Wellington, June 1, 2023
When it was unveiled, the government’s extension in this year’s Budget of 20 hours of free early childhood education to two-year-olds from next March was hailed as a masterstroke.
The Minister of Finance said that it would save qualifying households $133 a week, no mean sum during a cost-of-living crisis, as well as benefitting significant numbers of children.
At an estimated cost of $1.2 billion over four years, it seemed a well-targeted investment that would pay both a social and a political dividend.
The waning gloss
However, it was not long before the gloss started slipping off the policy.
Bold as it seemed, it would benefit only 44,000 families – just 2.3% of the total number of just over 1.9 million families in New Zealand. And then came the reaction of the early childhood education sector, pointing out that the extension could lead to fee increases for any extra hours beyond the initial 20 free hours, and increased child-to-teacher ratios leading to a lower quality of care. Others argued that while the intent of the policy was laudable, the current funding and delivery models were not fit for the purpose to implement it. There was even a suggestion that some private providers might be forced to close altogether.
All lamented that it was a pity that there had been no consultation with the sector about how things would work in practice before the Budget announcement had been made.
In response, the newly appointed Associate Minister of Education generally agreed with the concerns being expressed and offered the accurate but inadequate response that it had not been possible to have full consultation beforehand because of the traditional secrecy that surrounds the development of the Budget.
Repeat of a fiasco
Almost the same thing had happened last year when the Budget announced a one-off payment of $350 in three tranches to around 1.4 million eligible families to ameliorate the impact of the then-developing cost-of-living crisis. The roll-out of that programme was chaotic with many examples of dead people, others who had not lived in New Zealand for years or were otherwise ineligible, receiving the payment.
A novel policy idea, drawing on similar programmes introduced overseas, was treated with ridicule because of the apparently sloppy way it was being implemented.
However, it soon became clear that none of this should have been a surprise to the government. Official papers showed that Inland Revenue, the agency charged with implementing the payment scheme, had been warning the government for some time that it had been given insufficient time to gear up its systems and that implementation problems were inevitable.
It would not have been unreasonable to have assumed that chastened by this experience the government would have made doubly sure that the implementation of a policy like 20 hours of free early childhood education to 2-year-olds was, as former Minister of Finance, Sir William Birch was prone to say “tidy”, but apparently not.
Now questions are being raised about the government’s recent announcement of a $140 million subsidy to New Zealand Steel to reduce its carbon emissions.
New Zealand Steel is planning to buy an electric furnace that can remove up to 800,000 tonnes of carbon dioxide a year. This bold announcement, which was not part of the Budget process and therefore not subject to the same level of secrecy during its development, was hailed by Ministers as “not only be good for the climate, but also a win for minimising waste, retaining jobs, and improving New Zealand’s economic resilience.”
But the details of how these objectives will be achieved remain vague, with the government still to make significant decisions. Some have questioned how this investment sits alongside the more than 2.1 million free credits New Zealand Steel has separately been allocated under the Emissions Trading Scheme. Others want to know whether the government’s involvement is a one-off case, or whether it signals a return to more activist intervention in business. If that is the intention, then what steps is the government proposing to ensure transparency?
While the Climate Change Minister says that the Treasury is “on board” with the government’s subsidy to New Zealand Steel, the full details of its advice are not yet known. Normally, all the advice available to Ministers when preparing the Budget is released publicly about now, but it is not clear whether, since it was not formally part of the Budget, and for commercial sensitivity reasons, what, if any, information will be released about the New Zealand Steel deal.
The picture that emerges from each of these examples is of initially oversold government policy initiatives that fall short over time of the bold claims made for them.
So, against this backdrop, and with the memory of the failed Kiwibuild programme still fresh, is it now any wonder the Opposition has concluded that the housing intensification agreement reached with the government in 2021 is impossible to implement?
Peter Dunne was a Minister of the Crown under the Labour and National-led governments from December 1999 to September 2017. He lives in Wellington and writes a weekly Column.