Quick fixes, investment, votes and John Key

A month back Phil Goff said the Mana by-election result would “be a judgment on John Key and National’s failure to make the future better”. Two reports will soon confront Key and National with the future.

Saturday’s Mana judgment is positive on Key and National: in vote-share terms a 6.6% two-party Labour-to-National swing, which could be read as a green light for National’s policies. But the left-to-right swing was half that: Matt McCarten accounted for half Labour’s fall and ACT plunged.

With rare exceptions, it is hazardous to draw national conclusions from by-elections. Too many factors are specific to time and place. Labour’s strong Mt Albert by-election win last year did not foretell a big surge in opinion polls.

Key’s real “better future” test is in long-term policy.

Governments can at most make only part of the future and even in that part can usually only make the future a large proportion of the people want, or go along with, in the present. Moreover, government actions can take a long time to turn into the future. Next year’s future is still to a significant extent Labour’s work, as Bill English tauntingly tells Goff and his MPs in the House.

But governments can choose whether to invest for future returns or live in the short term. Usually, ministers fix on the short term because they want above all to be re-elected and think slow-acting investment doesn’t help, and might hinder, re-election. There is a belief, which Key seems to share, that political capital erodes over time, unlike capital in Key’s past world which is expected to generate a return which in turn grows the capital.

Against that backdrop the Welfare Working Group “options” report lands this week.

Three related cabinet instincts have driven this enterprise: that welfare “dependency” is bad for the dependants and work would lift their self-worth; that numbers keep rising and the fiscal “burden” is unsustainable; and that cutting benefit spending appeals to middling voters.

Contrast the refusal to rethink the pension qualifying age (which should logically now be 67, adjusting for the rise in life expectancy since 65 was set in 2001). The fiscal burden will be unsustainable, now that baby-boomers are about to start jacking up the numbers. But over-65s and near-65s vote.

In effect, the Welfare Working Group’s brief was to find ways to trim benefit spending.

In fact, the group has found, its real brief is more complex. An analysis by the British Institute for Public Policy Research in August of world welfare-to-work initiatives poses more questions than answers.

Why? Beneficiaries are individuals, with, as a conference last week on inequality heard, many inequalities besides income: genetics, epigenetics, early childhood upbringing (or not-upbringing), physical and mental health, disabilities, accidents and life experiences, among others.

Quick fixes, even “evidence-based” ones, risk children of quick-off-the-benefit adults developing into next decade’s low-, under- or non-performing adults. Five elections on, the returns may be negative.

There is also causality: do beneficiaries get more ill than non-beneficiaries because they are on a benefit or are they on a benefit because they get ill (perhaps because of bad upbringings)? And result: does working in a very-low-paid, routine job actually increase self-worth more than putting real effort into one’s children? The more you look, the more complexities.

So the group’s “options” may turn out more nuanced than ministers really want. To some extent they may focus on technique. An example: ACC has got skilled at assessing which injured people are likely to get back to work without intensive case management and which ones need that management.

So what about an investment approach? Sir Peter Gluckman’s “transition to youth” report by a team of academics specialising in psychology, paediatrics, families, children and adolescents and education is to reach Key in a few weeks.

Among other things, that report will present strong evidence that the highest return on state investment to get youth on the rails comes from very early intervention to ensure children get a reasonable start in nutrition and cognitive development.

That’s expensive, difficult, intrusive: not in line with cabinet instincts. But it promises fewer people on benefits 15 years hence. Key could invest some of his political capital to deliver that dividend.

And it would fit his wish that his legacy will be to have made a difference for disadvantaged children. Sir Peter is about to give him that opportunity.

As with science and innovation, another big investment opportunity, Key will need to pull rank if he is to squeeze out of English real investment in the next generation. But a Prime Minister can, as Jim Bolger noted in the Dominion Post on October 30, just sum up a cabinet discussion in his own favour even if he is in a minority.

Key’s time at the top has just passed two years. Maybe time to start on the legacy.