Going for Growth
Speech to the NZ Council for Infrastructure Development Conference
Eden Park, Auckland

I'd like to thank the council for this opportunity to address you today.

Let me start by acknowledging the important work done by the New Zealand Council for Infrastructure Development   Your advocacy, research, and collective voice play an important role in promoting world-class infrastructure development in New Zealand.

The National Party supports you in these efforts.   We agree that quality infrastructure is vital to lifting national productivity, improving public services, and generating long-term economic growth.  And we support your goal of drawing the public and private sector together in pursuit of better infrastructure for New Zealand.   

Today, I'm going to talk a little about the role infrastructure will play in National's economic plan.   I'm also going to touch on aspects of our energy policy which we are releasing today.  

National's Infrastructure Policy

Fundamental to all of these policies is my belief that New Zealand is failing to deliver on its economic potential. 

I simply don't accept that the bottom third of the OECD for average incomes is where our country belongs.  I don't accept that we have to put up with losing 80,000 of our people every year to other parts of the world.   And I'm horrified that the gap between our wages and those in Australia is now wider than it has been in our history – at more than 35%.

I'm confident, however, that National can turn these things around and improve New Zealand's economic performance. We have a detailed plan for achieving that. An important aspect of our plan is building the infrastructure New Zealand needs to grow. 

I don't need to tell you how vital good infrastructure is to a well-running economy. 

And I don't need to tell you that in the past few years New Zealand has shown all the symptoms of a severe infrastructure deficit – traffic jams, slow internet connections, inadequate public transport networks, and concerns about electricity supply.

These daily annoyances have a big-picture effect.  They constrain productivity growth and they put huge pressure on inflation.  That is a recipe for low growth and high interest rates. 

So there is no question that building better infrastructure is essential to fuelling higher levels of non-inflationary economic growth for years to come.  The question is how New Zealand achieves that step up in development and investment. 

Two weeks ago, I announced National's policy for achieving this. It's comprehensive, it's bold, and Labour is utterly opposed to it.   We are proud of it and I want to go over it for you today. 

First of all, National will appoint a Minister of Infrastructure to reshape, co-ordinate, and then oversee the Government's infrastructure objectives. And before you worry about increased bureaucracy, this Minister will have a co-ordinating role working with the other Ministers in infrastructure portfolios.  We remain very serious about not adding to the bureaucracy.

Secondly, we will spell out these objectives in a National Infrastructure Plan.

This 20-year plan will be developed in conjunction with local government. It will set a clear direction for vital national infrastructure investment, including top priority projects. It will be a plan that takes into account New Zealand's needs in a rapidly changing world. Changes like the growing price of oil and the need for public transport and roading networks that reflect that.

We have already announced one important component of our National Infrastructure Plan – that is our intention to invest up to $1.5 billion in Crown capital in an ultra-fast broadband network connecting 75% of New Zealanders.

This fibre-to-the-home network will be open access to allow for competition in telecommunication services.  It will not line the pockets of incumbents seeking windfall gains.   It will avoid duplication.  It will promote affordable services for consumers and it will see the Government doing all it can to capture and promote the innovation and expertise of the private sector.   

I believe that this broadband investment will be growth-enhancing, and that it will promote productivity and entrepreneurship. 

Our National Infrastructure Plan will also include a new category of state highway. We will call these Roads of National Significance.

These Roads of National Significance will be singled out as essential roads that require priority treatment. They will include, for example, State Highway 1, the essential backbone of New Zealand's roading network.

Over the next few weeks, in the lead-up to the general election, National will detail other critical projects that will form part of our proposed National Infrastructure Plan. 

Our plan will be underpinned by a new type of Priority Consenting.

National believes there are some infrastructure projects that are of such critical importance to the economy that they deserve priority treatment. 

Our new Priority Consenting process will streamline consents for major national infrastructure. These will not go through the local council but instead will be called in and determined nationally.  

Priority Consenting will still allow for proper environmental assessment and will enable communities to have their say. The law will require a decision on these Priority Consents within nine months.

In order to finance our increased infrastructure commitment, National will step up the levels of Crown capital investment. 

