All the things we could have done with a capital gains tax

I'm interviewed in this Spinoff piece about all the public services that could have been provided with the revenue from the capital gains tax, if the government had had the courage to introduce one starting this year.

Given the extraordinary gains currently being made in the housing market, it's safe to say that the revenue would have been substantial, and some seriously useful things – like providing free dentistry – could have been done with the revenue (along with some of the less serious ideas canvassed in the piece).

RNZ: Tackling child poverty a mountain that keeps getting steeper

Read the original article on RNZ

Tackling child poverty is like climbing a mountain that gets steeper with every step: easy at first, far harder as you enter the final push. So although the government should be cheered by yesterday's child poverty statistics, it must realise the scale of the task ahead.

In the two years since Jacinda Ardern's policies began to take effect - that is, from mid-2018 to just before last year's lockdown - child poverty fell on every single one of the nine measures the prime minister has set for herself.

Take, for instance, the proportion of children living in households with less than half the typical (median) income - households, in other words, who cannot afford the things necessary to participate in mainstream society and live with dignity. That proportion has fallen from 16.5 percent in 2017-18 to 14.6 percent in 2019-20.

Looking at the same measure but after housing costs have been included, the fall has been from 22.8 percent to 18.2 percent. That's 45,000 fewer children in poverty.

Consider, too, material hardship - the proportion of children in families who report they struggle to afford basic items like heating and decent clothes. That has fallen from 13.3 percent to 11 percent.

These are real achievements, and the government should be congratulated for them. Fewer children in poverty means less misery, less stifling of talent, less of a long-term burden on the public purse.

So is Ardern on track to meet her much-publicised child poverty targets? On a crude, straight-line projection, the answer is essentially yes.

Most problematic is next year's target for just 10 percent of children to be living in households with less than half the typical income, which looks set to be missed badly. But even on that measure, the 2027-28 target looks achievable.

On the measure that accounts for housing costs, the government has met its 2020-21 target (a reduction to 19 percent) a year early, and the current average reduction of two percentage points a year would see it meet the 2027-28 target of 10 percent with room to spare.

Material hardship, meanwhile, has been falling on average 1 percent a year, enough to meet next year's target of 10 percent and the 2027-28 target of 6 percent, if the average results so far are projected out on a straight line.

Four main obstacles

The future is never a straight-line affair, though. And there are at least four reasons to think that the longer-term targets might still be missed.

The first, of course, is Covid-19. The virus's economic fallout will have depressed average incomes, ironically making it easier to lift poor families closer to the middle. But the spiralling queues for food parcels suggest that extreme poverty, at least, may increase.

The second is that much of the reduction to date came in Ardern's first year, between 2018 and 2019. After that initial bump, partly the effect of the $5.5 billion Families Package, many of the measures actually got worse between 2019 and 2020. Even before Covid, progress was stalling.

Third, it is not clear what the government will do to help some of the worst-hit communities. Child poverty rates for Māori and Pacific peoples can be twice or even three times those for Pākehā. More positively, though, Māori children made up half of the most recent fall in material hardship numbers. Poverty rates are also much higher for children with disabilities.

Finally, and perhaps most problematically, the mountain to climb only gets steeper from here.

Ardern claimed yesterday that over 100,000 families were on average $100 a week better off thanks to her government. This is excellent, if true, but will only have been sufficient to lift over the poverty line those who were relatively close to it already. As the 2018 Welfare Expert Advisory Group calculated, many families would need $200 or even $300 a week to be raised out of poverty.

Each 'new' group of families to be lifted out of poverty, in other words, will cost more to help. They are also more likely to suffer multiple, overlapping issues - drug addiction, loan-shark debt, abusive behaviours, unstable living conditions - that will make it harder for them to convert extra cash into sunnier futures.

This makes the lack of a follow-up to the Families Package all the more troubling. Ministers like to talk about "radical incrementalism", the progressive realisation of demanding goals. But that implies that the Families Package should have been followed by something even more significant, something big enough to help the harder-to-reach households and genuinely keep the government on track.

So far there have been no major policy moves this term, and issues like the housing crisis are only making things harder. It is not clear that the government has either a coherent plan for meeting the 2027-28 targets or an estimate of the likely cost. Ardern and her colleagues can bask in the glow of some good first moves, but the future looks less rosy.

