Labour's opening ploy this election year combines heart and smarts, but the return of univeralism is fraught with political risk

If you go last, you'd better go biggest: That was the pressure Labour was under today with its state of the nation speech – the third of the main three parties to address voters at the start of this election year – and it didn't disappoint. Call it bribery or bravery, Labour's half a billion dollar per year Beststart package puts National's $150m teacher pay scheme and the Green's $90m a year school hub plan in the shade both politically and fiscally. Only hours after the announcement was made there's no doubt this policy had cut-through – people are paying attention.

Peter Dunne has already labelled the package a bribe, and it sure has the feel of the 2005 Labour government's interest-free student loan scheme about it. Labour is sending a clear message to voters that if it wins the election, they will notice it in their hip-pocket. And that kids are its top priority (the policy is in line with the recommendations by the Children's Commissioner and his expert advisory group, but isn't for all kids up to age six as they suggested). And that families' choices, even the typically conservative choice for a mum to stay home with her baby, matter.

It's a strong opening play by Cunliffe and shows a mix of heart and smarts. Yet it's by no means a sure-fire slam dunk.

Best Start's headline act is a $60 a week payment for the first year of a every baby's life. Well, 95 percent of babies. All households earning $150,000 or less will get the payment, which will be the first time in almost a generation that many of the country's top earning families will receive a government payment.

As a policy it trumps the other parties' in scale and focus. Research screams that the first few years of a child's life are the most important and that's where you'll get the best bang for your buck. In that regard, it's a smart place to spend. Labour can argue that while National's schools policy helps to pick up the pieces, it's building the fence at the top of the cliff. So a) it's a vote-winning handout and b) it's likely to do some real social good. Tick and tick as far as Labour's concerned.

Which is all the more reason to wonder why Labour put that all at risk by not targetting it at just the poorest, or even just the poorest and middle-income New Zealanders. In a country where the median household income is just $68,000 (and the average income is $85,000), Labour has opted to make the payment to those on more than double that.

So the two big questions: Why not end the payment at $100,000 rather than $150,000? And, can we afford it from 2016?

It's a heck of a policy decision that speaks to a change in philosophy amongst Labour's leaders. Working For Families – the big legacy policy of the previous Labour government – was highly targetted according to income. This thinking is more in line with the first Labour government.

Consider the debate that must have been had – universalism versus redistribution. Both are core ideals to such centre-left parties, but giving welfare to all means, by definition, you're not taking from the richest and redistributing to those most in need. As taxes have been cut and times have been hard, governments have tended to abandon pthe ideals of universalism, yet it seems Labour wants to bring them back.

Cunliffe tried to talk up the policy as aimed at those "most vulnerable children" and as "relieving the pressure on middle-income New Zealand". And when you look at the boost to the number of free early education hours, free antenatal classes and the like that's true. But the $60/week payment means only the richest five percent of households miss out, so the redistribution is minimal. This is a blatantly untargetted payment, up against a National government which is very big on targetting (in part stemming from advice from the likes of Sir Peter Gluckman).

So why would Labour go all-but universal? Cunliffe hinted at two reasons in the his stand-up interview with media after his speech. First, he said it offered those higher income families more choice. That's stealing the language of the right (just as National's education package last week stole of the left's language) and backs up the suggestion that Cunliffe has to tack to the centre this year to claim votes.

On the other hand, he also said payments to even higher income earners would "build a shared understanding" of the policy. I take that to mean he wants this policy to be sustainable. If it becomes valuable to even National-leaning voters it's a policy, like Super for example, that future governments won't feel able to cut. That's an older left way of thinking.

One reason Cunliffe didn't mention, but I think is useful to him, is that it makes for a clear distinction between Labour and National. It stresses Labour's central message this year, that it would govern for the many (even the well-off), not the few.

But it's a real punt with a large sum of money, which opens him to claims of fiscal recklessness and concerns that we as a country just can't afford it even if we'd like to.

It opens up a fascinating debate, but it's a debate about poverty and helping kids, which is where Labour wants it to be focused.

On the other hand, it allows National to stress how it is the more responsible and trustworthy economic manager. Already Steven Joyce is fretting about higher taxes and interest rates as a result of Best Start. (Which raises the question of whether National will stick with that message and back itself as a responsible party or whether it will now feel the need to match Labour with a "bribe" of its own, presumably in the form of a tax cut. That would undermine it's "where's the money coming from?" argument, but would go some way to counter-acting the hip-pocket votes Best Start is likely to win).

What's more, National hasn't even got onto the "where is the money going to go to?" bandwagon yet. Just wait for them to start warning of this untargetted money ending up being spent on cigarettes and Lotto for the parents.

