Alert On Welfare Reforms

TNC Agenda Lurks Here, Too

- by Sue Bradford

Watchdog 124 (August 2010) featured an excellent article by Murray Horton, entitled “Stop Thief!: The Not So Secret Agenda To Steal NZ People’s Assets”.(1) Murray detailed a number of ways in which National has been working to make our economy a more inviting place for foreign capital, including through its abortive attempt to allow mining in national parks, and its’ rather more successful efforts to open up local body infrastructure, ACC, education, State-owned Enterprises (SOEs) and prisons to at least partial privatisation.

He also outlined National’s latest attack on workers and unions through the industrial relations reforms announced by John Key on July 18, 2010, the scene in Auckland of the stroppiest protest we’ve seen in our city for at least a decade. “Stop Thief!” alluded to the latest round of beneficiary bashing in passing, but from where I stand the current actual and potential attacks on our welfare system are just as serious as those on workers’ rights, and are just as much influenced by the ambitions of international capital as the renewed push towards privatisation.

Brief Historical Perspective

During the Great Depression of the 1930s capitalism came under extreme threat, internationally, and here in Aotearoa. Traditional social contracts almost completely broke down under the pressure of very high unemployment and extreme poverty. Economic and social dislocation affected a large proportion of the population, in both urban and rural New Zealand. In response, the first Labour government laid the foundations of the Welfare State as we know it today. Through the 1938 Social Security Act Labour cemented in the notion that everyone has a right to a reasonable standard of living, and that society has a shared responsibility to look after those who cannot fend for themselves.

In 1964 a new Social Security Act “amended and consolidated” the 1938 legislation, but kept the principle of the safety net intact.(2) This Act is still the one in use today, although it has to be one of the most amended and difficult pieces of legislation to use, a constant nightmare for Work & Income staff and beneficiary advocates alike. It is well past its use-by date and reform is needed – but the question is, of course, reform in whose interests? Since 1938, the details of welfare law and practice have evolved, but until recently the fundamental underlying premise remained the same – that our most vulnerable citizens are guaranteed protection when they are not in the paid workforce because of unemployment, old age, sole parenthood, sickness, injury or major impairment. Unfortunately, National in the 1990s and Labour in the 2000s started us on a slippery slope towards a dangerous reconfiguring of the whole purpose and nature of our welfare system. National has now picked up on this again with renewed vigour, and like many others, I fear what the near future holds.

Why Is Welfare Reform Part Of The Transnational Agenda?

Changes to welfare and employment law are totally intertwined. When the National government introduced the Employment Contracts Act and substantial benefit cuts simultaneously straight after the 1990 election, this was a deliberately two pronged attack aimed at pressing down workers’ wages and conditions as far as possible. At the same time, Bolger, Richardson, Shipley and co were opening up our economy to foreign investors even more than their Labour predecessors had done, promising a complaisant workforce made even more compliant because of harsh welfare laws.

When benefits are at levels so low people can’t live on them with any degree of comfort; when workers who leave their job voluntarily or are sacked face a six month stand down before they receive the dole; and when unions are weakened to the point that most workers in NZ are non-unionised, you then have a situation where foreign capital feels most welcome. The Key government of course has just taken this to new depths with its eagerness to change employment law – under Parliamentary urgency – alongside a $100m gift of taxpayer money – to ensure a dodgy American corporation keeps its production onshore (the Warner Brothers/”Hobbit” fiasco. See cover story. Ed.).

The financialisation of capital over the last few decades has changed the old paradigm. In the 1930s and the decades following, capital was mainly directly involved in production. It was also at least partially fettered by the comparative power of unions, with compulsory membership and the ability to negotiate and maintain national awards. The big slice of capitalism which now operates in, and through, the financial markets is not subject to the same moderating factors. The signing of endless world trade and free trade agreements, the removal of almost all subsidies and tariffs for local production, and the selloff of whole hunks of our productive base and infrastructure helped lead to high unemployment in the 80s and 90s, which in turn led to the downward pressure on the benefit system.

Alongside this, we have seen increasingly clever arguments around words like “dependency” and “social responsibility” aimed at enforcing from the top a culture of disrespect and hostility towards anyone unlucky enough to be reliant on welfare for survival. There is one exception to this. Superannuitants have, on the whole, been fortunate enough to escape this opprobrium, as generation after generation of governments, politicians and media deliberately work together to obscure the fact that superannuation is actually another benefit. I just wish that all beneficiaries were treated with the same respect that our older citizens receive.

