Good evening ladies and gentlemen. It is a pleasure to return to Orewa.
As most of you know, I came into politics after a career in business and central banking. I did so because it is clear that this country will not provide future generations the opportunities which my generation has enjoyed unless we confront some fundamental challenges.
The Labour Government is not up to those challenges. It will create more committees, institute reviews, develop plans, establish boards, expand regulation, and maintain an expensive Beehive spin machine.
But it will duck the hard issues.
Only a National Government has the determination to make the changes that are needed.
For many generations, New Zealand has been a real land of opportunity. We need to face the fact that it will cease to be that for our children and grandchildren unless we make changes. The proof of that proposition lies in the increasing number of our citizens who vote with their feet every year, and leave this country for good.
A year ago, I set out five basic building blocks if we are to make this a land of opportunity for the coming generations.
Last year, here at Orewa, I outlined my attitude to Treaty issues. I argued that government funding for education and healthcare should be based on need not on race; that separate Maori electorates, set up in 1867 as a temporary measure for five years, should finally be abolished; that the Crown should own the foreshore and the seabed; that Maori New Zealanders should have the same rights – no more and no less – as other New Zealanders under the Resource Management Act and the Local Government Act; that we should do away with vague and undefined references to the principles of the Treaty of Waitangi in legislation and government documents; that we should accelerate the resolution of claims under the Treaty of Waitangi, and ensure that all claims are resolved, fairly, fully, and finally.
With a will, and the right government in place, all of this can be achieved, with Treaty settlements completed by 2010. National is committed to that goal.
Six months ago, I dealt with the second of these building blocks, our law and order policy. I made it clear that we would abolish parole for all repeat and violent offenders so that rapists and murderers, among others, are kept behind bars for their full court-imposed sentence. I made it clear that we would increase police numbers, require DNA testing for all people convicted of a crime, and amend the Proceeds of Crime Act to target organised crime more effectively. I've also made it clear that we would block Labour's plans to pay compensation to some of our most vicious criminals for their "hurt feelings".
Entrenched welfare dependency
Today, I want to deal with a third key element that is holding New Zealand back – entrenched welfare dependency.
Some of you might think it a little strange that I should identify welfare as one of the critical problems at this time when the official unemployment rate is low. Businesses large and small are screaming out for staff – skilled, semi-skilled, and unskilled. Nurses, teachers, plumbers, truck-drivers, policemen, orchard workers – almost every type of worker is needed. The media is full of stories about asparagus growers having to plough in their crops because they can't find people to pick them, and orchardists having fruit rot on their trees for the same reason.
What this economic buoyancy has done, however, is to lay bare the reality of a welfare system which is no longer about providing a hand-up in times of adversity. We now have a deeply entrenched problem which has little to do with the availability of jobs and everything to do with systemic, structural, problems within the welfare system.
If ever there was a time when beneficiary numbers should have fallen to record lows, it is now. Instead, we have over 300,000 working-age adults on benefits, about 15 per cent of the workforce (see note 1). Around 109,000 are on the DPB, around 79,000 on the Unemployment Benefit, and some 119,000 on the Invalids' and Sickness Benefits. Add in the children of these adults and we are talking about more than the equivalent of Christchurch and Dunedin combined – the combined population of two of our largest cities, on welfare, at a time of a booming economy. The latest fiscal projections show that the numbers are projected to increase by a further 18,000 within three years.
Something has gone seriously wrong with our benefit system, and Helen Clark and the Labour Party have no idea how to fix it.
We need to remind ourselves that this country was pioneered by people of enterprise, some who crossed the Pacific in small craft, others who much later travelled half way round the globe to carve out a land of opportunity. They would be aghast if they could see what has happened to the attitudes of personal responsibility, self-reliance, and independence which have been the essence of the Kiwi character.
Six decades and many policy changes after the creation of social welfare, we have obscured and de-personalised the essential nature of the transaction which is occurring. We need to remind ourselves that welfare benefits – the Unemployment Benefit, Sickness, Invalids' and Domestic Purposes Benefit – are funded from the taxes levied on those who go out to work each day, including the tens of thousands of New Zealanders who work overtime or take second jobs on very modest incomes, and who find themselves little or no better off than their beneficiary neighbour or relative as a consequence. These are New Zealanders who are trying to do the right thing, by themselves, by their families, and by other taxpayers. For them, this transfer of income to fund welfare takes place at a huge cost to their ability to save, to educate their children, to buy their own home. These are the New Zealanders Helen Clark has forgotten.