Just how Labour is able to deal with these counter-arguments in the next few weeks will tell us a lot about its chances come the election.

Comments (24)

by barry on January 27, 2014
barry

So how much is universality going to cost?

How many of the recipients will live in households in the $100K - $150K bracket?

by Tim Watkin on January 27, 2014
Tim Watkin

Barry, I have asked the Labour guys that question... how many households in that $100k-$150k bracket and what's the cost of paying them? They say they'll tell me tomorrow and I'll blog then.

by william blake on January 27, 2014
william blake

For the folk on $100,000 + pa this benefit will certainly be spent on cigs and lotto.

by Tim Watkin on January 27, 2014
Tim Watkin

@William – and the bach. It'll just go on the bloody bach.

 

by Rab McDowell on January 27, 2014
Rab McDowell

If you are going to go universal why not just don't take it off tax payers in the first place. Oh, I know, doing it as a welfare makes the Govt look like its helping you and you will vote for it.

Except that taking it out of your back pocket and putting it in your front pocket isn't free. All those bureaucrats making themselves busy by taking it and giving it back cost and, by the time you get that dollar back, there is only 60 cents of it left. And we are supposed to vote for them for that?

by stuart munro on January 28, 2014
stuart munro

There's a couple of wrinkles in Labour's move that make a bit of sense.

There is an immediacy to this policy for families with newborns or expecting them.

It is somewhat common for families to have 2-3 children relatively close together, this payment will do something to soften the impact on other children of the new family member.

If, as Cunliffe's speech indicates, this policy is an earnest of things to come, then it is the harbinger of a rebirth of NZ style social democracy - actual new policy direction from Labour.

Might even be worth voting for.

by Richard Aston on January 28, 2014
Richard Aston

It could be seen as a brave gamble on Labour's part and a clear reach out to swinging center right voters.

It is good basic Labour policy going back, as you point out Tim, to the first Labour government.

The $150k ceiling is an interesting one , certain to appeal to some "weathier" voters but in reality how many people in that bracket are likely to have new borns?

Its a family income bracket , according to this Stats NZ report 30% of couples with children earn over $100k so its a sizable chunk of voters to appeal to but will they still be havinbg kids?

 

 

by Pete George on January 28, 2014
Pete George

Targeting young kids should be good policy but there's a number of problems with Labour's attempt. There are signs that middle New Zedaland could have reached "peak welfarism". There seems to be a lot of annoyance at including households over $100k when families with older kids and half or quarter the income will get nothing.

And there's a time bomb problem - getting low income and beneficiary families accustomed to $60 per week extra (or $120 for twins, and many families have multiple kids under three, I had three) - and then cutting it off at age three could cause some significant problems for some living hand to mouth.

I think it could be targeted and scaled much better to overcome most of the flaws - Better targeting the baby bonus

by Andrew Osborn on January 28, 2014
Andrew Osborn

They tried a similar dodge in Aussie and subequently dumped it. Every second feckless woman in Redfern produced a sprog for the cash. NOT a good way to start a life!

I can maybe understand a tax allowance for families with children because it promotes what we all want in our society - families with employed fathers and/or mothers bringing up well adjusted, educated children.

Oh, and the unintended consequences of this move - expect downtown accountancy firms to be be tax planning for the wealthy so that those above 150K can also get it.

 

 

by Tim Watkin on January 28, 2014
Tim Watkin

Andrew, do you have evidence for your claim about people having kids for money and that it was only the feckless who did that? Second, it was introduced by a centre-right government with the intention of increasing the population, right?

by Andrew Osborn on January 28, 2014
Andrew Osborn

Tim: I certain have. Feast your eyes:

http://www.msd.govt.nz/documents/about-msd-and-our-work/newsroom/media-releases/2012/annex-to-paper-c-welfare-reform-parents-on-benefit-who-have-subsequent-children.pdf

http://www.msd.govt.nz/documents/about-msd-and-our-work/newsroom/media-releases/2012/r-paper-c-welfare-reform-parents-on-a-benefit-who-have-subsequent-children.pdf

Before going further, let's be precise with our definitions here. Feckless implies a lack of control but I'm told MSD has data which showed that up until the recent DPB work requirements, a subset of those on DPB were in fact carefully planning their pregnancies to ensure continuity of payment. I'm not sure if they should be classfied as feckless or just cynical and manipulative.

 

 

by Richard Aston on January 28, 2014
Richard Aston

"I'm not sure if they should be classfied as feckless or just cynical and manipulative"

There are other interpretations.