Because right now New Zealand doesn't have a debt problem, it has a growth problem.  So National's economic plan is focused on fuelling economic growth, not keeping within an overly restrictive debt target.

National is prepared to increase the Crown's current infrastructure investment by up to an extra $500 million a year above levels projected by Labour. This is in addition to the broadband investment commitments of $1.5 billion over six years that I've previously outlined. 

This will result in National investing close to $5 billion of additional capital investment over the next six years to fund infrastructure over and above that foreshadowed by Labour.

This means that, at the most, National will be running a gross debt-to-GDP ratio around two percentage points higher than Labour is planning.  So you can see that National will be achieving this step up in investment while remaining within conservative debt levels.

I believe this will be an investment that delivers considerable returns to New Zealanders for generations to come. That return will come in the form of enhanced services and enhanced capacity for our economy to grow and compete with the rest of the world.   

In addition to our commitment to stepping-up Crown investment, National will take steps to ensure further infrastructure investment by the private sector.

We will pass laws to introduce a new range of financing techniques for national infrastructure projects. 

As you know, governments raising capital from the private sector and working with the private sector to build and maintain public infrastructure is commonplace throughout the developed world.  National will bring New Zealand into line with these international developments.

First, we will introduce infrastructure bonds.

Last year, the Labour Government introduced what it described as "infrastructure bonds".  The reality is that these bonds were no different from bog-standard government bonds.  There were no infrastructure risks linked to them. National will introduce real infrastructure bonds, with funding tagged to particular infrastructure. 

Secondly, we will make greater use of public-private partnerships (PPPs).  

National will dispense with Labour's blind ideology which has locked the private sector out of public infrastructure development and operation for so long.  We will work with the best talent we can find to build and maintain infrastructure for Kiwis, and get it done quickly and efficiently.

We view PPP's as a vital tool for ensuring the government gets value for its infrastructure investment, realising that value is about shifting the government's sole focus on the upfront investment to a wider look at the whole-of-asset-life benefits, costs and risks.  It requires a consideration of a fuller range of options, including design, funding, operating, maintaining, and modifying infrastructure assets.

As you know, PPP's allow the government to spread payments for major projects over their useful life.  Payment is made only when services are delivered.  Risks are shared between the private sector and government.  And private sector management and expertise is also bought into play.

PPP's won't be appropriate for all assets, but by taking part in them, government can learn long-term management techniques to apply to fully publicly funded infrastructure.

In summary, National believes that government can work with the private sector to enhance the value and management of our public infrastructure investments.

Furthermore, we think these new financing and asset management techniques will open up infrastructure to a wide range of financial investors. This will include Kiwi mums and dads through their super funds and Kiwisaver accounts. It will also include Crown financial institutions, such as the NZ Super Fund and ACC, which, at their own discretion, will have the option of investing in quality long-term assets while at the same time investing in our futures.

Ladies and Gentlemen, National's infrastructure plan is based on our absolute commitment to do what it takes to get this country moving and growing productively again. 

We are not prepared to stand by and watch New Zealand be held back by utterly inadequate transport networks, inadequate telecommunications services, and inadequate electricity supply.

As I said at our National Conference two weeks ago: It's time to take the handbrake off.  It's time to turn the growth engine on. 

Electricity Supply

A critical component of that growth engine is our energy sector and, in particular, our electricity supply.

Later today, National's Energy Spokesman, Gerry Brownlee, will release National's energy policy.  I'm going to take this opportunity to highlight key aspects of that policy, as it relates to the electricity sector.   

National's focus is on security of electricity supply, upholding New Zealand's environmental responsibilities, and ensuring affordable electricity supply for consumers.

First, security of supply.

National has significant concerns about whether, under Labour's current policy settings, New Zealand can have confidence in the security of our future energy supply. We believe that policy changes are required to give New Zealanders certainty that the lights will turn on tomorrow and in the years ahead.  

Our country simply cannot afford to have insecure supply of electricity.  Our economic well-being, our growth prospects and our earning power all depend on New Zealand families and businesses knowing they can rely on there being enough electricity to service their needs.   