This whole process of neo-liberal reform – in NZ as around the developed world – has led to the development of what some of us now call the “precariat” – people who move constantly between paid work and the benefit system; are in both paid work and welfare at the same time; and/or are in low paid, part time, casual and/or temporary work. An enormous number of workers in NZ today fit this category, whether they are sole parents working their required 15 hours minimum stocking supermarket shelves while their children stay home alone; Pasifika women working three different part-time jobs cleaning at night to help support their family, young workers totally at the mercy of the boss when it comes to which shifts they’ll work next at the local fast food outlet….and the rest. For many in the precariat, it is only the benefit system, Working for Families and the Accommodation Supplement, which allow them to survive. This is a massive taxpayer subsidy to employers, enabling them to keep wages much lower than they should be, and ensuring we are a nicely attractive proposition for foreign investment.

The International Scene

Around the world, countries are being pushed into significant welfare reform as part of the pushback by global capital in the wake of the 2008 global financial crisis. Austerity measures are being demanded throughout much of the Organisation for Economic Cooperation and Development (OECD). The French fightback has been heroic, with massive protests against the pension reforms implemented by the Sarkozy government. We have seen periodic eruptions of mass protests and demonstrations in most parts of Europe in recent months as citizens reject the “privatise the profits, socialise the losses” mantra of their governments. What’s happening in Europe is very interesting but, on the whole, NZ governments tend to look elsewhere for their ideas on welfare reform, to countries like Australia, the UK, the US and Canada. What follows are a few snapshots of recent developments in these countries.


Our neighbour has introduced an “Income Management” system right across the Northern Territory. This requires that 50% of a household’s welfare payment, including any advance or lump sum payments, can only be spent in a way the State decrees, leaving just 50% at the beneficiary’s discretion. The managed income can only be used via a BasicsCard or by direct payments to approved providers like particular shops, landlords or power companies. A new law means this can be applied across the board, not simply to particular indigenous communities as was the case in the past (although that was bad enough). Australia also has widespread work for the dole, requires sole parents with children aged six or over to be work tested, and has stiff work testing obligations for people with disabilities and long term health issues.

United Kingdom

The previous Labour government initiated:

  • A Work First ideology, increasing and applying work testing to all categories of beneficiaries, including non-working partners.
  • The “Pathways to Work” programme has been applied to people with disabilities and chronic illness.
  • The onus is on the beneficiary to find work, undertake work experience, training or volunteer work. Active government involvement in creating new jobs is limited to some wage subsidies. Work is often poorly paid and low quality – increasing the numbers of people in the “precariat” discussed above.

The new Conservative/Liberal government announced sweeping reforms in early October 2010, including:

  • Introduction of a single means test and single “universal credit” with the goal of pushing people into paid work, no matter what the reason for their being out of the paid workforce. All people on incapacity benefit are to be reassessed for work readiness.
  • The end of the universal child benefit – it will be means tested from 2013.
  • Cuts to housing allowances
  • Cuts of £50 per week to incapacity benefits once people have been on them for a year.

… a time when there are five jobless people for each job vacancy in the UK, and Government has announced they are going to make 500,000 people redundant in the public sector.

United States

In 1992 President Bill Clinton introduced wide reaching welfare reforms, in a context of extremely anti-welfare rhetoric and demonisation of recipients. The National government and its allies - people like Dame Margaret Bazley - worked hard to bring the “Wisconsin” model’ into New Zealand in the late 1990s. Applied in many other states as well as Wisconsin, in its most extreme form this introduced extensive compulsory work for the dole programmes, including for sole parents with children as young as 12 weeks. Unemployment benefits were already privatised through private employment insurance schemes. The provision of welfare and employment services is also substantially privatised.

In the wake of the mortgage meltdown in the US, and its’ accompanying financial carnage, unemployment rates have skyrocketed. There is a new word in the American vocabulary – “99er”. 99ers are people who have collected their private unemployment insurance benefit for the maximum allowable period of 99 weeks. Once that’s over, the only type of income assistance for which they are usually eligible is foodstamps, which do not cover housing or other essential costs. It is no wonder that the US continues to be characterised by very high rates of homelessness and very high rates of incarceration – 1.4 million in state prisons as of January 2010.


Since 1996 Canada has had Employment Insurance (EI), a modified and cheaper (for Government) version of its earlier Unemployment Insurance scheme. Insurance premiums are compulsory for all workers, from the first hour of paid work. Employees and employers share the cost (like ACC here). If a worker goes on to welfare, they receive 55% of their pre-layoff weekly income, capped at $C457 a week in 2009–2010. However, this is only for some people – most people get less, averaged at $C350 a week in 2009.

