Labour is complicit in National's work-for-the-dole madness

The Standard highlights the likely implications of National welfare spokesperson inviting an Australian work-for-dole 'provider' to visit New Zealand. National plans to give them business by introducing work for the dole if it becomes the Government.

While Collins adopts the key approach of 'deny deny deny', Mission Australia's chief executive is keen to cross the Tasman.

Steve Pierson at the Standard is right when he describes work-for-the-dole as a nice sounding slogan that does not work in practice. In adopting such a policy "National is following ideology, rather than doing what makes sense."

But there is a problem with this analysis. The fact is that Labour adopted significant assumptions of the underlying ideology behind work-for-the-dole when they passed the Social Security Amendment Act. I have blogged on similar issues before. As Louise Humpage and Susan St John point out this amendment changed the fundamental purpose of the Social Security Act.

"[T]he Social Security Amendment Bill wipes away any notion that our social security system is about ensuring everyone can participate as citizens. Instead, it makes getting people into a job, any job, the fundamental duty of citizenship. This principle is baldly stated “Work in paid employment offers the best opportunity for people to achieve social and economic well-being”.

Even worse, the new Act allows for pre-benefit activity to be completed before a person can even apply for an Unemployment Benefit. So thanks to Labour, National will not even have to change the law to bring in work-for-the-dole, they can just pass a regulation to require registration for make-work schemes as part of 'pre-benefit' activity.

It is an irony that the right make so much of the 'excess' jobs offered by NZ Rail prior to corporatisation in the 1980s, when these jobs where of far more value to society than the neo-liberal work-for-the dole schemes, of the late 1990s, and of the early 1930s. In his book 'The Slump' historian Tony Simpson described how this philosophy and practice failed to address the demands of the depression.

"By and large it reflected the 19th century viewpoint that anything for nothing would be instantly exploited by the unscrupulous and feckless poor. The circumstances of giving must be unpleasant as possible and it must never amount to more than the lowest wage available otherwise it will encourage sloth."

The 1930 Unemployment Act provided for a sustenance payment of 21 shillings a week to unemployed men, with an additional 17s and 6p for a wife, and 4 shillings per child (even though working women contributed, they were not eligible). This was financed by a poll tax - in effect it was a compulsory insurance scheme.

"These rates were never paid. Instead, the unemployed were referred to local authorities, which were instructed to provide work and granted subsidies from taxation with which to pay the workers involved. A stern instruction accompanied this scheme. No one was to be given payment unless they actually reported for work. This led to ludicrous, even scandalous, situations where local authorities scrambled to create work which was clearly unnecessary or even useless (such as shifting sandhills from place to place)."

If local authorities could not create work payment was withheld. Despite this example being from the 1930s it still demonstrates the weaknesses of a work-for-the-dole policy, and how it can lead to further retrenchment. The work involved is either going to replace genuine jobs or it is not. If not, this can only mean sandhills. If a government (or a private provider) is inclined to cut 'benefit' costs further, restricting the amount of 'work' available becomes a very handy way to do this.

Its not just the Social Security Amendment Act. Consider Sue Braford's analysis of Steve Maharey's 'Jobs Jolt' policy from 2004.

"In this context, for those people who are living in poverty, on wages and benefits which aren’t enough to sustain a remotely decent standard of living, the ‘Jobs Jolt’ means little more than increased harassment by the State in a situation where there are still far from enough jobs to go around....This is why I view the ‘Jobs Jolt’ and the thinking behind it as intrinsically right wing, fundamentally unjust from a social equity perspective, and a clear signal that Labour is far keener on picking up votes from the beneficiary-bashing part of the political spectrum than it is from low income workers, unemployed people and beneficiaries, and those who support their right to jobs and a living wage.... Overall, I sense that the Government’s lurch to the Right on welfare as epitomised by the ‘Jobs Jolt’ is a product of their lack of any cohesive ideology or coherent thinking about solutions to structural unemployment, endemic poverty, a failed, fractured welfare system and an entrenched and increasing gap between rich and poor in Aotearoa New Zealand. "

In other words, the circumstances of giving must be unpleasant. If the Nats introduce work-for-the-dole it will be a logical extension of Labour's own policy, or perhaps lack of one. If Labour had wished to vanquish work-for-the-dole to the historical dustbin it belongs, perhaps it should have made more effort to challenge the neo-Victorian attitudes underlying the ideology of work-for-the-dole.

