UK Riots Wake-up Call for New Zealand

Gareth MorganTax and Welfare

UK Riots a wakeup call for New ZealandGareth Morgan and Susan Guthrie, Authors of The Big Kahuna

Last week the British division of Unicef released a report on child wellbeing that put some of the blame for the street riots down to disenfranchised or alienated children of middle class families. Unicef UK said the obsession with consumer goods was one of the underlying causes of the riots and widespread looting that gripped the UK last month, as teenagers targeted shops for designer clothes and goods.

The Unicef study compared indicators of the quality of family life in the UK, Spain and Sweden and the results showed that by comparison families in the UK are trapped in a “materialistic culture” that produces a low quality of life for their children.

“Consumer culture in the UK contrasts starkly with Sweden and Spain, where family time is prioritised, children and families are under less pressure to own material goods and children have greater access to activities out of the home,” the report said.

“The UK’s materialistic culture embeds inequality in our society, affects family time and relationships, and has a negative impact on children’s wellbeing.”

As the gap between the rich and poor widens, the sense of relative hardship of those “falling behind” increases (it is inevitable that some will make more rapid progress in the race for material wealth than others), and they feel pressure to somehow accelerate their efforts – at the expense of their family and community. It is a telling indictment that income inequality in the UK is higher than for most developed countries – it (and New Zealand) ranked 23rd out of 30 industrialised countries in a 2008 OECD study (only Italy, Poland, the US, Portugal, Turkey and Mexico were worse).

The omens for New Zealand are clear. In our book The Big Kahuna we noted that our tax and transfer regime has veered a long way from its original intent, which was to effect a redistribution of income and guarantee that everybody could live in dignity – something we sign up to in the treaties we’re party to, and acknowledge as an inalienable right. Without explicit recognition in our tax and transfer policies that in many cases time is better spent in unpaid work, in activity outside the labour market – time with our kids, with our elderly and with our wider community, in creative and active pursuits – the alienation that has gripped the UK is increasingly a threat to our own social cohesion.

Policymaker paralysis is evident in New Zealand on these issues. Right now the Government’s “welfare reform” consists of stepping up efforts to coerce people without paid work into paying jobs, denigrating unpaid activity and reducing further the status of these folk in the process. We have a tax system that is riddled with loopholes that the well-off have exploited for so long we now have an entrenched view that not paying tax is our fundamental human right. (How sick is that?); and we have a transfer regime we call a “welfare” system that badly attempts to identify those who need help, traps them in poverty when they do receive help, and stigmatises them to such a degree they become a sub-class of society. In short we have all the ills that the UK is rueing.

It’s clear what is needed: a radical overhaul of the tax system under which the return from wealth is taxed effectively – cash income and non-cash returns alike. Only this can ensure that we redistribute effectively and equitably. And we need a system of redistribution that gives to each adult the means to live in dignity in the absence of paid work, delivering to all the freedom to find a balance between paid and unpaid activity, while ensuring that all those who do seek paid work get rewarded for their efforts. And despite the sceptics trapped by their resistance to change, this sort of policy is feasible and affordable.

Of course, such a transformation will involve a battle against entrenched privilege and prejudice which is rampant. For example a recent report prepared for the Child Poverty Action Group by medical professionals and other experts on children’s policy, documented in detail how the lives of many children are marred by significant material deprivation that “compromises their health, education and future”. We’re not talking about the disappointment of not getting the latest iPhone here, but Third World preventable medical conditions, malnutrition and other horrors – so very serious instances of deprivation.

One editorial response in a Wellington newspaper to this professional piece of work was enough to make you cringe but sadly is a typical response from those who have obtained their own material status, and recite nauseatingly the stereotype of those who lag behind on that measure:

“Money redirected to one group must be taken from another.”

So entrenched now has the religion of individual gain become it seems that any sense of collective betterment is dismissed as impossible. In fact with effective redistribution we can all win with a healthier, more inclusive society.

The editorial continues:

“New Zealanders rightly take pride in a welfare system that acts as a safety net for those who fall on hard times.”

As our book points out in detail the fact is our transfer regime fails as a system on all of the academic measures applied to assess such regimes and any “pride” we may have in it is misplaced. The editorial’s rallying call for pride in our targeted welfare regime couldn’t be based on less evidence. It is pure dogma.

“[The action group’s] members appear to believe that choosing to live on a benefit is just as valid a choice as choosing to work for a living.”

Work and activity that is done outside the marketplace as the Unicef study showed, it is of enormous value to society. Our society would collapse without that unpaid work. Rather than pursuing material wealth ad nauseam we need, at the policy level, to adopt a fuller conception of national wealth and design policies to maximise that. Newspaper editorials such as this reflect woeful but common ignorance of our society’s ills.

The Unicef study found that parents in the UK work long hours (sometimes in multiple low-paid jobs), are unable to spend adequate time with their children, shower them with gadgets and branded consumer goods by way of compensation (yet the research showed the children valued these less than time spent with their families) and provide less clearly defined boundaries and expectations for their children. By the time they reach secondary school, many children in the UK have begun to withdraw from the sporting and creative pursuits they value. The seeds of antisocial and community-destructive behaviour begin to flourish. So long as compulsive consumerism bewitches us as the epitome of success it seems that no income is high enough. It is not a sustainable path. The tax and transfer system has a lot to answer for here by ascribing no value to anyone who is not in the paid workforce. When raising children is not as valuable to our society as stacking shelves at Pak’nSave then the seeds of alienation of significant tracts of society are sewn.

UK Riots Wake-up Call for New Zealand was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.