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The Mendacities of Mr English – Social Services under National’s tender mercies

12 February 2017 Frank Macskasy Leave a comment Go to comments

Context

On 25 January, as Radio NZ returned to it’s normal broadcasting schedule (and putting away it’s dumbed-down “summer programming” until next December/January), John Campbell had his first interview with John Key’s replacement, Bill English.

Campbell raised several issues with English; the US withdrawal from the TPPA; the Pike River mine disaster; and the housing crisis. At this point, English made this staggering claim;

@ 5.58

“We’ve got a government actually with a good record on addressing, in fact, some of the toughest social issues. There may be disagreement over means by which we’re doing it, ah, but our direction is pretty clear. And you know over, certainly heading into election year we think that the approach the government’s developed around social investment, around increasing incomes is the right kind of mix – “

English’s bland assertion that “government actually with a good record on addressing, in fact, some of the toughest social issues” is at variance with actual, real, mounting socio-economic problems in this country.

Key indicator #1: Unemployment

The latest HLFS unemployment stats show an increase from 4.9% to 5.2% in the December 2016 Quarter. However, in all likelihood, the unemployment numbers are actually much, much, higher since Statistics NZ arbitrarily altered the way it calculated what constituted unemployment.

On 29 June 2016, Statistics NZ announced that it would be changing the manner in which it defined a jobseeker;

Change: Looking at job advertisements on the internet is correctly classified as not actively seeking work. This change brings the classification in line with international standards and will make international comparability possible.

Improvement: Fewer people will be classified as actively seeking work, therefore the counts of people unemployed will be more accurate.

The statement went on to explain;

Change in key labour market estimates:

Decreases in the number of people unemployed and the unemployment rate
Changes to the seasonally adjusted unemployment rate range from 0.1 to 0.6 percentage points. In the most recent published quarter (March 2016), the unemployment rate is revised down from 5.7 percent to 5.2 percent
Increases in the number of people not in the labour force
Decreases in the size of the labour force and the labour force participation rate

The result of this change? At the stroke of a pen, unemployment fell from 5.7% to 5.2% for the March 2016 Quarter (and subsequent Quarters).

If the “current unemployment figures” from Stats NZ are reported as “5.2%’, they may well be back to the original March 2016 figure of 5.7%, before the government statistician re-jigged definitions.

Key indicator #2: Housing

– Home Ownership

According to the 1984 NZ Yearbook, in 1981 the number of rental dwellings numbered 25.4% of housing. 71.2% were owner-occupied. Nearly three quarters of New Zealanders owned their homes.

Home ownership reached it’s maximum height in 1991, when it stood at 73.8%. Since then, it has steadily declined.

By 2013 (the most recent census survey), the numbers of rental dwellings had increased to 35.2% (up 33.1% in 2006). Home ownership had decreased to 49.9% (down from from 54.5% in 2006). If you include housing held in Family Trusts, the figure rises to 64.8% of households owning their home in 2013, down from 66.9% in 2006.

Whether you include housing held in Family Trusts (which may or may not be owner-occupied or rented out), home ownership has fallen steady since the early 1980s.

Renting has increased from 25.4% to 35.2%.

More and more New Zealanders are losing out on the dream of home ownership. Conversely, more and more of us are becoming tenants in our own country.

As Bernard Hickey from Interest.co.nz said in December last year;

Nearly two thirds of the 430,000 households formed since 1991 are tenants.

Think about that for a moment. It is a stunning revelation of how the young and the poor have been hit the hardest by the changes in New Zealand since the mid-1980s, and on an enormous scale.

It means two thirds of the kids born in those families grew up in rental accommodation, and more than 80% of those are private rentals (although the Housing NZ homes are often no better). That means they often grew up in mouldy, damp, cold and insecure housing. It’s true that some homes occupied by their owners are also below par, but it’s a much lower proportion and owners have the option to improve their homes through insulation and ventilation.

