Question 16: Why do big business and the government want to cut welfare spending?

Big business wants to cut the costs of welfare for two reasons. Firstly, benefits above the barest minimum are seen as a barrier to lowering wages. The costs of welfare are also seen as a barrier to the government’s programme of cutting taxes on business and the rich. Cutting social welfare and cutting taxes for the rich usually go hand in hand.

In 1991 the then Minister of Social Welfare Jenny Shipley blamed “high” benefits for making it difficult to lower wages. Explaining her support for benefit cuts she claimed: “Benefit payments have been high enough compared to wages that for many people there has been little financial encouragement to take on paid work and employers have been unable to attract workers at rates that would maintain the viability of their business.” Commenting on what basis the benefit levels were decided she said: “Quite frankly, the research I rely on is the marketplace. If the marketplace cannot pay, there is no such thing as an arbitrary, isolated, adequacy level.”

The current government is also testing the water to impose time limits on benefits by forcing people to reapply after one year. Business Roundtable chairman Douglas Myers told the HR Nicholls Society in Melbourne in 1992: “The absence of any time-limit on the dole (following which people might be obliged to undertake training or qualify for restricted assistance) reduces the pressure on wages to adjust to competitive pressures.”

By targeting the most vulnerable the government hopes to get support for large scale cuts to basic welfare for everyone. They can then use those cuts to finance tax cuts for business and the rich. And they are happy to lie to achieve that goal. John Key claimed in February that the government would save $10 million over their lifetime if 100 sole parent beneficiaries were moved off benefits and into work. In March he upped the ante and claimed that getting 5 percent of DPB recipients (around 2150 sole parents) with a child over six off the benefit would save $200 million. This calculation assumed the full cost of DPB over another 6.5 years on the DPB. This number doesn’t actually match time usually spent on the DPB. What he also “forgot” is that nearly exactly the same amount would be spent or lost on Working For Families, In work Tax benefits, child care subsidies, payments from the other parent (which goes to the State) and the like if (as can be assumed) they work 20 or more hours a week. Working for Families alone would cost $170 million over the 6.5 years. That’s the way our benefit/wage/tax system is set up. The biggest disincentive to working is the 100% marginal tax rates for income earned by beneficiaries over $80 a week. The proposed increase in this level to $100 (for those on the DPB and invalids benefits only) will do very little remove the real disincentives that exist to working more hours while transitioning off a benefit. This $20 increase is the first increase in the limit in two decades!

People on unemployment and sickness benefits will still only be able to earn $80 a week before their benefits are reduced by 70 cents for every dollar they earn. Promising to allow beneficiaries to earn up to $100 a week before their benefit is affected was one of the only good parts of National’s pre-election policy and they have reneged on it. National’s 2008 Benefits Policy Backgrounder notes: “After paying tax on their extra income, and losing part of their benefit, beneficiaries can be in a position where they are losing up to 92 cents of every additional dollar they earn. This is a disincentive for people to work even a few hours a week.” The law change introduced by National will force sickness and unemployment beneficiaries to do exactly that.

As the economist Susan St John commented when releasing these calculations: “Reminiscent of the welfare attacks of the early 1990s, there is a disturbing lack of empathy for the hardship endured by the people who cannot work or who can only work part-time while on a benefit. Many are sole parents already carrying a huge load of caregiving work, others suffer ill-health that makes them unsuited to full-time or even any work. Then there are the alarming numbers of young people who are now pounding at the doors of tertiary institutes as the job market fails to absorb their growing numbers.”

The intrusive and punitive work test regime will set up a costly new layer of bureaucracy to police those forced onto benefits by an economic system that has failed to create enough jobs. Solo mothers on the domestic purposes benefit will be expected to work a minimum 15 hours a week if their child is over the six. For some reason Widows are exempt from this requirement even if they have no dependent children – probably reflecting the governments elitist concept of deserving and undeserving poor. If you husband drops dead you are “deserving” and won’t be work tested. If you are abandoned by a violent husband, or get pregnant outside of a good middle class family – you are “undeserving”. Sickness beneficiaries will also be assessed for part-time work and required to seek work if deemed able to work at least 15 hours a week. The package also offers case managers a new range of penalties, including cutting payments by 50 percent and suspension of payments in full. The requirement that sickness beneficiaries must present medical certificates at four, eight, thirteen and 52 weeks to verify their condition will impose considerable extra costs on everyone now on a sickness benefit, mindful that a full examination with blood tests can easily cost nearly $100 a time.

