Sir Michael Cullen: Wellbeing at the core of balanced Budget

Grant Robertson certainly delivered the dollars for beneficiaries. Photo / Mark Mitchell

Opinion

OPINION:

The first thing that needs to be said about this, or any other Budget, is that they have long since ceased to be the be-all and end-all of politics. The parliamentary rituals remain the same but the context and significance do not.

There is still an expectation of major new policy initiatives as the central purpose of the Budget when in fact much of it consists of the mundane business of explaining how existing, or pre-announced, policies of the Government are going to be funded.

In that respect one of the best features of the Budget, from my perspective, was the reassertion of the central importance of Wellbeing as the core of a wide range of government activities.

The Wellbeing Framework, like so much else, was largely buried in 2020 in the concentration on dealing with Covid-19. On this the Government was outstandingly successful, while the economy has kept moving at a faster pace than anticipated, bar the two obvious sectors of international tourism and education.

But the reality, and costs, of Covid-19 still hang over us. $5 billion has been set aside as a contingency fund in the event of a further outbreak of the disease in New Zealand.

The challenge for Finance Minister Grant Robertson is to balance the immediate needs in that respect against the long-term imperatives of reducing poverty, making a real contribution on climate change and underpinning sustainable economic development.

However well he has achieved that, we can be sure the various interest groups will say it is not enough.

Grant Robertson certainly came up with the big dollars on benefits. Almost in her first sentence in her speech, National leader Judith Collins took the opportunity to sing the old National Party song on beneficiary bashing.

The fact is that almost everything that has happened over the last decade has borne most heavily on our poorest people, disproportionately Māori and Pasifika.

Whatever the reasons for that poverty, it is the children who suffer the most, thus helping to perpetuate the cycle of deprivation and alienation. There needs to be a whole range of supporting measures if we are to succeed in breaking this cycle.

It has to be said there is a real degree of bravery in these increases as middle New Zealand is not generally very sympathetic to beneficiaries. The increase in the allowable earnings for beneficiaries will probably be more warmly welcomed as it will encourage greater participation in the workforce.

The benefit increases will, however, be a direct stimulus to the economy. The reinstatement of the Training Incentive Allowance will also lift participation by beneficiaries in tertiary education.

Whatever the reasons for poverty, it is the children who suffer the most, thus helping to perpetuate the cycle of deprivation and alienation. Photo / 123RF

As always, education gets lots of money, especially for continuing to improve and add to our school building stock. Labour's real success in the education area is its remarkable shift of resources into trades and technical training.

Numbers here have already risen dramatically under this Government and the funding and additional measures taken in the Budget should see the upward trend continue. This is a major contribution to economic development, especially housing.

Overall, the private sector failed dismally in training apprentices and it has taken strong Government action to remedy the situation. To further ensure the pace of housing development picks up, the Government is putting $3.8b into a fund to support the provision of infrastructure for housing, investing in affordable homes and expanding the Land for Housing programme.

This will all help considerably in keeping the economy moving over the next four years.

The construction sector has been one of the main engines of growth over the last year and it looks set to continue in that role.

In total, the Budget commits $57.3b to infrastructure, by far the largest such commitment in our history. Spending on training and infrastructure are two of the best ways the Government can help business.

No doubt that will not stop some business leaders from complaining that they want more certainty from the Government, whatever that means. In the situation of the world as it currently is, any assertion of certainty would simply be a falsehood.

But it is good to see the CTU, BusinessNZ and the Government working on a social unemployment insurance scheme. Overseas experience is that such schemes help people who have lost their job remain connected with the workforce.

The Budget does provide direct support for business through such measures as a significant increase in funding for Industry Transformation Plans and a new digital training, advice and support service for small businesses.

Compared with some of the numbers above, the spend on climate change looks rather small — $300 million to accelerate investment in low-carbon technology plus about $150m on other projects may seem slim pickings to some environmentalists but they are dwarfed by another part of the package.

Consistent with recommendations of the Tax Working Group, it has been decided that the revenue from the Emissions Trading Scheme will be recycled into supporting emissions reductions. It is estimated that this could raise more than $3b of revenue over the next five years.

Already the primary attack on the Budget from the National Party is that expenditure should have been reduced so future debt levels could be lower than is projected. Net debt is forecast to be a little over 40 per cent of GDP. The current average for the rich nations club, the OECD, is about 100 per cent of GDP and climbing. Some economists believe the purse strings should have been loosened further to enable more investment.

But that would be risky given the very real risk of some increases in interest rates in the near future.

All in all, Grant Robertson has done a superb job of writing a Budget which balances present and future needs, begins to address our social inequities and provides a solid foundation for future sustainable growth. This the first part of a trilogy of Budgets in this term of Parliament. Roll on the other two!

- Sir Michael Cullen is a former Labour MP and Minister of Finance.