The UBI and Thriving Families
First Steps to a UBI – Thriving Families
The Opportunities Party is starting along the road to an Unconditional Basic Income (UBI) by ensuring two groups are the first to get it.
As covered in the book, The Big Kahuna, a UBI:
- empowers people through giving them more choices on how to spend their time, invest their means;
- recognises the contribution of the 1 million people who work but are not paid, and without whom our society would collapse;
- provides a cushion to lessen the impact of the casualisation of work;
- eliminates the poverty trap, the disincentive to work accompanying targeted benefits; and
- winds back the dehumanisation and stigmatisation of benefit targeting.
The major constraints on how high that a UBI can be set includes its cost to the taxpayer and its relativity to the rewards for paid work.[i] If fiscal overload is to be avoided then the taxpayer cannot be expected to foot the bill for whatever level of UBI proponents dream of. Likewise, the incentive to seek paid work cannot be undermined by the level of the UBI otherwise the resultant lack of labour available and the rising costs of production faced by New Zealand firms, would impart serious consequences to our economy.
A full UBI is our firm objective but requires first that integrity be restored to the income tax regime as per Policy #1 and then we will introduce further taxation reform to fund this aspiration. It is unlikely that a UBI will ever totally replace targeted social assistance but it certainly will markedly reduce our reliance on targeting, with its stigma-laden selection criteria and its perverse impact on behaviour.
A UBI can relieve poverty without creating poverty traps. This will be increasingly important as the job market becomes more and more disrupted. The key difference between the UBI concept of social assistance and the targeted approach of the current regime is the absence of work testing. There may be broad criteria for certain types of UBI – age, income, family type for example – but those delineations will be nowhere near as granular and onerous as the poverty traps that targeted, work-tested benefits entail. In time there will be an underlying UBI for everybody – it must be modest of course and not compromise the incentive to take paid work.
The first 2 groups to enter the UBI regime will be
- all families with very young children (under 3, or under 6 if adopted or fostered) - $200 per family per week. This replaces paid parental leave
- elders - all those citizens over 65 years of age - $200 each per week. In addition elders who satisfy a means test will be able to top up to the current NZ Superannuation level by a further $7,500 pa. We will index the top-up to elders’ costs not to average incomes.
The UBI for families with young children provides a substantial (up to $10,000 pa) lift to those families and is the most potent boost to their ability to nurture their children in their most vulnerable years. This change starts to honour the millions of hours of unpaid work associated with child rearing, without which our economy would collapse. For low-income families we intend to make additional changes to step them back from the arduous work-testing that is proving so debilitating for these vulnerable families.
- Low-income families with children (under 17) – an additional $72 pw ($3,744 pa) instead of in-work tax credit, no hours test required. Of course they remain eligible for the other current welfare payments (unemployment, disability, sole parent, illness etc).
- low income families will get free full-time childcare (for children between 1 and 3) if they are in paid work. The work test will have no minimum hours.
The changes will be fiscally neutral, with funding of the family investment initiatives above plus the free universal early childhood education initiative of Policy Priority #5 coming from reform of the State pension scheme.
Over time we will continue to align the tax and welfare regime with the needs of a society confronting increasing inequality, the casualization of paid work, and the escalating health costs of an ageing population. This will be achieved by extending the UBI across the whole population and rolling back but not eradicating the need for targeted support.
Decent Housing for decent people
Housing costs have become prohibitive in New Zealand and so The Opportunities Party is planning to reform the residential market so that secure, warm shelter becomes accessible for all. With house prices as high as they are, the reality is many more families will never own their own house. They must have security of tenure. We intend to change the regulations around residential tenancy law so leases make it far easier for a tenant to remain in the premises long term.
- This will be achieved by restricting the conditions under which a landlord can evict a tenant to those of non-payment of rent or property damage. Sale of a property is not necessarily a legitimate reason for eviction. Tenants will be able to give 90 days notice.
- A WOF will be required for all residential rental properties – this will ensure sanitation, warmth and energy efficiency standards.
- We will expand provision of social housing by gifting Housing NZ houses to the voluntary sector.
We are investing more in struggling families and in our coming generations while closing the income tax loophole that favours owners of assets. Finally we are aligning the benefits received by the elderly with those available to families.
We see what we’re proposing as a long overdue correction to the situation sponsored by a succession of Establishment party politicians – wherein those least in need, benefit the most from the government’s social and tax policy. We see that situation as ethically an affront to New Zealanders’ sense of natural justice.
And so to funding of the particular initiatives outlined above – the total cost of which is around $3.3 bn pa. While we favour an Unconditional Basic Income (UBI) for all, the arithmetic on that indicates a pre-requisite is that NZ Superannuation, the most generous of all social benefits, is just too high. It needs to come down – the Establishment parties are ducking and diving around raising the age of eligibility to achieve that. We don’t subscribe to that arbitrary approach and instead favour setting NZS at the level of a possible ultimate UBI as well as means testing for any top-ups.
[i] “The Big Kahuna; turning tax and welfare on its head in New Zealand” (2011), Gareth Morgan and Susan Guthrie, Public Interest Publishing (PIP)
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.
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.
“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.
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.
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.
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.
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.
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.
If they violate lease conditions such payment of rent or care of the property they are evicted.
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.
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.
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.
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.
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