BilB asked me for my impressions about Labour’s performance in government, scandals aside. I’ve taken the question at face value, focusing on impressions, and what I can recall about Labour’s achievements in the nine years they have been in government. Of course, perceptions are critical when it comes to voting; when the punters finally make it into the polling booths, they will base their votes on what they know about Labour and the alternatives, rather than on the reality. My ‘perceptions’ are almost certainly biased; like most people in the LP community, I am a political junkie.
So what have they been doing, all this time?
Labour came back to power in 1999. One of the first things they did was to introduce a new tax top tax rate of 39%, on incomes over $60,000. They campaigned on this, and it was a known consequence of their election. So for most of their term, the effective NZ tax rates have been 15% on incomes up to $9,500, 21% on incomes between $9,500 and $38,000, 33% on incomes between $38,000 and $60,000, and 39% thereafter.
There has been quite a bit of bracket creep, and a corresponding push for tax cuts. In 2005, the Minister of Finance (equivalent to the Australian Federal Treasurer, not to the Australian Federal Minister of Finance), announced that thresholds would be inflation indexed, which had the effect of cutting taxes. The problem was that it simply didn’t deliver very much. People in the lower income tax brackets would have been better off by about 60c a week, so the changes were quickly dubbed as “the chewing gum” cuts, and the Minister backed down on them. Instead, he decided to give people tax breaks for saving. Towards the end of their first term, Labour had announced a workplace retirement savings scheme, KiwiSaver. Originally, the scheme was to be just one that was facilitated through payroll systems, but in 2006, Labour cancelled the chewing gum tax cuts, and added tax incentives to KiwiSaver instead. At the same time, they added compulsory employer contributions, although only for employees who actually sign on to KiwiSaver. So about 20 years after Australia got its compulsory superannuation savings schemes going, NZ followed suit.
KiwiSaver is one response to the problem of retirement savings for the aging NZ population. Another is the Cullen Fund, so called because the Minister of Finance is Michael Cullen. The Cullen fund is a enormous investment fund. Dr Cullen has run budget surpluses for virtually all of Labour’s term, and a portion of the surpluses has been directed into worldwide investments, with the specific purpose of helping to fund superannuation in the future.
Labour has made some specific moves to help lower income earners. In its first term, it introduced Working For Families, a system of transfer payments to families that were “in work” (20 hours per week for sole parents, 30 hours per week between them for couples). The Working For Families payments increase with the number of children you have, so a couple with three children earning over $100,000 (total) would still get $2 per week. The Inland Revenue Department has a handy little calculator where you can while away minutes working out what you might get. Labour has characterised the Working For Families Tax Credits as very tightly directed tax cuts.
Most recently, Labour has introduced a child care scheme, so that all children aged three and four are entitled to 20 hours of free child care per week (conditions apply). The object is to ensure that all children can have some preschool education, and to help families with the cost of child care. And in their first term, they introduced government funded paid parental leave (again, conditions apply, but not onerously so).
Two other groups of people have been given very specific help. New Zealand has a proud tradition of state housing, providing good quality housing at low cost. Under the previous government, many state houses, particularly those in desirable areas, had been sold off, and rents for state houses had been set at market rates. Tenants were able to apply for assistance to pay the market rate. The idea was to ensure that people who needed housing assistance could get it, whether the house they were renting was publicly owned or privately owned. In effect, however, it served as a subsidy to private landlords. The incoming Labour government stopped selling state houses, started building more, and re-introduced income-related rents, so that tenants of state houses pay no more than 1/4 of their income in rent. State tenants have been helped enormously by this. And in the lead-up to the 2005 election, Labour promised to remove the interest on student loans. In New Zealand, students take out loans to fund their tertiary education, and previously, the interest impost was set at market rates. Interest-free student loans have made a huge difference to young people fresh out of universities and polytechnics (equivalent to TAFEs).
Other financial actions include: renationalising the Accident Compensation Scheme (NZ has a no fault, universal, accident compensation scheme, which means that no other insurance is needed, there are no lawyers, and there are no massive payouts – it’s a fabulous scheme); buying back the railways, lock, rolling stock and tracks; and bailing out Air New Zealand (but that’s a lot cheaper than what’s going on in the US at present).
On the social front, the Labour government has decriminalised prostitution, made public places, and especially bars and restaurants smoke-free, and introduced civil unions, which are marriages in all but name, but they are open to all New Zealanders, including gay and lesbian New Zealanders. The sky has not yet fallen in. Even more contentiously, the Labour government backed legislation introduced by the Green party, initially repealing, but eventually amending, section 59. Section 59 allowed parents to claim in defence of an assault charge, that the use of physical force was justified by the need to correct a child. Unsurprisingly, some very nasty cases of physical “punishment” of children had been successfully defended using section 59 as a defence. Now that defence is gone, with the proviso that the police will not prosecute minor incidents. The sky still hasn’t fallen in.
On the international scene, NZ stayed out of the invasion of Iraq, took in refugees from Nauru, and signed a free-trade agreement with China. And finally, in the last few weeks, it has passed a bill enabling an Emissions Trading Scheme.
