Scoop Election 08: edited by Gordon Campbell

On John Key’s Assault On The Welfare System

May 31st, 2011

Corporate vs Individual welfare. Illustration by Tim Denee
Illustration by Tim Denee –

If John Key is the face of moderation, there’s not much room left on the margins for the extremism of Don Brash. “Moderation” evidently means asset sales, tax breaks for the rich, cuts to government spending, a view that public services are “unsustainable” and unaffordable” plus – as Key indicated at yesterday’s post -Cabinet press conference – forced contraception for women on benefits as an idea worthy of further consideration. If you can get all that from the smiling face of “moderation” who needs the Act Party?

Act’s first dismal round of polls under its new leadership suggest that the centre right voters have indeed decided that Act is a redundancy. That’s an entirely rational conclusion. As a political shell company for the National Party – led by its lesser, older lights – the Act Party’s only purpose seems to be to foster the illusion of Key’s moderation. Yesterday, Key-the-moderate was engaged in the age-old right wing election year rhetoric of welfare bashing.

More in sorrow than in anger though, of course. The current system was “broken”. It was “unaffordable” And it was “unsustainable ” – unless most of the wilder ideas of the Welfare Working Group are put into action. A Cabinet working team and government departments are now to be tasked with furthering the WWG recommendations.

These welfare alarums are bogus, of course. Only three years ago, this same allegedly broken system had benefit levels down at record lows. The driver of beneficiary numbers is not the mindset of individual beneficiaries, or the fact that New Zealand has suddenly transformed itself into a nation of shirkers. The main determinant of beneficiary numbers is a functioning economy where jobs are available – and that’s something for which Key takes no responsibility whatsoever. Instead, the government seems to be hellbent on making beneficiaries keep their side of the social contract – while taking no responsibility as managers of the economy, for failing to keep its side of the bargain.

In that respect, the government’s welfare reform rhetoric is as dishonest as the timeframe that Key chose to introduce the topic at yesterday’s press conference. In 1970, Key twice pointed out, only 2% of the working age population were on benefits, while 13% were on benefits today. Conclusion: the system is making it too easy for people to get on, and stay on benefits. No concession that he is measuring those beneficiary numbers at the employment trough of the worst global recession since the 1930s, and in the wake of one of New Zealand’s worst natural disasters.

Were things really as wonderful 41 years ago as he was intimating ? Back in the 1970 that he carefully chose for comparison, there was no Domestic Purposes Benefit at all. Is Mr Moderate saying that the DPB has been a mistake? Perhaps he was. After all, at yesterday’s press conference, Key seemed happy to be in denial of figures that show New Zealand’s income levels to be the 7th most unequal in the entire OECD. Here was Key’s response yesterday on that issue :

Are we deeply unequal? I’m not sure that’s right. I haven’t had a really good look, apples with apples comparison. If you take New Zealand’s welfare system for starters, which we’ve just been discussing, that’s universally regarded as a more generous scheme than in many other countries. So at one end of the scale you could say New Zealand is arguably providing more support for a lot of people.

If you go and have a look at the taxes on average income I think its either the IMF or the OECD is about to come out and say that New Zealand has one of the lowest levels of tax on average income and that’s because of Working For Families which in tough times the government has continued to support. At the high end yes of course, we have some New Zealanders that earn very large incomes but relative to the US or even Australia a bank CEO in New Zealand might earn -$3-4 million and $16 million in Australia.

I’m not so sure that range is as deep as other countries.

