Will it work? Three years in the making, this is the government’s biggest throw of the policy and political dice, a massive redistribution in favour of some battlers.
Sounds like old Labour. The better-off and companies get no tax relief. The poor get a higher floor under their living standard and 300,000 families get help from the state.
But there is a modern twist, driven by the seemingly unstoppable rise in welfare rolls, which not even a Labour government can live with forever. Since a Labour government cannot use the cattle prod, it has offered a lure.
Move off the benefit into work and you get cash in the hand. Stay off the benefit and keep the cash.
The government hopes that will prompt more beneficiaries, especially mothers who are under-represented in the workforce by international standards, to try harder to get into work — and once in work to stay in work.
That is a bribe: a cash bribe to get a job and stay in it.
There are two caveats.
First, there have to be jobs. No problem right now: after four buoyant years, employers in some industries cannot find workers.
Second, would-be workers need at least “foundation” skills — reading and counting, for a start. Increasingly, employers have to teach employees those basic “skills”. Some companies simply forgo export orders because they cannot get workers. The jobs go offshore.
There are programmes to teach those foundational skills and Work and Income staff are primed to prod beneficiaries into them, Social Services Minister Steve Maharey says. Perhaps his bribe will add some motivation.
His critics on the right will say he should also apply some stick. Later this year Maharey will do that, but for a limited number of the most intransigent cases.
There is a third objective of the “working for families” package — and arguably it is the most important.
That is to “ensure our children will live in decent home surroundings”, as Finance Minister Michael Cullen said at his press conference yesterday. The government says up to one-quarter of children live below the poverty line and that affects their learning — with obvious effects on employability when they leave school. Quite apart from the social and equity considerations, that is bad for the economy.
Cullen says his package — plus improved housing and other assistance to beneficiaries — will lift a third of those children out of poverty. Result, ministers hope: less sickness and fewer other disorders while at school, so cutting government costs immediately; and better learning and higher employability a decade or so from now — a shorter “tail” of unemployables and barely-employables.
Enter Education Minister Trevor Mallard. Teachers can make a difference, even for kids from poor and bad homes, his pilot programmes are telling him. A low-key programme prods teachers to make that difference by focusing on pupil learning outcomes instead of on their inputs.
Mallard has also backed pre-school education in several Budgets. Yesterday he added more money: from 2007 all community-based early childhood centres will be funded, not just kindergartens.
It is not yet backed with intensive Plunket-type help in the home for pre-schoolers and their parents but some ministers are arguing for this for future Budgets.
The package is an experiment — and a very bold and expensive one, more than double the money Cullen initially told Maharey he could have when framing it last year. It is a massive redistribution from the better off whose taxes have been rising and who get no tax relief and even from many of the families it helps whose tax has also been rising if their incomes are over $38,000.
It is a major policy gamble, which locks off other options.
That is a challenge to National, both leading up to the next election and when next it is in government. National prefers the tax cut route and now has much less scope for that. It would be risky for National to pull the handouts once they are flowing. It could perhaps can phases two and three and/or stop the indexation of thresholds and payments Cullen has built in. But those options are politically risky, too.
More likely National will accept the package, with one of its now typical fudges. But any tax cut promises will then be correspondingly less plausible.
Still, there is no guarantee this will cement Labour in office. Family handouts in the Australian Budget earlier this month sent polls the wrong way.
Only 300,000 families benefit, which, as Brash said yesterday, leaves another 1.2 million households without relief.
Moreover, it sharpens the ideological difference because it binds those 300,000 families closer to the state: “Asked to choose between self-reliance and dependency, they chose the latter,” Brash said.
That is the battleground Cullen and Maharey have chosen, though they would argue their package offers a route out of dependency for many now trapped. Middle New Zealand will decide who is right.