(Part of a series of extracts from “Exposing Right Wing Lies” by Mike Treen, Unite National Director)

Matt McCarten: Vector cheques powerful ploy just before the vote

Herald on Sunday 14/10/12

By Matt McCarten Email Matt

Voting papers have gone out to elect members of the AECT. Photo / Michael Craig

Evidence of what I regard as one of the country’s most dodgy pieces of electoral behaviour landed in Auckland isthmus and Manukau letterboxes this week.

The people behind this breathtaking cynicism were the five incumbents on what’s called the Auckland Energy Consumer Trust. Jenny Shipley, when Prime Minister, set it up after she abolished electricity boards. It owns $2 billion Vector power company shares. The trustees stand for election every three years. Their only job is to pay out Vector’s dividends.

The incumbent trustees are all up for re-election. And they have rigged the game. Two weeks before ballot papers were sent out they posted a cheque for $320 to every household where a voter lives. The cash handout came to $100 million.

Even more blatantly, they then ran a mass advertising campaign promoting themselves as the people responsible for this largesse. They got the trust to pick up the entire bill as part of $1 million spent on getting the grants out there.

When questioned, they said they were bound by the trust deed which dictated the timing of the payout and it was an unfortunate coincidence. Really?

That line fell over when the New Zealand Herald‘s David Fisher, a former chief reporter on this paper, exposed that the trustees themselves took a case to court so they could choose the timing of the payout. And they won that right.

I’m sure that had the judge realised the trustees intended to send cheques to voters just days before they voted there would have been a different decision.

If you are curious why the incumbents would go so to such lengths to protect their jobs you need to understand that all these trustees have been on a cushy number for six or nine years. They collect $63,000 to $90,000 a year to attend the occasional meeting. This year’s annual report was two pages long – twice as long as their previous report.

With all this extra time on their hands two of them get to appoint themselves to the Vector board to pick up another $100,000. Not a bad earner for a part-time job.

They’ve manipulated the system to keep their place at the trough by in effect getting the trust to pay for their election campaign. They send money to the electors just before the vote and then have the trust promote them as the givers. No challenger can beat that.

The cost of a campaign to 300,000 households is prohibitive. For example, both John Banks and Len Brown each had to stump up with close to $1 million for their mayoral campaigns. All the political parties, except National, raised less than $1 million for their national campaigns at the last election.

Could you imagine, two weeks before election day, John Key (or Helen Clark in 2008) sending a cheque to every voter from the public purse and then taking out taxpayer-funded full-page advertisements giving themselves and their party the credit?

That’s what the politicians on the Auckland Energy Consumer Trust have done. Even the most ethically challenged politician would blush at the antics of the incumbents. They smugly assume they’ll get away with it because most of us wouldn’t have a clue how they’ve manipulated us.

When we got an unexpected cheque two weeks ago we would have been pleasantly surprised. We’d vaguely note the faces and names of the people who gave it to us. And low and behold a few days later we get a ballot with the same five people asking us for our vote so they can keep giving us money.

Only one in eight people voted last time. On this basis, the incumbents will be expecting to romp home. This is where you come in. In the ballot you will see just 12 candidates. It’s a straight contest between the incumbents, under the banner Communities and Residents, and the challengers, the Your Power Team.

Whoever wins, you’ll still get a cheque in the future.

If you haven’t yet received voting papers, contact the returning office on 0800 922 822. This isn’t about partisan politics.

Sometimes as citizens we must stand on principle. This is one of those times.

Vote all the incumbents out.

By Matt McCarten Email Matt

Question 15: Why do big business and the government want to cut welfare spending?