In 1938 Labour's proposed Social Security Bill was the centrepiece of its election campaign. The National party called it 'applied lunacy', a bribe and a cheat. Labour not only won a majority, it won a majority of the votes cast - a first in New Zealand history.

Note: Made a small edit when I established Mission Australia are technically a charity rather than a private company. That will teach me for blogging too late at night. If National devolves welfare delivery to the charities sector it will like going back to a pre-1930s situation!

Price Waterhouse Coopers oppose measures aimed to cut tax avoidance

I came across an opinion piece from the Dominion Post on Friday where multinational tax advisors Price Waterhouse Coopers (PWC) attempt to start a scare campaign about the Government introducing a capital gains tax.

The article is headed 'Capital gains tax lifts its ugly head'. All that is lifting its ugly head here is the spectre of tax advisors complaining they will be less able to help their wealthy clients avoid paying their fair share of tax.

Is the government proposing to introduce a comprehensive capital gains tax? Sadly no. Ugly? Well assuming such a tax included an exemption for the family home, it is only ugly for the well off who have taken advantage of the lighter taxation on property investments, and have driven first home buyers out of the market as a result. It is a shame Labour didn't close this complete rort when it raised the top tax rate to 39c in the dollar in 1999.

Between 1989 and 2005 the residential property market provided investors and owners with a tax free gain of 319%*.

Despite PWC attempts to scaremonger, all that is happening is that the Government is tightening the rules around existing tax law that makes investments in housing for the purpose of making a capital gain taxable. So the Government is seeking to remove the loopholes that PWC and its clients love so much. It is not a new tax. As Michael Cullen explains:
"Associated persons: ... The definitions are used extensively in the Income Tax Act, primarily in an anti-avoidance capacity to counter transactions that are not conducted at arm’s length and therefore have the potential to undermine the intent of the law. ....There are a number of major weaknesses in the current definitions, particularly in the definition relating to land sales. That definition contains some major gaps which allow land dealers, developers and builders to circumvent the land sale tax rules by operating through closely connected entities. Parliament’s clear intent in 1973, when it enacted the current land sale tax rules, was that land dealers, developers and builders would be generally taxed on all gains on property sold within ten years of acquisition, and they could not claim to hold non-taxable investment portfolios."

PWC's Chris Leatham says
"In our view, the changes will not be well received. Land dealers, developers and builders have previously been allowed to structure their affairs to avoid tainting of rental properties so that they are not placed at a disadvantage to other taxpayers."

The New Zealand tax system generally taxes property investments with a lighter touch than other forms of investment. The whole point of removing such obvious loopholes in tax law is to ensure particular taxpayers are not disadvantaged over others. Why are PWR defending such loopholes I wonder?

Opponents of capital gains taxes often make unsubstantiated claims about how unpopular a capital gains tax could be - just because they don't like it. I think views are changing. Many economic commentators, including many on the right, now support capital gains taxes because they can see New Zealand would benefit from more money being invested in companies rather than sitting in bricks and mortar. A capital gains tax introduced in a declining or flat housing market would have limited immediate impact, but it would help to slow the next housing boom that will eventually happen. Then there are the growing numbers of twentysomethings and thirtysomethings, now on good incomes, who are becoming more and more aware of how the baby boom generation have shut them out of the housing market by speculating for tax free gains on the housing market. Bernard Hickey is really onto something when he identified "The generation that New Zealand Inc failed"

If it was up to me I would introduce a comprehensive capital gains tax (with an exemption for the family home) and direct the proceeds towards affordable housing initiatives. Ironically, a declining or flat housing market can make the structural issues easier to address.

Returning to Leatham's little opinion piece, one could be mistaken for thinking that the Dominion Post are now running free advertising features for Price Waterhouse Coopers.
"The new rules will apply only to property purchases from April 1, 2009 onward (or, in the case of builders, to property improvements made after that date). This gives you the opportunity to talk to your accountant to understand the impact of the changes."

As for their views on the taxation of housing investments - their vested interests are plain to see.

* Source: Sunday Star Times (17/6/07), "The Rent Trap"

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Drinking Liberally Auckland and Auckervegas

"Like politics? Like drinking? If you answered yes to both these questions then join us for Drinking Liberally, a monthly event aimed at building ties among left-leaning people."