Labour's record in this area is appalling. This winter was the third one since this Government came to office that New Zealanders were asked to seriously save power.

It's a travesty that in a country as energy-rich as New Zealand that every couple of years there have to be television advertisements and begging from the Government for the public to turn off their electric blankets and heated towel-rails, and for business to cut back on production.

When industry has to cut production because of an electricity crisis, we all lose out.

Treasury estimated that GDP fell temporarily by $200 million as a result of the electricity shortage in 2001.  The Reserve Bank has quoted estimates by market observers that the impact of the 1992 shortage was $600 million on the country's bottom line.

While these things are hard to measure, what we know for sure is that uncertainty about power supply knocks the confidence of businesses that rely on electricity to grow.
 
Despite these crises, barriers to the development of new generation capacity remain.  Only around 1140 MW of net new capacity – around 125MW per year - has been built since 2000. After each crisis we've been assured it won't happen again. New Zealanders are quite rightly sick and tired of being told that.

Put simply, if you rely on electricity to make your product, and you want to grow, then you need to know there will be enough power available now and in the future.  For some years now New Zealand industries have not had that certainty. 

National wants our economy to get growing strongly again, so we will ensure businesses know there will be enough electricity for their investment and expansion plans. 

National will make security of supply a priority. 

There are four key things we will do to ensure New Zealanders can have confidence that they can turn the lights and the growth engine on. 

1. We will acknowledge the extent of future demand.

National will be realistic about the likely need for more electricity supply to keep New Zealand growing in the years ahead. 

We are highly sceptical of Labour's claims that New Zealand will only need 150-175MW per year of new electricity capacity in future.   That claim is based on an assumption that New Zealanders' demands for electricity will grow by only 1.2% per year.

To put that into context, New Zealand's historical average is a 2.2% yearly increase in demand for electricity. It's likely that a growing economy and population under National will need far more than 175MW per year of new capacity to keep pace with demand. In fact, only three years ago the Electricity Commission was planning for 2% to 2.7% per year growth.

To ensure security of supply, and to promote economic growth, we must be realistic about future growth in electricity demand.    National believes that growth in demand will be closer to 2% per year than the 1.2% per year that Labour has flagged. 

National will plan for realistic levels of future demand growth, because running out of electricity is a risk we are not prepared to take.

2. We will reform the Resource Management Act (RMA) and introduce Priority Consenting to improve the processes allowing generation and transmission infrastructure to be built.

Security of electricity supply relies on new electricity generators and complementary transmission being built.  But right now it can be very hard for power companies to build and develop that infrastructure.    

The RMA is a key barrier.  It has created a climate of uncertainty around new development and has delayed decisions that need to be taken quickly.  It gets in the way of new projects and sucks excessive money and time from electricity generators who are trying to provide for the future.
 
National's reform of the RMA will affect the energy sector in two key ways.

The first is our plan for Priority Consenting, which I outlined a few moments ago.  It is possible that some future large electricity generation and transmission projects would be facilitated under this new law.

The second is our detailed plan to streamline and simplify the day-to-day workings of the Act.   The reality is that many new generation projects are on a small scale and won't fit the criteria for Priority Consenting.  It is vital that these projects are subject to an efficient consenting process.   

National will introduce to Parliament a bill to reform the RMA within the first 100 days of our first term.  The legislation will include removing the ministerial veto over consents, reducing the number of consent categories, and putting an end to frivolous and vexatious objections.

National's detailed reforms of the RMA will send a message about the seriousness of our support for considerable new investment in electricity generation. 

3. We will send a clear signal that gas will be a part of the energy mix needed for security of supply.

New Zealand has fantastic renewable resources like hydro and wind, and it's important we develop those.   But the lesson from this winter is that thermal electricity generation is essential in keeping the lights on.  

Labour's ban on new thermally-fuelled electricity generation is just dangerous political symbolism.

To prove the point, you need only look at this year's electricity usage.  At times this winter, thermal electricity was providing over 50% of New Zealand's power needs. It is a great irony that if it were not for every bit of thermal generation running earlier this winter, we would have been in the dark, cold, and in many cases, out of work. 

