Simon Wilson: Budget 2022 and the ridiculous 'squeezed middle'

Aftermath of the Budget continues, house sales slow and parts of the country brace for snowfall in the latest New Zealand Herald headlines. Video / NZ Herald

OPINION

Easier access to loans for first-home buyers, a new small-business growth fund, massive new spending in both health and education, Pharmac's biggest jump in funds ever, an extension of the cuts to petrol prices and public transport fares, a stronger focus on disability services and anti-duopoly action on supermarkets. There's quite a lot going on for "middle New Zealand" in this Budget.

Doesn't please everyone, of course. "The squeezed middle are paying the price for Labour's economic mismanagement," was National Party leader Christopher Luxon's verdict yesterday.

The squeezed middle: Is there a more pernicious phrase in politics?

It implies a vice, with forces on two sides pressing against everyone in the middle. But that's not how the economy works.

Wealth is a pyramid, with those on top squeezing down everyone beneath them. Things are harder than they should be in the middle, it's true. But not as hard as they are at the bottom.

The "squeezed middle" suggests redistributive policies like taxes and subsidies should focus on the middle, rather than helping everyone in need, proportionate to their need.

It apportions blame, by suggesting the poorest among us are part of the problem, rather than being the principal victims. That's code for saying benefits are too high.

Luxon also said: "Grant Robertson had one task: To ruthlessly focus everything on the cost-of-living crisis."

National Party leader Christopher Luxon yesterday: Who's looking after the "squeezed middle"? Photo / Marty Melville

Is that true? If our hip-pocket worries are the only issue, what happens to the large, urgent and complex task of aligning economic and environmental targets? Does it mean climate change is important but not right now?

Aligning those targets should be the central task of every responsible Government and every responsible political party. As we pursue the growth of widespread prosperity and social resilience, every relevant policy also has to help lower emissions.

How well did the Budget advance that cause?

In addition to the already announced $2.9 billion Emissions Reduction Plan, there was more money to decarbonise industry, plant native forests, reduce organic waste in landfills, put more freight on rail, retrofit insulation to existing houses and keep cheap public transport fares going for a couple more months.

All needed, but none of it enough. Green Building Council chief executive Andrew Eagles called the one-year extension to the home retrofit programme "literally the least the Government could do". That comment could apply more widely.

The freight-to-rail and decarbonising industry commitments are gradual; the extension of cheap fares seems absurdly cautious. Why not just make it the new norm?

And there were no big new climate-action policies. The Greater Wellington and Horizons regional councils have jointly called for new hybrid electric trains, for example, with the support of a business case paid for by Waka Kotahi. Not in the Budget. And I know I'm a total stuck record on this, but there are still no subsidies for e-bikes.

Green Party co-leader and Climate Change Minister James Shaw is rightly pleased at how far Cabinet has moved on climate issues: There's never been anything near as much climate-related spending. That shouldn't be ignored. But he's also right to call for "more rapid action".

Climate Change Minister James Shaw: Pleased at what's been done but calling for much more. Photo / Mark Mitchell

As for the question of who's being squeezed and what was delivered, the Budget contained much for the middle, as listed above, and quite a lot more for those at the bottom.

The $1b cost-of-living payments package is instructive. To qualify for the $350 lump sum you have to be earning less than $70,000 and not be getting the winter energy payment: That rules out superannuitants and most beneficiaries.

Still, the Government says, about 2.1 million people will get the money. That's a startling revelation about how many people really are doing it tough right now.

But what about beneficiaries? Working for Families tax credits were not extended to them, despite it being an easily achievable and extremely valuable proposal from the Child Poverty Action Group. That's shameful.

And it seems astonishing that child-support payments have never been paid directly to sole-parent beneficiaries. But that will now be fixed, giving around 42,000 families "a median gain of $24 a week", according to the Minister of Social Development, Carmel Sepuloni. Good news there.

And in education. A new "equity index" will replace the school decile system, with almost $300 million in extra funding. It doesn't sound like enough, but it's a good start.

Labour Party Finance Minister and Deputy Prime Minister Grant Robertson delivers his Budget yesterday. Photo / Marty Melville

Meanwhile, business groups seem, well, almost happy. "Small businesses across the country will breathe a collective sigh of relief," says Buy NZ Made's Dane Ambler. That's because of the new growth fund just for them. And BusinessNZ's Kirk Hope "welcomed" the investments in education, small business, remote broadband, health and climate action.

The oddest thing? The Budget allocates funds for a report that will, almost certainly, explain why the Government is wrong to think it might be able to put a deepwater port in the Manukau harbour. I suppose, when that's done and out of the way, we'll get back to real plans to move the port. It will be progress of sorts.