Drinking Liberally is a worldwide progressive network and is being launched in Auckland early next month. Two or three events have already been held in Wellington.

WHAT: Drinking Liberally Auckland City LAUNCH!
WHEN: 7.30pm, Wed 2nd July
WHERE: London Bar, cnr Wellesley & Queen Sts (opposite Civic)
SPEAKER : David Slack, of Public Address, National Radio, and several books

If you are in Wellington, Drinking Liberally meets on the first and third Thursday of the month at the Southern Cross on Abel Smith Street.

Lynn from the Standard made up a great graphic to help promote Drinking Liberally Auckland. I hope he will forgive me, but I could not help but wonder what the following would look like..

Not that I am a drunken litterbug - its only a thought crime citizen!

Is anybody else a little concerned that a key symbol of Auckland is a casino that looks like a hypodermic needle? In saying this I am not critiquing Lynn's choice of graphic at all - its more of a reflection on the symbols chosen to represent New Zealand's largest city. A choice, I might add, of an elite. With the addition of the bottle, the sky tower can now represent gambling, drugs and grog, all in one package.

And a short walk from a park named after a wealthy beer baron.

Obama should put Hillary on the Supreme Court

Listening to National Radio early this morning I did enjoy the suggestion made by Jon Johansson that a President Obama should appoint Hilary Clinton to the Supreme Court. As Johansson points out this would mean all of Hilary's conservative detractors would have to put up with Hillary for as long as she lives!

Looking into this idea a little further, I found the American Family News Network made a compelling case for Hillary, even if they might not have meant to. A so-called "pro-family legal expert", Mat Staver hopes the the potential legacy of Clinton is something conservative voters will consider.

"That legacy will likely be whether or not we have abortion for the rest of our lives or whether we restore the sanctity of human life," he explains. "Whether we continue to have [traditional] marriage ... [w]hat kind of security, what kind of family values and religious freedom are we going to have in the next couple of generations," lists the attorney.

The American Taliban have spoken. Many people reading the above will take it as an ringing endorsement of a Clinton candidacy.

While Clinton does not have any judicial experience (she is a lawyer), non judges have been appointed to the Supreme Court before. In 1952 California Governor Earl Warren entered the court. He later became one of the highest regarded Chief Justices, playing a key role in the Brown vs Board of Education case in 1954 that ordered an end to school segregation.

Of course Obama can't simply appoint her - he needs to become President and a Justice needs to die. Perhaps he could appoint her Attorney General (or a similar role) in the meantime, which would give a clear hint of where she might be heading, and avoid any perceptions of the Clintons running the Obama White House.

Given a Republican majority on the Supreme Court voted on party lines to appoint George W Bush to the Presidency in 2000, the Republicans can not credibly complain about politicisation of the Supreme Court. In fact, Hillary would bring welcome balance to the currently conservative bench.

Go Go Go Child Povery Action Group, Boo Labour

There was some good news on the box tonight. The Human Rights Review Tribunal has begun to hear the case bought against the Government by the Child Poverty Action Group that the Working for Families programme discriminates against the children of beneficiaries.

The case centres around the the In-Work tax credit, worth around $60 a week. The Labour-led Government excluded beneficiaries from being eligible for this payment. CPAG say this is illegal discrimination because it is Government assistance given only to a select group. 220,000 children from beneficiary families currently miss out.

The Working for Families policy assumes that parents use the money to help with the costs of raising families. How can it be fair that children of beneficiaries are denied $60 a week on the basis of the source of their parents income? Are the Labour party seeking to encourage a new pester power, as in Mummy why don't you get a job? How can it be fair that families lose the $60 a week when a parent has the misfortune to be made redundant?

Prime Minister Helen Clark attempts to defend Labour's policy by claiming Working for Families has lifted 130 thousand families out of poverty. Even though Working for Families has improved the lives of many families, New Zealand's child poverty figures would suggest Clark's claim is somewhat of an exaggeration. Particularly when the Working for Families policy deliberately excluded the very poorest - beneficiary families. Clark also claims "[s]ince the in-work payment came in for the first time we've got the numbers on domestic purposes benefit going down, thats a great thing because it means we have more children seeing their parents going to work everyday to earn a living." Now Helen, can you please tell me how this is the fault of the children?

