The 2015 Budget did not deal with children's poverty  but it did put a down payment. 

This is based on a presentation to a Child Poverty Action Group Post-budget Breakfast.

 

The budget begins by identifying five ‘fiscal priorities’. Three are about the fiscal deficit and the track of the fiscal debt, one is about ACC levies – which strictly are not a fiscal issue – and the fifth is the government’s intention to reduce income taxes from 2017 (which just happens to be an election year). Apparently the government does not have a long run priority of reducing child poverty.

 

Undoubtedly the 2015 budget gives some attention to child poverty. On its own estimate, it provides a $790m package over four years. It is a gross measure; the amount is not offset by reductions in the real values of other spending on children.

 

It is not much. A total of $790m over four years is equivalent to a spend of just over $2 a day for each of the quarter of a million children who are usually thought to be in poverty. That is an average. Some will get more, some will get less or nothing and there will be some unavoidable leakage to children who are not in poverty. Whatever, it is not a large amount. You can hear the government flipping a two dollar coin to a kid and telling them not to spend it all in one shop.

 

The small amount reflects two things. First, this is a very tight budget with little additional spending. I am not uncomfortable with the overall fiscal stance. It reminds that the claim that New Zealand is a rock-star economy is not very convincing; nobody has said that this government is a rock-star and its budget position certainly is not.

 

The second reason for the small amount is that the rise in child poverty was a consequence of substantial tax cuts favouring the rich which were paid for by cutting the incomes of poor households especially those with children. We cannot significantly address child poverty without rebalancing the tax and income support system towards them. Certainly one can find $2 a day by fidgeting around the edges of revenue and spending, but that is nowhere near sufficient. When I did a detailed analysis of a beneficiary and her child I concluded that they needed an extra $140 a week or so – about ten times as much as the $2 a day.


The government thinks it has found a way to square the circle. The budget speech says that ‘[t]he best thing we can do for these children [in material hardship] is to get their parents into sustainable, full-time work, where that is possible.’ There are two problems here. The first is that it may not be possible. The health problems faced by the particular family I was looking at – the one which needed an additional $140 a week – precluded her working very long hours. Admittedly, more income would have led to better nutrition and healthcare which may have made it easier for her to work – in which case the government’s approach puts the cart before the horse. The family needs more money in order to be able to go out to work. The government’s approach leaves her family rotting on a low material standard of living.

 

But there is a second issue only marginally understood by the government and those who advocate work as a solution to child poverty. Very often a working parent requires childcare; that can be costly. Their net income is actually their after-tax income less the cost of childcare. However the standard measures of poverty ignore this and treat childcare as a luxury spend. .

 

 Over the years there have been various childcare subsidies; they seem to be a bit of a shambles and are not flexible enough to meet many working parents’ needs, so the families end up poorer than the income statistics show, because of the costs of unsubsidised childcare. That means we underestimate poverty in working families and overestimate work as a solution to the child poverty problem. The government strategy won’t eliminate child poverty; it seems designed to allow the government off the hook of addressing the problem properly.

 

Yet one must acknowledge that within the tight fiscal constraints imposed by the state of the economy and the unwillingness to raise additional revenue, the government has tried to ameliorate child poverty in New Zealand.

 

There will be a lot of grumbling about aspects of the package as is the nature of budget commentary. Given that it is based on ad hoc incrementalism – of tinkering about with an inadequate structure – much of that grumbling is justified.

 

I would go the other way. Within the limitations and subject to the foolishness of their long run strategy of trying to solve the poverty problem by getting all parents out to work – the government has made some progress. The government acknowledges there is a serious problem and it is doing something about it.

 

But what it has done – at $2 a poor child a day – it is not enough. Or to put it more constructively, it is only a down payment. It would be totally wrong for the government to say complacently ‘we have addressed the child poverty problem, now onto the next issue’. What the children’s lobby must do is continue its pressure for further measures. It should demand another $2 a day, or more, in the 2016 budget and another $2 a day in the 2017 budget and probably for a few more budgets after that.

