Capitalism is in crisis, and our species’ imagination to save ourselves is sorely lacking. There are of course understandings out there, and solutions; but they are so heavily gate-kept that conversations about saving ourselves are well-nigh impossible. It remains a puzzle why those political and intellectual leaders who would most benefit from a regime of socially inclusive capitalism have been so avid in their anti-reform gatekeeping.

The missing ingredient from the capitalism that most of us know, or know of, is ‘public equity’. Capitalism is presented to us all as a system of markets, individualism, laws, and private property rights. The crisis of capitalism can be addressed through the development of a set of public property rights, which we may call ‘public equity’. It is the establishment of public property rights that is necessary to democratise capitalism.

New Zealand’s surprising history of universal income

At the end of my Zero-Sum Fiscal Narratives (22 May 2025), I suggested that we need to promote a narrative of “public equity over pay equity as an efficient means to correct destabilising inequality”.

In global capitalism, the first real narrative of public equity – even though it wasn’t called that – belongs to the New Zealand social security reforms of 1938. And the particular policy announced in those reforms, and implemented in the 1940 financial year, was known as Universal Superannuation. This was the activation of a human right; the right of a country’s citizens, once they reached a certain age, to receive a private income in the form of a public dividend. Irrespective of race, sex, or creed.

At its initial conception, the ‘Super’ was modest; but was projected to grow, in accordance with affordability constraints and fiscal prioritisation. Most good big things start with small beginnings. An annual payment of $20 was set to commence in 1940. And it commenced in 1940. And the 1938 universal welfare state came in under budget (refer Elizabeth Hanson, The Politics of Social Security, 1980).

The concept of Universal Superannuation proved to be extremely popular; a policy from the radical centre that pleased most of the public, though – until its popularity was demonstrated in 1938 – few of the politicians and other ‘opinion leaders’. The policy came to be because Michael Joseph Savage felt that his Labour Government had to come good on its most important 1935 promise, and because the ‘left’ and ‘right’ proposals favoured by each of the two main factions of the Labour Government (fortunately) cancelled out in the political numbers game.

The universal proposal came through the middle, between left-wing attempts to radically extend redistributive measures favouring working-class families and Labour right-wing attempts to bring in an actuarial pension system based on the supposed ‘miracle’ of compound interest. The latter idea, pushed by the finance industry, was to create a contributory ‘money mountain’ from which pensions from some future date would be paid to retired working men. (This idea disclaimed the obvious reality that all spending of pension income – not just public pensions – represents a slice of present [not past] economic output.)

(On the miracle of compound interest, it is useful to imagine persons born around 1920 saving regular percentages of their salaries from early adulthood until age 65. Such persons became rich from home-ownership, not from compound interest.)

This retirement-income policy based on public equity was not successfully exported to the wider world. The war got in the way, and unconditional non-means-tested payments to citizens of a certain age never caught on internationally. The post-depression environment – a relatively sexually-egalitarian time – was displaced by a post-war environment, which favoured men. The more common post-war welfare model was, in its various guises, ‘social insurance’. And even Universal Superannuation in New Zealand came to be seen, increasingly, through a ‘social insurance lens’; recipients widely believed it was a contributory scheme.

The aim of initially Labour, and subsequently National, was to gradually raise the amount of Super paid until it would render redundant (and henceforth displace) the alternative means-tested Age Benefit. National became increasingly committed to the concept of universal income support, favouring taxable universal benefits which would in practice confer more to each low-income recipient than to each high-income recipient. In the 1950s and 1960s, income tax rates were much more heavily graduated than they have been since the 1980s. (‘Graduation’ of income tax rates means higher ‘marginal tax rates’ faced by people with higher incomes.)

By 1970, the full convergence between Universal Superannuation and the Age Benefit had still not been achieved. Retired persons would still choose either US or AB. The convergence eventually took place, in 1976.

The universality of Super was lost twice, by the same man, who came from ‘working class aristocracy’: Roger Douglas.

Douglas replaced Super with an actuarial (‘money mountain’ for men) system in 1974; a system which became ‘the election issue’ in 1975. This plan was conceived in the days before Equal Pay for women; ie conceived when ‘labour’ was still a highly male-gendered word in certain Labour circles. (Equal pay for women was legislated for in 1972, when Robert Muldoon was Finance Minister.)

Robert Muldoon won a resounding victory – like Savage in 1938 – by committing to Universal Superannuation (albeit under the name National Superannuation). Muldoon, when recreating Super, did so by retiring the Age Benefit, leaving Super as the only publicly-sourced retirement income.

About Douglas’s 1974 scheme, Margaret McLure (A Civilised Community, 1998) wrote (pp.190/91): “Douglas’ plan was rooted in early and mid-twentieth century English labour history… It drew on the 1904 ideas of Joseph Rowntree which had helped shape English social insurance, and on the English Fabian Society’s promotion of a union’s industrial pension plan of 1954… It rewarded the contribution of the fulltime long-serving male worker and provided him [and his dependent wife] with comfort and security in old age.” The full earnings-related benefit would only be payable on turning 60 to life-long workers born after 1957. It was less generous to others, and represented a backward-looking “narrow vision for the late twentieth century”. While more like the current bureaucratic Australian scheme (with its many hidden costs) than today’s New Zealand Superannuation, the Douglas scheme had inbuilt disincentives for people of ‘retirement age’ to continue in some form of paid work after becoming eligible for a pension. An older population – as in the 2030s – requires older workers with work-life flexibility.

Douglas, in the later-1980s, again removed the universality of Super by introducing a ‘tax surcharge’ on superannuitants’ privately-sourced income, an indirect way of converting Super into a means-tested Age Benefit. Douglas renamed National Superannuation ‘Guaranteed Retirement Income’. (Douglas liked the word ‘guaranteed’, using it as a label for other benefits too. ‘Guaranteed’ implies a ‘safety net – ie an income top-up – rather than an unconditional private income payable to all citizens of a certain age. Income top-ups come with poverty traps; very high [sometimes 100%] ‘effective marginal tax rates’, when increased income from one source displaces [rather than adding to] income from another source.)

Super was restored in 1997 as a universal income when Winston Peters was Treasurer in a coalition government; Peters, the heir to the universalist tradition within the National Party as it once was, has enabled Savage’s enlightened ‘public equity’ reform to survive to the present day, albeit as an international outlier.

A Right. Or a Benefit?

The presumption against universalist principles has come from Generation X, the generation born either side of 1970 who have never known any form of capitalism other than 1980s’ and post-1980s’ neoliberalism. (And noting that Roger Douglas was the poster-‘child’ in New Zealand of the neoliberal revolution which acted to restore capitalism to its neoclassical basics; markets, individualism, laws, private property, and public sector minimalism).

This week I read this from Liam Dann, journalist on all matters relating to capitalism, and very much a ‘Gen Xer’, who wrote: Inside Economics: Should you take New Zealand Superannuation if you don’t need it? 4 June 2025. Dann is trying to resolve the clear view of his parents’ generation that Super is a ‘right’, against his own view that Super is an age ‘benefit’; a benefit that should be bureaucratically ‘targeted’. (A benefit in this sense is a redistributive ‘transfer’. By contrast, an income ‘right’ is a shareholder’s equity dividend; in a public context, the word ‘shareholder’ equates to the word ‘citizen’.)