 

by Ian Hassall on January 28, 2014
Ian Hassall

Tim, one of the arguments for universalism you missed was that it places a value directly on children and the people who care for them, whatever their financial circumstances. Since Labour’s policy  announcement the arguments for and against that I have seen have been mainly economic, incentive, political and moral. The signal that children are valued and can be central to a new politics whose values differ from those of the last thirty years is central to what I understood David Cunliffe to be saying.    

by Tim Watkin on January 28, 2014
Tim Watkin

Ian, I'd be interested in your take on this, especially as you mention morality. Is it economically and morally sound to simply give money to almost all parents who have a baby?

You mention incentives, but there are no incentives involved in this, no quid pro quo the recipients have to offer in return for the rest of us offering them financial support. So presumably the argument is simply that $60 a week – or to be less cynical, some form of state support – should be the right of every citizen? Because otherwise you'd target it, wouldn't you? Really, why not target this?

And what values from 30 years ago are you refering to? The value of the same for all?

by Ian Hassall on January 28, 2014
Ian Hassall

No, I think the argument goes that children are of value to society and that the time, love and material investment made by parents and others in the early years has a payoff for society as Heckman has shown. A cash subsidy acknowledges this. The values system that denies these things is encapsulated in the saying, 'There is no such thing as society'. This values system which has held sway in public policy for thirty years and contributed to the atomisation of a generation is not capable of sustaining our civilisation and needs to be replaced as the dominant driver by an alternative set of values.An alternative set of values which includes compassion, selflessness and a longer term perspective is typically what is evoked by caring for children, and can be encouraged by a public policy in which children's needs and interests are central. A society that looks after its children is an agreeable society and one that has a future.  

This is not to deny that rampant greed and selfishness is one, possibly essential, driver of our society, which you will have been reminded of if you saw the movie, 'The Wolf of Wall Street', or if you read the 'Alex' cartoons in the Herald but it should be put back in its box and not contaminate public discourse and public policy

by Brendon Mills on January 28, 2014
Brendon Mills

While I more or less support the payment, I think that the money would be better off being pumped into expanding state housing. It would have the same effect (gradually lowering house prices and rents, leaving people with more money in their pockets), and it would have better targetting yet the gains would slowly trickle up, to higher income earners, as the rack renters are pushed out of the market by increased state housing provision. I am left optimistic that Labour will provide a half decent state housing policy if this is anything to go by.

 

However a few suggested tweaks:

 

1) Give parents the option to capitalise the payment (State Advances-style) into a deposit on a house.

2) Establish a sovereign wealth fund for oil revenue that would be used to help pay for this policy -- it would be an example of tangible benefits coming from fossil fuel extraction.

by Tim Watkin on January 29, 2014
Tim Watkin

Ian, to play devil's advocate, you could argue that a more targetted scheme would be a vehicle for more compassion. That is, if it was limited to those earning, say, under $100,000, it would be a chance for those earning more to acknowledge that others need it more than them. And it would mean that $60 might become, perhaps, $70.

Isn't it a kind of greed to say that someone earning $140k needs to get their share, just as someone on $40k does? Or is there something inherent in making a scheme (near) universal that's important to the values you're espousing?

And is cash – as opposed to programmes or vouchers et al – the best way to express the value that children are vital to us all?

by Richard Aston on January 29, 2014
Richard Aston

"is there something inherent in making a scheme (near) universal that's important to the values you're espousing?"

Yes I think thats the point Ian is making. Its a wider argument thats says if the state models an all encompassing caring for children this value of caring will ripple out through our society or culture.

The "values system which has held sway in public policy for thirty years " that Ian talks about is that self centered, indiviualist ,user pays , ethos that grew from the late 80s. Governments then modeled the individualist message, added to by others voices saying anyone can achieve success if they really want it, no one needs help. 

The shadow side of these values was of course . all beneficiaries are bludgers, govt assitance is just hand outs and are kinda dirty etc. And a lack of caring for others.

How could a government attempt to change broad social values like individualism ?

Perhaps acting true to your real values is one way.

Not sure if  "targeting compassion" is a Tautology , compassion by its nature is not selective , in my experiance anyway.

 

by Shaun on January 29, 2014
Shaun

Tim, in your response to Ian, you state:

"Isn't it a kind of greed to say that someone earning $140k needs to get their share, just as someone on $40k does? Or is there something inherent in making a scheme (near) universal that's important to the values you're espousing?"

The discussion about whether earners of $150k annually deserve to be recipients of Labour's beststart policy surely resembles the perennial discussion about MP's wages and the role of the Remunerations Authority, doesn't it?.

