Tuesday, 15 Jun 2021

Budget 2021: Fran O’Sullivan: Look to the future, don’t dwell on rewriting the past


Why didn’t Grant Robertson and Jacinda Ardern persuade their bosses in the fifth Labour-led Government to roll back key elements of Ruth Richardson’s “Mother of all Budgets” if they thought it so iniquitous?


It is a sad commentary that Robertson had to reach back 30 years to provide a platform for his 2021 Budget when there were other initiatives — like a proposal to introduce a European-style “social unemployment insurance scheme” combined with a Singaporean approach to industry growth — that are potentially far more transformative than simply bumping up welfare payments which may well be swamped by incipient inflation (which is not to say increasing benefits should not happen).

Watching Robertson yesterday, I couldn’t help but ponder that the thrust of some very good initiatives was buried by his “take that” approach to Richardson.

An aside here. The Finance Minister was 20 years old when Richardson unveiled a Budget which marked a continuation of the ideological shift that began under the fourth Labour Government.

Ardern would have been bumping 10 years old and while she clearly thrived on yesterday’s pile-on, was hardly in a position to make sound commentary on the era.

The Finance Minister told Parliament his Budget was set against the one delivered 30 years ago,this so-called “Mother of All Budgets”.

“It was the Budget that finalised the benefit cuts, which introduced the idea of hospitals being replaced by Crown Health Enterprises, that set in motion interest-bearing student loans and that welcomed the passing of the Employment Contracts Act.

“On this 30th anniversary of that Budget, our Government is undoing some of the damage done all those decades ago.”

There was more besides, including commentary that his Budget was primarily a moral issue. He had recently watched a documentary about the late 1980s and early 1990s reforms and their intergenerational impact on wellbeing.

But that fourth Labour Government also hid from voters in 1990 the fact that there was snowballing debt and the Bank of New Zealand was just one signature away from a Government bailout. Those 1991 benefit cuts were hard on people. But so too was the sad fact that so many New Zealand companies were exposed as being in a pitiful state after the 1987 sharemarket crash. It was a long rebuild.

So, adopting measures that were new but proven elsewhere,that may give some relief to that hard personal impact from sustained unemployment, was important.

The Taxpayers Union was quick to jump on the proposed insurance scheme as “yet another tax”.

But in a world where changes are being wrought through technological change, it certainly has merit.

The 40 or so CEOs who travelled to Denmark in 2019 with the NZ Initiative were taken by that country’s “flexi-security” system.

As mission leader Fraser Whineray wrote then: “Income protection insurance is also included if you are out of work. However, you have to be available to work, and substantial support doesn’t last forever.

These flexi-security arrangements allow for easy hiring and firing, which Danish employees, the majority of whom are union members, support and use to their advantage to find better jobs.

Danes have the highest proportion of the population in employment in the world, though they worked only 1410 hours a year compared with Kiwis’ 1752 hours in 2016.”

The NZ Productivity Commission later picked up the idea. And BusinessNZ and the CTU have given broad support.

The Danish model is graduated. Insurance can be bought at different levels and it applies also to the self-employed.

What’s being discussed in New Zealand suggests an ACC-type model whereemployers will also kick in to support their employees’ own insurance payments, with coverage of up to 80 per cent of income as a possibility.

Danes are told that to play their role in society they must insure against the risk of unemployment while they are in paid work.

That focus on self-reliance — with a big nudge from the State — is the rub.

But it is transformative.

Pity there wasn’t more of that and less of “take that”.

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