Liam Dann asks an excellent question though – “Should rich people opt out of NZ Super?” – albeit by misconstruing the opting process. New Zealand Super is in fact an ‘opt-in’ benefit, as Dann comes to realise. Much of the present opposition to Super comes from people who would rather that the money paid to the rich was instead paid to bureaucrats to stop the rich from getting it. In reality, there is probably a significant number of rich older people who don’t get Super because they never bothered applying to MSD to get it. As Dann notes, the government is remiss in not collecting data on the numbers of eligible people who do not opt in to NZS. (And journalists, before Dann, have been remiss in not asking for that data.)

We should also note that, in spite of indications that ‘first-world’ life expectancies are levelling out, and indeed falling in some countries, Denmark is looking to raise its age of eligibility for a public pension to 70. In my view, this is moving in the wrong direction. Nevertheless, it is possible to both move in the direction that I am suggesting below, while raising what might be called the age of ‘privileged retirement’, meaning the age at which older people are entitled, as of right, to a higher pension or pension-like income than other citizens.

The Denmark policy is discussed in Denmark to raise retirement age to highest in Europe, BBC, 23 May 2025.

UBI

A Universal Basic-Income has come to mean an unconditional publicly-sourced private income, available to all ‘citizens’ above a certain age, which satisfies some kind of sufficiency test. Thus, a UBI is meant to be sufficient, on its own; a ‘stand-alone income’. New Zealand Super (NZS) – the present name for Universal Superannuation (from 1940) and National Superannuation (from 1976) – is such an income, designed to meet a sufficiency test. In particular, the ‘married-rate’ Super – $24,776 for a year before tax – is a UBI in Aotearoa New Zealand, payable to people aged over 65 who meet a certain definition of ‘citizenship’; a definition that neither discriminates on the basis of sex, race, nor creed.

However, a UBI is considered, by many of its advocates, to be a sufficient adult income, not just a retirement income. Just as NZS is in practice, a UBI needs to be a complement to wages, not a substitute for wages.

Technically, it is very simple to convert the ‘married-rate’ NZS into a UBI for all adults. Just two things would need to be done: lower the age of entitlement to 18, and pay for it by removing the concessionary income tax brackets (10.5%, 17.5%, 30%). (The higher ‘non-married’ rates would continue to apply to people over 65.) Under this proposal, there would no longer be MSD benefits nor student allowances, though there would still be some benefit supplements for MSD to process, such as Accommodation Supplements and NZS ‘single-rate’ supplements.

This UBI proposal would not be fiscally neutral; though it would be less unaffordable than many people would guess. (In practice, a fiscal stimulus at present could pay for itself in increased growth-revenue in just a few years; it might even ‘return New Zealand to surplus’ sooner than realistic current projections.) For present superannuitants working part-time, it would represent a small reduction in after-tax income, given that they would be paying income tax on their wages at what is commonly known today as the “secondary tax rate”.

Other than fiscal non-neutrality, two objections to such a UBI would be these: New Zealand has too many workers who would not meet the present NZS definition of ‘citizen’; and the UBI would be too generous to young people not working and living with their parents.

So, while it might be less unworkable than many people would expect, this instant-UBI policy is not one I would favour.

SUI

SUI stands for Simple Universal-Income. Self. We note that the prefix ‘sui-‘ means ‘self’; equity rights are a development of liberal individualism, not of ‘socialism’ or ‘communism’. Some people equate public property rights with Marxian collectivism, with the ‘nationalisation of the means of production’. They couldn’t be more wrong. Collectivist schemes involve full government retention of citizens’ incomes; they are schemes of government control; completely the opposite of universal income.

A universal private income drawn as a dividend from public wealth is individualism, not collectivism. Indeed, the natural political home of reformed capitalism is the political centre-right, not the left; albeit the new centre-right, not the privileged and stale centre-right politics which New Zealand Prime Minister Christopher Luxon has so far represented. A ‘universal private income drawn from public wealth’ is different from a ‘privileged private income drawn from public wealth’.

It would be very simple to create an SUI in Aotearoa New Zealand. New Zealand’s income-tax scale has five rates: 10.5%, 17.5%, 30%, 33% and 39%. The 33% rate has formed the backbone of the New Zealand tax scale since 1988. As with the UBI example above, the SUI proposal simply eliminates the 10.5%, 17.5% and 30% rates. In return every adult economic citizen – effectively every ‘tax resident’ – would receive an annual SUI (ie dividend) of $10,122.50; that’s $195.66 per week. For all people receiving Benefits – including Superannuation, Student Allowances, Family Tax Credits – the first $195.66 per week of their benefit payments would be recategorised as their SUI dividend.

That’s it. (The dividend of $10,122.50 is simply a grossing-up of the maximum benefit accrued through those lower tax rates.) Unlike the UBI option, all existing benefits and bureaucratic infrastructure would be retained; at least until they can be reconfigured in an advantageous way. From an accounting viewpoint, existing Benefits would be split into unconditional and conditional components.

It means no change for all persons earning over $78,100 per year ($1,502 per week) before tax. And it means no change for all persons receiving total Benefit income (after tax) more than $195.66 per week. (These people could continue to be called ‘Beneficiaries’, but without stigma. Without stigma, Superannuitants can be happy to be classed as Beneficiaries.) People whose present total weekly Benefit income is currently less than $195.66 would cease to be called Beneficiaries; they would cease to be clients of the MSD, the Ministry of Social Development.

What this means is that most New Zealanders, on Day One, would see no change in their bank accounts. Nobody would receive a lower income. And for most who receive a higher income, it would be only higher by small amount.

This begs the question, if most people’s disposable incomes do not increase, or only increase by a trivial amount, then why bother? The important societal benefits would be dynamic; would be around incentives.

First, individuals (of all adult ages, male and female, regardless of their position in their households) would be incentivised to take employment risks – including self-employment risks – if they receive a core unconditional income that they do not stand to lose when risk doesn’t pay off. Labour supply is boosted; as is the economy’s ‘surge capacity’ (technically, the elasticity of labour supply increases).

Second, lower-paid individuals – many of whom are women – would have increased bargaining power (through unions and as individuals) and would not have to resort to contestable narratives such as ‘pay equity’ in order to achieve a fair wage.

Third, individuals would be better able to negotiate weekly hours of work to optimise their work-life balance. The SUI would minimise the present ‘twin evils’ of overwork and underwork.

Fourth, and especially for today’s high-income workers, the SUI represents an unconditional form of income insurance to facilitate the acquisition of basic needs during a period of what economists call ‘frictional unemployment’; being ‘between jobs’. Or a period of ‘voluntary unemployment’, such as attending to the health needs of another family member.

Fifth, the SUI would count as a democratic dividend, an acknowledgement that each society’s wealth arises from both (present and past) private and public enterprise, and that – for that reason – both private and public dividends should be part of societies’ income mix. All citizens would have both private ‘skin in the game’ and a sense of ‘public inclusion’, motivating all citizens to have an ‘us’ mentality, rather than a divisive and exclusionary ‘them and us’ mentality.

