Analysis by Bryce Edwards.
One week on from last Thursday’s Budget, the “Benefit Boost” is still being discussed and dissected from all sides, but especially by the political left, which is celebrating, questioning, and endeavouring to work out how significant the move is.
Today, for example, welfare economist Michael Fletcher has published his breakdown of the numbers involved in the boost. He argues that due to recent cost of living increases, the proposed benefit levels are entirely insufficient – see: Will the new benefit rates be enough to live on?.
Plaudits from progressives
It’s natural that progressives are celebrating the welfare boost. And some commentators certainly see the rise in benefits as being significant, especially given Finance Minister Grant Robertson’s explanation that the boost is a historic righting of wrongs on the 30th anniversary of Ruth Richardson’s benefit cuts of 1991.
Chris Trotter was delighted at the thought that Labour has finally come back to its democratic-socialist roots, rolling “out a genuinely left-wing budget” of the likes not seen for decades – see: Passing the torch.
Numerous other commentators were in agreement with Trotter. RNZ’s Tim Watkin argued that all of Labour’s recent compromises and capitulations have turned out to be worth it, to get this result. He declared the rise to be “a significant reset of what New Zealanders can expect from the welfare state”, which means Budget 2021 is “dyed the deepest red” – see: Labour gets to be Labour, delivering a step-change budget 30 years in the making.
Other commentators used similar phrases: Newshub’s political editor called it “a purist ruby-red Labour Budget”; a Newstalk ZB broadcaster quipped that the Budget “should have been printed in red ink”. And many newspaper headlines pushed the idea that the benefit increases made this a much more leftwing Budget than usual: “Labour rewards its faithful”, “A very Labour Budget in the time of Covid”, and “A Labour of love”.
Why did the Government increase benefits?
Writing for the Guardian on the afternoon of the announcement, I explained the increase was a result of the pressure Labour had been under to do something about a crisis which appeared to be getting considerably worse under their watch – see: A ‘righting of wrongs’ as Ardern finally tackles New Zealand’s inequality crisis. My conclusion was that “the rising anger and concern about inequality and poverty was eventually just too great for Labour to ignore.”
This followed on from my pre-Budget roundup column, Will the Government take the poverty crisis seriously?, in which I argued that the tide had turned, and it was now untenable for Labour not to raise benefits considerably.
On the night before the Budget, Newshub released a new poll showing 55 percent in favour of a benefit rise, against only 35 percent opposition – see Tova O’Brien’s: Newshub-Reid Research poll shows Kiwis are on board with expected benefit increase.
Newshub’s political editor then reported on the increase the next day, explaining that Labour had been “bludgeoned for the last two years for failing to lift benefits” and finally had no other choice but to act – see: Blockbuster Beneficiary Booster Budget – bold but necessary. The embarrassment factor for the Minister of Child Poverty Reduction was just getting too much: “To have the stats consistently deliver abysmal results (albeit trend slightly in the right direction) for children was the ultimate black mark on her leadership. This is bold but necessary.”
The Herald’s Audrey Young had a similar explanation, saying Labour was facing a “revolt” from both the political left and the wider public over its inaction on poverty, and so a benefit rise couldn’t be denied any longer – see: If not now, then when for beneficiaries? (paywalled).
Young also points out that public consciousness had changed as a result of Covid, especially given how well the wealthy had fared from Government handouts: “With $57 billion having been spent in the past year on the Covid recovery fund, including expenditure on some pretty healthy companies, there has been an adjustment in the public’s mind as to what is deserving of state support. And for social welfare beneficiaries, if not now, then when?”
In another column, Young argues that the decision was ultimately “a political calculation”, and simply “had to happen, for several reasons other than alleviating suffering”. These were largely about the PM’s vulnerable reputation: “With Prime Minister Jacinda Ardern having created the Child Poverty Reduction portfolio in 2017, having put herself in charge of it, and having made underwhelming progress, it was clear something had to change this term to maintain her credibility, no matter what state the books were in” – see: This was the easy Budget for Grant Robertson (paywalled).
For the NBR’s Brent Edwards, the fact that Labour had not previously taken the opportunity to raise benefits speaks volumes about the motives behind the so-called “righting a wrong”, and it “is likely the government felt the political pressure to do something” – see: Budget 2021 benefit rises and the big debt mountain (paywalled).
Here’s his key point: “the more important question might be why has it taken Labour so long? While this budget is Robertson’s fourth, in total it is the 13th budget delivered by a Labour-led government since the 1991 benefit cuts. Despite slamming those cuts at the time, Labour never moved to restore benefits to pre-1991 levels even as the Helen Clark-led government banked large surpluses year after year. It is ironic this government has finally done it, as it banks large deficits year after year”.
The fact that Robertson felt pressured by the public to raise benefits was even discussed by Social Development Minister Carmel Sepuloni on Budget day, when she recounted that campaigners had had helped push them to act: “When we are… held to account then it actually does help with regards to the public narrative… I think it’s really important that we talk about it, it also helps behind the scenes because it puts pressure on the Finance Minister and others” – see Jo Moir’s Ex-beneficiary gets biggest Budget win.