The reality is that New Zealand relies on gas for security of supply. Gas plants like the highly efficient e3p plant at Huntly can run around the clock. If the wind stops blowing and the water stops flowing, gas just keeps going.

National will therefore overturn Labour's ban on new base-load thermal power stations.  

4. We will streamline the investment and decision-making processes for investing in new electricity transmission.

New Zealand is a small country; yet it now has a very complex and costly electricity regulatory environment.

We have 28 electricity distribution companies effectively under price control from the Commerce Commission, and we have Transpower, the monopoly transmission provider being guided by price-path regulation from the Commerce Commission and technical and economic regulation from the Electricity Commission. 

These overlapping roles result in second-guessing and considerable duplication of effort.

That duplication carries a cost that New Zealanders end up paying as electricity users and as taxpayers. What's more, in spite of the well-meaning bureaucracy, concerns about transmission have contributed to uncertainty about electricity supply.

For these reasons, a National Government will undertake a careful review of the roles that the Commerce Commission, Transpower, and the Electricity Commission take in the electricity sector. We will do this with a view to ensuring the best outcomes for consumers – in terms of security of supply and affordability – and we will do so with the goal of eliminating unnecessary duplication and cost. 

One possible outcome of this review is the dis-establishment of the Electricity Commission.  That would be a significant change, and National's intention would be to carefully work through the options in its first year in office prior to making it.

What is clear, however, is that the status quo is not good enough.

Environmental Responsibilities

In addition to security of electricity supply, National knows that New Zealand must balance its energy needs with its environmental responsibilities.   We are very conscious that energy contributes to greenhouse gas emissions and our Kyoto liability.

It's worth noting that while Labour has talked the carbon-neutrality talk it has failed to walk the low-emissions walk.

Labour's failure to reform the RMA has hampered environmentally friendly development initiatives.  The result is that in the past eight years well over half of new electricity generation has come from thermal sources.

What's more, the failure to ensure security of supply has led to dirty last-minute electricity solutions.  In the first six months of this year, for example, the diesel-fired emergency generator at Whirinaki burned 36 million litres of expensive and dirty diesel. 

National is determined to provide clear policy settings that favour renewable electricity generation.

Within nine months of taking office, we will introduce an Emissions Trading Scheme (ETS) that balances our environmental responsibilities with our economic opportunities.  This scheme will put a price on carbon emissions and will send appropriate signals to those wishing to invest in new generation.

We believe that one effect of our proposed ETS will be the phasing-out of the use of coal to fuel the power station at Huntly.  This could significantly lower New Zealand's emissions from electricity. We also expect that our proposed ETS will result in no new coal stations being built – unless proven technologies for carbon capture and storage change the emissions profile of coal.
 
I mentioned earlier New Zealand's extraordinary renewable energy resources, such as wind, hydro, and geothermal power.  We need to unlock the potential of those renewable resources to help them contribute to future electrical energy demand.

Labour has set a target for New Zealand to have 90% renewable electricity generation by 2025. The current figure is around 65%. National supports the 90% renewables target, and we believe our reforms of the Resource Management Act will encourage new renewable electricity generation. 

However, we will not let the 90% target get in the way of security of supply. We will not sacrifice energy security and our economy for the sake of a number.  There may well be times by 2025 when 90% of electricity demand is met from renewable sources.  But we will continue to need the constant reliability of thermal generation.

Affordability

Before I leave the subject of electricity supply, I'd like to make some brief comments about affordability issues.

One thing you can be sure of in any market is that scarcity of supply will result in upward price pressure.  Labour's failure to ensure there is enough new generation investment has seen exactly that occur.

Over the past five years, households have faced electricity price rises of 48%.   National is very conscious of the pressure these electricity price hikes have put on households and industry. 

The Electricity Commission is currently conducting a review of the electricity market.  National will receive that analysis with interest and we will take action on any recommendation we agree will improve the market and improve affordability for consumers. 

