Bruce Cotterill: $2b for welfare - is that our best spending choice?

The Government seems to have adopted the lolly scramble approach to spending, writes Bruce Cotterill. Photo / NZME

OPINION:

In a week when we’ve seen overseas banks start to collapse, it seems that New Zealand continues to underperform economically as a result of decisions past and present. The news that the New Zealand economy contracted by a surprisingly high 0.6 per cent in the December quarter was accompanied by suggestions that we are likely to be in recession sooner than we thought.

The week also saw one of our largest-ever strikes by school teachers, who remain unhappy with their pay and conditions. The fact that teachers are unhappy with their lot at a time when our educational performance is so poor should be a matter for some urgent national focus. Nations that can’t educate their kids are doomed to fail.

So, in a week when the indicators show us failing, it seems ironic that the Government chose to announce a $2 billion increase in the welfare bill.

It doesn’t matter how you try to say this, it’s always going to sound like we’re victimising the victims. That’s not the intention.

However, we seem to be on a never-ending curve of paying more to the people who don’t do enough for their money, while underpaying those who seem to do more than enough.

We have to remember that every extra dollar our politicians spend is borrowed. And in the aftermath of the Government announcement of a whopping increase to the welfare bill, you can’t help but think that if we are going to borrow even more money, there are better things to do with it.

Don’t get me wrong. I don’t think we should be borrowing any more in the first place. I’d rather see some focus on a decrease in government spending before we earn the right to share more money around. But if we push such logic aside, then I have a few suggestions on where we should be focusing our efforts.

There is something about charity work that puts things into perspective. I’ve spent a decent chunk of my life involved in efforts on behalf of various charitable causes. In the past three weeks I’ve been totally dedicated to the charity started by my mate Paul Muir and me. It’s called Bike for Blokes and we’ve been cycling the length of the country again to raise money for farmers’ mental health and prostate cancer research.

At the time of writing we’ve raised $236k. Our initial goal was $400k but the various initiatives on behalf of flood victims around the country have rightly taken a chunk out of our fundraising potential. We’re okay with that, as long as the money gets raised and goes where it’s needed. But we’re just as happy to be closing in on a $500,000 target from our first two years.

When you spend time in the charity sector, you start to understand the enormity of the need in the country. We have challenges that can’t be satisfied by charity bike rides and sausage sizzles. We have must-haves that aren’t funded and optional extras that are. It’s almost as if we have things the wrong way around.

That’s my worry about the latest government splurge. If the Government was borrowing more money for St Johns Ambulance, Plunket, rescue helicopters, surf lifesaving, Pharmac, prostate cancer or breast cancer, I could run with it. But these causes and the organisations that seek to support them continue to battle day in and day out for funding to provide what most would regard as essential services, necessary drugs or vital treatments.

And that’s before you get to the salaries of nurses, teachers and the members of the police force who seem to be fighting an ever-increasing crime wave.

When the minimum wage was forced up a few weeks ago, I must admit to thinking that the extent and timing of the increase was unfortunate. Increasing the minimum wage does nothing for productivity. And it’s expensive, as the flow-through impacts employers and therefore the cost of goods and services. This Government has raised the minimum wage regularly, despite the obvious impact on all employers (the largest of which is our high-spending Government) and the wage-driven inflation that follows.

And so we now overlay the minimum wage increase with a boost to welfare payments. So, we are paying people more not to work at a time when some businesses are running reduced hours because they can’t get staff. It doesn’t make sense. Simply put, we’re putting more borrowed icing on a rented cake.

When it comes to the welfare bill, I’m a fan of looking after those on superannuation, particularly those who have paid their way throughout their working life. They’ve worked hard, paid their taxes and they deserve their time in the government-sponsored sun. And then there are those who can’t look after themselves. None of us would, or should, deny such people a life of the treatment they need and the dignity they deserve. The state should do that and do it properly.

But there are plenty of people who are “beneficiaries” who aren’t yet retired and don’t fall into the category of “can’t look after themselves”.

When we’re in an inflationary environment, and borrowing every incremental dollar we spend, sooner or later we are going to need to consider the impact of such decisions. My assessment is that these measures will do nothing for the productive economy, but rather hang another unproductive noose around the neck of our indebted and struggling economy.

In case no one noticed, we once had two big earners. Tourism and agriculture used to provide a means for us to pay our way in the world. Tourism was wiped out by Covid and is not even close to being back to what it once was. And our rural sector is under attack from every quarter.

While we are all very concerned about the impact of the latest floods on people in eastern regions, no one is yet talking about the billions of export dollars that the fruit, produce and wines would have delivered for the country that are now lost. And then there is the impact of supply shortages in our own shops and the resultant inflationary impact.

In other words, our ability to earn has taken a hammering. If it happened in a household or a small business, we would have no choice but to cut our cloth. In other words, we need to reduce expenses.

But that is not the way of this Government. Borrow and spend seems to be the recipe. It would be OK if the spending was productive. But it’s not. It’s wasted money. My money. Your money. Unproductive. Down the drain. And all in the name of what? It’s all about votes, folks. It’s not about what is good for the economy or the country or the people. It’s about what’s good for the Government seeking re-election, and in an election year that’s about votes.

To be fair, most governments do the same in an election year. They hand out the lollies in the hope that those dependent on their goodwill will offer their votes in return.

And so we are forced to live in a world that is almost make-believe. A world where you don’t have to be better or do more, but you get paid more. Meanwhile, those who do become better or do more, those who try harder, or those who borrow money against a house or another asset so they can invest in their business and employ other people, are caught in a vortex that is sucking them closer and closer to a bank-induced failure.

Last week, this newspaper ran the headline “Government to spend $2 billion in welfare boost: are you eligible?” It should have asked “Are you worthy?”

You might think I’m being over-dramatic. But the reality is that businesses are struggling to find staff who enable them to keep the doors open. Others are struggling to find customers to buy their product in a post-Covid world. And then there are those who can’t source stock or product at a price that enables them to charge a reasonable margin when selling that product to the marketplace.

The GDP numbers tell us that the economy is shrinking. The anecdotal evidence tells us that the business owners can’t get the people they need to operate. And at the same time, the education system is producing unhappy teachers and failing kids who can’t read, write or add.

Sooner or later we will have to make a call. We can’t continue to pay more without receiving more. Sooner or later, New Zealanders will have to earn their increases. And government spending will need to shift focus to the productive economy, a focus where we invest in those who want to work rather than spending on those who don’t.

- Bruce Cotterill and Paul Muir have just finished cycling the length of New Zealand again to raise awareness and funds for charities that support men’s health. You can follow them, and donate at www.bikeforblokes.co.nz