People wait two weeks before getting any benefit; if they quit or are fired, they don’t receive anything; and the benefit only lasts 19 – 50 weeks, depending on regional unemployment levels. Some people do not qualify for employment insurance at all, or are eligible for only a very low payment. Only 40 – 45% of the unemployed qualify. Those in precarious work either don’t qualify, or are only eligible at a very low level. There is a provincial welfare benefit which forms a kind of safety net, but it is very punitive, and is paid at very low rates which differ from province to province (e.g. $C200 a month for single unemployed). Some people do not even qualify for this. These notes are based on a very useful presentation made by Canadian union economist Jim Stanford at Auckland University in 2010 – an interesting read if you would like to know more. (3)

New Zealand Follows Along – Our Recent History

In the 1990s National did its best to take a leaf from Wisconsin and elsewhere with its cutting of benefits, extension of stand down periods, limited extension of work for the dole and attempts to further entrench hatred of beneficiaries through measures like the Code of Social Responsibility, talk of “Beyond Dependency” and ads on TV warning people about ripoff beneficiaries. In the 2000s, Labour did not do anything to restore the benefit levels that National cut in 1991. They also, among other things:

  • Reintroduced the old “remote areas” provision through Steve Maharey’s “Jobs Jolt” in 2004, in which whole areas of rural and provincial NZ became “no go zones” for unemployed people,
  • Abolished the Special Benefit, replacing it with the far more limited Temporary Additional Support payment, reducing hugely the amount of discretionary income assistance available for beneficiaries whose basic needs exceed their income. This meant beneficiaries plunge into ever greater debt to Work & Income and to private companies as they struggle to survive.
  • Changed the fundamental purpose of the Social Security Act from one of meeting real needs to making seeking paid work the primary purpose of the welfare system – the “Work First” principle.
  • Announced plans for a single core benefit which it never managed to implement.
  • Entrenched discrimination against the children of beneficiaries through the In Work Tax Credit component of Working for Families.

The first major thing National, ACT and the United Future Party did on welfare after they came to power was to introduce the “Future Focus” legislation in early 2010. Key features of Future Focus, which became law in September 2010, are that:

  • Sole parents on the Domestic Purposes Benefit (DPB) are subject to work testing once their children turn six.
  • People who have been on the unemployment benefit for one year have to reregister and start again at that point.
  • More sickness and invalids’ beneficiaries face pressure from Work & Income to find at least part if not fulltime paid work.
  • Discretion was further removed from the welfare system.

Secondly, the Minister for Social Development, Paula Bennett, established a Welfare Working Group (WWG) in April 2010. Chaired by Paula Rebstock, former Commerce Commission Chair, the full WWG membership consists of Catherine Isaac (Judd), formerly President of the ACT Party, Professor Des Gorman, Professor Kathryn McPherson, Associate Professor Ann Dupuis, Sharon Wilson-Davis, Adrian Roberts, and Enid Ratahi Pryor. The brief for the WWG includes:

  • Reducing long term benefit dependence
  • Looking at ways in which more sickness and invalids’ beneficiaries can be encouraged to enter paid work
  • Considering how NZ might learn from overseas examples of employment or ACC-type insurance systems for welfare – such as Canada’s.
  • Looking at whether the structure of our welfare system contributes to “dependence”.
  • The WWG is not allowed to consider matters such as superannuation or whether benefit levels are sufficient or not. From comments made by Paula Rebstock and papers published so far, my perception is that the WWG is so far focused on:
  • Manufacturing a crisis based on shonky statistics, aimed at pushing major welfare changes on the false premise benefits will become unaffordable by 2050.
  • The possibility of introducing time limited benefits – i.e. each person will have a life time ration of benefit eligibility, which will run out after a certain number of years.
  • Looking at extending the work testing of DPB, invalids and sickness beneficiaries as broadly as possible, and at moving as many people off the invalids’ benefit as they can – because it is a more costly benefit than unemployment or sickness benefit.
  • Considering whether an insurance/ACC model might be applied in this country. This would be a step towards outright privatisation, and overturn in entirety the fundamental principles established in 1938.

In all this, the Government and the WWG appear oblivious to the fact that NZ’s unemployment rate is rising, with jobless figures around the 250,000 mark. Where all the new jobs for the sick, injured and disabled are going to come from is anyone’s guess, especially as the Government has no commitment to job creation. The Welfare Working Group makes its final report to Government in February 2011.

