Thursday, 24 September 2009

policies for the working class

this post is a follow-up to the discussion that's been happening over at the hand mirror on the post i put up yesterday. probably best to read through the post and comments there if you want a background to this little rant. in particular, i wanted to respond to this comment from hugh:

Yes, everything you've outlined above was positive. But conversely, we had steadily rising university fees, the outlawing of party pills, the near impossibility of home ownership for first time home owners, the continuing lack of a capital gains tax, increasing immigration restrictions, and of course the steadily rising cost of basic household food items.

i'll take each of the issues in turn. on university fees, the labour government had a cap on fees and kept tight control on rising costs, much more so than the previous government and let's see what this one does. at present, this government is capping numbers, which means we have infrastructure and human resources lying idle, while some of those who want a tertiary education won't be able to access one. the cutting of allowances that helped beneficiaries gain a tertiary education has also been a stupid move.

the removal of interest on student loans was a way of keeping costs down, and i was totally in support of the universal student allowance that would have been brought in had labour won a fourth term.

of course more could have been done. i'd like to have seen free tertiary education, but that would have required an increase in taxes, which i don't think the electorate would have accepted. it's a hard-sell when the opposition and media were so belligerent in their campaign of tax cuts. but yes, i'd accept that there is scope to do more in this area.

on outlawing of party pills, that's mostly a moral issue & i personally agree with that one. there was also a health aspect involved, and as far as i know, the advice given by health professionals supported the ban.

the home ownership problem was an extremely complicated one, and a lot of work has been done on it both within the party and by government officials. policies put in place were the kiwisaver government contribution of $5,000 after 5 years of investment in kiwisaver, to help with the deposit. there was also the welcome home scheme, which the current government has kept and expanded.

the capital gains tax wasn't favoured because evidence showed that such a tax hadn't proved effective in australia in reducing the speculation that was leading to higher prices. also, given the rules that already catch people who buy and sell rental properties regularly, it wouldn't have generated much revenue. there is an argument around equal treatment for all investment types, and that one is probably the most compelling. however that issue of equality wouldn't solve the problem of rising house prices.

another option was to ring-fence taxable losses, so that they couldn't be offset against other income. i'd favour that one; the only downside being that it would raise rents which would have a negative impact on those on lower incomes.

that in effect was one of the major problems. any policy solution would have the effect of either raising house prices (ie if you gave people more cash to buy a house, you stimulated demand and prices would rise) and/or raising rents (as landlords would try to recover costs). so again, i'd disagree with the notion that nothing was done in this area. and as more policy was being developed, the bubble burst and house prices started to fall, which meant it was no longer so much of a priority.

on the immigration restrictions, this is one area where i'd agree with hugh. i didn't like the direction that the immigration bill was taking. but the select committee never reported back on the bill, so i have no idea what changes they might have made. not sure what the new government is doing with the bill. in terms of policy, the current policy is much more restrictive, and the treatment of those on work visas has become particularly harsh. but overall, i think the previous government could have done better on immigration.

in terms of the rising costs of basic household items, agreed that this is definitely a problem. the most effective way to deal with it (bar price controls a la muldoon) is to have increased incomes, and there is no doubt that real wages increased over the term of the labour government. working for families has also had a major impact - i know, because i'm doing plenty of returns for farmers with kids, who are getting around $8-10,000 back just on WFF this year. raising the minimum wage and strengthening collective bargaining provisions were also helpful.

one policy proposal i've seen in this area is to remove the GST on food items, and that won't work. apart from the administrative nightmare, the likelihood is that it will be the retailers who benefit most. they won't be passing on the full benefits of a reduction in GST, in fact i expect very little of it would be passed on to the consumer. i say this because we have most recently seen this problem with subsidies for home insulation: costs have gone up to swallow up most of the subsidy, and this government has had to issue some pretty stern statements about that. there was a similar issue with GPs, and hon annette king had a real fight to ensure that subsidies for doctors visits were passed on to patients.

in this area, i think those in the workforce with lower incomes were pretty well served by the fifth labour government. not only did real incomes increase, but the fact that there were record levels of low unemployment meant that more people were getting a working wage. the weakness was beneficiaries, and i would dearly loved to have seen the basic benefit level rise. out of all the issues i've covered above, this would be my greatest disappointment.

so, on the whole, i don't think labour abandoned the working class nor did it fail to deliver for those on lower incomes. i'll always accept that more could have been done, i think everyone accepts that. nobody is perfect after all.

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