The NZ$696 billion increase in the value of New Zealand’s houses to NZ$821 billion between 1991 and 2015 means the 64% of owners in live-in houses have also had plenty of financial flexibility to improve those houses. Renters have had no access to that wealth creation and are not allowed to put a pin in the wall, let alone put in a ventilation system or some batts in the ceiling. The take-up for the Government’s home insulation and heating subsidies were vastly higher among home-owners than they were for landlords.

Those 284,000 renting households formed since 1991 have also often been forced to move schools and communities and all the roots that build families because New Zealand’s rental market is so transient.

[…]

It illustrates the scale of the fallout from that collapse in home ownership from 1991. Not only has it handicapped the education, health and productivity of a entire generation of New Zealanders, but it is set to magnify the likely growth in pension and healthcare costs of our ageing population. And that’s before the wealth and income inequality effects.

– Affordability

In 2016, the 13th Annual International Demographia International Housing Affordability survey rated New Zealand as one of the most unaffordable housing markets in the world;

The most affordable major housing markets in 2015 are in the United States, with a moderately unaffordable Median Multiple of 3.9, followed by Japan (4.1), the United Kingdom (4.5), Canada (4.7), Ireland (4.7) and Singapore (4.8). Overall, the major housing markets of Australia (6.6), New Zealand (10.0) and China (18.1) are severely unaffordable. (p2)

[…]

In New Zealand, as in Australia, housing had been rated as affordable until approximately a quarter century ago. (p24)

A 2014 report by the NZ Institute for Economic Research stated the “the average house price rose from the long-run benchmark of three times the average annual household income to six times“;

The NZIER report refers to several reasons for increasing housing prices; slow supply of land; demographic demand (from ‘Baby Boomers’); and investor demand caused by lack of a capital gains tax. Interestingly, the Report also refers to an “over-supply of finance”;

The loosening of financial standards and rising household debt relative to income has happened over a long period of time. The increase in indebtedness has coincided with rising house prices relative to incomes. This suggests that increased household indebtedness has at least partly contributed to the increasing price of homes. (p14)

Prior to Roger Douglas de-regulating the banking/finance sector, New Zealand banks could only lend depositor’s funds as mortgages.

As a result, mortgage money was “tight”, and scarcity helped keep house prices down. Vendor’s expectations were kept “in check” by scarcity of bank funds. Prior to the mid 1980s, Vendor’s Finance (by way of a Second Mortgage) were commonly-used financial tools to assist house-owners to sell and buyers to complete a purchase.

Once the banking sector was opened up, and monetary policy relaxed, cheap money flooded in from overseas for banks to on-lend to house-purchasers. As property investor, Ollie Newland vividly explained in the 1996 TV documentary, Revolution;

“I got a phone call from my bank manager to say some bigwigs were coming up from Wellington to have a chat with me. I thought it was just one public relations things they do. I had a very small office, it wasn’t much bigger than a toilet cubicle, and those five big fellows crowded in with their briefcases and books and they sat on the floor and the arms of the chairs – I only had one chair in the place – and stood against the walls. Their first words to me were, we’re here to lend you money. As much as you want. For somebody like me, and I’m sure it’s the same for everybody else, to suddenly be told by the bank manager that you could have as much money as you want, help yourself, that was a revelation. We thought we had died and gone to heaven.”

Unfortunately, the side affect of this was to increase vendor’s expectations to gain higher and higher prices for their properties. Combined with recent high immigration, and a lack of a comprehensive capital gains tax, and the results have been troubling for this country;

As well as increasingly unaffordable housing, we – as a nation – are sitting on a trillion-dollar fiscal bomb.

Think about that for a moment.

Little wonder that in September last year, the Reserve Bank issued the sternest warning yet that we were headed for impending economic mayhem;

A sharp correction in house prices represents a key risk to the financial system, and one that is increasing the longer the current boom in house prices persists. A severe downturn in house prices could have major implications for the banking system, with over 55 percent of bank loans secured against residential property. Moreover, elevated household debt levels and a growing exposure of the banking system to investor loans could reinforce a housing downturn and extend reductions in economic activity, as highly indebted households are forced to reduce consumption and sell property.

As with many other individuals, institutions, organisations, business leaders, left-wing commentators, media, political pundits, political parties, the NZIER was (and still is) calling for a comprehensive capital gains tax to be implemented.