A Similar Agenda

Once comparisons are made between what has happened or is happening in Australia, the UK, the US and Canada, and what is happening here, it is easy to see a number of similarities and influences. Internationally there has been considerable research on how conservative reforms aimed at cost cutting and privatisation have been deliberately and consciously driven by international governmental organisations and Rightwing think tanks – for example see “Social Security Privatisation: An Ideologically Structured Movement”,(4) and Sally Covington’s comment in “The war on the poor” (5).

We have our own Rightwing think tanks locally of course, joining in the fray. Both the Business Round Table and the Maxim Institute research and publish constantly and extensively their ideas for welfare reform in this country. Looking at the recent history of welfare changes through this lens, it is easy to see how successive NZ governments have been influenced by welfare reforms in similar jurisdictions, and by the ideological push which lurks beneath the surface. New Zealand is following a pattern that has worked for the neo-liberal agenda internationally.

  • Governments start by creating an urgent crisis through the use of dodgy statistics and economic fear mongering, saying that their country can no longer afford welfare at current levels of support, whatever they may be.
  • They then roll out propaganda campaigns, both overt and subtle. The campaigns in the 90s in NZ were very open; the current one in 2010 is a lot more clever and covert. International experts from countries like those I’ve mentioned here are brought in to tell us what to do. A campaign which denigrates people on benefits (Maori solo mothers, bludging sickness beneficiaries anyone?) rumbles quietly along.

The reforms themselves also share common themes:

  • Cuts to benefit levels, and to discretion within the income support system.
  • “Work First” – the primacy of paid work as the be all and end all, without any concept that caring for dependents or voluntary work in the community actually has any value.
  • Ever increasing interference in peoples’ personal lives, from details of income and expenditure, through to the nature of sexual relationships and the most intimate details of health and disability issues.
  • The push towards work testing almost all beneficiaries, including sole parents with young children, and people who are sick, injured and/or living with major impairment(s).
  • Linkage between employment law and welfare reforms, pressing down on wages and conditions alongside high unemployment and deunionisation, which leads in turn to an ever expanding “precariat”.
  • Moves to insurance models of welfare.
  • Time limited benefits; and increased use of punitive measures like reducing or cutting benefits altogether for non-compliance, even for those raising children.
  • Contracting out of employment and welfare services and programmes previously provided by the State.
  • Use of loaded language and the marshalling of simplistic statements to reinforce attitudes which blame and demonise beneficiaries - unless they happen to be on superannuation/old age pensions.
  • But – in regards to superannuation - there is also a strong push internationally, increasingly reflected locally, to raise the age at which people can receive superannuation, and to undermine universal provision.

In Conclusion

In welfare, as in every sphere of economic life, New Zealand is a fully paid up member of the globalised corporate sphere of operations. We must fight back against what is happening with welfare, just as we must against industrial reforms, privatisation – and the rest. These issues are all connected, and we need to understand the linkages. The Alternative Welfare Working Group will be publishing a full report on our findings and ideas about alternative solutions to those put up by successive governments in December 2010. I also hope that the year ahead will see more activity and direct action taken on welfare, jobs and poverty, and I am part of a new group being established in Auckland to do just that. I look forward to seeing activist groups coming together in other centres as well – Rotorua is an honourable exception, but elsewhere there hasn’t been much action for a number of years. This is not a time for sitting back and letting Paula Bennett and John Key continue with their plans without substantial resistance from all New Zealanders who think we should live in a fair and compassionate society, rather than a country whose overarching goal is to make itself as attractive as possible to the next transnational corporate spending spree.

Sue Bradford was an activist in the unemployed & beneficiaries movement 1983 – 1999, and a Green MP with responsibility for welfare & employment issues (among others) from 1999 – 2009. She is currently a fulltime PhD candidate in public policy at Auckland University of Technology (AUT), a member of the Alternative Welfare Working Group, and an active volunteer with the Child Poverty Action Group and the Kotare Research and Education for Social Change Trust. Contact:

1. Murray Horton, “Stop Thief! The Not So Secret Agenda To Steal NZ People’s Assets, Foreign Control Watchdog, 124, August 2010, pp 1-9,
2. BAFNZ & Caritas, (2008), “The Unravelling Of The Welfare Safety Net”, Wellington, New Zealand.
3. Stanford, Jim. (June 2010) “Beware The ‘Insurance Model’”, Presentation at Auckland University.
4. Svihula, J & Estes, SL (March 2008). “Social Security Privatisation: An Ideologically Structured Movement”, Journal Of Sociology And Social Welfare, v 35, issue 1.
5. Covington, Sally, (Winter1998), “How Conservative Philanthropies And Think Tanks Transform US Policy”, Covert Action Quarterly, pp 4-5.

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Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. August 2008.


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