Thursday, May 27, 2004

Delivering the social dividend

After four years of relative fiscal austerity, of delivering only small and incremental gains while running ever-larger surpluses, Labour has finally delivered the social dividend it was elected to do. Increased family support payments and wider eligibility. A new "In-Work" package which rewards low-income families. Free early-childhood education for 3 and 4 year-olds. More funding for education and health. Critics are dismissing it as a pre-election spendup and a lost opportunity to cut taxes, but this is what government exists to do: to provide those services, and to help out those at the bottom so that everybody can participate in our society and pursue their individual goals.

At the same time, though, it doesn't seem like enough. The government is still ignoring the elephant in the room - the student loans scam. While they've extended eligibility for student allowances, which will reduce the problem somewhat in the future, they have not universalised them, so people will still be having to borrow to eat. And they've made no mention of moves to reduce the debt burden on existing borrowers. Student loans are already having an enormous effect on our economy: they're preventing people from buying their own home (bad for the Kiwi dream, and bad for banks), and they're delaying the age at which people start families (bad for future generations). They are, to paraphrase Chris Trotter, a great steel straitjacket over our young people's future. Something needs to be done, and the longer the government waits, the worse it is going to get.

And unfortunately, it's not going to be done anytime soon. Labour is committed to being even more financially hard-nosed than the hard-noses, in wanting to pay down our gross crown debt to less than 20% of GDP. And the new spending contained in the budget has reduced room for maneuvre in future years. Effectively they're giving any future government a poison pill: if they want to cut taxes, then they must cut services or borrow to do so - both of which are likely to be unpopular with the electorate. It's electorally cunning, but it means that nothing significant is going to change for at least three years.

More when I've digestd the detail and seen more figures...