In the same article, it’s said that although Sepuloni also claimed that she had the “political will to continue to do everything we can to reduce child poverty”, she believed “it’s for the Finance Minister to decide how much more will be invested in the welfare system”.
The fast-rising state of inequality since Covid was also a central factor in both necessitating a benefit rise and allowing Labour the social licence to do so according to Jenée Tibshraeny, writing on the Interest website – see: Asset owners are still receiving more support than beneficiaries.
In this, she outlines just how well the wealthy and property owners have done out of government decisions made since Covid hit – in terms of the wage subsidy for corporates, the Reserve Bank’s fuelling of house prices, and the fact that “The NZX 50 Index is 17% higher than it was a year ago”. Profits and asset prices are up, and “business confidence is the highest it’s been since Labour came into government in 2017”. Hence, according to Tibshraeny, the wealthy are in no position to complain about a small rise of income for those at the bottom, which still pales in comparison to what the rich have received under this Government.
But what about advocates for the poor? They also seem to see the benefit rise as a result of their campaigning, rather than due to any Labour Government altruism. For example, Auckland Action Against Poverty’s spokeswoman Brooke Fiafia is reported believing “the benefit increase is all due to the mounting pressure from fellow advocacy groups which have fought really hard for an increase” – see Te Rina Triponel’s Beneficiary advocacy group slams Govt, says benefit increase is ‘weak’.
Is the benefit boost enough?
In the article above, Fiafia is also severely critical of the Government’s package, essentially claiming that it’s too little and happening too late. She’s quoted saying “I think it’s weak”, the Government is “moving too slow”, and “They’re looking at small incremental changes that aren’t going to make much of a difference”.
The same article reports the Child Poverty Action Group questioning why the Government is delaying introducing some of the increases until next year. Spokesperson Janet McAllister has also written an opinion piece, in which she says the heavily-trumpeted increases don’t live up to the hype – see: Budget did not go far enough to fix child poverty.
According to McAllister, by failing to raise benefits to adequate levels, the Government are condemning the majority of New Zealanders in poverty to remain without liveable incomes. Here’s her general point about the limited change that will result: “Treasury predicts child poverty will only reduce from 18.4 per cent to 17 per cent in 2022-23 on a primary target indicator. That shift of 1.4 percentage points leaves a lot of children in distress. The Government will release around 20,000 children from poverty – but only after a further year or so of increasing family debt. What’s more, it will leave around 190,000 children under poverty lines”.
Other poverty advocates have been more diplomatic, yet strong in their insistence that the benefit increases aren’t enough. Children’s Commissioner Andrew Becroft has indicated that the rises are a good start, but much more is still needed – see 1News’ More required post-Budget if NZ wants ‘welfare state that really works’ – Children’s Commissioner.
Similarly, both the Auckland City Missioner and Wellington City Missioner have explained why the benefit boost is a good start but not yet enough – see Sarah Robson’s Boost to benefits and student support already being questioned.
Inequality researcher Max Rashbrooke also has mixed views on the increases. His first reaction to the news of the increase was generally very positive, congratulating Labour – see: Labour’s years of caution are finally paying off. He argued that Labour can now feel “vindicated” for taking their approach of “radical incrementalism”.
A second column by Rashbrooke, for the Guardian, is less positive, saying “there is a real danger of celebrating too soon” and arguing that even with the latest changes, the Government isn’t on target to meet its own targets in terms of reducing child poverty – see: Jacinda Ardern’s budget made progress on poverty, but it’s not mission accomplished. He argues that on measures of “relative poverty” things are getting worse for the poor under Labour.
Business New Zealand have surprised many by suggesting the Government could have increased benefits more, and arguing that fixing poverty also helps business. On RNZ’s Morning Report, chief executive Kirk Hope said: “If you think about the impact on the business community by way of lost productivity where communities live in poverty – it’s massive… we would say it’s a substantial shift, but you could always help your more vulnerable communities more” – see: BusinessNZ supports welfare increases which ‘could have been more’.
The latest research published today by Michael Fletcher (Will the new benefit rates be enough to live on?), is especially worth taking note of. This is because Fletcher worked as a special economic advisor to the Welfare Expert Advisory Group, and he has updated the original figures that were the basis of the recommended increases.
Fletcher finds that once you consider the increases in the cost of living since the 2018 report, the new levels of welfare are inadequate, meaning that for beneficiaries, “making the budgets balance is going to require deep cuts and, unless you have savings or some other income to fall back on, serious hardship.”
In fact, it seems that the benefit rises are so modest that many figures in business and on the political right are comfortable with them, suggesting Labour could have raised benefits much higher. For example, Judith Collins has stated that National supports the increases and wouldn’t reverse them in Government. And other figures from the last National Government have also spoken out in support – for example, Paula Bennett has said the following: “I also support the benefit increases. Housing costs, particularly for the poor, have gotten so high so quickly that there has to be additional support for those who are struggling” – see the Herald’s The verdicts from Paula Bennett, Sue Bradford, Neale Jones and Jon Stokes.
Finally, for satire about the Budget and the benefit boost, see my blog post, Cartoons about Budget 2021.