Smart politics help the poor

OPINION: The Government's coronavirus response package is perfectly pitched politics – but also does the right thing.

Disease crises tend to hit the poor hardest. They are the most likely to get sick, the least able to afford doctor's fees, and the least able to deal with work suddenly drying up. And their numbers are about to be boosted, as the coming recession pushes more people onto benefits.

So it's absolutely right that the Government is spending $2.4 billion helping the poorest as part of its overall $12.1b package. Main benefits will increase by $25 a week, a massive boost for those managing on dole payments currently worth just $220. The Winter Energy Payment, which goes to many beneficiaries including pensioners, will be doubled.

And it will become slightly easier for families to get the $72.50 in-work tax credit, as long as they are not on a benefit. Previously they would have had to be working 30 hours every single week to qualify; that requirement has been waived.

This injection of cash will help stressed households cope with the coming crisis. It is also smart economics. Whereas wealthier people might just save the extra money, poor households will spend it all, if only because they have no choice.

So the economic stimulus will be significant, while targeting those most in need. Rightly, ministers have resisted the calls for untargeted tax cuts. Even cutting the lowest tax rate would have benefited CEOs by the same dollar amount as cleaners. This is a much better way to put money in people's pockets.

It is also the sort of thing that campaigners like the Child Poverty Action Group have been urging Jacinda Ardern to do ever since she took office.

The moves may not go as far as many would like. But it's striking that they are permanent, except for the doubling of the Winter Energy Payment. If they were strictly designed to address the current crisis, they would only be temporary.

In short, the Government is using two kinds of political cover to make changes it has long desired but never had the guts to actually implement. (Ministers may say the changes would have come in May's Budget regardless, but that's an unprovable assertion – and, in any case, they have already had two and a half years to act.)

The first cover is, of course, the excuse of a pandemic-induced crisis. One Twitter user jokingly labelled it "disaster socialism", in contrast to the "disaster capitalism" in which emergencies are supposedly used as an excuse to implement Right-wing policies.

The second, slightly less obvious, form of political cover is the package's broad-spectrum approach. 

It is often unpopular to help the poor without also doing something for squeezed middle-class families who feel they are struggling more than anyone. But the Government's package saves its most powerful stimulus for those people, broadly speaking. 

It is the small businesses and self-employed contractors, those mainstays of middle New Zealand, who will benefit most from the unprecedented $12.1b injection, in particular its wage subsidies and extended sick-leave provisions. Relieved by this recovery package and the promise of more to come if needed, middle New Zealanders are far less likely than usual to object to these benefit increases.

It's sad that a centre-left government has to wait for an emergency to deliver the change it promised. But better late than never, as they say. And as late as this has come, it has been delivered expertly, with substance and spin in perfect accord.

Max Rashbrooke is the author of Government for the Public Good (BWB 2018).

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