Leave aside for a moment whether our welfare system is particularly generous. (See below) For now, just contrast Key’s position of denial with the comments made about income inequality by the outgoing Treasury head John Whitehead in an interview last weekend on Q&A with TVNZ’s Guyon Espiner:

    Whitehead..,.,.,, I think the general point is right – that if you get highly unequal societies, it becomes really difficult to sustain your economic performance, so that is something I think most New Zealanders would want to think about.
    Espiner :  And we’re a highly unequal society.  You say in that document we’re the seventh most unequal country in the developed world.
    Whitehead :  In the advanced economies, yes, but the world’s much larger than that.
    Espiner : So we are a highly unequal country?   
    Whitehead : Well, I think the issue for New Zealand is that there are some people who are caught in a trap, and they’re caught in some senses between generations as well, so I think most Kiwis would be pretty concerned about kids that go to school without breakfast, for example.  And it’s that kind of thing that we need to focus on as a country.  There’s so much that’s positive about this place, but there’s a few things we really need to tackle.   
    Espiner : So you’re worried about the gap between rich and poor at Treasury. 
    Whitehead : Absolutely, yeah. 

So even the outgoing head of Treasury is concerned about the levels of income inequality in this country, while our ‘moderate” Prime Minister doesn’t think that any such problem exists at all. As for Key’s claims that New Zealand has overly generous welfare payments and has too many people skiving off onto sickness and invalids benefits, this is still relevant :

Werewolf – Ten Myths About Welfare Late last year, the OECD released comparative figures which showed that one of the main reasons for the recent rise in people receiving disability benefits is that New Zealand has been operating from a very low base – mainly thanks to the pre-Rogernomics policies of full employment and prior methods of institutional care….,Even so – and this is the relevant point – the numbers of working age people who receive sickness and disability benefits in New Zealand is still well below the OCED average. In 2008, this ratio was 3.8% in New Zealand, as compared to the 5.7% OECD average. Moreover, the share of people on disability benefits is among the lowest in the OECD for older workers aged 50-64, but fifth highest for young adults aged between 20-34.

Therefore, if there is mis-diagnosis going on here – as Paula Bennett would no doubt suggest – it is among young adults, which represents even worse news for the Key government. It means that the already calamitous figures for youth unemployment are even worse than they currently seem. Either way, the bulk of those people on sickness and disability benefits likely to be re-classified as work-capable by the Bennett reform process (ie, young people on sickness and disability benefits) are going to be tipped out onto the very part of the job market where the shortage is already the most extreme.

To continue : New Zealand’s spending on sickness and disability as a share of GDP was also lower in 2008 than the OECD average – 1.3% to 1.9%. A further sign that if anything, New Zealand has been skimping in this area. Moreover, the unemployment rate for New Zealanders suffering from chronic health or disability was in 2006 (the most recent comparison period available) only 7.4% – which is far, far short of the 13.7% average unemployment rate for such people among OECD nations as a whole. Conversely, the employment rate for sick and disabled people in New Zealand is among the highest in the OECD – 59.5% compared to 43.6%. The sick and disabled are already working in large numbers here even though, as the OECD also noted, such poorly paid work still leaves their incomes lower than that of the general population of New Zealand.

In the light of such figures – that show by international standards we have proportionally fewer of the sick and disabled on benefits, allocate relatively less of our national wealth to meet their needs, have more of them in work, and fewer of them on the dole – Bennett should be deeply ashamed of mounting any further attack on the people who currently receive such benefits.

Try telling that to Mr Moderate.

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    1. 23 Responses to “On John Key’s Assault On The Welfare System”

    2. By Leon Henderson on May 31, 2011 | Reply

      Another excellent article Gordon, thank you and Scoop/Werewolf for being a voice for the voiceless in New Zealand, and God help us if the National party becomes the government again in November.

    3. By Roy on May 31, 2011 | Reply

      I am fed up with the government beating up on the sick, the disabled, and young mothers. When will we have a government with the intestinal fortitude to bring back means-testing of superannuation, and stop forking out money to greedy oldies who are already wealthy? I would also like to see 100% estate tax over a per-child limit of, say, 1 million per child.

    4. By Graham Dunster on May 31, 2011 | Reply

      We will have a government that works for us as a population when we vote one in. It’s as simple as that.