Spinoff: New housing and incomes data underscores breadth of Ardern’s problems

Read the original article on the Spinoff

Just-released pre-pandemic stats show that rises in disposable income have been matched by skyrocketing housing costs. And that poses a conundrum for the prime minister.

Jacinda Ardern’s critics, who see her as unable to solve the housing crisis or make meaningful progress on tackling poverty, will be emboldened by yesterday’s release of incomes data.

The Statistics New Zealand data, covering the nine months before the March 2020 lockdown, isn’t all bad news for the PM. The average household’s disposable income rose a healthy 3.9%, from $83,400 to $86,600, off the back of a similar increase the previous year.

But that increased income wasn’t evenly distributed. Central to this story is the ‘Income shares’ graph in the link above, which shows the income increases for nine groups of New Zealanders. As can clearly be seen, the groups traditionally identified as “Kiwi battlers” – the predominantly working families on low to middle incomes – benefited the most, their income increases clearly outstripping those of the very poorest.

This is all, on one level, very predictable. We already knew that Ardern intended to govern for the centre, taking a cautious path towards social progress with her eyes firmly focused on a third term. So she’s looking after the middle. The very poorest? Not so much.

In the pragmatic world of elections, which are won and lost in the centre, it’s not always a bad approach. But it raises major moral questions – and some political ones, too.

Ardern has staked a lot on tackling child poverty, but many of her targets there are relative ones – that is, they measure how much income poor families have compared to the typical household, and therefore require incomes to increase more rapidly for the former than the latter. If current trends continue, Ardern will struggle to hit those targets, creating some awkward political problems, to put it mildly.

All this, of course, is based on data from before the economic pain of the last 12 months, which – although widely spread – seems to have been visited most on those who were already most vulnerable. Against that, though, the incomes of the very poorest New Zealanders, being made up mostly of benefits, are often fixed, and may actually have held up better than those of middle-income households affected by job losses.

We won’t know exactly how all that has washed out until the next data release in a year’s time. But there is nothing in this data to suggest that, pre-lockdown, the prime minister was barnstorming her way towards a brighter, less poverty-ridden future.

The second, equally predictable problem for Ardern concerns housing. In the new data, the share of family income taken up by housing costs, 20.8%, was unchanged from 2019 to 2020. But that implies that the 3.9% increase in the average family’s income was almost exactly matched by an increase in housing costs – as indeed it was, the precise figure coming in at 3.8%.

Ardern could argue that, despite the “crisis” rhetoric, housing costs didn’t actually outpace incomes in that year. But the point that will stick in most people’s minds is that, on average, any increases in income are being matched by housing cost increases (although the former start from a higher base, so in dollar terms people do have more left over).

And generally the housing stats are horrific. One in six New Zealanders spends more than 40% of their income on housing. Renters are twice as likely as homeowners to be in that unfortunate category. In the poorest fifth of the country, nearly one-third of people face that situation, as opposed to just 3% of people in the richest fifth.

Bright spots in the data are few and far between. Because the income increases were weighted more towards the middle than the top, inequality, as measured by the Gini coefficient, fell slightly, from 32.7 to 32.0. Wellingtonians, meanwhile, got the country’s biggest income boost, recording an increase of 9.6% even after housing costs. If the city is dying, it’s dying fatly (as Donald Trump would probably put it).

Mostly, though, the data will make difficult reading for Ardern and her ministers. In the coming years, they will be quick to point to coronavirus as an impediment to social progress. What this data shows is that, even before the virus hove into view, they weren’t doing a splendid job.

What do New Zealanders think about inequality?

I’ve been reviewing the evidence on New Zealanders’ views about economic inequality. I’ll publish a full report in time, but for the moment, here are some initial conclusions.

·       Concern about inequality, belief that it has increased, and belief that it damages society are all at high (70-80%) levels (UMR, 2014). People want a much more equal wealth distribution

·       Certain policy proposals (higher taxes on the very rich, minimum wage rises) are popular. There is also a view, in some surveys, that high earners are significantly overpaid. People also feel the rich should be more grateful for the social support they receive. However, these proposals are “popular” only in an abstract sense. People say they want/are open to these things – but this support may decrease when other factors are introduced.

·       Belief that inequality overall should be tackled, however, can be muted by the ‘middle’ effect: everyone thinks they are average, and that “those in the middle” are having an especially hard time in New Zealand today. Tackling inequality would thus mean raising the undeserving poor above them. This sentiment – “I want more equality, but not if it harms me personally” – leads to political caution in addressing inequality. Louise Humpage’s work shows that while many people say they want a more equal distribution, they are often unsure or confused as to how this might be achieved (or whether it is possible).

