One of the most significant aspects of the Budget on 21 May will be what has been described as radical changes to funding of public services. For example, yesterday Bill English announced a voucher system for funding people with disabilities. Other ingredients will include applying wider use of the “investment approach”, currently being trialled for managing beneficiaries. Many such policies lead to large scale contracting out and privatisation of provision of services.
We can expect more Budget announcements shortly. Here are some suggestions as to what should be done in the Budget, particularly focussing on incomes and wages.
The Government has set itself tight spending limits, determined mainly by a political agenda of shrinking government. Though it admits it could afford $1.5 billion of “new” spending in each
of the next three years it is “saving” some of that up for tax cuts in the 2017 election year leaving only $1 billion. This gives tax cuts a higher priority than the mounting economic, social and environmental deficits that it has swept under the carpet for the last six years.
The Government has said it is going to do something about poverty in the Budget. This cannot be adequately addressed without raising beneficiaries’ incomes significantly. That would benefit wages and salary earners too. The Children’s Commissioner’s report on child poverty put the cost of its recommendations in the range $1.5-2.0 billion. That shows the magnitude of the problem: it doesn’t fit into $1 billion.
Neither can the pay levels of state sector employees continue to be ignored. The gap with Australia and the private sector is increasing. The government also has direct influence over large and growing areas of low wage employment that are desperate for better pay and conditions. In the residential care sector, wages and sustainable management of the sector are held down by insufficient funding. It also has to face up to Kristine Bartlett’s successful equal pay case. The government will have to stump up for this and other cases that follow.
It is not so straightforward to use the Budget to encourage private sector wage rises in general. They need better legislation to encourage collective bargaining and stop unfair employment practices, a change in immigration policy and faster increases in the minimum wage. But there are some things that the Minister of Finance could do to raise private sector wages. They include wider objectives for the Reserve Bank, more active involvement in housing to bring down prices, and taxation to raise revenue, reduce inequality and cool the housing market in the longer run.
Download the full bulletin: CTU Economic Bulletin 167