    5. By Margaret on May 31, 2011 | Reply

      Years ago while working in a clients home I saw a book titled “White Face – Black Heart”.

      Being in a clients home I could not satisfy my curiosity by reading the dust jacket and always wondered what was meant by those words.

      Now years later I feel the meaning of those words were directed at the Neo Conservatives
      who think a country’s workforce should be happy to be endentured workers in their own land while making sure that the Neo Concervatives have the kind of country they want to live in.

    6. By jenese on May 31, 2011 | Reply

      typical policy from a party that is so insulated by its wealth that it has moved out of reality -;- attacking the most vulnerable is a sign of weakness and degrades not only the attacker no matter how monstrous or bogus their reason but the society in which they are part

      the measure of a true civilization is the care of its most vulnerable – it is as any indigenous first people will tell you – the wealth is in the prosperity of its people – it is people it is people – there are no real surprises here – you got what you voted for red, blue it makes no difference they should really not be paid by us and both have run the country to the ground so much so that they now resort to robbing the welfare system while bulging off it

      insanity is voting for the same old same old and expecting change

      i don’t see any thing about government having responsibly to create jobs for all those who haven’t got any…instead its more blame at those who have already lost so much shame on all of them

    7. By Kay on May 31, 2011 | Reply

      Mr Key also conviniently forgets- actually probably doesn’t know or care in the first place- that in 1970 and into the 1990s the institutional system was still in place, and the thousands of people in these institutions were not in receipt of a benefit. On closure of said institutions the former inmates, mostly people with disabilities of some type, had to go onto benefits thus skewing the statistics. It also cost the state a hell of a lot more to keep someone in an institution that keep them on sickness/invalids benefit.

      But don’t let reality get in the way of statistics.

    8. By jenese on May 31, 2011 | Reply

      you might like to read this -;-

      QUOTE “Without growth, there is little lending. With less lending, there is less money to invest in new production. Without new production, there are no new jobs and no room for raises, so income stagnates. Without income growth, there is no growth in demand. Without growth in demand, there is no economic growth.

      What is being seen by government policy – no matter red or blue -;- will result in more of the same….the view is an economist perspective and it totally lacks compassion or understanding for any human beings living in it – mothers and children are no longer human beings to them but deficit units lined up strategically on a page devoid of any human agency or value completely missing the reality of human existence in all its variables…which is why nothing much has changed

    9. By Penny Bright on May 31, 2011 | Reply

      Where’s the ‘Corporate Welfare Working Group Report’?

      How much of the total central Government spend is going to all those private ‘piggy-in-the-middle’ consultants and contractors, providing core Government services which used to be provided ‘in-house’ by ‘public servants’?

      How much money is being spent on contract administration across all state sectors?

      How much public money could be freed up to help the ‘needy’ if it were not going to the arguably ‘greedy’?

      Where is the Treasury ‘cost-benefit’ analysis which proves that the private procurement of formally public services is a more cost-effective use of public monies compared with former ‘in-house’ provision?

      Opposition to CORPORATE WELFARE will be one of my key platforms when I stand as an ‘Independent’ in the Epsom electorate.

      At both central and local government levels – it’s time to CUT OUT THE CONTRACTORS!

      (I’ll also be continuing to oppose the Auckland ‘$upercity’ as a SUPER RIP OFF, and encouraging Epsom residents and ratepayers to dispute and refuse to pay the 3.7% rate increase.

      Wonder where John Banks stands on THAT issue – as a $upercity ‘cheerleader’ and supporter from Day One?

      Penny Bright

    10. By Warwick Taylor on May 31, 2011 | Reply

      Great article. I had never thought about the new role of ACT – it really is an act!

