The Labour-Greens cooperation agreement having been signed, and ministerial portfolios allocated, what progress can we expect in the next three years towards greater economic equality and deeper democracy in New Zealand?
Greater economic equality
Verdict: Small steps towards dealing with one half of the problem
Labour has a free hand to implement the promises in its manifesto, many of which are sensible but unlikely to make a large dent in the problem of a wide disparity between rich and poor. Bear in mind that income inequality rose more rapidly 1985-2005 than anywhere else in the developed world, and we have stagnated at the resulting level ever since. Rewards go disproportionately towards the already wealthy, leaving many in poverty with their talents squandered and health and social problems on the rise.
Labour will address the poorer end of this problem in various ways:
- Beneficiaries will be able to earn significantly more before their benefits are clawed back;
- Fair pay agreements will allow workers who have won good terms with one employer to have those conditions spread throughout their industry;
- The minimum wage will continue its rise towards $20 an hour;
- Some 200,000 children will get free school lunches; and
- Another 8000 state houses will be built.
For this work, key ministers will include Carmel Sepuloni (welfare, employment and ACC), the Greens’ Marama Davidson (homelessness), Poto Williams (public housing), and Michael Wood (workplace relations). Prime Minister Jacinda Ardern retains responsibility for child poverty reduction.
Hitting her child poverty targets, however, will be demanding, given the impact of coronavirus. And the principal drivers of poverty will not be substantially addressed. In the last 40 years, the share of company revenue going to staff has fallen from 60% to 50%, leading to the average wage being $12,000 lower than it would have been. Fair pay agreements will not make much of a dent in this. On the welfare front, benefits need to rise by nearly 50% to genuinely lift people out of poverty and ensure lives of dignity, according to the Welfare Expert Advisory Group. While the Labour manifesto promises to prioritise “increasing income support”, it contains no specific undertakings. And while new state houses are welcome, the amount promised is only half the current waiting list.
Moreover, these policies are all aimed at the poorer end of the spectrum, even though action on economic inequality is needed at the wealthier end as well:
- A lack of competition in many sectors of the New Zealand economy drives super-profits towards a small number of firms at the expense of the general public;
- Chief executive pay, principally in the private sector but also to some extent in government, is far higher than is justified;
- IRD research suggests many of New Zealand’s wealthiest individuals pay very little tax; and
- More generally, the system is unsustainably weighted towards taxing income while leaving wealth virtually untaxed.
Famously, however, Ardern has ruled out any kind of wealth or capital gains tax during her political lifetime, while Finance Minister Grant Robertson made clear there would be no new taxes of any kind in this Parliament. Apart from a new 39% rate on income above $180,000, very little will be done to address unjustified inequality at the wealthier end of the spectrum. David Parker, the new Minister for Revenue, will have to see what he can do to generate greater fairness and revenue from the existing system.
Verdict: Bold subjects but little clarity
With relatively little fanfare, Labour has announced that it will examine some major weaknesses in our democratic system. Its cooperation agreement with the Greens notes that it plans to address:
- the Electoral Commission’s 2012 recommended changes to MMP, which crucially include:
- lowering the threshold to 4%; and
- ending the coat-tailing rule;
- electoral finance law, which involves reassessing donations rules that allow the wealthy excess influence over politics with minimal scrutiny; and
- the length of the Parliamentary term, which could be extended to four years.
(NB: While the government may also make some slight progress on greater autonomy for Māori, this element of improving democratic systems merits its own separate discussion.) But while these are big issues to take on, there is no clarity as to what Labour will actually do, and some of the proposed changes, notably the Parliamentary term, would almost certainly have to go to a referendum. In addition, the review of electoral finance law will be part of a wider review of the Electoral Act, initiated by the previous justice minister, Andrew Little, who has moved to health. His replacement, Kris Faafoi, has not made profound change in any of his previous portfolios, including commerce, though he is widely regarded as one of the Cabinet’s most surefooted performers. He will presumably also have responsibility for the reform of the Official Information Act that was previously in Little’s bailiwick.
Beyond these headline areas, Chris Hipkins, who remains Minister for Public Services, will have the opportunity to continue his open government reforms of the previous term, which included publishing ministerial diaries and Cabinet papers. How far he will go, and how substantive will be New Zealand’s next Open Government Partnership action plan, remain unanswered questions. A wide range of democratic innovations being taken up overseas – including citizens’ assemblies, participatory budgeting and crowdsourcing legislation – still struggle to get on the agenda here.
Other developments of note include the return to Cabinet of David Clark, now responsible for both commerce and “the digital economy and communications”. Again, it is not clear how much progress to expect here.