I ask this because I find it remarkable that the government could be opposed to the policy on the grounds there is not enough money to afford its application up to the 150k level, yet do not express similar opposition on these grounds when MP's receive their annual pay rise.  Don't backbench MPs salaries commence at 150k, while the median wage is around 50K?

How much of a factor will this be in election year?

by Andrew Osborn on January 29, 2014
Andrew Osborn

Ian: I think the argument goes that children are of value to society and that the time, love and material investment made by parents and others in the early years has a payoff for society as Heckman has shown

You are saying this in the right order - Love then material investment.

The Youth Court has demonstrated it is able to very accurately predict future criminality based solely on birth circumstances. So should we be taking money from hard working New Zealanders and giving it to women who fit the Youth Court's profile as being highly likely to produce criminals. How is that a "payoff for society" ?

 

by Richard Aston on January 29, 2014
Richard Aston

Andrew I dispute that idea that birth circumstances are a "very accurate" predictor of future criminality, granted some people are born into dreadful families but a lot can happen between birth and the key offending ages. There are  plenty of young crims from good backgrounds, they just don’t tend to keep offending for as long.

Your idea to exclude women who fit some kind of risk profile seems just vindictive and it just doesn’t make any sense. Getting an extra $60/ week or not getting it, will make no difference to the risk factor or that likelihood that those woman will have babies or not.

But thanks for sharing the dark side of targeting.

by Tim Watkin on January 30, 2014
Tim Watkin

Richard, I'm not sure if stretching a threshold up into the upper/middle classes does reinforce those values. I guess the argument is that puts us all in the same financial boat when it comes to caring for our kids, but it also means less for those at the bottom and the anomolies of someone on $40,000 paying tax to give $60 a week to someone on $140,000 ... Yes, when the poorer person has a baby they get the same, which by its nature is egalitarian, but, but, but...

Shaun, I don't get how that comparison works. One is a party policy that imapcts tens of thousands and will cost half a billion a year and the other is renumeration decreed by an independent body that costs relatively few millions... And how does your position on pay have any bearing on your position on child subsidies?

by stuart munro on January 31, 2014
stuart munro

I can maybe understand a tax allowance for families with children because it promotes what we all want in our society - families with employed fathers and/or mothers bringing up well adjusted, educated children.

Oh, and the unintended consequences of this move - expect downtown accountancy firms to be be tax planning for the wealthy so that those above 150K can also get it.

You shouldn't upset youself so much Andrew - this policy is simply a reduced version of the old family benefit, which worked without great drama in NZ for generations. It is heavily abated too, so that the 150k families' return is mostly symbolic, which is as it should be.

Nor should you really quote the deeply flawed and partisan rubbish cooked up by Paula Bennet et al; like Bill English's concept of tax progressiveness it simply cannot be relied upon.

Ian's identification of Hayek as being problematic is overdue. These writers (Rand and Hayek) had some personal experience of the failings of Soviet states. Their criticisms were less well-founded outside that context however. Hayek's good friend Karl Popper described wartime NZ social democracy much more positively, it informed his The Open Society and Its Enemies, a tract modern critics sometimes mistook for being utopian.

by Shaun on January 31, 2014
Shaun

Tim, If the policy debate is about universalism vs targeted payments, there is a valid comparison with MP's wages and the Remunerations Authority.

What I noticed is the similarity between the cut-off point for the best-start policy, and a back bench MP ($150,000).  Even though MP's wages are set by an independent body and cost relatively millions, it is also an example of a targeted payment that involves the use of tax-payers money.  It also happens annually, so it's not an insignificant amount of money.  

Meanwhile, there is an expectation from the government (using the GFC as a reason), that everyday NZers should 'tighten their belts'.  Isn't that what Bill English told NZ citizens to do?  The RA may be considered as 'independent of MPs, but are they so independent as to have heard this message also?  

This leads to another comparison:  there is no opposition to these payments on the part of MPs, yet the government claim there is not enough money for the best-start policy. If their opposition to the policy is on the ground will impact tens of thousands and cost half a billion annually,  that surely is an irrelevance given that they are not opposed to receiving annual pay rises on existing levels ranging from 150 to 420k, while (as you note above) the median wage in NZ is 68k.

It may be a large difference, but there is an inconsistency in a willingness to accept a pay rise when you're already receiving at least 150k, and being opposed to those below that level receiving money from the same source. 

If there were backbench MPs who turned down the pay rise in the year preceding election year, I believe they would not have to do as much campaigning as their political opponents, because their stance on principle would resonate with large sectors of the voting public.  Conversely, annual pay rises for MPs are likely to alienate voters targeted by the best-start policy.

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