The SUI is my preferred option for New Zealand for the year 2026.

BUI

BUI stands for ‘Basic Universal-Income’. In the New Zealand context, it could be easily created by removing the 10.5%, 17.5%, and 33% income brackets. Thus, except for high-income-earners (say the five-percenters), there would be an effective flat tax set at 30% of production income. It would work much as the SUI.

I have calculated that, for New Zealand, the BUI would be $7,779.50 per year, effectively $150 per week.

To partially offset the tax cut that would be payable to people earning more than $78,100 per year, the income threshold for the 39% tax rate should come down (to $146,000, from $180,000). Tax cuts would be received by all persons earning between $78,100 and $180,000, with the maximum tax cut of just over $2,000 (just over $39 per week) being payable to someone earning $146,000.

With this BUI, compared to the SUI, there would be more day-one beneficiaries (ie more better-off people) on higher incomes, and fewer day-one beneficiaries on lower incomes. Nobody would be worse off. The dynamic benefits discussed in relation to the SUI would still apply.

This is a policy that the Act Party should embrace, given its stated commitments to liberal-democracy, individualism, enterprise, and the future of capitalism.

A wider benefit of BUI is that it could represent a small beginning to something bigger and better. Just as with Universal Superannuation, the ‘establishment fear-factor’ soon dissipated. And universal benefits came to be embraced in the 1950s by both ‘left’ and ‘right’ in Aotearoa New Zealand; a decade in which there were very few persons of working age relative to persons classifiable as ‘dependents’.

HUI

HUI represents Hybrid Universal-Income; a mix of UBI and SUI. What would happen is that the age of entitlement to New Zealand Superannuation would be lowered, but not all the way to age 18. Today the ‘threshold age’ is 65. Under a HUI, all adult tax residents under the new threshold age would receive a SUI, on the same basis as described above.

A variant of HUI would be more flexible; a flexible Hybrid Basic Income. Everyone between say 30 and 70 would be able to have a UBI for say ten years; otherwise they would have an SUI. (This might be a policy that would work well for Denmark.)

Today a large proportion of babies are born to mothers aged 30 to 40. Many of these mothers might prefer to have children while in their early thirties, but, for financial reasons, end up having their children later. If all adults could choose when to have their ten years UBI, I could imagine many women choosing their thirties, and many men choosing their forties. Thus, women would be able to leave paid work to a greater or lesser extent around when they would most like to have children, and their partners could take their UBI after the mothers of their children have returned to fulltime employment. For persons in their forties, parenting non-infant children fits with the life-stage when many people would like to be establishing their own businesses and becoming employers. This would create incentives to both working-class (and bourgeois) human reproduction, more enterprise, and more employment opportunities in the private sector for youngish and oldish workers.

A further variant of this variant could be to extend the SUI to a UBI for individuals over 60 who lose their jobs on account of redundancy. This would help the many women such as those who were caught out by the Labour Government’s barely-noticed 2020 decision to remove NZS entitlements to ‘non-qualifying-spouses’ (ie people who become redundant, mostly women, whose life-partners are already on New Zealand Superannuation). (We might also note that the Sixth Labour Government – 2017 to 2023 – cut the after-tax wages of all women [and men too] by not inflation-adjusting income-tax bracket thresholds. Looked at in full historical context, Labour governments in New Zealand have not been kind to women.)

GUI

We might note that the UBI case, first-mentioned above, would be very close to a Generous Universal-Income. In this case, only the 39% income-tax rate would be retained, and the UI would be an annual GUI dividend of $20,922.50 (ie $402.36 per week). All income would be taxed at 39% and all economic citizens would receive a weekly private (but publicly-sourced) dividend of just over $400.

Conclusion

The UI policies presented above (possibly excepting the GUI, and the UBI) reflect a liberal non-establishment centre or centre-right political perspective. The GUI and UBI, in practice, realistically reflect only future policy directions (given their clear fiscal non-neutrality), whereas the SUI, BUI, and HUI all represent changes that could be easily implemented in the May 2026 Budget.

My preference, for immediate implementation, is the SUI. In inclusive capitalist societies, public equity returns to individuals are a right. Much of societies’ capital resource is not privately owned.

As in 1938 to 1940, New Zealand can set an example for the democratic reformation of global capitalism. Unfortunately, the 1938 to 1940 reform – Universal Superannuation – was not taken up by an otherwise distracted world. (Sadly, New Zealand’s misguided 1989 monetary policy ‘reform’ – the Reserve Bank Act – was taken up by a then-attentive wider world. Unnecessarily high interest rates have caused huge grief on a global scale.)

We can choose to have a 2026 reform – a technically simple reform, that, through being promoted to the wider world as an example of how capitalism can be democratic and inclusive – which can have beneficial global consequences. Do our leaders have the intellect, imagination and courage that Michael Joseph Savage revealed in 1938? Hopefully ‘yes’, but realistically ‘no’.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

The Commentariat

There is a regular commentariat who appear on places such as ‘The Panel’ on Radio New Zealand (4pm on weekdays), and on panels on television shows such as Newshub Nation (TV3, weekends) and Q+A (TV1, Mondays). Generally, these panellists come out in favour of targeted assistance to the misfortunate, in contrast to the provision of universal entitlements. A common refrain is: “I am not poor. Such a policy should not give me more money”.

Most of the panellists on these shows have little understanding about the process vulnerable people must face when applying for targeted help in a political society (such as New Zealand); a society in which substantial and costly bureaucratic efforts are made to deny people help. These processes represent the essence of targeted income support. (Such processes – unkind, sometimes cruel – also apply in other policy fields, with immigration being an obvious example. At present New Zealand has a substantial and vulnerable non-resident population experiencing simultaneous official cruelty from both the social welfare and the immigration agencies of government. And it’s not only government processes that can be cruel; consider the insurance industry with its propensity to seek out ways to not pay out on claims.)

Mechanisms of Income Distribution and Redistribution

A targeted mechanism to provide income support only to those people who meet prescribed criteria is unambiguously redistribution; it is supposed to save money by not helping anyone who does not fit the qualification profile for any targeted income benefit. As redistribution, the economists’ word ‘transfers’ neatly describes such benefits; although the mainstream media, with its love for inflammatory language, generally prefers the pejorative synonym ‘handouts’.

Targeted ‘support’ mechanisms are ‘rules-based’; a person or family either qualifies according to a set of rules, or does not qualify. Complex rules generally require bureaucratic processes. (Some rules – such as the rule that determines what percentage of a persons income must be paid in income tax – follow an arbitrary and seemingly complex formula; the benefits arising from these tax rules are unconditional but far from universal.)

Universal mechanisms are ‘rights-based’. The must obvious example is the right to vote in parliamentary elections, the universal suffrage. New Zealand Superannuation is essentially a universal rights-based benefit, though it does have exclusion rules, and does have rules allowing some qualifying people to get bigger superannuation benefits than other people. (Even universal suffrage has exclusion rules; for example, children are excluded.)