 

In the interim, I hope that the government will start doing some hard thinking and, instead of incremental additions to an existing and not very effective system of fmaily assistance, develop a comprehensive approach which – as an aside – would demonstrate that getting parents into paid work is not going to be the ultimate solution.

 

The lobby can take heart. It appears that it was only during last year’s election – six months ago – that the government came to the conclusion that child poverty is an issue to which it should give priority. It was not the research evidence, accumulating for forty odd years, which persuaded it; it did so because the public showed it cared about the state of our children. That is what led to the prioritisation – pressure from people like you. Congratulations. Good on you. Keep it up, you should be able – eventually – to get much more than $2 a day for our kids.

Comments (25)

by Charlie on May 23, 2015
Charlie

If a couple produce a bunch of children they can't afford to feed & cloth, they shouldn't be automatically looking to the government to get them out of the mess they've created for themselves.

Amidst all this 'human rights' stuff we seem to have forgotten personal responsibility.

 

 

 

by Andre Terzaghi on May 23, 2015
Andre Terzaghi

Charlie, I'm genuinely curious about your views.

Please put the parents aside for a moment and focus on the kids. At the moment, we have a lot of kids growing up in situations where their options and opportunities are pretty limited. Do they deserve a decent shot at making the most of themselves? If they do, what changes would you make to give them that opportunity?

Personally, I'm also pretty disgusted with parents having kids they can't provide for. But to me, that doesn't make the kids undeserving. So I end up favouring "nanny state" solutions, such as feeding the kids at school (I've eaten plenty of cafeteria lunches in American schools, a long time ago). I'd even go as far the state providing free school uniforms, free healthcare, and anything else I could think of that directly benefited the kids.

Charlie, I'd really appreciate a thought through discussion. Because so far, I've never interacted with anyone that started with a "stick it to the parents" approach get past it to really look at what to do for the kids. Or have the honesty to say they think the kids genuinely deserve to suffer the consequences of their parents' choices.

by Nick Gibbs on May 24, 2015
Nick Gibbs

I'd be interested to know what an extra $140 a week per beneficiary (additional budget spending, not robbing Peter to pay Paul) would look like on my tax bill? Not good I suspect, and any party that suggested it would find its prospects rapidly dimming.

After all I still have my family to raise and educate through till past university, and my own retirement to fund. Why should I raise someone else's kid to my own detriment? 

by Lee Churchman on May 24, 2015
Lee Churchman

We seem to have forgotten personal responsibility.

Of course. The economic and social cost of insisting on personal responsibility to the exclusion of other goods is an unaffordable fetish.

I'd be interested to know what an extra $140 a week per beneficiary (additional budget spending, not robbing Peter to pay Paul) would look like on my tax bill? Not good I suspect, and any party that suggested it would find its prospects rapidly dimming.

You do understand that it generally isn't to your detriment, don't you? If not, then why do you have any business talking about it? You might as well lecture us on microbiology.
by Nick Gibbs on May 24, 2015
Nick Gibbs

Well I've dusted off my microscope as you suggested Lee and the first thing I tried to find was your argument. All I found was an empty assertion and ad hominem attack. Not a good look Lee. Got anything better?

by Lee Churchman on May 25, 2015
Lee Churchman

I'm asking why you think the welfare system is to your detriment, since you appear to have done a brief cost/benefit analysis by the unusual method of listing the costs but not any of the (blindingly obvious) benefits. 

From what you've said you appear to me to be parroting shopworn right-wing talking points, but of course you could easily prove that to be wrong, right?

by Ross on May 25, 2015
Ross

http://www.theguardian.com/world/2015/may/03/europe-happiness-danish-wom...

Older Danish women are apparently very happy and it's got something to do with Denmark's pension. I guess there is a message there about what the State can do for its people if it prioritises people.

by Ross on May 25, 2015
Ross

<em>Why should I raise someone else's kid to my own detriment?</em>

No no one is asking you to raise someone else's kid(s). The cost of keeping a person in prison is about $90k per year. Is that a good use of the tax you pay, or would you prefer some of that went to helpimg people into work which will help to fund your retirement?

by Lee Churchman on May 25, 2015
Lee Churchman

The cost of keeping a person in prison is about $90k per year. Is that a good use of the tax you pay, or would you prefer some of that went to helpimg people into work which will help to fund your retirement?