Even then, this blogger suspects we may be too late. National (and it’s predecessor, to be fair) have left it far to late and the economic horse has well and truly bolted.

Even a Capital Gains Tax at 28% – New Zealand’s current corporate tax rate – may be insufficient to dampen speculative demand for properties.

Meanwhile, the dream of Kiwis owning their own homes continues to slip away.

Depressingly, New Zealanders themselves have permitted this to happen.

– State Housing

If the Middle Classes and their Millenial Offspring are finding it hard to buy their first home, think of the poorest families and individuals in our communities. For them, social housing consists of packing multiple families into a single house; living in an uninsulated, drafty, garage; or in cars.

Last year, the story of mass homelessness exploded onto our media and our “radar” as New Zealanders woke up to the reality of persistent poverty in our cities;

Although on occassion, the mainstream media found them themselves in embarrassingly ‘schizophrenic’ situations as they attempted to reconcile reporting on our growing housing crisis – whilst raising advertising revenue by promoting “reality” TV programmes that were far, far removed from many people’s own disturbing reality;

According to UNICEF;

295,000 New Zealand kids are living beneath the poverty line, which means they are living in households where income is less than 60% of the median household income after housing costs are taken into consideration.

One way to alleviate poverty is to provide state housing, at minimal rental, to families suffering deprivation. Not only does this make housing affordable, but also strengthens a sense of community and reduces transience.

Transience can have deletarious effects on families – especially on children – who then struggle with the stresses of losing friends; adjusting to new neighbourhoods, and new schools.

A government report states that transience for children can have extreme, negative impact on their learning;

Nearly 3,700 students were recognised as transient during the 2014 year. Māori students were more likely to be transient than students in other ethnic groups.

[…]

Students need stability in their schooling in order to experience continuity, belonging and support so that they stay interested and engaged in learning.

All schools face the constant challenge of ensuring that students feel they belong and are encouraged to participate at school. When students arrive at a school part-way through a term or school year, having been at another school with different routines, this challenge may become greater.

Students have better outcomes if they do not move school regularly. There is good evidence that student transience has a negative impact on student outcomes, both in New Zealand and overseas. Research suggests that students who move home or school frequently are more likely to underachieve in formal education when compared with students that have a more stable school life. A recent study found that school movement had an even stronger effect on educational success than residential movement.

There is also evidence that transience can have negative effects on student behaviour, and on short term social and health experience

Writing for The Dominion Post, in April 2014, Elinor Chisholm and Philippa Howden-Chapman pointed out the blindingly obvious;

Continuity of education and supportive relationships with teachers are critical for children’s educational performance.

“Churn” is not good for educational performance or enrolment in primary health care, where staff can ensure children are properly immunised and chronic health problems can be followed up.

It was for this reason that, in our submission on the Social Housing Reform Bill late last year, we strongly recommended that families with school- age children should be excluded from tenancy review.

Secure tenure and stability at one school would allow children the best chance of flourishing. In high- performing countries such as the Netherlands, children are explicitly discouraged from changing schools in the middle of the school year.

The bill had announced the extension of reviewable tenancies to all state tenants (new state tenants had been subject to tenancy review since mid- 2011). However, the housing minister, as well as the Ministry of Business, Innovation and Employment, had made clear that the disabled and the elderly were to be excluded from tenancy reviews.

In our submission, we acknowledged the Government for recognising the importance of secure tenure.

People who are compelled to move house involuntarily can experience stress, loss, grief and poorer mental health. Housing insecurity is also associated with poorer physical health.

National’s policy of ending a state “house for life”; increased tenancy reviews for state house tenants, coupled with the sale of state houses, is inimical to the stabilisation of vulnerable families; the well-being of children in those families; and to communities.

In 2008, Housing NZ owned 69,000 rental properties.

By 2016, that number had dropped significantly to 61,600 (plus a further 2,700 leased). National had disposed of some 7,400 properties.

Between 2014 and 2016, at least 600 state house tenants lost their homes after “reviews”.

