It will take courage to clean up the welfare mess

Ian Shirley

It took courage for Metiria Turei to challenge the welfare mess that has emerged over the past four decades whilst at the same time owning up to the way in which she exploited the welfare system to provide for her daughter. She no doubt anticipated the reaction her declaration would invoke in the lead-up to the 2017 general election and perhaps she was even able to identify in advance the vitriolic language that would be used by those righteous commentators throwing stones.


The welfare mess that we have inherited today emerged during the transition from the Think Big strategy of the Muldoon era to the neoliberal excesses of the ‘80s and ‘90s. Driven by a small group of politicians, big business and Treasury officials the theology of the new right was embedded by subsequent governments in the policies and practices of the welfare state. We moved from what was arguably one of the most progressive social policy regimes in the aftermath of the Great Depression to one of the most punitive, miserable systems in the so-called ‘developed world’. And apart from Metiria Turei we have few politicians today who understand the scale of the welfare mess and even fewer with the guts to address the fundamental problems.


As one who was directly involved in this transition and in providing on-going assessments of how social policy in New Zealand has been hi-jacked by private interests both in this country and overseas I am constantly reminded how ineffectual we have been in changing the socially bankrupt agenda. It hasn’t been for the want of trying. As a consultant to the Budget ’85 taskforce, a key element in the introduction of the neoliberal agenda, I argued with Ministers and Treasury officials who were responsible for introducing what was essentially an imported model and a fundamentally flawed agenda.


The flawed agenda was evident from the first meeting of the Budget ’85 taskforce when it became clear that Treasury officials did not even understand the ideology that underpinned their draft document. After being challenged during a meeting called by Ministers, Treasury withdrew from participating in the consultations that were conducted around the country and Ministers began to argue that social policy would be ring-fenced thereby protecting ‘the welfare state’ from the implementation of the neoliberal economic program. The fallacy of separating economic and social policy became evident within 18 months of introducing what is referred to as ‘Rogernomics’ – a misleading abbreviation for a form of laissez-faire economics that went far beyond what Thatcher and Reagan tried to do in their own countries.


The cumulative impact of these policies resulted in severe damage to the tradable sector with investment in New Zealand manufacturing declining by almost 50 percent between 1985 and 1989 – major employment areas such as forestry and manufacturing declined by 67 percent and 21 percent respectively. The workforce of forestry towns such as Murupara became redundant overnight. By 1991 registered unemployment represented 11percent of the total workforce and long-term unemployment became a serious social problem. An estimated 20 percent of the Maori working age population lost their jobs in the two years from March 1987 to March 1989. Two years later the unemployment rate for non-Maori aged 15 to 24 years was nearly 20 percent – for Maori it was approaching 40 percent.


Exclusion from the paid workforce placed increasing pressure on immediate and extended families and where households were unable to support their dependents, the state became the primary means of income support. As a consequence government became exposed to relatively high levels of welfare expenditure. In 1981 (apart from national superannuation and the family benefit) almost 115,000 people were in receipt of a welfare benefit – by 1985 that figure more than doubled and by 1992 it had trebled. By 1993, just over one quarter of all dependent children lived in households supported by benefits.


This coincided with a particularly destructive set of policies implemented by the Bolger government and driven by Richardson and Shipley. The 1991 budget sought to target expenditure by narrowing the criteria for benefit eligibility and by reducing state funded services across a range of traditional social policy domains such as education, health and housing. The assumptions on which the 1991 benefit cuts were introduced were fundamentally flawed. The concept of a ‘core family’ at the centre of Treasury calculations was eventually abandoned because it failed to make any demographic sense but the benefit cuts went ahead based on a minimum income level for a ‘family’ estimated from the average cost of feeding a prisoner. Not only did these policies generate increasing levels of destitution and hardship but they were internationally regarded as the most punitive set of policies of any OECD country designed to make the claiming of benefits less attractive.


Adjustments were made by subsequent governments such as removing market rentals from state homes and introducing subsidies for households by way of ‘working for families’ but apart from increasing the numbers of those receiving benefits the fundamental principles of the market fundamentalists was maintained. The past nine years has done nothing to alleviate the social deficit we have incurred as a nation. The language has changed with the Minister of Finance claiming in 2010 that he wanted to address ‘the welfare mess’. What in fact transpires is that the Minister was uncomfortable with the language of the ‘mother of all budgets’ whilst the government’s preoccupation with reducing benefit numbers and privatizing public services has in fact been accelerated. So in those respects little has changed.


An important by-product of this punitive approach to welfare is reducing the size of government and in the context of WINZ this has seen public servants set targets for removing beneficiaries from receiving government support. There is now considerable evidence to show that the treatment of those seeking support is frequently accompanied by moral judgements and behaviour reminiscent of bygone years and practices. When you are reliant on the benefit system to feed your family or get access to housing it takes courage to front up at the local WINZ office and ask for support. The same applies to those caring for the disabled, or supporting family members with mental health issues – likewise young people facing an uncertain future but encouraged to be resilient in the face of moral judgements, sanctions and treatment reminiscent of the workhouse and the poor law. It was in this context that Metiria Turei drew attention to the state of welfare in New Zealand.


And to those who have any understanding of welfare policy today or the individuals and families (including working families on welfare) who are reliant on the welfare system to survive, it is patently clear that the welfare mess has become a major problem for us all. Not only does the policy framework need to be radically changed but also the departments administering these public services need to be overhauled. It is a major task facing us as a nation and it will take courage to carry it out – but let’s start with the easy part, the general election in September, and begin clearing the policy swamp.




Ian Shirley
About the author

Ian Shirley

Emeritus Professor – Auckland University of Technology
Ian Shirley is a former Professor of Public Policy at AUT, and founder of The Policy Observatory. He has led major research programmes both in New Zealand and overseas the most recent being an international study of economic and social development engaging 15 research teams in the major metropolitan cities of Asia, the Pacific and Latin America. Professor Shirley has led ministerial councils for both Labour and National administrations in New Zealand. He has acted as a consultant to the Minister of Finance and a Budget taskforce on Income tax and Social Security. He continues research on New Zealand as a social laboratory and Auckland city governance.