·       Also muting the desire to tackle inequality is the familiar moral worldview that rich and poor deserve their station. In particular, people think the poor are lazy. This view would lead to a belief that even if inequality exists and is damaging, it may be inevitable.

·       Blame for child poverty is often put on bad parents (40%) (CPAG, 2014). Even the structural explanation (40%) is about jobs, etc – not government action directly.

·       People continue to believe that opportunities are open to all or most New Zealanders, even if they understand that life is tough for poor children. They also tend to think that inequalities resulting from skill, effort, etc, are more valuable than greater equality.

·       People’s views about government are mixed. Many surveys show falling or low support for the idea that it should tackle inequality, though that support has increased in recent years.

·       If people are sceptical that politicians are competent, or that policy mechanisms will be effective, this may reduce support for tackling inequality. A strong belief in market logic may be having the same effect. In Peter Skilling’s 2014 focus groups, even people who strongly supported a more equal distribution of earnings seemed persuaded by the argument that “it’s just not possible” because of the unchangeable laws of the market.

·       There is a strong view that people who are poor need to take more responsibility.

·       Related to this, the idea that inequality is a result of society being “unfair” has fallen to very low levels. This is in keeping with what social psychologists have termed “system justification theory”: the finding that people are loathe to accept that the (economic-political) systems that they live within are fundamentally unfair.

·       People do not feel they have much in common at all with the poor/beneficiaries.

New Wealth Inequality Statistics

Today we are releasing the second tranche of our wealth inequality data in conjunction with Statistics New Zealand.

The data, available at this link, give details of wealth inequality thresholds – that is, the boundaries between wealth deciles (and in some cases percentiles) by both individual and household.

Other tabs in the same spreadsheet provides details about the overall make up of wealth by asset class.

What does the 2020 election mean for greater equality and democracy?

The Labour-Greens cooperation agreement having been signed, and ministerial portfolios allocated, what progress can we expect in the next three years towards greater economic equality and deeper democracy in New Zealand?

Greater economic equality

Verdict: Small steps towards dealing with one half of the problem

Labour has a free hand to implement the promises in its manifesto, many of which are sensible but unlikely to make a large dent in the problem of a wide disparity between rich and poor. Bear in mind that income inequality rose more rapidly 1985-2005 than anywhere else in the developed world, and we have stagnated at the resulting level ever since. Rewards go disproportionately towards the already wealthy, leaving many in poverty with their talents squandered and health and social problems on the rise.

Labour will address the poorer end of this problem in various ways:

• Beneficiaries will be able to earn significantly more before their benefits are clawed back;

• Fair pay agreements will allow workers who have won good terms with one employer to have those conditions spread throughout their industry;

• The minimum wage will continue its rise towards $20 an hour;

• Some 200,000 children will get free school lunches; and

• Another 8000 state houses will be built.

For this work, key ministers will include Carmel Sepuloni (welfare, employment and ACC), the Greens’ Marama Davidson (homelessness), Poto Williams (public housing), and Michael Wood (workplace relations). Prime Minister Jacinda Ardern retains responsibility for child poverty reduction.

Hitting her child poverty targets, however, will be demanding, given the impact of coronavirus. And the principal drivers of poverty will not be substantially addressed. In the last 40 years, the share of company revenue going to staff has fallen from 60% to 50%, leading to the average wage being $12,000 lower than it would have been. Fair pay agreements will not make much of a dent in this. On the welfare front, benefits need to rise by nearly 50% to genuinely lift people out of poverty and ensure lives of dignity, according to the Welfare Expert Advisory Group. While the Labour manifesto promises to prioritise “increasing income support”, it contains no specific undertakings. And while new state houses are welcome, the amount promised is only half the current waiting list.

Moreover, these policies are all aimed at the poorer end of the spectrum, even though action on economic inequality is needed at the wealthier end as well:

• A lack of competition in many sectors of the New Zealand economy drives super-profits towards a small number of firms at the expense of the general public;

• Chief executive pay, principally in the private sector but also to some extent in government, is far higher than is justified;

• IRD research suggests many of New Zealand’s wealthiest individuals pay very little tax; and

• More generally, the system is unsustainably weighted towards taxing income while leaving wealth virtually untaxed.

