Editorial: Goff on right track despite dole gaffe

At the end of a bad week for Labour leader Phil Goff, he may be wondering today where he went wrong. He had found, he thought, the ideal example of a couple cruelly penalised by the denial of the dole to one partner if the other is still earning an income, a policy Labour proposes to change. The couple might have been a good example had they not turned out to own two rental houses as well as their Helensville lifestyle block.

Mr Goff did not think the extra properties worth mentioning because they were not returning a profit and asset wealth is not part of the means test for the dole. Strictly speaking, he was right. But in a more important sense he was wrong.

Policy makers in Wellington might consider it right to take no account of such assets when someone applies for an unemployment benefit. Outside the inner circles of government, people instinctively disagree.

Mr Goff was thinking "inside the beltway", as they say in Washington DC when they want to warn their inner circle that its view is at variance with the rest of the country. A politician of Mr Goff's experience will be aware of it. But he has suffered enough in Parliament this week. It is time to consider the underlying issue.

Beltway policies are not always wrong no matter how much wider sentiment disagrees. It would seem unfair to deny the dole to somebody whose wealth is tied up in rental property that cannot cover its mortgage and cannot readily be sold for its purchased value at a time like this. But nor should assets be entirely ignored when the owner makes a claim on the taxpayer.

A sound economy requires every working-age citizen to be self supporting if at all possible. And it cannot make exceptions for people simply because they have been paying taxes for a long time, an argument heard this week.

Taxation is not income insurance or a down-payment on national superannuation as many in previous generations imagined. Taxation most of the time barely covers the cost of current state services. If it carried a claim on social welfare non-taxpayers would have no entitlements.

People with investment property who lose their income in the current recession can be given cash support without losing sight of their asset wealth. One way of doing so would be to enable them to borrow from the state against their property. They could draw the dole in the form of a loan that could be repaid when the property market recovers, or when they are again earning a good income.

In many cases, especially where a partner is still bringing in a weekly wage, the couple might decide they can get through the recession without giving the state a claim on their investments. Support would probably be sought only when vitally needed.

Labour is showing policy initiative that is rare for a party in opposition at this early stage of the electoral cycle and is to be welcomed. But if it wants to help working couples when one earner loses a job, it would do better to embrace a loan scheme or introduce the more permanent benefit of income splitting for taxation.

Income splitting - allowing couples to each pay tax on half their combined income - would benefit all households except the very well off with an income of more than twice the level of the top tax threshhold. For many of those reduced to one income at the moment it would be a timely tax cut.

Welfare grants to the asset-rich grates with most people, as Mr Goff probably knew when he withheld details of his model case this week.

He will have drawn the political lesson and the Government, which has been so keen to criticise him, should act on it. Property should be part of the test.