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On the ‘morning after’ feeling from the Wellbeing Budget

Allegedly, there are 628 different synonyms for “ well-being” on this website so there should be one that fits your own response to the Wellbeing Budget. IMO, “in the pink” is the closest fit. Meaning: not socialist red, but a lighter shade of pink that’s been spread thinly across a slew of social and infrastructural spending initiatives that – with a couple of exceptions – are disappointing in their scale and scope. It isn’t transformational. From mental health to the rail network to improving the state of the waterways, much of the spend will merely be playing catch up for the previous decade of neglect.

Sure, there are some Very Good Things. The $1.9 billion boost to mental health spending over the next five years is a major step forward, and it will be spearheaded by the funds earmarked for a frontline mental health service. That’s very welcome, and long overdue – and one can only hope that enough trained mental health professionals can be found to deliver this new service intended to be embedded alongside GPs and iwi health providers.

To some extent, those headline funds for mental health will be met from other areas of operation. For example: about $213 million of the funding to enhance mental health and addiction services will be ‘ring-fenced’ from within the funding boost delivered to DHBs. The downside of that situation is that DHBs have received a limited level of extra funding that – given the rising costs they face – will probably leave them capable of meeting only their existing standards of treatment. In other words, Budget 2019 isn’t a transformational document for many other areas of public health.

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In fact, that same ‘ yes, but’ response applies to much of this budgeting exercise. No doubt, the Wellbeing Budget is a marked improvement compared to National’s systematic neglect of New Zealand’s social, environmental and infrastructural needs. Hearing National rant on about the coalition government’s bungling and incompetence is shameless, given its own M.I.A. track record while in government. (In that respect, National is like a deadbeat dad now claiming to be an expert on parenting.) In the light of that dismal inheritance, only a Grinch could fail to welcome Finance Minister Grant Robertson’s plans to improve mental health services, to build new hospitals and repair existing ones, to put $80 million more into Whanau Ora, to assist business startups and innovation via a $300 million venture capital fund etc etc.

The problem is that the inspirational rhetoric that preceded the “Wellbeing Budget ” had promised even more. On the morning after, it isn’t valid for Labour to claim that it can’t all be done at once, and then expect tons of praise for doing relatively little. The gains have been from within the constraints of an entirely self –imposed straitjacket. It seems that National-led and Labour-led governments alike still feel it obligatory to worship at the altar of government debt kept at around 20% of GDP (until 2022!) when – if they were really serious about eliminating the scourge of child poverty and replenishing our failing infrastructure – New Zealand could be taking full advantage of the global lows in interest rates. The coalition government could easily borrow more, invest more and create more…. and reap the social, economic and employment advantages from doing so. (Building the nation’s infrastructure creates jobs.) Going down this path would require leaders to directly challenge the free market fiction that says the state lacks the ability to invest and to build wisely – which is a myth, since the history of this country proves the exact opposite.

One Hand Clapping

At the Budget lockup, the big takeaway from a slide headlined “Transforming The Economy” was that the government has allocated a large funding boost to Kiwirail and the Auckland City Rail Link. Now…much as everyone loves rail for its climate change friendliness and its services to regional New Zealand, this large investment will not “transform” rail, let alone the wider economy.

KiwiRail has been receiving meagre funding boosts since 2012 at least, including from the Future Investment Fund that National created after it privatized part of the public’s stake in the state energy companies. This time around, the far bigger KiwiRail funding boost will go into repairing and replacing the existing trains, wagons, railway lines and interisland ferries. An overdue investment, but not exactly transformational. (KiwiRail will not be investing in bullet trains or opening up new regional rail routes any time soon. Instead, this is a rescue operation for the existing network.)

Nowhere was the gap between the caring rhetoric and substance made more clear than in the Budget’s treatment of beneficiaries. Twice during yesterday’s lockup Robertson claimed that wage indexation – whereby benefits rise in tandem with average wage increases, rather than in line with inflation – was the best way of countering child poverty. Well sorry, but it isn’t. More money is the best way of countering poverty, by the raising of benefits. According to Robertson those on benefits could stand to gain $15-20 a week by 2023, via wage indexation, over and above what they’d previously received from adjustments linked to changes in the Consumer Price Index.

You still have to ask – is this really as good as it gets for the unwaged poor? The Labour-led government on which people have pinned so many hopes has chosen to delay (until next April!) the removal of the financial penalty imposed on women and children fearful to name the father of the child, and there’s been a similar delay in implementing a (slightly) more generous level at which benefits reduce when extra income is earned. There is no justification for this delay.

The miserliness cannot be blamed entirely on New Zealand First. Traditionally, Labour has always had far more sympathy for the poor in paid employment than for the unwaged poor living on benefits. At the lockup Social Development Minister Carmel Sepuloni reminded journalists that this was only “the first phase” of the government’s response to the Welfare Expert Advisory Group report. Later this year, Sepuloni said, the coalition will respond in greater detail to the report’s recommendations. In the meantime, expect more delays.

One class of beneficiaries will be doing OK, though. While social assistance spending is due to increase by $6.8 billion over the Budget forecast period, $4.8 billion of that growth will be in NZ Superannuation payments, as the number of pensioners increases from 741,300 in 2017/2018 to over 872,900 in 2023, a rough increase of about 17.8%. By then, NZ Superannuation will be soaking up 53% of core Crown social assistance spending. Increasingly, “well-being” will become a Kiwi experience that’s guaranteed as of right, mainly to the old.