This and other comments made at the time by of the introduction of Working for Families make it clear that a key policy objective of Working for Families was to increase the difference between the incomes of those on a benefit and those in (low) paid work. The same policy principle underlay Ruth Richardson's 'Mother of All Budgets' in 1991, where Ruth Richardson slashed benefits. Despite making many complaints about these cuts in opposition, Labour have never made any real effort to restore benefit levels in 9 years of Government. Labour ensured beneficiaries did not get any benefit from the tax cuts announced in the Budget, which will only make the situation worse.

The Government's own Ministry of Social Development now say beneficiaries are now worse off now than they were under National in the 1990s. With such a record Labour do not deserve the support of beneficiaries, but neither do National as they have said they are happy with benefit levels as they are now. In contrast, the Greens have given consistent support to beneficiaries in Parliament, despite a great many beneficiaries continuing to support Labour out of habit.

In her recent speech on the 2008 Budget Green MP Sue Bradford said
"..,Dr Cullen certainly has a different understanding of labour history in this country than I do. I had thought that the first Labour Government under Michael Joseph Savage swept to power in 1935 as a result of the mass unemployment and poverty suffered through six years of the Great Depression. It was unemployed workers together with their comrades still in work who helped create and drive the great things Labour did in those early days, including taking the first steps towards getting a decent welfare system into place, and I see this generation of Labour’s approach to beneficiaries as a real betrayal of that proud history."

By excluding beneficiaries, Working for Families becomes an effective subsidy to underpaying employers. While many on the right such as Labour and National promote the virtues of a free market economy, they want to ensure the right of employers to offer underpaid jobs as a forced sale. If workers want higher wages, they should support CPAG's case against the Government, as giving low paid workers the choice to tell underpaying employers to go to hell is one way to ensure wages in New Zealand are lifted for all.

PS: It is an irony that my very first post on this blog, now four years and a few days ago, I criticised Labour for making cynical use of the Bill of Rights Act to justify a cut in student allowances, at the same time they were defending the continued discrimination of parental income tests on the basis of age on the grounds it would cost them too much money to do otherwise.

National's u-turn on Kiwisaver should not be trusted

The National party attempted to make a swift u-turn today when its Industrial Relations Spokesperson Kate Wilkinson told an employment relations forum that National would do away with the compulsory employer contributions to Kiwisaver. "The National party is not a party of compulsion".

Under pressure from her boss, John Key, Wilkinson issued a later statement claiming she had "misinterpreted the question" (yeah right). "National will release its Kiwisaver policy later this year, but suggestions that National will do away with compulsory employer contributions to the scheme are incorrect.

According to Key, Wilkinson "got it wrong", and added that National's industrial relations spokesperson is not involved in the setting of National's Kiwisaver policy. Perhaps Wilkinson was only guilty of telling National's wealthy backers what they want to hear. Perhaps this is a also a sign many National MPs are currently sharpening their hatchets, desperately looking for ways to cut government spending to fund tax cuts, following a budget that tied up most of the cash.

Despite it not being National's day, I think the media have missed something important, and have subsequently let Key off the hook with his refusal to outline any further detail about National's Kiwisaver policy.

While employers have to make contributions to their employees Kiwisaver accounts, employers also gain tax credits for doing so. These tax credits reinburse 100% of employer contributions up to a maximum of $20 a week. In situations such as the 2+2 scenario (where employees put in 2% and employers 2% to make up the 4% minimum) Kiwisaver does not end up costing employers any money more money (than paying 1%) when the tax credits are taken into consideration (for those earning less than 52,000 a year). Labour have set aside a total of $2.4 billion to compensate employers for their 'contributions' over the next four years.

National's denials come with a pungent stench of weasel. National could keep the employer contributions, but give employers greater tax breaks so a greater proportion of employer 'contributions' actually end up being effectively subsidised out of the public purse. National could pay for this by trimming the government contributions, and dangle the prospect of greater tax cuts. This would be consistent with the comments made today.

The effect of such a policy change would also deliver to National's big business backers, who prefer corporate welfare when they can get it. The 650,000 New Zealanders who belong to Kiwisaver should not take any relief from National's blundering policy announcement today. As far as Kiwisaver is concerned, the National party still refuses to answer the key questions regarding their Kiwisaver plans.

Hat tip for some of the links NoRightTurn.

No recent posts due to internet issues

I haven't been able to post as much as I would like recently due to internet issues. Over the weekend my internet went from being slow to non-existent.

I hope to get it sorted soon.