So far, so good. This is all consistent with progressive government, and indeed, what we might expect a progressive, left-wing government to do. But Labour ran into major problems over the foreshore and seabed. It’s a long story, and the complexities are, well, complex. But the essence of it was that a Maori iwi (tribe) had won the right to appeal a judgement involving the foreshore to the Maori Land Court. To people with brightly coloured necks, it looked as if the Kiwi right to a day at the beach was threatened. So the government legislated to assert its sovereignty over the foreshore and seabed. To many Maori, it looked like yet another confiscation. (To the credit of its philosophical consistency, NZ’s leading right wing business lobby group argued that this was a removal of property rights, and as such, was unconscionable.) One Maori MP split away from the Labour party on the strength of it, and formed the Maori party, which now holds four seats, and is likely to hold more after this election.
The Labour government has achieved an enormous amount during its time in office, particularly with respect to providing support to lower income people, and with respect to social issues. It has been a classic, reformist, Labour government. Some of its reforms will, I think, endure, such as KiwiSaver, and the various social reforms. I can’t see any major political party wanting to go near civil unions again, much to the dismay of the fundies.
But the government is looking old and tired, and it seems to be lacking vision. It has become embroiled in a corruption scandal (well, as corrupt as NZ gets, which is not much, really), and so far, it’s not offering anything other than more of the same. So despite being, on balance, a jolly good government which has done all sorts of sensible things, I think we are going to toss it out.
Thanks so much again, Deborah, extremely informative.
Can you shed any light on how much the Labour government did to roll back the former government’s Employment Contracts Act? Although – as I understand it – it wasn’t 1200 pages of impenetrable gobbledygook like WorkChoices – I also understand it was in some ways more extreme.
I hadn’t realised they had implemented quite so many social reforms. The foreshore thing seems a fiasco though – it will be interesting to see how many more seats the Maori party pick up.
The Working for Families initiative has a downside. My daughter and son-in-law are both fulltime students (he doing a PhD, she completing her BA) with two children. They have a really low income (student allowance at married rate plus some tutoring – less than 30 hours a week between them). They have a lifestyle block with a hosue and a small granny flat that they rent out, and they grow a lot of their food, but it has been really hard for them and they are quite bitter that their efforts have not been recognised with financial support.
I’ll get back to you on the Employment Contracts Act and the Employment Relations Act, Mark.
M-H: another big problem with Working for Families is that while it has been good for families in recognised work, it has been of no benefit to the poorest families in NZ, the families of beneficiaries, who of course, are not in work. The Child Poverty Action Group took a case to the Human Rights Commission over this, but I’m not sure what the outcome was. Again, I’ll get back to you on that (this evening, I hope)… ‘though again, maybe I/S will have the information on that to hand.
Wow, I’d like to think of myself as reasonably well informed on NZ politics, but that’s a more extensive list than I’d be able to produce! FWIW, as an expat kiwi, I’d say this is a pretty fair summary too, though I ought to confess to being a Labour supporter.
If I might add only a little detail in the section on education I’d mention the reforms around apprenticeships and traineeships where Labour’s increased funding three-fold leading to increased participation – up from less than 50,000 per annum in 1999 to close to 180,000 in 2008. It has been a major success, enjoys strong employer and union support, is cheap (average funding of approximately $3,000 per individual and requires industry to make a co-payment) and has directly improved workforce productivity (as in there’s credible research measuring the impact).
I would say much the same, although I would add a comment to the Emissions Trading Scheme, that it has been passed very recently, after years of delays, despite longstanding consensus in the Government that the issue needed to be addressed. I would also note that they have spent very heavily in roading infrastructure (and moderately in public transport), and providing new equipment for the New Zealand Defence Force.
There are also things that are easy to forget, such as the fact that the Government continues to allow conditions for hens and pigs that breach the law, the War in Afghanistan was authorised with no UN mandate (which split the then left-support-Party, the Alliance), allowed the use of GM with caution (to the chagrin of the Greens), and has overseen a massive intensification in the dairy industry. The complete lack of tariffs sees jobs going overseas on a weekly basis.
They’ve ratified a large number of human rights conventions, and just in the last week passed a bill to allow mothers to care for children while in prison (with adequate conditions and provisos). However, after a five year battle in the courts with an asylum seeker (Ahmed Zaoui), they’ve introduced a draconian immigration bill. It contains such elements as indefinite detention, refoulement, refusal of access to the courts (and in some cases even a representative), extensive surveillance of citizens and other removals of rights. They’ve also passed a complement of “anti-terror” legislation, introduced a bill for seizure of assets without proof of guilt, and are generally sliding towards the United Kingdom on the human rights front.
A very good summary.
Mark, I’ve “cheated” on the Employment Contracts Act and its replacement, the Employment Relations Act, and searched on I/S’s blog, No Right Turn, which turned up this post [link]. The money quote:
Re-reading NRT, I was reminded of another of Labour’s significant achievements: over its time in office, it has increased the minimum wage significantly, from $7 per hour in 1999, to $12 per hour in 2008.
