Politics and the $350 payout

The Government always knew there would be some issues with its "cost of living" payment.

After all, Inland Revenue had warned that not only would the administration cause "critical operational impacts" but that it was not sure where people lived.

Treasury, meanwhile, said the $800 million set aside for the scheme should be used for "initiatives than more directly impact on interim child poverty targets".

It said the payments would make short-term inflation worse.

But Labour believed, under pressure because of the cost of living "crisis", it had to do something.

And so it did, boldly announcing the $350 to New Zealand tax residents who are supposed to live in this country and who earned less than $70,000.

Labour won the initial round. It was seen to be acting. The figure was modest for many but, nevertheless, significant for others. It was targeted at an income level, while excluding those receiving the winter energy payments, notably those on superannuation.

The $116 that popped into many people’s accounts this last week will be welcome.

Quickly, however, stories appeared of New Zealanders living overseas who might have earned something in interests or dividends and were being paid.

Some temporary migrants now back home are also being given the payment.

There will also be spouses of high-income earners receiving what for them will be a little extra.

Students aged over 18 who undertook paid work over the past financial year are also eligible, for them a useful fillip, paid no matter their family’s circumstances. As well, there will be those who had already manipulated their finances so their taxable income is below $70,000.

Plenty of wealthy people — not the standard wage or salary earners — already make the most of the likes of working for families or student allowances for their offspring.

Labour has faltered in the politics of round two, especially because the payment plays into the narrative of high-sounding aspirations but poor delivery.

KiwiBuild has been followed by Three Waters confusion and the polytechnic shambles.

National, unsurprisingly, has plugged the payments as yet another example of Labour being "cavalier" with taxpayers’ money — another strong attack line.

Inland Revenue has had to contract 300 temporary staff for five months and divert more than 400 of its own employees.

And this was for the most straightforward option.

Indeed, many in need would have missed out through an application process, and the quantity of paperwork would have been mountainous.

Revenue Minister David Parker has said only 1% of the payments were going to the likes of New Zealanders overseas.

If that figure is correct, that could be seen as a reasonably low level of collateral damage.

There will always be some waste and some mistargeting.

But one of the difficulties is that Mr Parker and Inland Revenue cannot really know what the figure is.

It would seem we will never know.

Credibility is also dented because the initial payment went to about 1.3 million, not the 2.1 million expected.

Some of those about 800,000 who missed out so far might feel a little aggrieved, even if that is because they are yet to file a tax return for the past financial year.

A Government working on what is best for the economy could have eschewed the pressure to "do something" because of the inflationary effect of another $800 million in circulation.

But, as Labour says, at least the payment is temporary. It is also not huge.

Tax cuts without reduced spending would be more damaging.

Politics dictated that Labour felt it had to be seen to care and had to respond.

Other countries had dropped in "helicopter" money during the worst of Covid, so why couldn’t New Zealand soften the impact of higher prices?

Round three now proceeds. We could well be heading for a split decision on the success of the politics of the payment and any lasting impact on next year's election.

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