      I have been thinking for some time that this Government parallels the Muldoon Government of 1975-78 – oil crisis just past (2008 parallels 1973-74), unemployment on the rise (about 5000 in 1975, about 50,000 by 1978) and improved terms of trade. The difference, I thought was that Mr Muldoon (as he was at the time) was abrasive. Lately, however, Mr Key has been playing on prejudices. This is a rerun of the Muldoon era – Social Welfare Minister Bert Walker called on people to spy on their solo mother neighbours and to call Social Welfare if they had men sleeping with them. Who remembers that.

      One difference though. At the time, Robert Muldoon was not considered a moderate but many people do consider John Key a moderate.

    11. By mutyala on May 31, 2011 | Reply

      “The main determinant of beneficiary numbers is a functioning economy where jobs are available – and that’s something for which Key takes no responsibility whatsoever. Instead, the government seems to be hellbent on making beneficiaries keep their side of the social contract – while taking no responsibility as managers of the economy, for failing to keep its side of the bargain.”

      Absolutely bang-on, although I’ve never heard it said with such clarity.

    12. By Robert Miles on May 31, 2011 | Reply

      Neither Key or Brash remotely represent the sort of economic policies favored by Reagan, Friedman or Chicago school economics. In some ways Brash comes close, but the Auckland act party supporters and much of the party essentially want the privilege, monopoly and power of the old professional class protected. Rational economics would legitimise a 24/7 society and break the professional monopolies.
      John Key and Stephen Joyce are poll driven populists their policies are not really right wing, rationally economic or sustainable. At a certain level they realise government spending has to be controlled, if there is to be any hope of avoiding the fate of Greece and Ireland. Nevertheless the only two areas where they are really prepared to cut are public transport and government employment. Government professionals and government employees perceived to have privileged safe jobs free from private sector discipline and the hire and fire reality are those loathed by a large sector of the public. Nurses and the police are popular with the public and perceived as part of the general job creation that gives ordinary people jobs, regardless of whether the jobs make economic and social sense or whether the people employed are really up to them. Public Transport and rail generally have long ceased to be used by the public outside Auckland and Wellington and are generally mostly used by students, immigrants, beneficiaries and government employees. Employees like Hillside and Design line which support and build for public transport are expendable in the eye of the government.

    13. By Joe Blow on May 31, 2011 | Reply

      The sad thing is that the majority of Kiwis are going for this beneficiary bashing. It’s an old grumble: “I’m sick of paying for those bludgers”. And it’s the same for legal aid and them criminals. I blame the majority of New Zealanders. All I can say is that it’s all fun and games until you’re job is on the block or you’re standing in the dock!

      One thing about Key’s comparison with the 1970s. The 70s were when most industries were nationalised and the economy ran on government subsidies. Masked unemployment was hidden in a government run economy. How can he compare the beneficiary rates from a time that he would liken to inefficient state led economics and propose that the exactly opposite conditions today will improve unemployment? The answer = because most of New Zealanders are sadly dumb enough to buy it.

      National’s polls are still going from strength to strength. How can the majority of us be dumb enough to fall for this bollocks?

    14. By VB on Jun 1, 2011 | Reply

      Always good to read your sensible analysis of the real situation, Gordon. Keep up the good work. Like Joe Blow, I do wish more people would think about these issues, and not be so “dumb”. Current poll results astound me, but then I do take some comfort in the fact that they are unlikely to truly represent us all, as I believe nearly all of the polling is being done using landline phones, and many young people choose not to have landlines, and many can’t afford them any more, so election results may surprise us all, and perhaps restore my faith in the “smartness” of New Zealanders on the whole.

    15. By Penny Bright on Jun 2, 2011 | Reply

      The only poll results that REALLY count – are election results. Look at the recent Botany and Howick by-election results.

      ‘Safe’ National areas?

      (The Howick Ward essentially comprises the Botany and Pakuranga electorate)

      Where were the polls which accurately predicted the 36% voter turnout in Botany and the 30% voter turnout in Howick?

      Where were the polls which predicted that more (former?) National Party voters in Botany would choose not to (over 9000) than vote – despite ‘Mr Popular PM John Key effectively begging them to get out and vote?

