Tuesday, April 29, 2008

GST, food, and child poverty

The big issue of the day seems to be RAM's call to remove GST from food. It's a sign of how successful the Revolution has been that even lefties like me (and Russell, and The Standard) think that its a bad idea, and that the hassle, confusion and increased compliance costs will likely swallow any benefit (assuming of course that our greedy supermarkets don't just absorb it themselves. After all, if people are willing to pay the pre-GST price for milk now, why wouldn't they keep charging it?) But coupled with a desire to avoid arguments over why precooked chicken purchased in a supermarket should be GST-free while KFC should not, there's also a more important objection - and that is that it fundamentally misses the point. The problem here is income adequacy, and you do not address that by cutting taxes. Instead, you address it by boosting wages and benefits. It's cheaper, it allows you to target people in need rather than benefiting the rich, and it doesn't play havoc with your tax system. The down side is that there’s a very real danger of people falling through the cracks - which brings me neatly to the Child Poverty Action Group's latest report.

CPAG has been reporting on child poverty in New Zealand since 1994, and making policy recommendations which have usually been ignored (National thinking child poverty is all a communist statistical trick and their own fault anyway, while Labour recognises the problem but is too craven and beholden to the rich to do anything serious about it). Their latest report - Left Behind: How social and income inequalities damage NZ children (executive summary here) - points out the extent of child poverty in New Zealand and the way it affects their lives. In 2004, there were an estimated 150,000 children in benefit-dependent families in severe hardship. And this poverty utterly blights their lives. Children who grow up in poverty are three times more likely to be sick. They are significantly more likely to be hospitalised for preventable diseases. They face reduced education prospects, and so reduced opportunity throughout their lives. And they are more likely to die. In a nation built on the concept of a fair go and everyone getting an equal start in life, this is an obscenity.

Even more obscene is that Labour, the party that is supposed to care, has done nothing about this. All their policy interventions - Working For Families, the engineered labour shortage, raising the minimum wage - have excluded beneficiaries. While those programmes have done wonders for the working poor, for those on unemployment benefits, and those easily able to take on work, beneficiaries with children, with illnesses or disabilities have been left behind. And these make up the majority (and certainly account for the majority of children dependent on benefits - the Herald has the stats in passing here). Those 150,000 beneficiary children in poverty? They're still there, after nine years of a Labour government. They have simply been left behind.

The problem, as with GST and food, is income adequacy. In 1991, benefits were cut to sub-starvation levels, and have never been restored. It's time they were. We also need to target child poverty specifically by expanding WFF's tax credits to cover children of beneficiaries (effectively this would reintroduce a universal child benefit), and by improving access to health, education, and housing. This is supposed to be a country where everyone, whether rich or poor, gets an equal start in life - and we should make it happen.

Update: I should add that it's not that I'm particularly fond of GST - it is after all a regressive tax rather than a progressive one. But it's interesting to note that no-one in this debate is advocating its abolition and the return to a more progressive system of income tax. Instead, they're nibbling around the edges and pushing for changes which are far less effective and more complicated than they need to be. To paraphrase Napoleon, if you want to fight poverty, fight poverty - don't distract yourself with arguments about what "food" is.