Inside Story on National and Disadvantage

Inside Story is a publication of the Swinburne Institute for Social Research in the School of Arts, Social Sciences and Humanities at Swinburne University of Technology.

They look at what is happening in NZ:

Imagine a country in which a government of the centre-right decided to make it a top priority to tackle inherited disadvantage. Where much of its limited new spending is devoted to “social investment” to reduce deprivation and increase workforce participation. And where it’s chalking up impressive results.

You don’t have to go far to find it – just across the Tasman. Taking on disadvantage is rarely a priority for conservative governments, but it has become an increasingly important theme of the second and third terms of the National Party government under prime minister John Key.

They look at the motivations of Key and English:

John Key himself grew up on welfare, in public housing in Christchurch with his sisters and widowed mother Ruth, a Jewish refugee from Austria. While he rose to become head of global foreign exchange trading for Merrill Lynch before entering politics, he has never forgotten where he came from. In his first speech as National Party leader, in 2006, he declared, “You can measure a society by how it looks after its most vulnerable… It is in the interests of no one, and to the shame of us all, that an underclass has been allowed to develop in New Zealand.”

Bill English, whom close observers see as the main generator of the government’s ideas, came to politics as a young conservative Catholic who had been a Treasury economist, then a farmer in the remote Southland. He has grown into a formidable independent thinker, committed to balanced budgets, small government, rebuilding earthquake-damaged Christchurch, and increasing business opportunities – but also to creating a society that intervenes to help its most vulnerable back into the mainstream.

And then they focus on the investment approach:

Key, English and other ministers have combined humanitarian instincts with actuarial logic to create a world-leading experiment: investing heavily to reduce the risk of children inheriting their parents’ welfare dependency, and to offer incentives and intensive help for the parents themselves to get off welfare and into work, and then stay in work.

What is most remarkable is that Key and English have made this “social investment” a top priority, in part, as a business decision to reduce the long-term cost of government.

Spending more money now, so we have to spend less later. All too often a Government won’t look beyond an electoral cycle.

English described it to Inside Story as “using an insurance approach to crack welfare dependency… A lot of government spending is trained on a relatively small part of the population whose lives are…” he paused, “complex for them, and expensive for us.” Targeted interventions aimed at lifting them out of dependency and into productive working lives not only improve their lives, he said, but also dramatically reduce government spending in the long term. “What works for the community works for the government’s books.”

It is working in welfare – the challenge is now to expand it.

The hardship package was focused particularly on “children at risk”: those kids whose parents are long-term welfare dependents and have family problems and criminal records. At the budget launch, English said actuarial assessments based on longitudinal studies have found that among children growing up in such families:

• 75 per cent will not complete school;
• 40 per cent will themselves become long-term welfare dependents by the time they’re twenty-one; and
• 24 per cent will have been jailed by the time they’re thirty-five.

Children growing up in this group, English said, cost taxpayers an average of NZ$320,000 by the time they turn thirty-five; some cost taxpayers more than NZ$1 million. These are stunning figures, which he uses to persuade fellow conservatives that it is in society’s interests to give these children and their parents a priority on spending that they have never had before.

So many of these families have second or third generation dependency and offending issues. It is about breaking the cycle.