      (Just over 8000 voted for National’s Jami-Lee Ross.)

      Where were the polls that predicted the collapse of the ACT Party electorate vote?

      (Less than 700 votes were cast for the ACT Party candidate)

      Where were the polls that predicted that Labour would proportionately do better in Botany and increase their share of the electorate vote?

      It is my considered opinion that in our New Zealand ‘democracy’ we tend to get the government that the majority of big business want us to have.

      In my view, this is achieved through corporate media manipulation, as happened in the 2008 election with the smear campaign against Winston Peters and NZ First, in order to help prevent their achieving the 5% threshold.

      When Rodney Hide made complaints to the Police and Serious Fraud Office about NZ First – there were ‘MAN ON THE MOON’ headlines (although these complaints came to nothing – no charges were laid – no prosecutions – no convictions).

      During a similar time period, I made complaints to the Police and Serious Fraud Office about John Key’s failure to disclose his pecuniary interest in Tranz Rail, at a time it was an ‘item of business’ before the House, and his subsequent attempts to flush out commercially sensitive information about Tranz Rail through an OIA request and a complaint to the Ombudsman.

      NOT ONE SENTENCE in the NZ Herald.

      I then filed a private prosecution in the Auckland District Court, under s 228 of the Crimes Act.

      NOT ONE SENTENCE in the NZ Herald.

      Spot the difference.

      Seems that the same tactics have been used to try and undermine the Labour Party by attempting to undermine Phil Goff’s leadership.

      Could this possibly have anything to do with John Key’s announcement of National’s support for ‘partial privatisation’ of state assets on 26 January 2011, which were accompanied by statements of support for ‘partial privatisation’ by Roger Kerr (NZ Business Roundtable) and other business leaders – and Phil Goff’s position (on the same day) that state asset sales were a ‘dumb idea’?

      Was there a National /ACT big business panic after the Botany by-election results?

      (Given that originally National were expecting to increase their vote?)

      Is that what helped cause the huge media fuss over the Darren Hughes matter, then Phil Goff’s handling of the Darren Hughes matter?

      Is that what was behind the Don Bra$h ‘I’ve got the (big business) ca$h – it’s my way or the highway’ ACT takeover?

      That the ‘polls’ weren’t/aren’t actually looking so good for National/ACT – so desperate measures were/are needed?

      Unfortunately for the National “A” Team and “B” Team – the voting public have NOT had a collective frontal lobotomy.

      National (and ACT) Party voters still get a power bill every month and know full well that the introduction of the ‘competitive / market’ model into electricity – an essential public service natural ‘monopoly’ only results in duplicating resources and increasing power prices.

      This should be a FASCINATING election!


      Penny Bright

    16. By Joe Blow on Jun 2, 2011 | Reply

      @ VB

      I hope you’re right VB (you spent a lot of time in Oz by any chance?), but Grey Power are set to out vote the young consistently for the next 20 years…

    17. By Codi on Jun 4, 2011 | Reply

      Just a small thought. If I am on a benefit and receiving income from others tax, whilst working to find a job, and trust me it is working. What makes John Key any different to me? Give him birth control and 14 weeks to fix the economy. I strongly believe politicians are paid to much. If they were paid the average wage in New Zealand I think they would work a little harder to achieve our nations goals.

    18. By June Ranson of Woburn International on Jun 22, 2011 | Reply

      “We will have a government that works for us as a population when we vote one in. It’s as simple as that.”

      I agree with this we have to move and let them know what we wanted. In the end of the day the people is the to decide what kind of system they like. My suggestion is to have more migrants with the help of migrants service firms such as woburn international the system migh recover.

    19. By May Ransom "services" on Jun 23, 2011 | Reply

      “I am not really bias (I stand to profit more off increased immigration services and the lower wages ) but more corporate welfare, cutting more key social services is better for ME and for my wealthy over privelleged fiends population be damned! “

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