The financial cost of the four main benefits, and the various income supplements which go with them – most of which go to those on benefits – amounts to over $5 billion a year, or about $14 million a day. That amounts to about $2,500 a year for every single member of the workforce.
But it is not the impact of welfare on our budget numbers that hurts us most as a community. It is what it is doing to our culture: we are sending absolutely the wrong signal to the next generation about what is needed to get ahead in life.
These perverse welfare incentives operate in parallel with those of our tax system, as I outlined in a major speech last month. Our tax system punishes enterprise and hard work, while the welfare system encourages a set of attitudes which are utterly destructive of self-reliance and self-confidence. National will fix the disincentives in the tax system by giving tax cuts to all working New Zealanders. We are now focusing on correcting the incentives in the welfare system.
Why should Kiwi families battling to get ahead in life, working hard and coping with the pressures of raising a family and paying off the mortgage, all at their own expense, have to support numerous people who are not making a similar effort, or who have substantially contributed to the unenviable situation they find themselves in?
Why should pensioners who have worked hard throughout their working lives, and who often know what real hardship means, be taxed to fund those unwilling to make similar sacrifices to get ahead in life?
What has happened to personal responsibility?
The National Party recognises only too well that being dependent on support from taxpayers is the last thing that most people want for their lives. Dependency saps self-esteem and morale. Most people want to be self-reliant and independent, not stuck on a benefit and financially dependent on friends and neighbours.
We know, too, that many beneficiaries are great parents, overcoming real problems in their past, devoting themselves to their children, and working in the community. We will do everything we can to encourage them.
But we also know that the welfare system is destroying many lives. How can we tolerate a welfare system which allows children to grow up in a household where the parents are permanently dependent on a welfare benefit? Our welfare system is contributing to the creation of a generation of children condemned to a lifetime of deprivation, with limited education, without life skills, and without the most precious inheritance from their parents, a sense of ambition or aspiration. Nothing can be more destructive of self-esteem.
Clearly, over the last 30 years, an entrenched welfare culture has been allowed to emerge in this country, all too often accompanied by crime and family violence.
It wasn't supposed to be like this.
Alas, successive governments, usually with the very best of intentions, have created a system where many people face all the wrong incentives and can subsist on a state handout more or less indefinitely. We over-regulate the employment relationship, making employers wary of hiring more staff; we make it very costly to dismiss unsatisfactory staff; we make it too easy for people to shift to the Sickness Benefit, where there is no obligation to look for work (see note 2); and our tax and benefit system often makes it financially scarcely worthwhile to get off a benefit and into a job (see note 3).
Attitudes
But there is something more involved than the specifics of government policy. And I believe that that something is a profound change in attitude towards the benefit system. At its core, the current extent of welfare dependency is the fruit of some well intentioned but essentially naïve thinking. The truth is that if you offer people a free lunch, even a not very big free lunch, and you make it available every day for the rest of their lives, there will always be some who will take it.
The first Labour Prime Minister, Michael Joseph Savage, was a fiscal and moral conservative who, like me, saw welfare as a temporary hand-up not an open-ended handout. He saw all too clearly how open-ended welfare would dramatically undermine the incentives people have to work.
Early Maori leaders such as Sir Apirana Ngata were especially worried about the effect of such welfare on Maori New Zealanders. And his concerns have been amply justified.
Over the last 30 years, an indefinite state handout has come to be seen by far too many as a birthright. We are developing a culture where, when people leave a relationship, too many take it for granted that the first port of call is not their own savings or their family but the WINZ office; on leaving a job, many don't look for another but simply head for the WINZ office. If WINZ wants them to look for work, too many make a bee-line for the doctor and use stand-over tactics so they can head back to the WINZ office with a certificate (see note 4). And once they have the certificate they get put onto a Sickness Benefit where no search for work is required.
Ripping off the system just seems to be taken for granted by too many people, and the majority with more traditional attitudes to self-reliance end up paying for it all.
We see many hard luck stories in the media about people who have no jobs, poor living conditions and many children. Yet our journalists rarely ask the hard questions that must be asked: how did you get into this situation, how much of it were you responsible for, and how much was bad luck?