In practice, almost all political societies will feature a mix of rules-based and rights-based benefits. Some support mechanisms are, in essence, universal. Others are, in essence, targeted. Each political society has its own particular mix of rights-based and rules-based benefits.

A universal rights-based publicly-sourced income benefit is an aspect of income distribution. A targeted rules-based income benefit is an income transfer; an act of income redistribution.

Before and After (‘comparative statics’)

Most commentators do not think about mechanisms. Rather they think of a present status quo, without much concern for the mix of principles and historical quirk that have contributed to that ‘present’. This presentbecomes the ‘before’.

When a policy change is suggested – creating a hypothetical ‘after’ – such commentators then wish to know, in relation to its immediate implementation, who will be the winners and who will be the losers. Winners get more dollars ‘in their pockets’; loses get less money.

In this sense, both policies underpinned by universal principles and policies underpinned by targeting principles will create a redistribution, meaning that the ‘after’ distribution is different from the ‘before’ distribution. (An important exception is a purely accounting policy, which will change the description of the present, but not alter the amounts of dollars in different people’s pockets.)

Let’s consider a Basic Universal Income (BUI), as featured last month in Universal Income Flat Tax: the Mechanism that Makes the Necessary Possible and Universal Basic Income (or Basic Universal Income) and Covid‑19. (The BUI is the benefit component of the UIFT mechanism.) Because UIFT is a policy to inject universal distribution principles into New Zealand’s tax-benefit mechanism, commentators such as those mentioned above tend to assume that such a policy is not targeted, and is therefore not useful.

However, the Universal Income Flat Tax (UIFT) policy does benefit some people differently from other people, and turns out to be peculiarly well-targeted in its immediate impact. While the suggested policy to introduce UIFT makes no immediate difference to beneficiaries nor to people grossing more than $70,000 a year, that policy does distribute increased income to the remainder of the adult population, the people in the middle. Thus, a Basic Universal Income (as proposed) targets people earning less than $70,000 a year and who are not beneficiaries.

Universal Basic Income (or Basic Universal Income) and Covid‑19 presents five example people: Janet, Max, Bob, Jill and Fred. Two of these people Bob and Jill – receive increased incomes as a direct result of the introduction of a Basic Universal Income. Thus, the ‘target group’ is non-beneficiaries receiving low and lowish incomes.

The Universal Mechanism at Work

It is important however to note that those whose incomes would not immediately change are better off, not in the sense that they would receive an immediate gain, but in the sense that they would receive an emergency cushion. Thus, persons whose incomes fall below $70,000 in the future will gain support from their cushions. Further, persons who are presently beneficiaries gain support from their cushions when they move into precarious employment. (Much – if not most – employment is precarious in these days of Covid19.)

The policy – based on universalist principles – is both well-targeted and provides an ongoing and automatic (ie non-bureaucratic) mechanism to protect individuals whose circumstances are subject to change. Additionally, the policy stabilises the economy itself, by providing an automatic economy-wide cushion, when economies face contractionary circumstances (such as pandemics and financial panics).

Benefit Adequacy

This particular UIFT policy facilitates a rights-based income distribution that contains fast-acting equalisation and stabilisation measures – the important metaphor here is the ‘cushion’.

The policy does not directly address the issue of child poverty. Nor does it directly address the issue of benefit adequacy for existing beneficiaries. (By targeting lower-income adults, including parents, UIFT does mean that there should be less future child poverty. And, by cushioning people in precarious employment, the policy should contribute to a reduction in the numbers of misfortunate people needing to be beneficiaries.) Nevertheless, the policy does help parents who may be earning lowish incomes, or who may be suffering from falling incomes, or who may be experiencing income insecurity arising from precarious employment (including precarious self-employment). This help mitigates child poverty. The UIFT policy – thanks to its cushioning effect – also gives these employees more bargaining power, enabling some to earn higher wages.

Re benefit adequacy, the adoption of a UIFT policy in no way pre-empts the introduction of other policies that focus on the level of benefits payable to those we call ‘beneficiaries’; those people whose circumstances would determine that their income should include a benefit over and above a BUI.

The presence of a Basic Universal Income (BUI) does not mean the absence of other benefits. (It does however mean that, if a BUI of $175 per week is introduced, then a beneficiary presently receiving $300 per week, would have the first $175 of their present benefit replaced by the BUI. If this person needs an extra $50 per week to ensure benefit adequacy, then they should get an extra $50 per week, giving them a total disposable income – BUI plus benefit – of $350 per week.)

Conclusion

A reform policy need not be either universal or targeted. It may be both universal and targeted. Critics of universal income support mechanisms should be aware of both the universal and the targeted effects of particular policies, rather than indulge in ill-informed scattergun opposition to policies which are based on universalist principles. These critics should confine their criticism to particular universalist policies, and not extend their criticism to all policies that are informed by universalist principles.

Fact Checking

On Mondays – or Tuesdays after public holidays – National Radio’s Kathryn Ryan runs a session called ‘Political Commentators’. On 28 April, from the right was regular commentator Matthew Hooton. From the left was Neal Jones who is listed as: “Chief of Staff to Labour Leader Jacinda Ardern, and prior to that was Chief of Staff to Andrew Little”.

It was good to hear Hooton now becoming something of an advocate for a Universal Basic Income (UBI), though (given past comments) I am not clear yet that he understands it fully.

It was concerning, however, to hear Jones – a man close to Prime Minister Jacinda Ardern – repeating falsehoods about Universal Basic Income. Jones said that a key problem with UBI is that it would be paid to New Zealand’s richest man, Graeme Hart. That comment reflects an attitude that is dismissive of universalism. Universalism is the basic principle that underpins democracy; and, more generally, underpins ‘horizontal equity’, the idea that we are all equal in our economic and other civil rights.

Perhaps even more importunately, Jones’ comment on Tuesday was false.

It was me who in 1991 first coined the term ‘Universal Basic Income’; my aim was to connect the established concept of ‘Basic Income’ (‘Citizens Income’ in the United Kingdom) with insights gleaned from New Zealand’s tradition of universal income support, as established in the 1938 Social Security reforms and as reaffirmed in the 1972 Royal Commission on Social Security.

The mechanism I envisaged in 1991 is: “a universal tax credit available to every adult – the universal basic income (UBI) – and a moderately high flat tax rate”.

(Refer to my ‘Briefing Paper’ From Universal Basic Income to Public Equity Dividends (2018) which in turn links to a report that links to, among other papers, my original 1991 University of Auckland Policy Discussion Paper. To the best of my knowledge, this was the first ever published use of the name ‘Universal Basic Income’. The name started to be used internationally after I presented a paper at the Basic Income European Network conference in Vienna in 1996.)

Since the 1990s, the concept of Universal Basic Income has become poorly defined, and tends to be seen, simplistically, as an unfunded handout, a kind of regularly paid ‘helicopter money’. In that sense, it is true that some proposals that use the name ‘Universal Basic Income’ would raise Graeme Hart’s income. But not all versions of UBI. In those versions that are truest to the underlying concept – Graeme Hart’s income would be unaffected.