Famously, however, Ardern has ruled out any kind of wealth or capital gains tax during her political lifetime, while Finance Minister Grant Robertson made clear there would be no new taxes of any kind in this Parliament. Apart from a new 39% rate on income above $180,000, very little will be done to address unjustified inequality at the wealthier end of the spectrum. David Parker, the new Minister for Revenue, will have to see what he can do to generate greater fairness and revenue from the existing system.

Deeper democracy

Verdict: Bold subjects but little clarity

With relatively little fanfare, Labour has announced that it will examine some major weaknesses in our democratic system. Its cooperation agreement with the Greens notes that it plans to address:

• the Electoral Commission’s 2012 recommended changes to MMP, which crucially include:

  • lowering the threshold to 4%; and

  • ending the coat-tailing rule;

• electoral finance law, which involves reassessing donations rules that allow the wealthy excess influence over politics with minimal scrutiny; and

• the length of the Parliamentary term, which could be extended to four years.

(NB: While the government may also make some slight progress on greater autonomy for Māori, this element of improving democratic systems merits its own separate discussion.) But while these are big issues to take on, there is no clarity as to what Labour will actually do, and some of the proposed changes, notably the Parliamentary term, would almost certainly have to go to a referendum. In addition, the review of electoral finance law will be part of a wider review of the Electoral Act, initiated by the previous justice minister, Andrew Little, who has moved to health. His replacement, Kris Faafoi, has not made profound change in any of his previous portfolios, including commerce, though he is widely regarded as one of the Cabinet’s most surefooted performers. He will presumably also have responsibility for the reform of the Official Information Act that was previously in Little’s bailiwick.

Beyond these headline areas, Chris Hipkins, who remains Minister for Public Services, will have the opportunity to continue his open government reforms of the previous term, which included publishing ministerial diaries and Cabinet papers. How far he will go, and how substantive will be New Zealand’s next Open Government Partnership action plan, remain unanswered questions. A wide range of democratic innovations being taken up overseas – including citizens’ assemblies, participatory budgeting and crowdsourcing legislation – still struggle to get on the agenda here.

Other developments of note include the return to Cabinet of David Clark, now responsible for both commerce and “the digital economy and communications”. Again, it is not clear how much progress to expect here.

Guardian: Jacinda Ardern must use her mandate to tackle child poverty in New Zealand

Read the original article in the Guardian

As the New Zealand First party’s vote share evaporated on election day, so too did Jacinda Ardern’s last excuse for not making more progress on child poverty, her signature issue.

No longer able to blame inaction on her one-time conservative coalition partner, and possessing an absolute majority, the Labour leader now has a free hand on an issue dear to her heart. She may have labelled climate change her “nuclear-free moment”, referencing the 1980s Labour government’s famous opposition to nuclear weapons, but it is child poverty reduction, not climate change, that she has always taken as her “extra” portfolio.

And Ardern has already made modest progress. Data released in February showed that, on seven out of nine key measurements, child poverty had fallen slightly in her first year in office. And that data was collected before her main anti-poverty initiative so far, the Families Package, had fully taken effect.

The latest Treasury modelling shows that, pre-coronavirus, Ardern was on track to achieve the 2021 targets in the Child Poverty Reduction Act, which include lowering from 16.5% to 10.5% the proportion of families with less than half the typical (median) household income. This, though, was a little bit like getting to base camp on Everest: no mean feat, but infinitely easier than the task ahead.

The coronavirus-induced recession has clearly worsened some forms of poverty – just look at the food bank queues. The Treasury thinks the number of families in “material hardship” – those reporting they are unable to afford basic items – will “rise sharply”. Progress on other measures, such as the household incomes one, is likely to stall or partially reverse.

Ardern’s long-term targets, meanwhile, are daunting. They require the proportion of households with less than half the typical income to fall to just 5% by 2028, for instance.

It is important to stand back and appreciate the scope of this ambition. It would cut the number of children in poverty by two-thirds in a decade, placing New Zealand amongst the world’s best performers and profoundly reducing misery and marginalisation.

But ambitious targets require ambitious policy agendas – all the more so as the hardest challenges are still to be met. The families helped so far will largely be those who were in relatively “shallow” poverty, needing perhaps an extra $50 a week to be lifted over the line. The families Ardern will have to help in later years will be as much as $350 a week under the poverty line, according to the 2018 Welfare Expert Advisory Group (WEAG). And their numbers will have been swollen by coronavirus.