Not having a job in today's buoyant economy is not an excuse; having many more children than you can afford to raise is not bad luck.
It amazes me that, as a society, we're quite happy to force people to pay taxes but seem reluctant to ask questions about people who put themselves in the situation of living off the rest of the community. That is surely the most destructive aspect of the political correctness that Labour would engulf us in.
We have seen situations where WINZ will not even ask unemployed people whether they can read and write. How on earth can we help people if we cannot get this sort of information? An absolute minimum would be to do an audit of the literacy and numeracy of those seeking the dole.
National's approach
So what will the next National Government do about this situation?
First, let me make it absolutely clear that the National Party believes that some people in our community are entitled to indefinite taxpayer support.
It should go without saying that that group includes those 65 years of age and over who are in receipt of New Zealand Superannuation – superannuation is not part of the welfare system. The next National Government will maintain Superannuation unchanged.
Let it also be clearly understood that the next National Government will of course provide indefinite support to all those who are physically or mentally unable to support themselves.
But commonsense suggests that something is not quite right.
Since 1975, a period over which New Zealand's population has increased by some 32 per cent, those on the Sickness Benefit have increased by almost 500 per cent, while those on the Invalids' Benefit have increased by almost 700 per cent.
Since 1999, New Zealand's population has increased by 6 per cent, while those on both the Sickness Benefit and the Invalids' Benefit have increased by 40 per cent.
There has been a huge increase in government spending on health over the same period, and no obvious epidemic, war, or other cataclysmic event which might explain the very sharp increase in the number of those on these two benefits.
The number of times that media report that those up before the courts for some violent offence are on the Sickness Benefit, or even the Invalids' Benefit, makes me suspicious that at least some of those on these benefits could be making some contribution to their own support.
The next National Government will therefore want to confirm that those who are receiving the Sickness and Invalids' Benefits are in fact unable to contribute to their own support, and will implement a more thorough medical evaluation process for both benefits. In particular, the next National Government will work with doctors' groups to ensure consistency in the way those applying for Sickness and Invalids' Benefits are evaluated.
But what about those on the Unemployment Benefit?
The fundamental question is this: should those receiving the Unemployment Benefit be required to attend job schemes, take part in community service work, or retraining?
I say the answer must be yes.
The Labour Party pretends to agree, but puts little pressure on beneficiaries to take available employment.
There must be some mutual obligation in this: the community will help you when you need help, but you have a responsibility to make an effort to make yourself employable, or to give something back to the community by way of work.
While indefinite taxpayer support is clearly warranted for those who cannot ever be expected to support themselves, for others in receipt of a benefit that benefit should be seen as strictly temporary. There can surely be no justification at all for the average wage earner – somebody who gets up at the crack of dawn each day to get to work on time and works hard till late in the day – paying to provide indefinite support for able-bodied, working age adults. That must stop – for the sake of the long-suffering taxpayer and for the sake of the beneficiaries themselves.
To reduce those dependent on the Unemployment Benefit, the next National Government will take two steps which will have the effect both of increasing the incentive for those on that benefit to take employment and of reducing the risk to employers in hiring them.
- First, after a period allowed for job search, ongoing taxpayer support (at the level of the Unemployment Benefit) will be conditional on the unemployed person undertaking some form of community work or approved training (see note 5).
- Second, to reduce the risk to employers of taking on a person who could be perceived as "risky", we will introduce a 90-day trial period during which the parties can agree that employment can be ended without penalty (see note 6).
These moves would have three objectives. First, they would cause the people who are taking advantage of the weakness of the current system to move off the Unemployment Benefit and actively pursue a job. Secondly, they would give some dignity to those long-term unemployed who have limited skills and who have real difficulty in finding regular employment. And thirdly, and in many ways most important, they would break the cycle of intergenerational dependency by ensuring that children grow up in households where their parents are contributing to the community in some way.
Reforming the Domestic Purposes Benefit is clearly the most difficult issue to deal with because there are children involved. Nobody, and certainly not the National Party, wants to make children suffer for the mistakes of their parents. Nor does anybody want to see people trapped in violent and abusive relationships. One of the big arguments advanced for the DPB in the early seventies was that it would enable women and children to escape from violent situations.