So, once again, for the remainder of this essay, I am going to avoid the term ‘Universal Basic Income’. The term I will use here is ‘Universal Income Flat Tax’ (UIFT, if you will). This is a mechanism made up from a universal income and a single (flat) rate of income tax. Thus, the universal income is funded by the removal of the lower marginal tax rates. In the New Zealand case, that means the universal income replaces the 10.5%, 17.5% and 30% marginal tax concessions. With a single tax rate of 33% and a universal income of $175 per week, Graeme Hart would be completely unaffected, at least in the implementation phase. This represents a reconceptualisation of income tax rather than a redistribution of income.

The Mechanism at Work

Rather than labour the point about how we introduce the UIFT mechanism, it’s good to get the vision of the mechanism in action. It is a mechanism that addresses the issues of stability, precarity, equity, and sustainability. UIFT is not a sufficient panacea to cure all our economic ailments, just as the introduction of MMP did not remove the politics from politics. UIFT is, however, a mechanism that makes the necessary possible. It is an enabling mechanism for the evolution of liberal democracy. The Covid19 global emergency has shown more clearly than ever that our present ways of thinking about public finance are disabling, and as such threaten to bring about an end to liberal democracy in some parts of the world.

(Much of the disabling is due to the fact that many welfare benefits continue to be delivered to us in the form of tax exemptions, allowances, concessions and graduations. These are attractive to recipients because they are unconditional – they do not have to be applied for – and to policymakers because they barely contributes to public debates about social welfare. The big problem with this kind of benefit is that, when a person’s income declines, these tax-related benefits also decline. We tend to think of benefits as a cushion, or a safety net. These tax-related benefits represent the cushion being removed when we fall. The best benefits are cushions that are there for us when we fall, rather than cushions given to us when convalescing from an uncushioned fall.)

So, imagine that we already have in place a 33 percent income tax and a weekly basic universal income of $175. (For present beneficiaries, this $175 per week would represent the first $175 of their present benefit. This situation does not represent any substantial change from the income distribution we have become accustomed to. It is a conceptual change.)

How could we use this tax-benefit mechanism to address the four issues: stability; precarity; equity; sustainability?

Stability.

Stabilisation is the familiar issue of how societies use fiscal and monetary policies to manage normal economic downturns and upturns in the economy. Governments expect to pay more welfare benefits in an economic contraction (eg a recession), fewer benefits in an expansion. And governments expect to collect fewer taxes in a contraction, more taxes in an expansion.  Thus, we expect the government to run budget deficits during contractions and budget surpluses during expansions.

When we have welfare benefits that are easy to access, this process is known as automatic stabilisation. While such automatic benefits are good for the recipients, they are especially good for the stability of the economy as a whole. (Countries that already had a system of benefits in place before the Great Depression of the 1930s – notably Sweden and the United Kingdom – emerged from that emergency comparatively quickly, in 1932. Other countries – for example France and the United States – were still in economic depression at the onset of World War 2.)

The more bureaucratic the process of accessing benefits – and the more conditional those benefits are – the less efficient is the stabilisation process. (Reliance on benefits delivered as tax concessions is especially destabilising, because these benefits are lost when they are most needed. A particularly egregious example of a destabilising benefit in New Zealand at present is the In-Work Tax Credit, which, as its name suggests, is lost when recipients lose their employment. Another such benefit is the KiwiSaver annual tax credit of $521, which is progressively lost as a person’s gross weekly income falls below $1,043.)

Under the UIFT mechanism, the full universal income is retained when a person loses their job, or suffers a reduction in wages. And it’s instant, a genuine cushion; not a subsequent palliative. Further, this cushion benefit cushions people with partners still in work; many people (especially married women) do not qualify at all for present targeted bureaucratic Work and Income benefits.

When there is an economic expansion, under this UIFT regime, government income tax revenue increases by 33 cents in the dollar for every extra dollar of gross income; thus, during a normal economic upturn, the government moves into surplus more quickly and more automatically.

Precarity.

Precarity is the situation where many people are employed on short-term contracts; some may be expected to be ‘on call’ without being compensated for that restricted time. It also refers to many the self-employed people – free-lancers and small business operatives – whose labour incomes fluctuate with little predictability.

For these people, a basic universal income works as a personal economic stabiliser – a cushion allowing some income tide-over during down times – with a higher marginal tax rate which offsets this cushion in the good times. With the UIFT mechanism in place, these people can remain self-reliant, and will have minimal need to engage the welfare bureaucracy which needs to prioritise those people with structural income incapacity.

Further, the unconditional benefit component of the UIFT creates some incentive for self-employed workers to retain work-life balance, by not overworking at certain times, and by not penalising them when they need some downtime, such as family time.

Equity.

Equity is a central component of democracy. And equity represents the equal ownership of productive resources. Private equity represents the equal ownership rights of the principals of private businesses. Public equity represents the equal ownership rights of all economic citizens over those many productive resources which are not privately owned. Equity-holders expect to receive an economic return on their equity. There is no law of economics that restricts this capitalist expectation to private shareholders.

The consequence of this liberal democratic reasoning is that the universal income component of UIFT can be properly understood as an economic dividend; interest on the public equity represented by the public commons. And it also means that a universal income that is basic (ie low) need not remain low under all possible future circumstances.

Just as political citizenship reflects the universal suffrage, one person one vote, so, in a mature democracy, economic citizenship requires a universal publicly-sourced private income. One person, one equity dividend. A reflection on equity principles suggests that the universal income part of the UIFT mechanism should be understood as a public equity dividend.

A universal publicly-sourced private income is capital income, not labour income. It is a social dividend, not a wage. It is a yield on public capital. It is social capitalism at work, not socialism.

The word ‘equitable’ must be associated with an equalising mechanism. Here we may consider both financial inequality and time inequality.

A liberal democratic dividend means that one substantial part of the economic pie is distributed equally, and that the remainder of the economic pie is distributed unequally in line with market forces. It means that people experiencing substantial declines in their market incomes retain a personal stake in their liberal democracy, through their rights to an income from the public share. And it means that people experiencing increases in their market incomes do not simultaneously draw increases from the public share. Financial inequality is mitigated.

Time inequality is addressed, because the inclusion of an unconditional universal income gives encouragement to the overworked to work less, and for the underworked to work more. Without such an equalising mechanism, workers, who also lose public benefits when they lose private incomes, are disincentivised from reducing their work overloads. Likewise, people with little or no work know that, with UIFT, they will retain their publicly-sourced private income when they take on increased market workloads. The overworked work less and the underworked work more. For the unemployed and the underemployed, a basic universal income is work enabling; it facilitates rather than restricts labour supply.

Sustainability.

This issue relates to both the issue of robots and the issue of climate change. It relates more generally to the possibilities of being able to enjoy high living standards in a more relaxed form, and having a supply-elastic economy. At present we try to have a full-capacity (ie, ‘maxed out’) growing economy where we have little choice but to overproduce and overconsume. At present, our overconsumption is someone else’s livelihood.

