Peter Dunne
Wellington, August 3, 2022
In a weekend television interview, the Prime Minister pushed back on a suggestion her government is far better at talking about things than achieving them.
She countered that “I would not ever change the fact that we have always throughout been highly aspirational…what you are asking me essentially is to shy away from aspiration.”
She is right – up to a point. Governments should never lose sight of their aspirations to make the country a better place. That is, after all, why they have been elected in the first place. But, at the same time, they should also never lose sight of heeding practical advice about the best way to achieve those aspirations.
Too often, this government has been so focused on the aspirational aspect of its policy agenda that it has given insufficient attention to how it might be achieved. The failure of Kiwibuild, the confusion and division around Three Waters, the uncertainty surrounding the move to Health New Zealand, and the emerging controversy over plans to merge the country’s 16 polytechnics into one super vocational training entity, Te Pukenga, are all examples of where bold aspiration has hit major implementation roadblocks.
The one-off bonus mess
Now, the government’s Budget plan of a one-off $350 payment to around 2.1 million eligible taxpayers to offset the current increase in the cost of living has run into trouble. It seems a substantial number of taxpayers living overseas (perhaps up to 10,000 people) are receiving the payments, and that the government has no plans to recover the windfall from them. At the same time, approximately 800,000 people reportedly eligible for the payment appear to have missed out. Once again, an “aspirational” government initiative looks in danger of being derailed by the way it has been implemented.
The government’s first response to the news that people no longer living here is getting the payment was one of surprise, and it looked disorganised. The Minister of Revenue initially said that people receiving the unexpected payment, which they had neither applied for nor requested, were potentially committing tax fraud, only to wind that back a few hours later to say it would be too difficult for the government to try to recover those funds.
Yet none of this should have come as any surprise to the government, so it is hard to understand why its responses were not better and more fluently prepared for when the story broke. After all, Inland Revenue Department (IRD) had warned the government at the time that the payment scheme was being devised that it would have “critical operational impacts” which would “compromise” IRD’s “already stretched workforce.”
Other official advice questioned the wisdom of the payment plan saying it was a “poor mechanism for supporting households with a longer-term problem.”
Inland Revenue even suggested that it would need 750 additional staff to implement the scheme as the government intended.
Clearly, little if any of these warnings and advice were heeded, as the government went ahead with its plan. It was more focused on immediate steps that could be taken to demonstrate empathy with the emerging public concern about the steeply rising cost of living. A simple, one-off token payment, as had been implemented in other countries, appealed as the best way of achieving that, and it is easy to see why.
Other options overlooked
But there were other options the government could have considered. The simplest would have been a cut in the GST rate of, say, 1% to 2%. Not only would have been that deflationary, but it would also have benefitted all households, whatever their current situation. However, it would have taken time to work its way through the system, so would not have had the immediate impact of the one-off payment.
In a similar vein, the government could have cut tax rates – especially the lowest rate by one or two cents in the dollar, but that might have created distortions elsewhere in the tax system and led to wider pressure for tax cuts, something this government is vehemently opposed to. Or, it could have lifted tax thresholds and perhaps indexed these to inflation levels, but, again, that would not have the immediate impact the government was seeking. It could have looked at increasing Working for Families payments and adjusting benefit levels further to compensate for increases in the cost of living, but there are already annual processes in place for doing this, meaning any additional increases now would have been minimal, and of little impact.
Object of ridicule
The government’s “aspirations” in this instance were simple and two-fold. It was seeking an initiative that would both look decisive and give a boost to its flagging political fortunes. A straightforward one-off payment was always going to appeal in such circumstances, ahead of more comprehensive, time-consuming and potentially expensive changes to the wider tax and benefit system.
But what looked like a political winner at Budget time is now looking like becoming an object of ridicule because of the way in which it has been rolled out, a risk the government was warned about at the time but chose to ignore. It looks like Kiwibuild all over again, where a laudable policy intent became widely derided because the government failed to appreciate the challenges associated with implementing it.
The lesson that emerges once more for this government is that while aspirations are laudable, their credibility quickly flounders if they cannot be made to work as they were intended. But, given how this government has handled previous situations, the lesson is unlikely to be taken notice of. Talking about things and making vague, soothing, aspirational promises is always easier than taking officials’ advice to help make things work.
Peter Dunne was a Minister of the Crown under the Labour and National-led governments from December 1999 to September 2017. He writes a regular weekly Column and lives in Wellington.