Furthermore, National will support energy efficiency by making sure the Energy Efficiency and Conservation Authority and its programmes are well funded.

Increased energy efficiency saves households and the country money in the long run. You can expect National to adopt an approach of encouragement rather than a sledgehammer-like approach that denies consumers' choice, like we saw from Labour and the Greens with their outright ban on incandescent light bulbs.

We will also not let energy efficiency projects get bogged down in red tape.

To contrast our approach to energy efficiency with Labour's, you need look no further that the mess over solar water systems. The Government's $16 million assistance scheme - set up to encourage expansion in solar - actually led to a drop in installations.  The solar industry, like so many, has become tangled in a new layer of red tape. 

That is why National has announced a simplified $1,000 grant scheme for homeowners to go solar, alongside reforms to the Building Act, with the aim of doubling total solar water installations within 5 years.

Conclusion

Ladies and gentlemen, National is ready and eager to make the policy changes needed to get this country moving ahead again with strong non-inflationary, productive growth. 

In the infrastructure area, as in so many others, our approach will be fundamentally different from Labour's.

- We will spend at least $5 billion in additional Crown capital on public infrastructure projects. 
- We will alter the debt track to achieve this. 
- We will do what it takes to encourage significant further private investment in infrastructure.
- We will invite the private sector to work in partnership with government to build and maintain the infrastructure New Zealanders need.
- We will undertake extensive reforms to the Resource Management Act.

Ladies and gentlemen, National is the party that is promising to do what it takes to unclog New Zealand's arteries and go for growth. We will turn the growth engine on to ensure a better future for all New Zealanders. 

We are serious about these policies, and let me say that if you're serious about infrastructure, then this election you should be voting for a National Government.

Policy & Backgrounder: Click here

Ladies and Gentlemen, today I am announcing National's policy on the benefit system.

This is a very important part of National's welfare policy but it's not the only part.

At a later date we will be announcing policies on other aspects of the wider welfare system, including vulnerable children and families, child support, and the community and voluntary sector. But today I want to talk about benefits.

There is also a background policy paper that goes into some more detail, and this can be downloaded from the National Party's website.

I don't need to tell you how significant this policy area is.

We have a very comprehensive benefit system in New Zealand, and almost 260,000 working-aged people currently receive a benefit. The vast majority of these people are on the domestic purposes, sickness, invalids, or unemployment benefit.

Historically, the unemployment benefit was the focus of most people's attention, but there are now just over 17,000 people on an unemployment benefit and most get off it within six months.

At the same time, however, there are 130,000 people on either the sickness or invalids benefit. Since 1999, the number of people receiving these two benefits has increased by more than 50%.
 
The benefit landscape has changed and our policies need to change to reflect this.

Before I get into that, I want to talk a little more about welfare in general.

You might ask why I use the word "welfare" when the vogue nowadays is to talk about "social development". I unashamedly use the word welfare because I believe in the welfare state. I have a personal commitment to it. My father died when I was seven years old. My mother, my two older sisters, and I had no other family in New Zealand. For a period of time after my father died, my mother relied on the safety net provided by the Widows Benefit.

My family was poor, and we knew it, but the benefit gave my mother enough security to keep us together and keep us focused on a time when things would improve. By having our most basic needs covered as a family, we were able to hold on to that most precious human emotion – hope.

Over time, my mother moved off the benefit and into work. The welfare system continued to support us, however, by providing us with a state house. It wasn't flash, but it was home.

I think almost all New Zealanders believe in the desirability of the welfare state. In particular, I think New Zealanders take it on trust that there will always be a safety net of social welfare benefits. We're a compassionate and fair people whose instinct is to give a person a helping hand when they need it.

National is committed to a benefit system that is a genuine safety net in times of need. We're committed to a comprehensive system of benefits that provides temporary support to people as they return to independence, and also provides indefinite, compassionate support to people who are physically or mentally unable to support themselves.

In addition, we believe the benefit system should be one that treats people with dignity but is not afraid to call a spade a spade. It should be fair and should provide certainty to people during what are often some of the most difficult and vulnerable times of their lives.