My guess is that he thinks that such people would magically become "personally responsible" if we introduced harsher punishments and that women wouldn't have children they can't afford if the benefits regime were tightened.

All this in the country where the price of cigarettes has been raised to extortionate levels to stamp out smoking, and yet 15% of NZ adults still smoke cigarettes. So much for the efficacy of rational incentives – imagine how punitive benefit sanctions would have to be in order to work properly...

by Nick Gibbs on May 25, 2015
Nick Gibbs

I don't have to do a cost benefit analysis. Under the current regime crime rates a falling rapidly. See here. A summary:

  • Homicide rate down 39%
  • Violent offence rate down 11%
  • Robbery rate down 26%

 Social Welfare stats. See here. 

  • 38,000 fewer people on welfare than three years ago
  • 42,000 fewer children in benefit dependent households over three years

Apparently I don't need to pay an extra $5K a year in tax as the sky isn't falling and society is not about to be swept away by the proletariat. The proletariat is doing ok.

by Megan Pledger on May 25, 2015
Megan Pledger

@Nick

The rates of crime you mention are falling (as they have been everywhere in the Western World) because baby boomers swamp all statistics and they are at an age when people of that age don't do that type of crime.   Since 1995 there has been a 4% increase in  15-39 year olds while there has been a 37% increase in 40+ year olds. 

There has not been an equivalent net increase in jobs though so it's most likely these people are either 1) living without benefits or 2) are going into jobs and displacing a person who can't get a benefit.   That's not actually solving anything.

 

by Nick Gibbs on May 26, 2015
Nick Gibbs

@Megan,

Ok so the crime rate is down to demographics rather than great police work. It still leads to a lower crime rate. We are not turning into South Africa and I don't need to pay 5k extra a year tax to create  a police state. 

The challenge you point out is an ageing population and the solution for that is immigration.

 

 

by Lee Churchman on May 26, 2015
Lee Churchman

Apparently I don't need to pay an extra $5K a year in tax as the sky isn't falling and society is not about to be swept away by the proletariat. The proletariat is doing ok.

Really? I see that your comments regarding crime were already debunked earlier in the thread. Why would you think we need a police state? The most efficient way of dealing with crime is prevention. 

I'm not sure what "doing OK" means, but having an increased level of children in poverty doesn't bode well for the future, nor do other social indicators. But that's OK, we'll just pass the buck to our descendants, like we are on climate. 

by Nick Gibbs on May 26, 2015
Nick Gibbs

I think you need to go back and re-read the tread carefully. Crime is falling Lee.

by Megan Pledger on May 26, 2015
Megan Pledger

But the baby boomers aren't going to live for ever. 

It's cheaper to pay now to educate a child to be a productive member of society than to pay later for him to live out his life in jail. 

The former means he will pay for your pension, the latter means you'll be paying for his incarceration.

 

 

by Nick Gibbs on May 26, 2015
Nick Gibbs

That's the vision that the left must sell. 5k definitely gone now, in exchange for a possible jack pot in twenty years. Its a big ask. And at present I don't even see that vision being taken to the NZ public. Just attacks on Key and his pony tail pulling.

by Wayne Mapp on May 27, 2015
Wayne Mapp

Megan,

You are clearly wrong about the number of jobs. The rate of participation in the workforce is the highest it has ever been. That means a greater percentage of those of work age are actually working than ever before. And the great majority of the jobs are full time jobs.

This is the reason why New Zealand as a whole feels quite prosperous (in relative terms). Most people are better off than they were a few years ago.

I appreciate that the Left (at least as represented by Metiria Turei) don't get this. She constantly asserts that the great majority of New Zealanders are getting poorer. Just about every official statistic contradicts her assertion, but that does not seem to deter her. I guess it is why so many people say the Greens do not have a blind clue about economics.