The robot concern is that our economies will become too productive. The only thing scary about that scenario is that, at present, we have no social mechanism to distribute the proceeds of that productivity. In the absence of such a mechanism, the endgame is extreme inequality, which means (among other things) extreme poverty. An advanced society with extreme poverty has high unemployment of bothpeople and robots.

How does a mature UIFT mechanism address this issue? It addresses the issue by both raising the amount of universal income and by raising the income tax rate. If done in a neutral manner, then the overall extent of economic inequality (measured by the Gini Coefficient) would be unchanged.

In order to avoid increased inequality, both the universal benefit amount and the tax rate would need to increase. This would be a simple reflection of increasing capital income relative to labour income; more gross income accruing to ownership relative to income accruing to effort.

(At this point we might note, Graeme Hart, as a likely robot investor, would be even richer than he is now, before tax. While the UIFT mechanism would give him an increased public equity dividend, he would also pay more income tax. The net effect of these three influences on Hart’s income should be that his ‘disposable income’ would increase at about the national average.)

As this process of rising incomes and rising income taxes unfolds, it means that the public share of the economic pie increases relative to the market share. This increases the willingness of the overworked to work less. And it increases the understanding that paid work is a cost rather than a benefit. Rising public equity dividends relative to total income gives the necessary signal to the entire workforce to work less for money, and to embark on more projects that may not deliver financial returns. More voluntary unemployment, less involuntary unemployment. More ‘slack’, in the sense that slack represents market supply elasticity. An economy with more slack has the capacity to increase production when it needs to. In normal times, liberal capitalist economies should not be ‘maxed-out’; only in certain types of emergency.

We can now imagine a democratic capitalist world order, in which people choose to both earn less and spend less, while being assured that basic economic needs are covered, as well as many higher-order needs. Ironically, in our Covid19 lockdowns many of us gained a sense of that, though missing the coffee and ambience of the local café. But not missing the wider rat-race.

It is this slower living – which we have seen briefly – that has the potential to bring about environmental sustainability. We have heard more birdsong. We have smelled the flowers. We have heard that the people in China have lately seen the stars in the firmament.

We can have a high productivity economy without maxing-out our countries’ GDPs. We just need a mechanism to make the necessary possible.

What is the First Step?

In New Zealand, the first step is to reconceptualise our tax-benefit system, and in the process to apply a little relief to those who work hard without receiving high wages. This step would have easily been funded through tax revenue in 2019, pre-Covid19. Today this first step should be funded – and immediately, eg through the 14 May 2020 Budget – by Reserve Bank credit, just as the emergency wage subsidies have been funded.

See my Five Examples for any further clarification about how the transition to UIFT would affect different people.

In many other countries, the process will be more difficult. They have more complexities to unravel (compared to New Zealand) in their present income-tax scales. Australia could make the transition quite easily, with a 37% tax rate and a basic universal income of $240 per week.

We need political commentators with open minds.

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References:

Universal Basic Income (or Basic Universal Income) and Covid19. Scoop or Evening Report, 7 April 2020.

From Universal Basic Income to Public Equity Dividends (2018); Policy Observatory Briefing Papers, AUT, Auckland

Public Equity and Tax-Benefit Reform (2017); Policy Observatory, AUT, Auckland

The Universal Welfare State incorporating proposals for a Universal Basic Income, Keith Rankin, University of Auckland Policy Discussion Paper No.12, 1991

Constructing a Social Wage and a Social Dividend from New Zealand’s tax-benefit system, paper presented to the Basic Income European Network (BIEN) international conference; Vienna, Austria, 12-14 September 1996.
(Note that in this paper, I used the terms ‘full universal basic income’ and ‘adequate universal basic income’. My use here of words such as ‘full’ and ‘adequate’ are suggestive of the aspiration that a basic income could be more than a basic dividend; rather a substitute for a wage, and therefore a possible disincentive to engage with the labour market. However my emphasis in this paper – and subsequent papers – was the ‘social dividend’, a basic universal income that might eventually evolve into a non-basic payment.)

The original news story by Nita Blake-Persen was published on the RNZ website, and relayed how “Parents lined up in the torrential rain for hours this morning outside Manurewa’s Work and Income office to meet with advocates who help them with their claims. Without them, they say their desperate pleas for cash are almost always denied” – see: People queue from 2am outside Work and Income for help.

The first person in the queue, who arrived at 2am, told the reporter he needed a grant, as he was struggling to buy basic necessities for his three children: “I need to buy long pants, jumpers, jerseys and that, and then I need to get food, because I stay in a three bedroom house – I pay $610 a week.”

Like others lined up at the Work and Income office, he had come on that particular Thursday because the advocacy group Auckland Action Against Poverty (AAAP) come along on that day every week to help beneficiaries obtain their full entitlements. Those advocates claim that beneficiaries are otherwise being turned away from proper grants.

One of the AAAP advocates appealed to the Prime Minister to sort out the situation – Kathleen Paraha challenged Jacinda Ardern, saying: “The government needs to get off their bums and come down and have a look for themselves.”

The story has provoked some strong reaction on Twitter, with many saying it epitomises this Government’s failure to deliver the transformation it has promised. For example, Newsroom editor, Tim Murphy, stated “This is one of those stories that will be remembered about a government’s time in charge”, and “The more that this Governments term progresses, the more clear it is that that they are at their core no better than the last guys, or the ones before that. Virtuous media soundbites & photo ops aren’t making a difference”.

And his business journalist colleague Bernard Hickey pinpointed the conservative fiscal approach of Ardern and her Government as being responsible, saying the 2am welfare scenes occurred “At the same time as a ‘progressive left’ Government has a $7b budget surplus and has net debt so low that even Moody’s says we could almost double it and keep our AAA rating. Yet…budget Rules…”

Political activist and former MP Sue Bradford suggested that the Government was not following through on its promises: “Minister Sepuloni used to talk about the culture change she wanted at Work & Income, but the ongoing desperation of people who need help to get the most basic of needs from W & I flies in the face of Labour’s supposedly ‘kinder’ approach to welfare.”

In the blogosphere, some on the political left expressed their frustration. Steven Cowan blogged to say the continued plight of beneficiaries was a case of Paying the price of Jacinda Ardern’s austerity policies. He argued “these Auckland beneficiaries provide more stark evidence of a society where the depth of poverty continues to deepen and the chasm of inequality continues to widen”.

And he pointed out that “It was only two months ago that the Labour-led government declined most of the recommendations of its own welfare working group”. Similarly, Martyn Bradbury argued the incident was an example of The Toxic culture of WINZ & MSD laid bare,

But is it really fair to see the 2am Manurewa event as representative of the Government’s failed welfare reform agenda? The Minister of Social Development, Carmel Sepuloni, went on RNZ’s Checkpoint programme to dispute this version of the story – see: Long queues outside MSD ‘shocking’ but not the norm – minister. Sepuloni’s reaction to the story was: “I saw the image and I saw the story and no one would pretend that it’s not shocking to see that… that is not a normal occurrence at MSD (Ministry of Social Development) offices around the country.”

The Minister’s main point was that the queues from 2am in this instance were not directly due to Work and Income decisions, but because the advocacy group AAAC had arranged for beneficiaries to gather in a way that they needed to arrive early to get the chance of advocate help.