This, despite our growing population.

This, despite John Key’s own family having been provided with the security of a state house, and Key enjoying a near-free University education.

This, despite John Key, ex-currency trader, and multi-millionaire, admitting in 2011 that New Zealand’s under-class was growing.

Key indicator #3: Incomes & Inequality

In June 2014, Oxfam reported on New Zealand’s growing dire child poverty crisis;

The richest ten per cent of New Zealanders are wealthier than the rest of the population combined as the gap between rich and poor continues to widen.

Oxfam New Zealand’s Executive Director Rachael Le Mesurier said the numbers are a staggering illustration that the wealth gap in New Zealand is stark and mirrors a global trend that needs to be addressed by governments in New Zealand, and around the world, in order to win the fight against poverty.

“Extreme wealth inequality is deeply worrying. Our nation is becoming more divided, with an elite who are seeing their bank balances go up, whilst hundreds of thousands of New Zealanders struggle to make ends meet,” said Le Mesurier.

Figures for the top one per cent are even more striking. According to the most recent data, taken from the 2013 Credit Suisse Global Wealth Databook, 44,000 Kiwis – who could comfortably fit into Eden Park with thousands of empty seats to spare – hold more wealth than three million New Zealanders. Put differently, this lists the share of wealth owned by the top one per cent of Kiwis as 25.1 per cent, meaning they control more than the bottom 70 per cent of the population.

Oxfam New Zealand’s Executive Director, Rachael Le Mesurier, was blunt in her condemnation;

“Extreme inequality is a sign of economic failure. New Zealand can and must do better. It’s time for our leaders to move past the rhetoric. By concentrating wealth and power in the hands of the few, inequality robs the poorest people of the support they need to improve their lives, and means that their voices go unheard. If the global community fails to curb widening inequality, we can expect more economic and social problems.”

A 2014 OECD report placed New Zealand as one of the worst for growing inequality;

Not only was inequality a social blight, but according to the report it impacted negatively on economic growth;

Rising inequality is estimated to have knocked more than 4 percentage points off growth in half of the countries over two decades. On the other hand, greater equality prior to the crisis helped increase GDP per capita in a few countries, notably Spain.

According to the OECD assessment, income inequality had impacted the most on New Zealand, with only Mexico a close second;

The OECD Report went further, making this “radical” observation;

The most direct policy tool to reduce inequality is redistribution through taxes and benefits. The analysis shows that redistribution per se does not lower economic growth.

The statement went on to “qualify” any suggestion of socialism with a caveat. But the declaration that “analysis shows that redistribution per se does not lower economic growth” remained, constituting a direct contradiction and challenge to current neo-liberal othodoxy.

In August 2015, former City Voice editor, and now NZ Herald social issues reporter, Simon Collins revealed the growing level of child poverty in this country;

The Ministry of Social Development’s annual household incomes report shows that the numbers below a European standard measure of absolute hardship, based on measures such as not having a warm home or two pairs of shoes, fell from 165,000 in 2013 to 145,000 (14 per cent of all children) last year, the lowest number since 2007.

Children in benefit-dependent families also dwindled from a recent peak of 235,000 (22 per cent) in 2011, and 202,000 (19 per cent) in 2013, to just 180,000 (17 per cent) last year – the lowest proportion of children living on benefits since the late 1980s.

But inequality worsened because average incomes for working families increased much faster at high and middle-income levels than for lower-paid workers.

The net result was that the number of children living in households earning below 60 per cent of the median income after housing costs jumped from a five-year low of 260,000 in 2013 to 305,000 last year, the highest since a peak of 315,000 at the worst point of the global financial crisis in 2010.

In percentage terms, 29 per cent of Kiwi children are now in relative poverty, up from 24 per cent in 2013 and only a fraction below the 2010 peak of 30 per cent.

In September 2016, Statistics NZ confirmed the widening of income inequality from 1988 to 2015, between households with high and low incomes;

In 2015, the disposable income of a high-income household was over two-and-a-half times larger than that of a low-income household.
Between 1988 and 2015, the income inequality ratio increased from 2.24 to 2.61.

