John Roughan: Government's income insurance scheme an idea to be enthused by

Labour's proposed New Zealand Income Insurance Scheme could be Finance Minister Grant Robertson's legacy if the party is returned to power. Photo / Mark Mitchell

OPINION:

The present Government has been susceptible to so many big but fatally flawed enthusiasms that it's nice to find one that looks promising. This income insurance scheme appears to be a thoroughly good idea.

In return for a small levy on employers and employees, those who lose a job through no fault of their own will be assured of receiving 80 per cent of their income for another seven months. That's a whole lot better than the dole.

The idea springs from the earliest days of the pandemic, when ministers had the profoundly distressing experience of making a decision that would throw people out of perfectly good jobs. The Cabinet hurriedly arranged a special benefit for them but "two-tier" welfare was obviously not fair.

An insurance system was jointly proposed by the Council of Trade Unions and Business NZ. Grant Robertson adopted the idea in last year's Budget and it was refined by a working party over the summer. When the detailed scheme was put out for discussion last month the business lobby sounded as keen as the CTU - and no wonder.

Income insurance is not just a better deal for those who innocently lose a well-paid job, it makes it a little easier for employers who have to lay off staff they find surplus or unsuited to changes in the fortunes of their firm or its business environment.

Just as important, the scheme is designed to encourage those laid off to take more time to look for a new job that suits their interests, experience and abilities – or train for work that might suit them better - rather than grabbing any job they can get because they need to restore their income quickly.

In these ways, the whole economy might become more adaptable to changes in technology, market conditions and environmental regulations, and probably more productive too because more people will be more likely to be in work they are enjoying and performing to their employer's satisfaction.

All this for a tax of 2.77 per cent split equally between the employer and employee, a mere 1.39 per cent of the insured person's pay.

Income insurance is not just a better deal for those who innocently lose a well-paid job. Photo / NZME

Naturally National is against it. National is in that deep opposition mode when a party out of power opposes just about everything, safe in the knowledge that the next election is unlikely to put it in a position to repeal anything.

When Christopher Luxon recently promised to reverse every tax Labour has enacted since 2017, he may as well have declared he doesn't expect to win the 2023 election. If National is leading Labour in polls a year from now, expect to see "reverse" become "review" on this and other subjects.

Stability and continuity of government is well served by polls that give a party plenty of notice when it is coming to power. The present Government's weakness for big but flawed ideas arises in part because polls gave Labour little chance until it changed its leader seven weeks before the 2017 election.

That was too late to fudge commitments to impractical housing targets, a pointless Pike River re-entry, light rail and other things the National Government had sensibly declined.

Now, in its fifth year, the Government is still embarrassed by decisions it did not sufficiently think through. It has had to amend its legislation against "loan sharking" because it made banks ask unduly intrusive questions. A commission set up to investigate possible miscarriages of justice has been overwhelmed with cases because it is seen as another court of appeal.

Both of these seemed good ideas at the time. So I'm nervous about the income insurance scheme. But it has been open for public submissions for nearly two months and will be for another month - and I haven't heard of a flaw in it yet.

It is a worry, as the Herald's Kate MacNamara has revealed, that the scheme will be cover loss of a job owing to the onset of illness or disability, and that this is expected to comprise nearly half the claims. Many of these people will probably need more than income maintenance.

Since the fund will be administered by ACC, I hope the Government is not advancing the scheme as a way to treat illness as generously as accidents, an idea long resisted for good reason, the cost.

I would also prefer that the scheme was not run by ACC. Funds built on compulsory contributions tie up a great deal of national wealth. It is better that their investment decisions are made by different boards.

With those caveats the idea looks well worthwhile. Robertson says the scheme will not proceed unless Labour is returned next year. It could be his Government's legacy.