National leader Christopher Luxon announcing his policy in Auckland. Photo / Alex Burton
OPINION:
“Nearly 23 per cent of mothers report difficulties getting childcare while working or wanting to work.”
Assisting with those costs “helps remove that barrier and enables parents to enter the workforce to help fill labour shortages, so it’s a win-win for families and the economy”.
This also restores “opportunities for children to get the best start in life”.
You might think those are the words of National leader Christopher Luxon, announcing his policy to help reduce the cost of childcare, which he announced on Sunday.
They’re actually the words of former Prime Minister Jacinda Ardern, who announced her own childcare assistance policy last November.
The cost of childcare has become an enormous political issue for both major parties. Childcare costs mean that parents, usually mothers, delay returning to the workforce after giving birth.
Last August, National Party members passed a remit at the party’s AGM, urging it to look at policy in this area (today’s policy is partly a result of that remit, although it’s been on the caucus agenda for some time).
Members openly wept as they described what the cost of childcare was doing to families.
Despite being a massive taxpayer-funded subsidy, members felt it fit within the party’s philosophy of self-reliance and empowerment through work. Members said that the cost of childcare was forcing mothers to stay at home for longer, keeping them out of the workforce and harming their careers.
(In light of this, Luxon was asked on Sunday whether the policy was “feminist” - he said it was good for families, but wouldn’t use the word “feminist”: one wonders whether the electorate would have really cared if he’d just used the word).
Childcare costs are a deep foray into Labour territory - so much so that the words on the page of Luxon’s speech might have been lifted from Ardern herself (the delivery, of course, was quite different).
That National should devise a policy that is more universal and costly than Ardern’s should be alarming to Labour.
Since Luxon’s first State of the Nation speech last year, at which he announced a suite of tax cuts, the political debate retreated into fairly familiar territory: National promised tax cuts that offered a fair bit to the wealthy and peanuts to low and middle-income earners, which Labour said would probably mean cuts to public services.
National tried to upend that on Sunday, declaring it too could spend up big on social services.
Unlike last year’s tax cut, this policy is tilted towards people on lower incomes, rather than away from them.
Labour’s childcare policy cost $189 million over four years - National says its own policy will cost $249m each year, so nearly $1 billion over the standard four-year budget period.
The policy is transparently something Labour would like to do more of, paid for by cutting something Labour can’t really defend: the ballooning costs of Government consultants.
New leader Chris Hipkins’ decision to pull back on the Government’s policy agenda was an admission the Government was doing too much.
Part of the evidence for this is in the fact the core public service has been unable to accomplish the simultaneous reforms Labour has asked of it, leading to masses of consultants being brought on to make up the difference.
In five years, the Government has merged polytechs, merged DHBs, merged councils’ water service delivery, planned to merge RNZ-TVNZ, planned a light rail line in Auckland and mass rapid transit in Wellington.
The Government has been warned against this. Treasury told the Government last year there simply wasn’t the labour to do everything the Government wanted to do. Labour forged on regardless, in no small part thanks to the fact that consultants are more than happy to do anything for which the core public service lacks the capacity - for a fee, of course.
Annual spending on consultants topped $1b under Labour - it’s now at $1.7b. National’s public service spokesman Simeon Brown says he can chop $400m out of that to pay for this policy.
Can he do it?
Well, that’s one of several big delivery questions that arise from the policy.
First, Brown’s $400m of consultant savings.
There are two parts to the contractor and consultant spend in Government.
The most obvious of these is the cost of Government departments contracting in expertise the public service does not have - often for a major project or reform.
National, naturally more averse to reform than Labour, could reasonably claim to find some savings here. The party has not put out specifics of where these would come from, but has put out a list of consultant spending it disagrees with. But some are obvious.
Light rail is not unfairly pilloried as a gravy train for consultants and contractors (more than 200 separate firms have worked on the project so far). It would be gone under National.
Other projects that are heavy on consultants might actually require consultants should National wish to unpick them - think the Three Waters reforms, the Māori Health Authority, and the polytech merger.
The second part of the consultant and contractor story is often less appreciated outside of Wellington and that is how many ordinary core public service jobs like paying invoices, answering Official Information Act requests, and planning where to put road crossings, are done by consultants and contractors.
Everyone agrees this is wrong.
Jobs that are part of the core public service should be done by core public servants. But despite that consensus, no one has actually been able to stop the growth of contractors and consultants.
National rightly points the finger at Hipkins. As public service minister, Hipkins attempted to stop the growth in contractor and consultant spend by bringing core jobs in-house in 2018 when he lifted the cap on the core public service, which was meant to bring these sorts of jobs in-house. The record would show that this clearly didn’t work.
But, Hipkins, in 2018, equally rightly pointed the finger at the John Key Government which put the cap in place in the first place. The cap didn’t cause the core public service to do more with less - it simply meant they hired contractors and consultants to do what the cap prohibited them from doing in-house, creating a problem that has never gone away.
The Government spent about $272m on contractors and consultants in 2008/9, the year before the cap. Adjusted for wage inflation, that would be $448m today - just under a quarter of the current $1.7b spend.
This is a plague on both your houses territory. Both Labour and National have a terrible record on restraining this kind of spending and both need to work out a way to fix it.
Another concern for the policy is whether injecting these kinds of subsidies into people’s pockets will simply inflate the cost of childcare.
Labour is keeping quiet about this one for now. When it came to office it increased living cost allowances to students by $50 - an increase that was promptly eaten up by landlords who raised their prices.
Luxon said childcare was a competitive enough sector to mean the cost would not simply go to providers, but he has little evidence to show for it.
It’s not the death knell for the policy, but National, having rediscovered its One Nation social democratic streak, shouldn’t forget the orthodox economic arguments against simply throwing money at a cost problem and hoping it disappears. A regulatory eye on childcare providers’ margins would not go amiss.
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