use the money to help their kids learn.

Instead of fully addressing these poverty-related needs, the government has decided to pay down debt early and float the prospect of tax cuts. The result is a budget that does the bare minimum for political survival, and deals with some of the consequences of social problems – but does little to address the causes of these things.

© Scoop Media

Max Rashbrooke

Journalist

Max Rashbrooke is a journalist and author working in Wellington, New Zealand, where he writes about politics, finance and social issues.

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