Big business wants to cut the costs of welfare for two reasons. Firstly, benefits above the barest minimum are seen as a barrier to lowering wages. The costs of welfare are also seen as a barrier to the government’s programme of cutting taxes on business and the rich. Cutting social welfare and cutting taxes for the rich usually go hand in hand.

Protests against benefit cuts in 2012 that echo those of the early 1990s

In 1991 the then Minister of Social Welfare Jenny Shipley blamed “high” benefits for making it difficult to lower wages. Explaining her support for benefit cuts she claimed: “Benefit payments have been high enough compared to wages that for many people there has been little financial encouragement to take on paid work and employers have been unable to attract workers at rates that would maintain the viability of their business.” Commenting on what basis the benefit levels were decided she said: “Quite frankly, the research I rely on is the marketplace. If the marketplace cannot pay, there is no such thing as an arbitrary, isolated, adequacy level.”

The current government is also testing the water to impose time limits on benefits by forcing people to reapply after one year. Business Roundtable chairman Douglas Myers told the HR Nicholls Society in Melbourne in 1992: “The absence of any time-limit on the dole (following which people might be obliged to undertake training or qualify for restricted assistance) reduces the pressure on wages to adjust to competitive pressures.”

By targeting the most vulnerable the government hopes to get support for large scale cuts to basic welfare for everyone. They can then use those cuts to finance tax cuts for business and the rich. And they are happy to lie to achieve that goal. John Key claimed in February 2010 that the government would save $10 million over their lifetime if 100 sole parent beneficiaries were moved off benefits and into work. In March 2010 he upped the ante and claimed that getting 5 percent of DPB recipients (around 2150 sole parents) with a child over six off the benefit would save $200 million. This calculation assumed the full cost of DPB over another 6.5 years on the DPB. This number doesn’t actually match time usually spent on the DPB. What he also “forgot” is that nearly exactly the same amount would be spent or lost on Working For Families, In work Tax benefits, child care subsidies, payments from the other parent (which goes to the State) and the like if (as can be assumed) they work 20 or more hours a week. Working for Families alone would cost $170 million over the 6.5 years. That’s the way our benefit/wage/tax system is set up. The biggest disincentive to working is the 100% marginal tax rates for income earned by beneficiaries over $80 a week. The proposed increase in this level to $100 (for those on the DPB and invalids benefits only) will do very little remove the real disincentives that exist to working more hours while transitioning off a benefit. This $20 increase is the first increase in the limit in two decades!

People on unemployment and sickness benefits will still only be able to earn $80 a week before their benefits are reduced by 70 cents for every dollar they earn. Promising to allow beneficiaries to earn up to $100 a week before their benefit is affected was one of the only good parts of National’s pre-election policy and they have reneged on it. National’s 2008 Benefits Policy Backgrounder notes: “After paying tax on their extra income, and losing part of their benefit, beneficiaries can be in a position where they are losing up to 92 cents of every additional dollar they earn. This is a disincentive for people to work even a few hours a week.” The law change introduced by National will force sickness and unemployment beneficiaries to do exactly that.

As the economist Susan St John commented when releasing these calculations: “Reminiscent of the welfare attacks of the early 1990s, there is a disturbing lack of empathy for the hardship endured by the people who cannot work or who can only work part-time while on a benefit. Many are sole parents already carrying a huge load of caregiving work, others suffer ill-health that makes them unsuited to full-time or even any work. Then there are the alarming numbers of young people who are now pounding at the doors of tertiary institutes as the job market fails to absorb their growing numbers.”

The intrusive and punitive work test regime will set up a costly new layer of bureaucracy to police those forced onto benefits by an economic system that has failed to create enough jobs. Solo mothers on the domestic purposes benefit will be expected to work a minimum 15 hours a week if their child is over the six. For some reason Widows are exempt from this requirement even if they have no dependent children – probably reflecting the governments elitist concept of deserving and undeserving poor. If you husband drops dead you are “deserving” and won’t be work tested. If you are abandoned by a violent husband, or get pregnant outside of a good middle class family – you are “undeserving”. Sickness beneficiaries will also be assessed for part-time work and required to seek work if deemed able to work at least 15 hours a week. The package also offers case managers a new range of penalties, including cutting payments by 50 percent and suspension of payments in full. The requirement that sickness beneficiaries must present medical certificates at four, eight, thirteen and 52 weeks to verify their condition will impose considerable extra costs on everyone now on a sickness benefit, mindful that a full examination with blood tests can easily cost nearly $100 a time.