She said: “They’re not meeting with MSD at that hour, they’re actually meeting with their advocates… We tell AAAP… on Thursdays they have guaranteed appointments for their clients, that we will see them on that Thursday – so there’s no reason for them to turn up at that hour of the morning.”

In another interview, Sepuloni explained “I am advised that the long queues seen at Manurewa are the result of benefit recipients being encouraged by their advocates to all congregate at the same time on Thursdays”. She has also called on AAAP to work differently to help beneficiaries: “The queues can be avoided if AAAP works with MSD to deal with these cases in an orderly way across the week, rather than creating a bottleneck that forces everyone to be there at once in the rain” – see Michael Daly’s Auckland Action Against Poverty hits back at Government over WINZ queues.

The same article reports Work and Income regional commissioner Mark Goldsmith claiming that the AAAP advocacy group had refused “numerous attempts” made to work together. And, further, that “We would be happy to pre-book appointments with clients and AAAP advocates so clients don’t have to wait, but so far AAAP haven’t agreed to this.”

The group has responded, disputing this: “It’s categorically untrue we’ve refused to engage with MSD re:Manurewa.” And in open letter to the Government, published on The Spinoff, the group say: “When you say we should go to different offices to spread out the work of Ministry Social Development staff and avoid ‘creating a bottleneck’, what you are admitting is that MSD staff all over Aotearoa New Zealand are failing the people they are meant to be assisting. You are admitting that there is something seriously wrong with our welfare system” – see: We should not have to do MSD’s job for them.

The group also challenges the Government on its welfare policies in general: “There is enough money to end poverty but you need to be bold. You need to tax wealth and redistribute it into social welfare and public housing. You need to spend that surplus you are sitting on. It is socially and fiscally irresponsible to allow people to continue to live in poverty. We would like to see this rhetoric on well-being and kindness materialise in the lives of the people we work with.”

To get a better understanding of the work that the AAAP group is doing with welfare beneficiaries at the Manurewa office, it’s worth reading Michael Daly and Joel MacManus’ Minister responds to Manurewa Work & Income queue problem. In this, it’s explained: “The arrangement with Work and Income was that AAAP advocates were allowed to help 65 people in the queue on Thursday mornings. There were usually about seven advocates at the office, and they interviewed those 65 people.”

AAAP coordinator Ricardo Menendez March is reported saying: “In reality we always see far more. People have the right to have a support person at Work and Income… Throughout the day we end up helping far more people, explaining to them the process and making sure the case managers are doing their work and following the law adequately”.

Menendez March says that this has been going on for about two years, during which time the queues have always existed but are getting worse. Why? He says: “We know beneficiaries have been the most disproportionately impacted by the rising cost of rent. More people than ever require hardship grants to get by.” And according to this article, “The Manurewa WINZ office gave out $698,000 in Special Needs Grants for food last year, the highest in the country by more than $200,000.”

This article is also useful for providing the Government’s side of the story on what it is changing at the frontline to help welfare recipients, with Sepuloni stating: “this Government has sent a clear instruction to frontline MSD staff that anyone coming in is to be provided with the full financial support they are legally entitled to…. As a result of this instruction the number of hardship grants provided by this government has increased 60% year on year. The value of hardship grants has gone from $81m to $128.5m from March 18 to March 19.”

In addition, the article points out that “The Government has also announced funding for 263 new frontline MSD staff over the next 4 years.”

Perhaps this means that Work and Income offices will also stop referring beneficiaries to loan sharks to help raise their necessary funds, as reported recently by 1News – see: ‘Fundamentally wrong’ – Ministry referring beneficiaries to loan sharks, activists claim.

What else can be done to alleviate the plight of those on benefits? University of Auckland economist Susan St John has come up with a list of possible solutions that could be implemented immediately. Her “emergency package” includes the “Payment of the full Working for Families tax credits to all low-income families”; “An increase in the allowable income before any benefit is lost to 10 hours at the minimum wage or $170 per week”, and “A suspension of all student loan repayments for families who get Working for Families” – see: Poverty: not an earthquake but still a crisis.

As to what reforms the Government has already come up with, St John is derisory: “The tiny changes made in the 2019 budget will miserably fail to make a difference to the immediate problem. Worse still they don’t come in until April 2020.”

And like other economists, she criticises the fiscally-conservative approach of the Government as being at the root of their failure to act: “It may be laudable for the Government to be fiscally responsible, but not in the very narrow ways it has chosen. The nation is facing a crisis, it’s like a slow earthquake shaking our values to the foundation. You don’t store up goodies for the future when faced with life damaging catastrophes, you invest in reversing the damage and in preventing further damage.”

Finally, is there a need for reform of how the welfare system treats people in relationships? A new report out last week challenges the “traditional” and “current rules” in which people’s eligibility for benefits is based on whether they are in “relationship in the nature of marriage” – see Sarah Robson’s Welfare system needs to change how it defines relationships – report. And for a personal version of this story, see Sarah Wilson’s The consequences of love: how finding a partner left me penniless.

Have the political left and supporters of the Labour-led Government been conned again? Big changes were promised in welfare reform, but with the response to the just-released working group report on the welfare system, it looks like very little is actually going to be delivered.

Of course, the left has already been feeling shocked and disillusioned by Jacinda Ardern’s capitulation over the capital gains tax proposals, which is raising serious questions about the Government’s promised “Year of Delivery”. And now the weak response to the Welfare Experts Advisory Group report is essentially “Capitulation Number Two”.

Once again, the Government has opted for caution and conservatism instead of making bold reforms recommended by experts. Leftwing supporters and those who care about a properly functioning welfare system are outraged.

The report released on Friday was radical, with a solid critique of the state of the welfare system, and 42 recommendations for fixing it. But the Government response has fallen vastly short. The Minister of Social Development, Carmel Sepuloni, has come out to say that only three of those recommendations will be taken up. Of course, she’s suggesting that more reforms might happen in the future, but few observers appear to have confidence in that eventuating.

One of the best explanations of the Government’s response is Henry Cooke’s column yesterday Greens fail to win major change with welfare review.

In terms of the three working group proposals chosen by the Government, Cooke explains these are hardily bold: “Given the sweep of the report, these changes seem pretty small. Labour and the Greens have been campaigning on removing the sanction since before the election, and have delayed doing it until this report has come back. The change won’t go into effect until April 1, 2020. The sensible abatement rate changes track with minimum wage hikes and are so non-controversial that National agree with them. New staff are hired all of the time. You can even quantify the smallness. The changes as a whole will cost $286.8m over four years. The working group estimated its full suite of changes would cost $5.2b a year – more than the Government’s entire operating allowance.”

Activist and former Green Party MP, Sue Bradford isn’t mincing her words, saying the Government’s “dismal” response to the report recommendations indicates it’s “neoliberal”, by which she means economically-rightwing and still clinging to Establishment and punitive approaches of the last few decades – see: No hope for progressive welfare reform from this government.