Measuring the Wellbeing

The architects of the Wellbeing Budget take pride on it being an alternative to crude economic reductionism. Truly, they do deserve credit for recognizing that our social, cultural and environmental needs all interact in ways that can’t be assigned a market value, and treated as a line item. In future, it seems, Budget surpluses will be treated as means to an end, and will no longer be pursued as fetish objects regardless of the social cost involved. That’s all to the good. Ultimately though, the “Wellbeing Budget” process seem to have been more about the collaborative process that the politicians and officials put each other through in creating it, rather than a set of mechanisms visible on the printed page.

That’s a little bit surprising, given that the Wellbeing Budget would supposedly be such a novel departure. An international trendsetter, no less. Instead, it looks like a label that’s been attached to a fairly standard Third Way ordering of priorities. As mentioned, the market disciplines that generate poverty and inequality have largely been maintained, while the government does its level best to treat the victims of these processes in more kindly fashion. Along the way, surprisingly little was offered in the way of a replicable framework for how the Wellbeing Budget’s goals were identified and prioritised – let alone an analytical framework for how the Budget outcomes will be evaluated. Like Mom and apple pie, there is not a lot a lot to disagree with in the 61 (!) different measures that Robertson says were used to produce the Budget documents we saw yesterday.

Should we care? The main shortcoming of the Wellbeing Budget is not in the vagueness of its premises or the arbitrary ways its priorities have been decided. It is in the lack of adequate funding for a truly transformative agenda. Does the government really want to brag about spending $44 million over four years in suicide prevention, ie at a rate of little more than $10 million a year? No doubt, other services in Vote Health and Vote Corrections will help to deter suicide and these will all (hopefully) work in harmony to lower what is one of the highest suicide rates in the developed world.

But is this really all we can spare for dealing with the causes and outcomes of suicide...when at the same time, we’re putting at least $1.3 billion this year into buying four new Poseidon surveillance planes for Defence, in what will end up as a $3 billion package, once the costs of training, the Ohakea runway repair and extensions, the crew accommodation etc have been factored in. Moreover, the bill for the Poseidons will be paid off just in time for Defence to put its hand up again for a similarly huge amount to replace its Hercules air cargo planes, a costly project that’s strangely absent from the Budget documents, estimates and projections…And after that outlay, the next Defence bill will arrive for the new frigates.

Unfortunately, that example/contrast is pretty typical. Other big funding priorities exist alongside well-being in the Wellbeing Budget and at times, those big ticket items have crowded out and curtailed the levels of social spending. As result, Budget 2019 sometimes felt more like well-being on a budget, rather than a Wellbeing Budget.

Footnote One: Talking of the nation’s defence and security, the annual budget allocation for the security services that did such a great job recently in protecting us from extremism has gone up from $83,577 million to $106,145 million, a 27 % increase. Feeling safer? Not.

Footnote Two: While New Zealand First keeps racking up the policy/funding gains within this coalition, the Greens continue to look like Labour’s silent partner, and the politics of that reticence seems unfathomable. Justice Parliamentary Under-Secretary Jan Logie’s $320 million family and sexual violence prevention package was a genuine (but isolated) gain on the social justice side of the Greens agenda.

Conversely though, it was no easy task to find a line item for say, the new funding for climate change research and emissions mitigation…which is being spread across a range of several different initiatives to which the Greens can lay only partial claim. With election 2020 on the horizon, the Greens appears to be gambling on making a strong late run for relevance. It looks like a risky strategy.

Footnote Three. As the middle Budget in a three year cycle, it can be safely assumed that the government will be holding back some goodies for election year 2020. But goodies for whom? Will it be for the middle class who comprise the (mythical) political centre - or will it be belated rewards for those centre-left voters still feeling underwhelmed by yesterday’s Budget? Core voters on the centre-left will be feeling less than motivated next year, if Budget 2020 proves to be targeted at the First World problems of the middle class, rather than at the unmet needs of people (unwaged and waged alike) subsisting on low incomes.

Footnote Four. Global events could, of course, blow much of the above out of the water. “Well-being” targets are at risk of being tossed overboard if a global downturn ends up hitting New Zealand exports amidships. Currently it is the economy of China – New Zealand’s main trading partner - that is looking more vulnerable in the ongoing Trump vs Xi battle for trade supremacy.

Even without this struggle, there’s quite a contradiction in the Budget documents between Treasury’s rather rosy forecasts (e.g. for exports, investment, tax revenues and wage growth) on one hand, and the downbeat analyses that surround them on the other. Don’t know about you, but this scenario (it appears on the opening page of the Executive Summary) sounds to me like the end of the golden weather :

“Growth in the economy over the initial year of the forecast horizon continues to be supported by migration-led population growth, government spending, accommodating monetary policy and solid (though slower than recent years) growth abroad. Increased government spending and stronger investment see real GDP growth reach 3% in the year ended June 2020. Growth then eases to 2.4% over the latter part of the forecast period, as the fiscal stimulus from the increased government spending fades, net migration eases and interest rates increase.”

Ulp. And then we all live happily ever after, right?

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