An Intergenerational Lens on Budget ‘24
Budgets are big events, they dominate the media and public discussion for days. People pour over calculators and ask themselves what’s in it for me?
What if we stepped back and asked what’s in it for a child born today, someone who will attend high school in 2040 on the 200th anniversary of Te Tiriti o Waitangi? What if we took an intergenerational lens and applied that to the choices made in the 2024 Budget?
This Budget and its tax settings unfortunately steer us towards a future in 2040 with entrenched poverty and inequality for those children. Reduced investment in social and civic infrastructure, slashing environmental programmes and prioritising multiple home owners over renters and workers will keep New Zealand trapped in an unjust and unsustainable economy. These are the longer term consequences for people and planet of decisions made today but it doesn’t have to be that way. We could rebalance our tax and budget system to have the funds to invest in our collective wellbeing.
In the here and now of 2024, Finance Minister Nicola Willis can be said to have met her self-imposed test to deliver tax threshold changes and to cut spending. She succeeded in amending tax thresholds giving the majority of Kiwis a modest tax cut but this came at the cost of 240 programmes, around 5000 public servants’ jobs, and greater borrowing.
To cobble together the $12 billion needed for the tax cuts in 2024, without further blowing out borrowing costs, sweeping cuts were made across the board and are likely to continue. The Budget’s operational allowance, the amount set aside for discretionary new spending in future budgets is lower than needed to just keep the lights on, meaning without future revenue, deeper cuts will be needed in the future to just keep up with inflation and population growth. The biggest beneficiaries of the tax changes were landlords who will be about $2.9b better off in contrast to those on NZ Super and Veteran’s Pension who will only get $2 extra a week.
Willis’ Budget wasn’t an extreme slashing and burning budget like the Mother of All Budgets in 1991 but it is important to ask how the impacts will ripple through time? Does it lay down the tracks for collective wellbeing today and tomorrow or instead, future austerity and longer-term problems for the lives of children born today and the state of the environment in the future?
It is easy to answer this question in the case of children. Under the Public Finance Act, the Minister of Finance is required to present to the House on Budget Day a report on child poverty and this found that conditions for children will worsen as a result. Child Poverty Action Group estimates this Budget will see an additional 20,000 Kiwi kids growing up in poverty over the next three years. With over 25,000 families currently on the social housing waitlist but only 1500 social houses funded in the next few years (in contrast to the 6000 delivered last year alone) housing insecurity will deepen.
More people will stay caught in cycles of poverty and despair, unable to find warm and safe housing or to buy sufficient food for the whole family. We know that childhood poverty negatively influences adult employment, education, income, health and cognitive outcome, which is a grim legacy for the future.
By 2040, what might New Zealand’s economy look like as a result of choices made today? There’s very little in this Budget to promote productivity growth, such as investing in R&D and innovation which would help us lift our dropping economic performance rankings. Science spending was cut in the Budget, despite it being an investment in future low-carbon, high-wage job growth. Even though New Zealand has an estimated $200 billion infrastructure deficit, less was allocated in the Budget for it than forecast. Our infrastructure is crying out for investment in water pipes, schools and hospitals, which is needed to keep our economy functioning.
In two and a half decades time will we keep seeing the buying and selling of houses as the main personal wealth generator, only accessible to those with capital? New Zealand’s fixation on investing in multiple houses over productive businesses will only be further encouraged with the Coalition Government’s bright-line test reductions and expensive interest deductibility changes for landlords.
What about the natural environment children today will inherit as guardians to pass on to their own descendents? To pay for tax cuts there have been sweeping cuts in the environmental space including the Department of Conservation, Climate Change Commission and Jobs for Nature programme. It’s hard to imagine things can get better for our natural world and threatened species with less funds and a fast-track approach to resource consenting.
Having faced our most expensive storm last year, and with extreme weather events certain to worsen, the lack of any initiatives to reduce New Zealand’s high per-person climate pollution in the Budget are stark. What might future generations say about our lack of climate action? The Treasury today is ringing the alarm bells and pointing out from a financial perspective the massive risk we face paying billions of dollars to other countries to purchase carbon credits to make good our climate commitments?
This was a Budget focused on the short-term which carries a risk for the future in social, environmental and economic spheres.
However ideas like Social Investment, evidence-based policy making, devolution and localism offer glimmers of a different path forward. There’s another way to avoid further deeper cuts while investing in the most important things for our future, like our most vulnerable kids, and modern infrastructure. Successive governments have avoided capital gains or wealth taxes asking workers, consumers and businesses to pick up more of the tax share. Our current tax system leads to greater inequality, locks in disadvantage and funds low-quality infrastructure. A crucial way to create a healthy future is to rebalance our tax system including asking the seriously wealthy to contribute more to our collective wellbeing. Perhaps that could be considered in Budget 2025.