I don't mind politicians having different world views. But I do mind when they simply make up things. Unless Metiria can show that Statistics NZ just makes up data, she does not get to make up her own facts. Or at least she cannot be surprised when people do not believe her. 

 

by Lee Churchman on May 28, 2015
Lee Churchman

That's the vision that the left must sell. 5k definitely gone now, in exchange for a possible jack pot in twenty years. Its a big ask.

That's because rationality is a big ask. Late Capitalism has big problems with an addiction to short term thinking.

by Lee Churchman on May 28, 2015
Lee Churchman

This is the reason why New Zealand as a whole feels quite prosperous (in relative terms). Most people are better off than they were a few years ago.

There is no such thing as "NZ as a whole" and most people includes those boomers who got a more or less free ride. Hell, Muldoon basically gave my working class parents a house and most of my friends' parents received free tertiary education. Now my students despair of home ownership and are paying about $7K a year to study – that's only slightly less than it cost the University of Toronto's scholarship fund to pay for me, as a foreign student, to attend there.

There's also the fact that people tend to persistently underestimate inequality and are bad at long term planning. So claims about what most people feel or think are essentially worthless other than for political reasons.

by Eliza on May 28, 2015
Eliza

Thanks for the cross generational solidarity Lee. 

Wayne, full-time childcare for one child under 3 costs about $300 a week. Paid parental leave only lasts for 16 weeks and is paid at less than the full-time minimum wage. I'm not sure whether "most people are better off than they were a few years ago", but it's obvious that even parents with two good jobs will find themselves dealing with a major drop in disposable income while their children are young. I shudder to think about the kids of parents who aren't on good incomes. 
by KJT on May 30, 2015
KJT

"Why should I raise someone else's kid to my own detriment?".

Because it is their participation in the work force which will keep you in your old age, when your kids have left you becuase you are a selfish a--hole.

"Most people are better off than they were a few years ago".

What people are better off? A few "executives" on 17% per year pay rises, and speculators in farms and Auckland housing. You also forgot to mention It is also from a very low base after the devastation caused by the 1984 Labour and 1990 National Governments.

Also ignoring that almost all new jobs are casual and minimum wage, or less.

 

 

by Lee Churchman on May 30, 2015
Lee Churchman

Thanks for the cross generational solidarity Lee. 

Do I look that old? Sigh...

by Katharine Moody on June 01, 2015
Katharine Moody

Most people are better off than they were a few years ago.


Perhaps you meant, most people are more in debt than they were a few years ago;

 

http://www.interest.co.nz/charts/credit/consumer-credit

http://www.interest.co.nz/charts/credit/housing-credit

 

 


by Megan Pledger on June 01, 2015
Megan Pledger

@Wayne

You clearly misunderstand what the participation rate is - it includes people looking for work as well as those working.  So if you make solo mothers of three year olds look for work then the participation rate goes up and it doesn't matter (in the statistic) if they get jobs or not.

The employment rate has come up from 63% (2009q3) to 66% now but it's still less than 67% (2007Q4).  The unemployment rate is 6.1% now and was 3.3% in 2007Q4.

There has been an increase in FTEs and filled jobs *lately* but when divided by the working age population, the rates are still lower than when Labour was in power.

(All data from infoshare at http://www.stats.govt.nz/tools_and_services/infoshare.aspx )

The employment figures have come up in the last year but they are not the best ever.  Once the rebuild is over and if the milk price doesn't rebound (and it won't because the Chinese would rather buy farms than milk) than we're in trouble.

 

 

 

2007Q4
by Roger Barker on June 08, 2015
Roger Barker

If I have understood Bill English correctly, he has at least hinted that if the budget surpluses work out the way he predicts/hopes in 2017, his party will look to using at least part of that to fund tax cuts, which will, of course, increase inequality.  So here's a simple challenge for Labour/Greens...Will you commit right now that you will not offer tax cuts, but will use any such surplus to further reduce child poverty rates in NZ?  Will you promise that in the 2017 election campaign and will you stick to it if you form the next government? 

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