M-H, and others, here’s the Child Poverty Action Group’s account of the case it has taken to the Human Rights Commission, in respect of the In-Work payment / tax credit not being available to beneficiary families. [link]
Thanks, Deborah, that sounds sneakily like Australian Labor’s plan to *tear up* (sic) WorkChoices.
Many thanks for covering some of the things that I left out, Paul and George. Not deliberately so on my part – just losing track of everything that has happened in the last nine years.
Has Clark done a Steve Bracks at all – Bracks “locked in” a lot of his reforms either by requiring a three-fifths majority of both houses of parliament or a referendum to change them – I wonder if Clark has done the same
No, she hasn’t. So they are all vulnerable, except that most governments prefer not to open cans of worms again(civil unions, section 59), and they won’t make people worse off in nominal terms, so I suspect some form of Working for Families is here to stay.
excellent summary deborah. i’ll just make a minor quibble about working for families (incidentally, passed in the second term and implemented in the third, or at the end of the second): it is available to beneficiaries. the only bit that is not available to beneficiaries is the “in-work payment” of $60 per week ($3,120 per year), for which one of the parents has to be in paid employment for 20 hours a week to qualify. it is the in-work payment that the child poverty action group is taking action on, not the whole working for families. beneficiaries and part-time or casual workers still get the parental tax credit (i think $1,200 in full) and the family support tax credit ($3,744 for teenagers, $2,444 for younger kids in 2007, higher in 2008), which are also substantial amounts of money.
i just get really annoyed at language that makes it seems that children of beneficiaries get absolutely no government support because it’s simply not true. they don’t get as much support as those families where a parent works, but that work requirement of one person doing 20 hours a week is not excessive.
i do accept that there is a case that the in-work payment is discriminatory. it was designed to get people off the benefit and encourage people them into work, on the basis that paid employment materially increases financial well-being. the in-work payment affects solo-parents most of all, as they don’t have the luxury of another parent at home if they have to work.
and i accept the argument that working for families lets off employers by allowing them to pay a lower wage. but on the other hand, i do believe that if we’re going to have tax cuts, they should in the first instance go to those who need it most. working for families achieves this and directly targets child poverty.
so in short, not a perfect policy by a long shot. but still a pretty good one.
Has Clark done a Steve Bracks at all – Bracks “locked in” a lot of his reforms either by requiring a three-fifths majority of both houses of parliament or a referendum to change them – I wonder if Clark has done the same
Nope – not least because we don’t use such constitutional entrenchment here. The only example is a clause in the Electoral Act 1993, and even that can be repealed with a simple majority.
Nor do we have two houses of course (though select committees serve essentially same purpose even though they tend to follow the same proportionality of the parliament). Unicameral and unitary, not bicameral and federal. Most of the times I think it’s an advantage, the NZ system that is, for its simplicity though that’s not without risks as others will attest.
Paul: Unicameral and unitary works for our small country. But there’s more than one way to do it, and bicameralism is the obvious solution in federal states.
Thankyou very much, Deborah. That gives me a lot of background information to build on in discussions.
Kind regards,
BillB
Nice post (but a few possible counterpoints): a lot of the small-scale progressive stuff such as smoking bans is the sort of stuff that are kinda post-ideological these days, in the late 90s early 00s governments of all hues passed these things. The gorilla in the room (gosh that’s becoming a hackneyed phrase these days) with regards social welfare, families and domestic violence is the shocking state of affairs amongst poor islander and Maori families. It’s a bit like Australia’s aboriginal shame except it’s not so far away, not so out of sight out of mind.
I’m amazed by the (very poor) level of debate about superannuation and the modesty of KiwiSaver – all economic commentators in NZ are very familiar with Australia and know how well it’s worked here.
Sure, wilful. Smoking bans came from all over the spectrum, and a jolly good thing they are too. I have started to enjoy going to pubs again. Nevertheless, it was the Labour government that did it in NZ.
I agree about the gorilla, ‘tho.
Great summary! Thanks very much. In my view, a major achievement was showing great common sense and good judgment by NOT joining the invasion of Iraq.
This has been my own benchmark between Labour and National. National (Wayne Mapp and Simon Power) were quick to accuse Labour of costing NZ a possible FTA with the US by not joining the invasion.
Sixty seconds later, it dawned on most others that this amounted to National having a set of values operating that would allow them to whore the lives of Kiwi service personnel for better trade arrangements….and they quickly backed down.
But I can’t forget or forgive them their first impulse. Those people are still on National’s front bench. Ready to sell your life for an FTA.
Labour did not go into Iraq until after the US and UK acknowledged UN oversight in Iraq.
To me, this is was Labour’s greatest achievement between 1999 and today.
thanks for the summary Deborah, i tried having a few discussions re politics while in Godzone over the last three weeks, but nobody semed that interested.
It’s always a matter for significant debate and I can see both sides but I’m not a federalist having grown up in NZ and now living in the eastern states of Australia. That said, I’ve seen legislation rushed through in NZ that’d never get passed in Australia. Incidentally the Weekend Australian’s piece on the present power Victorians wield in Canberra certainly seems true to me… perhaps Rudd’s new federalism is already underway.