Grant Robertson realised his political dream yesterday with the unveiling of proposals for a Social Unemployment Insurance programme.
It is the most significant social reform proposed by any New Zealand government since Accident Compensation in 1964 and for Labour, since the 1938 Social Security Act.
It surely assures Robertson’s place in Labour Party history alongside its great reformers like Savage, Nash and Nordmeyer.
But because it proposes a compulsory 1.39% levy on employers and employees, it risks being seen as a breach of Labour’s pledge of “no new taxes” given during the last election campaign.
POLITIK understands that concern about this late last year delayed the Prime Minister’s agreement to the scheme being made public.
The proposal is an Accident Compensation type employer and employee levy (each will pay 1.39%) with a payout calculated at 80 per cent of the employee’s wage for six months if they lose their job through redundancy or long-term illness.
Employees who are fired will not be eligible.
The proposal has the support of the Combined Trade Unions and Business New Zealand and was developed in the Tripartite Forum involving the two organisations which Robertson has been running since 2018.
The presence of BusinessNZ raises an interesting political question.
Only two days after he promised that National would be more constructive in Opposition, National leader Christopher Luxon came out and bluntly rejected the entire proposal put forward yesterday.
“The Government should just call this what it is – a Jobs Tax, and then they should abandon it,” he said.
Luxon’s opposition was odd for several reasons.
The proposal first saw the light of day in the Commission on the Future of Work launched by Robertson in 2016 when he was in opposition. Luxon, as CEO of Air New Zealand, was an enthusiastic supporter of that Commission.
The fact that the proposal is supported as strongly as it is by Business New Zealand makes Luxon’s opposition even odder.
BusinessNZ CEO Kirk Hope said the proposal would offer a period of income support at a time when a worker was most vulnerable.
“But it would also support business by offering a system where people get more time to find work that matches the skills they have,” he said.
“This would mean better skills matching in the workplace generally.
“New Zealand has long endured significant skills mismatches.
“One part of this is where mid-skilled people take lower-skilled jobs because they have no other choice.
“This is a suboptimal outcome and contributes to our poor productivity outcomes.
“The scheme can contribute to helping rebalance this issue by enabling the opportunity for increased skilling and additional training our workforce can better provide employers with access to the skills that they need.”
There is a web of informal links between BusinessNZ and National – just as there is between the CTU and Labour — and the current BusinessNZ President, Andrew Hunt, is a just-retired member of the National Party board and its former Auckland regional chair.
ACT appeared to read the business room more perceptively and came out not opposing the idea in principle but questioning the detail.
“ACT has previously proposed an employment insurance scheme, but it wouldn’t have increased taxes, and it would have required workers to actively look for work and report in,” said the party’s welfare spokesperson Karen Chhour.
“Labour appears to be encouraging workers to take as long as they like to find work.”
There are a host of questions in the fine print in the proposal — how will it affect the self-employed; will the government need to subsidise levy payments for those on the minimum wage; will the levy need to be regularly adjusted; what will be the ultimate fate of redundancy clauses in pay agreements and how will the ACC run it.
At the end of the 2019 financial year, ACC had $44 billion in its investment fund.
The discussion document for the Social Unemployment Insurance proposal says the levies have been set at an initial estimate of an annual cost of the scheme of $3.54 billion.
Robertson said it was estimated that about 100,000 people a year lost their jobs “through no fault of their own.”
What was not clear was whether the scheme would be a pay-as-you-go scheme or whether, like ACC, it would build an investment fund to provide the money for its payouts.
The decision for the proposal to extend beyond redundancy to people losing their jobs for health reasons is likely to surprise some members of the business community and may jeopardise unanimous business support.
Hope indicated that there could be changes as a consequence of the consultation period.
“The thinking now needs to be tested in the real world, which is why the release of a discussion document today is really important,” he said.
“The next three months will see the public, business employees and unions all able to test the thinking and make an important contribution to how a scheme like this could operate.”
Robertson, however, appeared strongly in favour of health being included in the criteria.
“We’ve known for many years that tens of thousands of people have health conditions, disabilities that knock them out of the workforce for a period of time,” he said.
“This is a missing bit of our Social Security system, and it will pay benefits over the long term.”
Robertson came to yesterday’s media conference clearly prepared for questions about the 2020 “no new taxes pledge.”
“I believe we have a mandate to go to the New Zealand people say, why are you not getting what most countries in the world get,” he said.
“We have a mandate to make sure that we provide economic, security and opportunity.
“Covid has taught us a lot of lessons, and one of those is that we need better than ad hoc policy responses.
“We went to the 2020 election with a commitment to design a scheme such as this.
“And then last year, at the budget time, we reaffirmed that commitment and put ourselves on the timeframe we are on.
“So I believe we do have a mandate to address these issues, and I think New Zealanders would want us to do that.”