For all that she is supposed to be a transformational figure, Ardern has relied largely on the “third way” policies of her Labour predecessor, Helen Clark, in her fight against child poverty. The Families Package rejigged a familiar array of tax credits and payments, albeit signalling a minor shift to universalism via the best start payment for all newborns.

Some more ambitious policies are on the way. The minimum wage will continue its rise towards $20 an hour, while so-called fair pay agreements will ensure that if workers win good pay rates with one employer, those conditions are spread throughout their industry. Beneficiaries will be able to earn significantly more before their benefits are clawed back, some 200,000 children will get free school lunches, and another 8,000 state houses will be built.

But most experts believe these policies will be nowhere near enough. “There’s nothing in place that would give you any confidence that they have the tools to meet the 2028 targets,” says Susan St John, a founding member of the Child Poverty Action Group. At a minimum, she says, the government needs to raise core benefits by nearly 50%, as the WEAG recommended. It should also simplify and increase Working for Families payments, remove sanctions, forgive beneficiaries’ debts and make housing more affordable.

Ardern’s innate fiscal and political caution will not help here. Although New Zealand’s coronavirus-induced public debt will, at 55% of GDP, be modest by global standards, she seems reluctant to spend up large on things like solving child poverty. Yet that fight, if it is to be successful, will be expensive, even if it brings immense savings – in the form of healthier, better-educated children – in the long run.

St John says the government could easily spend $1bn a year – on a package that includes extending some tax credits to beneficiary families – just as “a holding position to relieve the depth of poverty”. This starkly illustrates the scale of the challenge Ardern faces. She has made it part way up the mountain: but does she have the strength for the climb ahead?

Prospect: Jacinda Ardern, the God of small steps

Read the original article in Prospect

New Zealand’s geology and culture are often at odds. Famously prone to earthquakes, the South Pacific nation has, nonetheless, a low-wattage, “she’ll be right” attitude to life that does not lend itself to political landslides, at least not since it adopted proportional representation three decades ago.

But it just got an electoral earthquake. Despite the wear and tear of holding power for three years, Jacinda Ardern has led her Labour Party to an astounding 49 per cent vote tally and an outright majority, consigning the opposition National Party to a mere quarter of the vote. It was a rout, a “blue bloodbath,” and a swing to an incumbent party for which there are few if any modern parallels.

Yet it is hardly the decisive left-wing victory that it might appear to the outside world. If the New Zealand Labour Party is on a journey, it is one in which some important paths have been firmly blocked off, their vistas disappearing from view, even as other ones open.

There is no argument that Ardern has, in some respects, profoundly changed the political landscape. Her compassionate response to last year’s terrorist attack on Christchurch Muslims, combined with her impressively competent handling of Covid-19, have shown that kindness is not a political weakness but in fact a virtue, a form of strength.

I summed up her emerging “ethos of kindness” in a profile for Prospect last year, and it is an approach which has now been thoroughly vindicated in narrow electoral terms, gaining her unparalleled trust among centre-right voters. It has also completely changed the tenor of New Zealand politics, at least for the present. She dominates the political scene, and can now carry the country with her on issues that might otherwise have seemed out of reach.

Free school lunches, currently being piloted in a handful of schools, will be rolled out to hundreds of thousands of children. So-called fair pay agreements will allow workers who win good terms with one employer to get those conditions spread right across their industry. New Zealand’s equivalent of council house building will be ramped up, minimum wages lifted, dirty rivers cleaned up.

Economical with radicalism

Few of these policies are especially innovative, though; many are already standard in countries like the UK. And it seems unlikely that Ardern will surpass them in the next three years, for the simple reason that she never campaigned on doing so. Labour’s 2020 manifesto was notable principally for its lack of ambition. Its biggest initiative to address child poverty, one of Ardern’s signature issues, was a pledge to increase the amount that beneficiaries can earn before their benefits are clawed back. Its headline climate change policy was—wait for it—to make the public bus fleet zero-emissions by 2035.

And it is on economic issues, long the left’s weak point, that Ardern’s limitations are most evident. Labour’s only tax change this term will be to raise the top income tax rate from 33 per cent to 39 per cent, a move that will at best raise hundreds of millions of dollars, not the billions required to address climate change and child poverty. On the campaign trail, even a desperately enfeebled National Party was able to goad Ardern into ruling out a wealth tax, a key policy plank for her former coalition partner, the left-wing Green Party. Ardern dismissed it not just for the next three years but for her political lifetime. And she has previously done the same thing for a capital gains tax, a policy that is part of the furniture in many developed countries.

