The UBI and Families FAQ

The UBI and Families FAQ

1. If a universal income is meant to be universal, why is there so much targeting?

Answer

We are moving to an Unconditional Basic Income not a Universal Basic Income.  There is a labyrinth of targeted social benefits that has to be unwound in the process and our focus is in removing the most dehumanizing and patronizing of these first. We start from the position that just because a person is in need doesn’t mean they are in any way “badly behaved” – that being a totally different issue. Such an ethical stance is very different to the accusative and arrogant underbelly of tightly-targeted social benefits. 

The fiscal constraints make it most unlikely that a UBI anywhere near a ‘living wage’ would be acceptable to society. It’s better to think of it as a part time paid work equivalent, meant to provide us all with some means to finance periods of no income – such as for re-training, dealing with family problems, or temporary unemployment. It is also a long-overdue modest recognition of the contribution to society from the 1 million people who work but are not paid.

NZ Superannuation is a universal benefit for elders. However it is set at such a high level it would be impossible fiscally to extend that across the whole population. Meanwhile the evidence suggests the most stressed families are those with very young children. So our first step to an Unconditional Basic Income for all, is to reduce NZ Superannuation and lift (from zero) the basic income of families with very young children. It is an iterative path – there will be more steps as integrity is restored to the taxation system from TOP’s flagship policy #1. So targeting will reduce over time.

2. Won’t this just incentivise people to breed?

Answer

No more than a very high NZ Super payment encourages people to live longer than they otherwise would. The evidence tells us that families with very young children are vulnerable and the consequences of their children being disadvantaged end up costing society an awful lot of money. This policy alleviates some of that stress at source. And of course the children of today are the taxpayers of tomorrow who – under the current arrangements – are expected to fund the basic income for elders. No children = no pension.

So there is no evidence that “breeding” is an outcome, and when you consider the full cost of having children you’d see why. This policy exists in many countries that have very low fertility rates and it hasn’t resulted in more kids. It has resulted in parents investing their children more however.

3. Won’t bad parents just smoke or drink the money?

Answer

“Bad” parents do that with all their money by definition, irrespective of their income. The UBI policy is about alleviating the stress of families with young children. To assert that that somehow is equivalent to funding bad parents is pejorative profiling more suited to ideological preconception. Evidence shows that the vast majority of parents when given extra money spend it on their children and spend less on alcohol and ciggies.

4. Shouldn’t we be incentivizing parents to stay at home with their kids rather than paying for child care?

Answer

Such a payment helps in those cases where that is desired by the parents. The parents are free to make that choice as they should be, it is not for some external agency to impose any form of parenting on people as required. This unfortunately has been the mindset of tighter and tighter targeting of social benefits that we are rolling back – because of the unnecessary stress it puts on recipients.

Up until the age of 3 the evidence on childcare is mixed, but after the age of 3 childcare has clear benefits, particularly for children from struggling families. That is why we are funding high quality full time childcare from that date. 

5. Is your social housing policy exactly the same as National’s and what evidence is there that putting social housing in the hands of private providers works.

Answer

No. With respect to social housing we are proposing to hand over the State Housing stock to approved charitable agencies, not to attempt to sell assets that have a false book value established by taxpayer funds being used both as the tenant subsidy and as the cost of the investment. The reality is that this housing needs to be maintained in a manner that is acceptable. There is plenty of overseas evidence that social housing providers provide a better service to tenants than government providers, at no extra cost. 

6. Won’t the rental reforms you suggest lead to a reduction in property being built and a lack of rental accommodation?

Answer

The market will decide the demand and supply. This certainly hasn’t been the case in Germany which is the model being advocated here. In fact 60% of people there live in rental accommodation – as opposed to 30% here. There is no suggestion of any permanent disequilibrium.

7. Or… does your policy exist to create a disincentive to be a landlord?

Answer

Not at all – quite the opposite. Providing tenants with permanency will incentivize them to take pride and care in the property they occupy – it is their home, no longer just a short term flat. So long as the rents are free to settle at market they will reflect the balance of acceptable return and acceptable cost. 

In conjunction with our tax reform the incentive to land bank or speculate on housing will vanish, leaving rental income as the chief reason to own property. This will provide a strong incentive to build and rent out accommodation.

Landlords will be able to charge market rents, but without rapidly increasing land and house prices we expect these to stablise at a reasonable rate of return for landlords. 

Given the high prices and prospect that many face of being tenants for life, offering them stable, warm and dry housing stock is merely levelling the playing field.

8. If people are going to be renting all their life what will they use for retirement savings?

Answer

Instead of the equity in a house being their savings, they will be free to apply that income to the universe of savings vehicles. There is evidence in New Zealand that the very high home ownership rate has depressed savings rates from annual income, created a morbid dependency on debt-financing and engrained an expectation of house price inflation as the way to erode the load of the debt. Of course such an expectation can only be fulfilled if lenders are less rational than borrowers and happy to see the real, risk-adjusted value of their loans diminish. There is no reason that should be so – which supports the evidence that new Zealanders savings have actually been lessened via the money illusion of debt-leveraged speculation.

We will still encourage Kiwisaver as currently happens. The government can’t be expected to provide everyone with a comfortable retirement, especially as we live longer.

Applying savings instead to investment in business that creates jobs and incomes will – if other economies’ experience is to be accepted – result in a stronger ability to fund retirement.

9. What happens if a tenant is a bad tenant (e.g. trashes the house, smokes P etc)

Answer

If they violate lease conditions such payment of rent or care of the property they are evicted.

10. There are a bunch of people coming to retirement age who don’t own a home and will be getting NZ super soon. Even with the hardship grant these people won’t have enough to survive.

Answer

That sounds assertive rather than evidence-based. However if it’s true then the standard response of the welfare state would swing in as it always has. And don’t forget our policy package overall makes housing much more affordable.

11. How will you phase in your super plan?

Answer

This is the big difference between means testing as a policy response and just continuing to move out the age of eligibility. By definition the means test will remove the full NZS payment from those who don’t need it and redirect that to those who do. There is no need for phasing.

12. Is the means testing progressive or is there just a line in the sand?

Answer

There will no doubt be an abatement regime. Whether it is tight or wide will be a matter of negotiation with the government of the day. But we would propose a straight line as follows:

As people earn more they will progressively lose their top up. Once a person is earning $50,000 in total income they will not receive any top up. This equates to an additional tax for superannuitants of 15c in every dollar they earn up to $50,000. This means that generally superannuitants will not face tax rates higher than the current highest tax rate. 

13. How much does all this cost?

Answer

There is no cost – it is a transfer of taxpayer-provided funding from one group to another. Breaking it down, the whole package of first steps to a UBI will cost around $3-3½ bn pa and that will all come from the means testing of NZS – it’s about ¼ of the cost of NZS currently. Evidence suggests this investment would give society a return on investment $2b more than it costs each and every year, thanks to the improved outcomes of these children.

By changing the indexation of NZ Super to the rate of inflation faced by retired people rather than wages, the headroom for other forms of UBI will grow.