Newsroom Pro's 8 things at 8am

The family incomes package in Steven Joyce's Budget has proved an effective political jujitsu move. Photo: Lynn Grieveson

In today's email we dig even deeper into yesterday's Budget.

1. A political jujitsu move

Now the reaction is in and the first votes in Parliament have been made, it's clear the Government's family incomes package in the Budget has proved an effective political jujitsu move.

Bill English and Steven Joyce took the thrust of an Opposition attack on child poverty and housing stress and then used two Labour policies (the Accommodation Supplement and Working For Families) to flip Labour and the Greens on their heads.

That was evident in the votes last night in Parliament on the family incomes package, which includes more than $100 a week extra for some poorer working families paying high rents in the likes of Auckland Tauranga.

The Green Party and New Zealand First ended up voting in favour the package, while Labour did not.

Greens Co-Leader James Shaw told me this morning he had criticised the design of the package, which delivered extra income to those on higher incomes through the tax threshold changes, but he supported the measures aimed at poorer renters.

"We've been arguing for a version of these reforms for many years," he said.

"It's too small and it's eight years too late, but it's a step in the right direction."

Labour and the Greens had identical criticisms and would look to coordinate amendments in Parliament, but had come to a different decision on voting for the package, he said.

"They came down on one side of a fine line, and we came down on the other."

The family incomes package has effectively done what National did in the 2014 and 2016 Budgets - pivoting left into Labour and Green territory (as it did then with its free doctors visits for children and its real benefit increases).

There is an open question though on whether it has done enough for housing affordability and housing supply, and one of the big topics of debate after the Budget is whether the big accommodation supplement increases will lead to rent increases.

2. More work to do

Finance Minister Steven Joyce acknowledged in an interview with Guyon Espiner on RNZ's Morning Report that there was still a lot more work to do to alleviate child poverty and housing stress.

For the first time he identified figures for the numbers of children left in poverty and the number of families in severe housing stress.

He said the package would lift around 50,000 children above the threshold for child poverty used by the OECD, which is that a family's income is less than half the median income. Joyce acknowledged that 90,000 children were still left in that category of being in poverty.

He also said the family incomes package would lift around 20,000 people out of severe housing stress, which is measured as the number of people with less than $180 a week to spend after housing costs. But it would also leave around 100,000 in that category.

See the full interview and a panel discussion afterwards here. I was on the panel discussion led by Guyon with David Slack and Heather Roy, which starts around the 31.40 minute mark.

3. Stealthy tax cuts for the rich?

Newsroom's National Affairs Editor Shane Cowlishaw has taken a closer look at the reaction to yesterday's budget.

He finds there were shades of red in the keystone of National’s Budget – a family package aimed at those on the lowest incomes. But is it a symptom of a Government really trying to help the bottom rung, or simply an election sweetener?

The Government’s Budget seemed to have something for everyone, but it was also fiscally restrained considering spending could have been much higher given the healthy sheen to the books.

At the centre of yesterday’s announcement was a family package, aimed squarely at those on lower incomes and living in expensive areas.

Of course the Budget was designed to appeal to votes, but National has been keen on social conservatism for some time. They have been steadily digging into Labour territory, putting their mark on the 2015 Budget by introducing the first benefit rise beyond inflation in 30 years.

So it was not hugely surprising when the family package, which will cost $2 billion a year, was revealed.

It consists of four main parts: a boost to both Working For Families (WFF) and the Accommodation Supplement, a rise in the two bottom income tax thresholds, and an increase to the student Accommodation Benefit.

Soon after details became public, both Labour and the Greens lambasted the policy as tax cuts by stealth that benefited the wealthy rather than the poor.

The parties’ social media teams were quickly into action, pointing out that under the tax threshold changes the more you earned, the more you would save. Of course this is true, but it ignores a few points...

4. Bigger percentage gains for the poor

Firstly, that $5 a week is arguably more important to low-income workers than $35 is to better-off families.

Secondly, the argument overlooked the family package - particularly the accommodation supplement. This received a hefty increase, albeit one that was overdue with current rates pegged to 2005 rents.
It means that a family with two children living in Auckland will receive more than $100 extra a week, considering the supplement boost, WFF increases, and the tax threshold shift.

That’s significant, and will be tough to argue against with those in line to benefit.

5. The politicians respond

Labour leader Andrew Little described the Budget as a classic election year piece of work that was designed to get National across the line in September.

“We don’t support a tax plan that’s skewed to the wealthiest families, the top 20 percent, about 300,000 families do pretty darn well out of this, they’re not the one that need the biggest [increase].”

He raised the point that although WFF was being boosted, the abatement rate was rising and the threshold where the benefit began to erode was being lowered.

James Shaw also argued the Budget was dressed up to support low and middle-income earners, but in reality was tax cuts in disguise for high earners. He was in favour of increasing the tax thresholds in line with inflation, which would have cost about $900m, but this was a step too far.

Asked what he would have changed, Shaw said WFF should have been extended to those people not in work.

Cleaning up rivers and improving water quality, spending more on efficient transport, and housing were also priorities for the party.

“We could have done all of that, and still kept within roughly 30 percent of GDP so that’s one of the things that I think this Budget shows, just how far Steven Joyce’s small-state dream really extends.”