Meanwhile, the public discussion about New Zealand’s modest levels of Covid-induced public debt, forecast to peak at around at 50 per cent of GDP, which—for comparison—is around half of the ratio the US and the UK are now looking at, is nonetheless dominated by the supposed need to slash borrowing.

Ardern has, in short, been unable—or unwilling—to change the conversation about tax, spending, the size of the state, and government’s role in the economy. When it comes to tax in particular, the impression is of a party left trying to govern in a constantly shrinking space.

Centre forward

These are the paths that are being closed off; at the same time, others have opened up. While Ardern has given way on economic issues, she has cleared space on many social ones. New Zealand’s antiquated abortion laws have finally been modernised, a change that the election entrenches.

She has also won—and won big, without having to give ground on the standard conservative issues—crime, “security,” immigration, welfare spending and the like—and in that sense, at least, offers a real-break with Third Way triangulators in the mode of Tony Blair and Bill Clinton. And now freed from having to work with the conservative New Zealand First party, her other more populist former coalition partner, Ardern may in fact take steps towards a gentler, more restorative approach to criminal justice issues. Tougher hate speech laws may also follow to protect minority groups.

In a wider sense, though, Ardern remains fundamentally cautious—progress will have to be forged through consensus rather than struggle, and will only be delivered in increments. Disdaining even the term “progressive,” she will govern from the centre, aiming to hold onto as many of those newly won centre-right voters as possible and hoping that, by gradually acclimatising them to change, she might win a mandate for slightly firmer steps in 2023. A plan that will only work if nothing trips her up between this rare moment of opportunity, and then.

Some landslides, in short, remake the landscape only gradually, if at all.

RNZ: Jacinda Ardern has huge majority but that may not be much use to her

Read the original article on RNZ

"I want us to simply be the country we already believe we are." That's how Jacinda Ardern described her ambition for New Zealand in 2018, and it won't have changed in the light of last night's extraordinary election victory. The ambition is especially pertinent when it comes to inequality and child poverty, which stand in stark contrast to the lingering belief in New Zealand as an egalitarian nation.

As Labour commands an absolute majority for the first time in the MMP era, the party could in theory go all out to bring the facts back in line with the belief, slashing poverty rates and restoring a sense of fairness to the nation. But in practice they cannot, because they have already tied their own hands.

While it is still possible that Labour will make some kind of arrangement with the Greens to bring them into the government tent, such a move would at best extend only to the less controversial Green policies in areas such as conservation.

Nonetheless Labour will undoubtedly take some steps to reduce poverty and inequality. They will significantly increase the amount of money beneficiaries can earn before having their benefit clawed back, reducing the welfare system's notorious poverty traps.

They will increase paid sick leave to 10 days, pay the Living Wage to government contractors, and create fair pay agreements that allow workers who win good terms and conditions at one employer to spread them right across their industry. They will make trades training free, build 8000 state homes, and continue the roll-out of free school meals until they are so embedded as to be very hard for a future National-led government to abolish.

None of this, however, will make a major dent in the poverty rates that see around one in five New Zealanders lacking the income they need for a life of minimal dignity and participation in society.

This is especially true in the light of Covid-19. Pre-coronavirus, Ardern had made modest inroads into child poverty, according to early statistics and Treasury modelling. But tens of thousands of people are losing their jobs and the economy is heading back into recession.

Absent further government action, this will push many more families into poverty. If Ardern is to stay on track to meet her child poverty reduction targets, which involve more than halving it over a decade, she will need some real financial firepower.

Other ambitions, such as making New Zealand's rivers swimmable again, can be met through regulation - that is, without major cost (to government, at any rate). But not so inequality, which is quite literally a question of cash. And cash is precisely what Ardern has denied herself.

Either a wealth tax or a capital gains tax could have raised billions of dollars from the wealthiest New Zealanders in order to support a better life for the less fortunate. But Ardern has ruled both of them out, not just now but for her political lifetime.

The prime minister may have had a moment's pause on election night, reflecting that she had forever ruled out a wealth tax - or indeed any new tax this term except one new top income bracket - in order to hang onto a final 2-3 percent of swing voters that, as it turns out, she didn't even need (given the wasted vote, even 47 percent would have been enough for an outright majority).