(Part of a series of extracts from “Exposing Right Wing Lies” by Mike Treen, Unite National Director)

Question 12: How did the government justify the 1991 benefit cuts? What did the government say about welfare recipients then?

Beneficiaries were demonized to blame the victim not the system for rising unemployment and more people being forced onto some type of benefit to survive. The very existence of the welfare state came under attack.

In the 1990s the then National Social Welfare Minister and later Prime Minister Jenifer Shipley sought to justify benefit cuts by demonising the benefit recipient and blaming them for society’s social ills. In 1992 she wrote: “the welfare state itself through its mechanisms, produces young illiterates, juvenile delinquents, alcoholics, substance abusers, drug addicts, and rejected people at an accelerating speed.” She counterposed “rampant welfarism” to “individual initiative and effort.” In 1996 even the then head of the Social Welfare Department Margaret Bazley linked sole parenting to “at risk” children.

This became a common right-wing theme at the time but was completely without any factual basis. Bazley’s own department’s research found little evidence that being on welfare was causal of problems for children. Only 6 percent of beneficiaries’ children come to the Child Youth and Families Service notice. The report concluded: “The results thus provide no support for stereo-typed notions of the children of beneficiaries as being highly likely to come to the attention of the CYFS. Indeed, the results establish that only a small minority of these children come to notice.”

But facts did not deter Bazley and her ilk. The very title of the “Beyond Dependency” conference organised by the Social Welfare Department in 1997 was designed to promote the view that receiving a benefit was some chosen addiction rather than a necessary safety net to protect working people in the face of a ruthless restructuring and rationalisation of business at the expense of our wages and jobs. It aimed to blame the victim not the system which has destroyed so many jobs. Margaret Bazley’s contemptuous attitude to the “clients” she supposedly served came through in a revealing interview with her at the time by Gordon Campbell in The Listener. Campbell asked Bazley if welfare “dependency” was caused by the mindset of the poor – or had the numbers risen because economic change has wiped out thousands of low-skilled manufacturing jobs? “Do you think that’s it?” she replied. “I don’t see it that way. I think that what we are dealing with is the evils of the welfare state.” Just like what happened in Russia, she continued, after several generations of communism. Indifference among those who could help, apathy among the downtrodden. “We’re seeing the same thing here, with the welfare state.”

At the “Beyond Dependency” conference Blazey said 25 percent of children in New Zealand have no parent in paid work, with the figure for Maori children 48 percent and for Pacific Island children 45 percent. This she claimed is causing an intergenerational dependency problem, so now “we have got children whose only fantasy, whose only dream, is life on a benefit.” The focus, she said, had to be on “the people who have lost their living skills, they’re living in a chaotic state. They don’t go to bed at a decent time, they don’t get up in the morning, they don’t get their kids to school, they don’t feed them, they don’t give them lunch so those kids are doomed to that same lifestyle.” Bazely denied there was a problem of a lack of jobs. “I think the reason that they are not in jobs is not because the jobs aren’t there. It’s because other people are more attractive to employers.” A hint of what Bazley has in mind for beneficiaries was given by those she invited to speak at the conference, including Jean Rogers, representative of the US state of Wisconsin which cuts off benefits for mothers after 12 weeks – before they have finished breast-feeding!

It is doubtful if the National politicians actually believed their own propaganda. They knew they couldn’t create the necessary jobs, or make them secure enough, to eliminate unemployment. In fact the free market system they are so attached to needs unemployment to police the employed. North and South magazine reported in an election special for the 1999 election that “In a candid, if callous, interview for a recent Canadian television documentary on New Zealand’s reforms, Jenny Shipley told interviewer Eric Malling that taxpayers might have to carry the present group of unskilled beneficiaries forever. Malling was incredulous and asked if that meant those people were being written off. Shipley replied: ‘You can’t change what you can’t change, and I think that politicians and the community need to be honest about that. They have had their jobs destroyed, not by governments but by modernisation, by computer technology, by many of the things that have happened in agriculture in New Zealand. And so we must carry them.’ She did pledge that the government would try to save the next generation.”