“One of the things about this National Government and Steven Joyce in particular is that he’s shown a real commitment to staying in Government beyond all ideology or sense of other purpose, this is yet another Budget that is designed to maintain their position in Government rather than solve problems the country faces.”

National dismissed the criticism. Joyce said he was struggling to understand the Opposition’s numbers. “It looked a bit flat, would be my view, I might be biased but it looked a bit flat. They also don’t seem to be able to count.”

6. Supplements for landlords?

Prime Minister Bill English addressed concerns that the boost to the Accommodation Supplement would simply be soaked up by landlords raising rents when they realised tenants had extra cash.

The way to stop this from happening was to build more houses, something he said the Government was doing.

“The key to housing has always been getting more houses built, that happens to be a difficult, challenging, and lengthy process but it’s happening…we’d like it to be faster but the construction sector is running pretty hard.

"Just ask the families whether they’d rather have it or not have it, I don’t think families who are under real pressure with their rents regard themselves as some kind of bank account for their landlord.”

This approach may be true, at least in theory. However, there are questions about whether the housing supply is growing fast enough, especially in Auckland.

The Independent Hearings Panel that oversaw the creation of the new Auckland Unitary Plan reported a housing shortage of 40,000 in 2016, which has been growing at a rate of more than 5,000 a year since then.
Just 7,400 houses were built in Auckland last year, while the Government’s Housing Accord with the Auckland Council has targeted annual housing supply growth of 13,000.

While the main parties debated the merits of a family package, it was perhaps ACT leader David Seymour who provided the quote of the day.

“There was once upon a time when the National Party campaigned against Working For Families, they said it was communism by stealth but it seems today Steve has the hammer and sickle right on his sleeve.”

7. The mental health package

Newsroom's Sam Sachdeva has taken a closer look at one the bigger spending surprises - the $224 million added to mental health spending. He asks whether the Government has gone far enough.

Mental health is in the spotlight like never before. With a steady stream of reports calling attention to the pressures on the mental health sector, and increasing numbers of Kiwis willing to share their stories, the public understanding of, and concern about, the issue is steadily growing.

That in part explains why the Government sought to single out its mental health funding as part of the Budget, touting a $224 million increase over four years.

Among the spending is a $100m fund for mental health as part of the social investment programme, intended to target spending more accurately at those who need it using datasets.

The Government says the fund will “target innovative new proposals to tackle mental health issues” – exactly what those may be is unclear.

Social Investment Minister Amy Adams said the $100m fund was a complement to the Government’s wider mental health spending, and would focus on how mental health affected other areas like housing, justice, education, and social welfare.

“Obviously the significant majority of mental health spending is through the traditional health approach ... this is allowing the wider social system to say, what are the mental health initiatives that they think would significantly help drive down their pressures.”

Adams said one of the first orders of business of her new social investment agency, announced last month, was to work with the health system and social sector agencies on a new mental health strategy, which was “quite well advanced”.

“There’s some really interesting early thinking and we’ll have more to say when we put that strategy out soon.”

There’s also $4.1m for the Ministry of Social Development to trial integrated employment and mental health services, $11.6m for the Department of Corrections to improve its management of prisoners at risk of self-harm, and $8m for a fund to reduce suicide and self-harm among young Maori.

Health Minister Jonathan Coleman has touted an extra $100m for DHBs to support local mental health services, although that figure is included within their overall budget increase rather than in addition to it.

8. And the response?

The Government is clearly hoping it can inoculate the issue before it negatively sways voters’ opinions during the election campaign.

However, it has received mixed marks from mental health advocates.

Mental Health Foundation spokeswoman Sophia Graham said the Budget was “a really positive step in the right direction”, given previous shortcomings.

“The system has been stretched and fairly neglected for many years, so we’re glad to see investment into the mental health system.”

Graham said it was crucial that the Government learns from previous initiatives so it does not invest in “the same things” that were unlikely to lead to change.

Kyle MacDonald, a psychotherapist and spokesman for the People’s Mental Health Review, said the mental health spending in the Budget was only a small percentage of what was required, with mental health funding increasing only 28 percent since 2008 despite a 60 percent increase in demand.

“What was announced today comes nowhere near addressing the ongoing shortfall in funding for our core public mental health system.”

Labour leader Andrew Little dismissed the social investment fund as “a fudge”, and said overall mental health funding fell well short of what was needed.

“I’m the first to acknowledge we've got to do more, that’s why actually doing a stocktake in the very early stages is important just to see the magnitude of the gaps, the size of the problem so we can do something meaningful about it over time.”

With Coleman confirming Cabinet will soon consider a new mental health and addiction strategy, it's clear the Government intends to develop some meaningful plans of its own.

Sam also has a closer look at the Education funding announcements over at Newsroom, an in particular whether they represent a real increase.

According to a Budget analysis carried out by Victoria University’s School of Government and the New Zealand Institute for Economic Research, health spending was in fact forecast to decrease in real terms by an average of 1.5 percent each year through to 2021 once adjusted for population growth and the Consumers Price Index. Education spending was forecast to decrease by 1.6 percent during the same period.