What kind of country do we want to be?

Published in The New Zealand Herald, 25th. November 2022

The Herald is embarking on a worthwhile effort to open up debate about New Zealand’s future in a non-partisan environment. With the shrinking base of the major centrist parties, the polarisation of opinion, the amplification of these issues by mainstream and social media on a 24/7 cycle, with the hollowing out of the public service and the absence of universities from the public square, it is hard to see where long-term issues can be shaped and crystallised for implementation in an evidence-based and consensual fashion.

In their book Policy-making Under Pressure, University of Canterbury academics Sonia Mazey and Jeremy Richardson note that the New Zealand’s policy style is short-term, reactive, and lacking continuity, and argue for longer Parliamentary terms, standing policy commissions, and using non-Parliamentarians as Ministers.

This is not a problem unique to New Zealand. In Australia the Grattan Institute, a bipartisan think tank, reviewed over 70 policy reports issued by the organisation in the decade from 2009, mostly mainstream OECD proposals, and found two-thirds were never adopted. Where these proposals were publicly unpopular, none were taken up. Ideological party lines were also a show stopper. Other reforms were opposed by vested interests, but could get by if the evidence in their favour was strong.

There are a range of commitment devices that governments can use to make adoption of policies easier, such as commissions (Productivity, Climate Change, Infrastructure), commissioners reporting to Parliament (environment), and Royal Commissions. For example, without the Royal Commission on Auckland Governance we would never have got the single city, such would be the opposition of parochial interests.

Another approach is through future-focused think tanks. The Helen Clark Foundation (THCF), of which I am chair, is one such and has been operating for nearly four years, in that time producing 17 major reports and projects and holding 34 public events including conferences, in-person seminars and webinars. Recently THCF released two reports that received an open-minded response from across the political spectrum: one on methamphetamine developed jointly with the New Zealand Drug Foundation, and another which advocated congestion charging, in collaboration with WSP New Zealand, the international engineering and design firm. We are also working up with NZIER a report on how to shift our major primary sector export industries from bulk low-value commodity production further up the value chain. Other research areas have ranged from raising wages to maternal mental health.

One of the questions we have to ask ourselves is what kind of country we want to be. There are some indicators of the company we keep and where we are headed. A recent report in the Global Competitiveness series on 37 countries from the World Economic Forum (WEF) suggests that we are among a small group of countries able to take full advantage of post-COVID transformative economic and institutional change.

The top-performing countries were almost all small-to-medium social market/social democratic counties with competitive economies and developed welfare states: Denmark, Finland, and Sweden in the first rank, with the Netherlands, Canada and New Zealand not far behind. In other words, we are on course to maintaining an open economy underpinned by environmental protections and socially cohesive welfare state arrangements.

But there are still some clouds on the horizon. Treasury, in its forward projections, has identified major funding shortfalls amounting to over 15% of GDP by 2061 for our pension and health care arrangements. And these are not matched by any foreseeable funding commitments.

New Zealand has a relatively low level of taxation, and one that is skewed towards income tax. For example, the average New Zealand worker pays almost the lowest level of income tax in the OECD, second only to Chile. Furthermore, our top tax rate is the lowest in the OECD, a higher proportion of income tax is charged on personal (rather than corporate) tax than in all OECD countries bar one, and, alongside Australia, New Zealand is the only country in the OECD that does not have social security taxes. Across the OECD social security charges account for over a quarter of the tax take. Typically, these charges fund pensions, health care and other social protection systems. It is not surprising then that New Zealand will find itself short on funding pensions and health, although ACC and KiwiSaver provide ready-made social insurance/social security options. Furthermore, other areas of investment that might be considered, like defence and overseas development assistance, tend to be given lower priority in budgetary considerations, despite current heightened regional security issues.

New Zealand has a Fiscal Responsibility Act, which has greatly improved the management of the government’s financial system and has increased fiscal honesty and transparency. Perhaps we need a Social Responsibility Act which gives governments an equal responsibility to respond to social need. If, for example, we were to respond to the five ‘giants’ or threats to social cohesion that Sir William Beveridge identified over half a century ago, we would focus on Want (that is, poverty and material need), disease (health and health care), Ignorance (education and skills), Squalor (homelessness and poor housing), and Idleness (an active and humane labour market policy).

With luck and good management, we could get to a position where we could do away with the partisan name-calling with changes of government when it comes to accepted indicators of material need, health, education, housing, and labour market policy.

But we would still need the broad consensus on economic and institutional policy that could provide the wherewithal to underpin the country we want to be.    

Peter Davis, Chair, The Helen Clark Foundation, an independent public policy think tank.

5 comments

  1. Great article Peter-well done and yes we definitely need a designated social security tax-that would fund health, education and welfare etc. Cheers and best wishes to you and Helen. Kevin
    Professor Kevin P Clements,
    Director, Toda Peace Institute.
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    (ii) Kevin.P Clements, Identity, Trust and Reconciliation in East Asia:Dealing with Painful History to Create a peaceful Present. https://link.springer.com/book/10.1007%2F978-3-319-54897-5#editorsandaffiliations

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  2. I like the idea of a Social Responsibility Act. In regard to shifting major primary sector export industries from bulk low-value commodity production further up the value chain, having worked in RD&I for the last 30 years, I have seen sequential entities proposing this (both government entities, and individual organisations) and failing (notably Fonterra, on the organisation front)…pretty tricky problem for a considerable number of reasons. There is no silver bullet, that’s for sure.

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