Similar completely spurious arguments are being raised today by defenders of lower minimum wages. Business Round Table Chief Executive Roger Kerr quotes Professor Judith Sloan (a “labour economist” and member of the Don Brash-led 2025 Task Force which recommended a cut in the minimum wage for younger people) who wrote: “The causes of unemployment are well understood with labour market inflexibilities and perverse welfare incentives being the main culprits.” Kerr then adds in brackets “A growing economy helps, but is a less important factor”. Kerr then adds: “Sloan noted that labour and welfare policies can be changed ‘unemployment is essentially a political choice.’”

National’s Social Welfare Minister Paula Bennet has resurrected this approach to beneficiaries today. She has appointed a “Welfare Working Group” to advise her on changes to the system. It has former Act president Catherine Isaac on it – who is coincidentally also the wife of Roger Kerr. As Gordon Campbell also notes in his Scoop article: “What also seems extraordinary is that some members of the working group – eg Adrian Roberts and Enid Ratahi Pryor – are also current contractors with Social Welfare. As such, they are involved in business relationships with the same state welfare system whose rules they are being asked to evaluate, with a view to change. How can they help to devise solutions to welfare dependency without being seen to be generating more business for their own enterprises? Answer: they can’t.” One of the two “scientific” advisors appointed to the panel is Peter Saunders a former Director at the right wing Centre for Independent Studies think tank in Sydney. Campbell checked him out and concludes:

“Saunders, if I can put this succinctly, is a nut job. He writes fiction as well as right wing opinion pieces for the press in Australia and Britain, even though it can be hard to tell the difference. Let’s start with the opinion columns. In 1994, in his review of Charles Murray’s notorious book The Bell Curve on the alleged links between race and intelligence, Saunders concluded that social class, not race, was the real determinant of IQ: ‘Britain looks surprisingly like a society divided into classes on the basis of talent.[!] The pattern of social mobility is broadly consistent with what should happen in a perfectly open society with recruitment based solely on intelligence.’ The working class, in other words, are innately more stupid. No wonder more of them end up on welfare. Especially the sole parents.

“In this Sydney Morning Herald article published last year, Saunders gave passing mention to changes in sexual morality and family norms, before quickly moving on to finger the real culprit for the rise in solo parenting : the welfare system itself. ‘By making sole parenthood more financially viable, [former Australian Prime Minister
Gough] Whitlam inevitably also made it more socially acceptable, even attractive, as a lifestyle choice. Today, single parenthood has become “normal”, and a key reason for this is that the welfare state supports, enables and endorses it. In this, as in other areas of welfare, when government pays money to people in need, it inevitably increases the number of needy people. This is the central paradox of the modern welfare state, and it helps to explain why the numbers have risen so dramatically.’

“I’ll spare you the nostalgic praise for Margaret Thatcher, for whom a smitten Mr Saunders continues to hold a serious torch. For an even better sense of this expert that Paula Bennett is urging her working group to consult, we should turn to a novel called The Versailles Memorandum, that Saunders published late last year. To put it kindly, the book is a mélange of right wing paranoia, and Islamophobia. It describes itself this way in its publishing blurb: ‘The year is 2046. Across the United States of Europe, millions live under Sharia law in Special Islamic Zones. Four European cities have been contaminated by radioactivity from dirty bombs. In the Middle East, Israel has been incinerated by nuclear war. In the East London Special Islamic Zone, Aisha Sharizi is on the run from the religious police after having an affair with a kuffar boy. In Sydney, the body of a former cabinet minister is fished out of the harbour…’ etc etc According to an admiring reviewer on Amazon.com, the book is “as important as Ayn Rand’s Atlas Shrugged in its warning of the fate that awaits us if we do not act to fight the tide of liberal-left thinking…”

(Part of a series of extracts from “Exposing Right Wing Lies” by Mike Treen, Unite National Director)