The neo-liberal “revolution” took place from the mid-to-late 1980s. Hardly surprisingly, the rise in income inequality takes place at the same time.

Income inequality dipped from 2004 when Labour’s “Working for Families” was introduced.

However, income inequality worsened after 2009 and 2010, when National cut taxes for the rich; increased GST (which impacts most harshly on low-income families and individuals); and increased user-charges on essential services such as prescription fees, ACC levies, court fees, etc. Increasingly complicated WINZ requirements for annual re-applications for benefits and complex paperwork may also have worsened the plight of the country’s poorest.

Despite all the promises made by the Lange government; the Bolger government; and every government since, our neo-liberal “reforms” have not been kind to those on low and middle incomes.

Key indicator #4: Child poverty

According to Otago University’s Child Poverty Monitor in 2014;

Child poverty has not always been this bad – the child poverty rate in the New Zealand many of us grew up in 30 years ago was 14%, compared to current levels of 24%.

Thirty years prior to 2014 was the year 1984. David Lange’s Labour Party had been elected to power.

Roger Douglas was appointed Minister of Finance. The Member for Selwyn, Ruth Richardson, was also in Parliament, taking notes.

The term “trickle down” entered our consciousness and vocabulary. It promised that, with tax cuts; privatisation; winding back state services; and economic de-regulation, wealth would trickle down to those at the bottom of the socio-economic ladder.

How is that working out for us so far?

So much for the “aspirational dream” offered to us by “trickle down” economics.

Key indicator #5: The Real Beneficiaries

In June last year, Radio NZ reported the latest survey of household wealth by Statistics NZ. It found;

“…the country’s richest individuals – those in the top 10 percent – held 60 percent of all wealth by the end of July 2015. Between 2003 and 2010, those individuals had held 55 percent. The richest 10 percent of households held half of New Zealand’s wealth, while the poorest 40 percent held just 3 percent of total wealth.”

Following hard on the heels of the Stats NZ report, Oxfam NZ made a disturbing revelation;

Three years after her previous public warning, Oxfam New Zealand’s, Rachael Le Mesurier, was no less scathing. Her exasperation was clear;

“The gap between the extremely wealthy and the rest of us is greater than we thought, both in New Zealand and around the world. It is trapping huge numbers of people in poverty and fracturing our societies, as seen in New Zealand in the changing profile of home ownership.”

National minister, Steven Joyce responded. He was his usual mealy-mouthed self when interviewed on Radio NZ about the Oxfam report;

“There’s always inequality but again you have got to look at those reports carefully because in that report a young medical graduate who has just come out of university would be listed as somebody who is in the poorest 20 per cent because they have a student loan.They’ll pay that student loan off in about four years and they’ll be earning incomes of over $100,000 very quickly.

So although they’re in those figures today, they won’t be in those figures in five years’ time.”

Which appears to sum up the National government’s head-in-sand attitude on child poverty and income inequality.

Economist, Shamubeel Eaqub, though, had a different “take” on the issue and warned;

“Every time we see a new statistic on inequality, whether it’s in terms of income, opportunities or wealth, it shows very clearly that New Zealand is being ripped apart by our class system.”

When economists begin to issue dire social warnings, you know that matters have taken a turn for the worse.

So where does that leave our New Dear Leader Bill English with his insistence that “we’ve got a government actually with a good record on addressing, in fact, some of the toughest social issues”?

English’s assertion to John Campbell on Radio NZ, on 25 January, (outlined at the beginning of this story) makes sense only if it it is re-phrased;

“We’ve got a government actually with a good record on addressing, in fact, some of the toughest wealth-accumulation issues. There may be disagreement over means by which we’re doing it, ah, but our direction is pretty clear. And you know over, certainly heading into election year we think that the approach the government’s developed around private investment, around increasing incomes for the wealthiest ten percent is the right kind of mix – “

Not a very palatable message – but vastly more truthful as income inequality continues to wreak appalling consequences throughout our communities and economy.

Otherwise, English appears to reside not so much in the Land of the Long White Cloud, but in the Realm of Wishful Thinking.