But that's already in the past. Ardern now has to work out how on earth she will reduce inequality, all the while holding back the tidal wave of poverty represented by the newly jobless, without the extra revenue she needs for the task. The prime minister may have unparalleled popularity, but that huge majority may not be much use to her.

Guardian: Want to build high-rise homes for 74,000 more people in Wellington? Build consensus first

Read the original article in the Guardian

It’s like a slow-moving nightmare, in which the same battle is fought over and over again, without resolution.

The city council in Wellington, New Zealand’s capital, has announced plans to house an extra 74,000 people – plans that would require some low-rise inner-city villas to be replaced by dense modern apartments.

This has provoked howls of outrage from property-owning 70-year-olds – who, in turn, face sneers of derision from young would-be house buyers. Both sides are entrenching themselves behind their battle lines, the same lines that have bisected recent attempts at increasing urban density in cities in New Zealand – and indeed around the world.

But there might be a path out of this impasse. In the 1980s, the US city of Seattle tried to densify, but saw its efforts sunk by intense neighbourhood conflict and Nimbyism (the ‘Not in my backyard’ phenomenon). So a decade later, the city council took a different tack: it decided to trust its communities.

City council staff, in particular their legendary neighbourhoods department head, Jim Diers, realised they needed to rebuild relationships – both between the council and residents, and within fractured communities. The council appointed neighbourhood development coordinators who acted as “intermediaries of trust” and held hundreds of one-on-one meetings with often-suspicious residents.

One coordinator, interviewed by the academic Carmen Sirianni, described their role this way: “I find people who are frustrated and are not plugged into the process and are just throwing rocks, and I meet with them and help them understand how they can work with their neighbours.”

Community ties re-established, the council then made their pitch, which in essence was: “We all know we need a denser inner-city, but you’re fearful about that – so you take charge. You draw up the plan for how this will go down.”

Communities earmarked for greater density were given $10,000 each to develop their plans. That done, they got further funding for the next stage – but only if they could prove they had reached out to every part of the community and hadn’t let the usual suspects dominate. Officials supported these “citizen planners” with neighbourhood design toolkits and software that mapped demographics, land use and transport flows.

The community plans were then tested at “alternatives fairs”, sent to residents for approval, reviewed by officials, and subjected to neighbourhood hearings. Displaying remarkable engagement, some 20,000-30,000 residents took part in a city of 560,000.

After years of conflict, the process brought together politicians, neighbourhood leaders, and even local groups that had formerly been at loggerheads. Best of all, it delivered densification: added together, the neighbourhood plans provided all the housing the council had sought.

Along the way, a pro-development, anti-Nimby constituency was born. Seattle today remains – for various reasons – one of the few American cities to be densifying effectively. Citizen planning hadn’t been quick or cheap but, as Sirianni puts it: “The city council’s investment of money and time ... had clearly paid off.”

All this might seem counterintuitive, given Seattle’s previous animus towards densification. Two factors made the difference: control and environment.

People often feel more relaxed about change if they have a modicum of control over it. And in a good, well-facilitated environment, one where people are encouraged to listen deeply to the arguments of others, consensus can be reached where it seemed impossible. People who shout slogans at each other in vox pops or newspaper front pages can find surprising common ground.

Such results could be expected in Wellington, or indeed elsewhere. It’s easy to laugh at older left-wingers opposing the housing so badly needed by those they claim to help. But what if baby-boomer fears about densification turn out to be legitimate concerns about what private developers will build if left to run rampant? What if, once they hear good arguments in a relaxed setting, their concerns can be assuaged by stringent rules that ensure high-quality architecture?

What if, conversely, young people who see no merit in draughty old villas come to better understand the value of built heritage, the stories of old houses and neighbourhoods that can so profoundly enrich the present? What if they realise that some suburbs do need more protection than the city council’s plans allow, and that mouldy houses can be improved, not just demolished?

This potential consensus is the prize on offer. The challenges of running such a deep, community-led process are of course real, and complex. In New Zealand, there would have to be elevated role for local iwi (indigenous tribes), given their role as mana whenua (groups holding customary land rights and authority).

The alternative to dialogue, though, is all too predictable: a long bout of trench warfare, one in which bickering prevails, the council’s plans are dragged through the courts, catastrophic amounts of time and money are wasted, and no one gets what they want. Right now such an outcome seems likely – but not, as Seattle shows us, inevitable.