Bradford includes the Green Party in this critique. She says the Greens are good at saying the right thing on welfare but, when it counts, the party is wedded to neoliberal practice. Bradford concludes that for the political left, this latest capitulation proves that a new leftwing political party is necessary.

Other commentators are also acknowledging the Greens’ failure to secure welfare reform. Henry Cooke points out that the party had increased its reputation with the left and the poor on the basis of their 2017 election campaign on reforming the welfare system, but says “The Greens are not living up to Metiria Turei’s promise of transformation.” Given that they promised so much, but are delivering so little, he suggests they now “need to be asking questions of themselves”.

Disappointment with the Greens on this appears widespread amongst activists. Leftwing blogger Steve Cowan says that it’s a failure of Green Party leadership, and especially of co-leader Marama Davidson, who he says “has proven to be yet another routine establishment politician betraying the interests of the very people she claims to represent” – see: Why is Marama Davidson in Parliament?

His disillusionment is clear: “We’ve been shafted again. Watching Marama Davidson blandly smiling as Sepuloni denied beneficiaries and the poor a better and more secure future reminded me that in 2017 Davidson was making speeches at South Auckland rallies, lambasting the National Government’s failure to address growing poverty and inequality. All that passion has faded away to bland smiles and empty words trotted out about she knows about the hardship that many people are enduring and that she will continue to work hard for them.”

And for Cowan it’s not just a case of Davidson and her caucus lacking courage, but that they have essentially revealed their true colours now that they are in power: “But her ‘radicalism’, if it was ever there in the first place, has gone missing in the impenetrable centrist fog that now clings to the Green Party like a wet blanket. She displays exactly the same kind of reverence for ‘politics as usual’ centrist politics displayed by the Labour-led government and her fellow Green MPs”.

On the report and the Government response in general, Cowan is highly sceptical, suggesting there’s been an attempt to bury this embarrassing capitulation: “Was it just a coincidence that Jacinda Ardern’s engagement to Clarke Gayford was announced on the very same day that the Labour-led government announced its shocking response to the Whakamana Tangata: Restoring Dignity to Social Security in New Zealand report? If the motive really was to deflect attention that Jacinda Ardern and her government have shafted ordinary people once again, it kinda worked. The engagement news was the leading item on one of the six o’clock news bulletins (TV3’s Newshub) while it was trending number one on Twitter for most of the day, with the welfare report nowhere to be seen” – see: Government response to welfare report is a shocker.

Others have also expressed scepticism about the Government’s handling of the release of the report. Some have noted that the timing for the release and response from the Government was late on a Friday, and at a similar time to the long-anticipated (but thwarted) Pike River Mine re-entry attempt.

Auckland University economist and welfare expert Susan St John declared her suspicion: “Releasing the Welfare Expert Advisory Group report at 2pm Friday (3rd May) just before the weekend at a far-flung West Auckland venue miles from the train station was a masterstroke of political strategy”, and she complained that the actual launch that she attended was strangely uninformative – see: I am not a conspiracy theorist but….

St John suggests that the whole working group approach lacked transparency and public engagement: “For 11 months no one breathed a whisper of what the WEAG was concocting. All consultation was one way to the WEAG with no outsider trusted to respond to any of the development of ideas. In stark contrast with the Tax Working Group process, no background papers and no interim report were released. There were no public forums preceding the report, and no interviews were given”.

She reports from the launch that the audience were less than impressed with the proposals being adopted, and the timeframes involved: “The Minister’s pre-Budget announcements were breath-taking in their superficiality. There were audible gasps of disbelief when she announced that the sanction applied to sole parents who do not name the father of their children would not come in until 2020.  Another lowlight was very minor changes to the abatement thresholds that are to be phased in over 4 years.”

St John is also highly critical of the “lost opportunity” to fix many different elements of the welfare system such as Working For Families. And she suggests Labour is incapable of facing these problems with the welfare system because the party is complicit in creating many of them.

There are so many important recommendations in the report that the Government appear to be ignoring, but the biggest is benefit levels. Henry Cooke explains this best: “The report presents a coherent argument for greatly increasing benefit rates, indexing them to inflation, and reforming the way relationships are treated by the Ministry of Social Development (MSD). It makes the point that relative to wages, benefit rates have fallen an extremely long way since reforms in the 1980s and 1990s. If implemented, this report would truly represent an ‘overhaul’ of the benefit system, and this Government could make a pretty good claim to being ‘transformational’.”

The issue of benefit levels is discussed by Tim Watkin in his excellent column, Another chance to be transformational rejected… Labour’s cautious welfare response. He says the report “recommended a massive 47 percent increase in current benefit levels. Those would be hugely controversial reforms… or, you could say, transformational. Because the report says if its recommendations were adopted it would lift 40 percent of children in poverty out of that plight. And that it could be done in two years.”

Watkin explains one of the reasons for the proposed increase is the increasing gap between beneficiary incomes and others: “What people seldom consider though is that since then wages and salaries have continued to grow. Super, linked to wages, has grown to. But other benefits – with any increases linked to inflation, not wage growth – have not been increased nearly as much. Until, that is, John Key and Bill English famously raised them in 2015. So the gap between work and welfare has grown since the 1990s”.

Therefore, on this rejected recommendation and many others, Watkin says Labour and the Greens are showing their real colours: “Sepuloni agrees the welfare system is not working. Greens co-leader Marama Davidson agrees the welfare system is not working. And then they commit to ignore the report’s big recommendations. They say no to up to 47 percent benefit increases, preferring ‘a staged implementation’. The call for ‘urgent change’ is rejected. Remarkably, Davidson has put her quotes into the same press release with Sepuloni, tying the Greens to this approach when they could have been dissenting from the rafters. The political and institutional reality is that no government can make these changes overnight. But the cold water thrown on this report underlines what we’ve learnt about this government in its handling of tax, its debt level, labour reform and more. It is not just incremental, it looks timid. There is certainly no sign of it being transformational.”

Once again, therefore, as with other potentially-transformative change in key areas for the political left, the Government has lost its political values and courage: “Ardern has political capital to burn after the Christchurch attacks and twice in three weeks she has chosen not to spend it. She has the political cover of National having increased benefits under Key (so just how critical could Bridges be?)… Yet Labour has chosen not to go to the wall for something it believes in. Again.”

But not all is lost. The report is going to have an ongoing impact. Max Rashbrooke writes about how the report represents a major change in thinking about beneficiaries. Previous and existing models saw “welfare recipients as akin to naughty children, needing a harsh overseer”, whereas “the experts’ report is an attempt to put a nurturing, caring assistant at the heart of the welfare system” which sees beneficiaries as needing support – see: At last welfare emphasis will move from punishment to support.

Also, although Chris Trotter bemoans that the fiscal conservatism of Finance Minister Grant Robertson is behind the Government’s rejection of progressive welfare reforms, he thinks there is still a good chance that Robertson and Sepuloni might yet be able to create a new world “of ‘active’ labour market management and planning” – see: The State and welfare: Opportunity or cost?

Finally, for a first-hand account of how well the welfare system works (or doesn’t), and how life on a benefit could be improved, see Hannah McGowan’s The dehumanising reality of life on a benefit in New Zealand.