In terms of providing certainty, we want to send a clear message that benefits will continue to rise each year in line with inflation, and that there is no question of benefits being cut.

While it's currently convention that benefit levels rise with the CPI, there is no law that ensures it.  National will rectify that.

We will enshrine CPI adjustments in legislation, as is the case with New Zealand Superannuation.  National will give beneficiaries the same certainty that superannuitants enjoy about future levels of their payments.

I want to talk now about honesty in the benefit system, and about calling a spade a spade.

The first point to make is that we will be rejecting Labour's planned new benefit terminology.

Labour has spent eight years, millions of dollars, and thousands of hours in meetings and committees trying to pretend that different people don't have different needs.

Labour's pursuit of a "single core benefit" has ended in a complete farce. The different benefit types will still exist, and will be different from each other, but will all be simply called "income support". The Labour Government is going to issue a directive telling case managers and government officials that they are forbidden from using use terms such as "DPB" and "invalids benefit".

Ruth Dyson has one opinion about this. She says this will "remove the stereotyped language and bureaucracy of a bygone era [and] will ensure that Work and Income responds to people as individuals rather than as categories".

I have another opinion. I say that is a load of politically correct rubbish, it will waste money in rewriting everything, and it will not help beneficiaries in a single way. National will not be making those changes.

Another area where we are going to bring some much-needed honesty is around the planning process for beneficiaries.

Currently, beneficiaries, and their partners, who don't have work obligations requiring them to look for a job must take part in a "planning process". Most are required to complete what are called "Personal Development and Employment Plans".

The manual for Work and Income case managers says this:

"The set of goals contained in the client's Plan are the general objectives that the client wishes to obtain. Goals may be long- or short-term and focused on strengthening any aspect of a client's life. They should include pre-employment, employment, and social activities, as appropriate to the client's individual circumstances."

Isn't it great that busy case managers are required to help people develop an annual plan for social activities? I don't think so.

National will require that the planning process be focused squarely on preparing people for work, either at that time or at the time they face work obligations. We are going to change the name of plans to just "Employment Plans" and make them focused on employment-related activities and pre-work preparation.

The final point I want to make about honesty in the benefit system is around benefit advances.

Work and Income is allowed to pay a portion of a person's benefit in advance, to cover lump-sum expenses like school uniforms and appliance repairs. These advances have to be paid back over time, out of the benefit.

That's fine, except that benefit advances are being granted with apparent ease to people who apply multiple times, and who are finding themselves more and more in debt as a result. In the past year, 20,689 beneficiaries received three or more benefit advances. Total beneficiary debt has increased by around 75% since 1999.

Let's not pretend that people can repay benefit advances, when they can't. Lending to people who can't realistically pay it back is creating a group of people who are not just dependent on benefits but who are also burdened with increasing debt.

National will require the most frequent applicants for benefit advances to attend a budget advisory service, at the government's expense, to get qualified, experienced, non-judgmental budgeting advice to help them manage their finances. People who do not attend this service, in good faith, will not be eligible for any further benefit advances.

We consider that people who are regularly finding it difficult to make ends meet, for whatever reason, need more assistance than a continuing stream of benefit advances, which may or may not ever be repaid. They need expert help and we are going to ensure that help is provided.

I want to talk now about work, and about the work expectations that National has for people on a benefit.

Many people on a benefit will realistically never be able to work. They will be people on the Invalids Benefit whose illness or disability is all-encompassing, or who are terminally ill, and we will not expect them to be seeking work or training for work.

But for most people, a benefit should provide support when circumstances temporarily make them dependent.

National is going to have an unrelenting focus on work. We will do this for two reasons.

The first is that paid work is the route to independence and well-being for most people, and is the best way to reduce child poverty. Long-term welfare dependency locks people into a life of limited income and limited choices.

We all know there is little chance of a better future for beneficiaries and their children unless they come off a benefit and work for an income. Work is beneficial not only for the greater earning potential it provides, but also for the dignity, self-worth, and sense of belonging that is part of being in a workplace, having colleagues, and being productive.

I truly believe work has more than a monetary value, and there is more than just an income to lose by not working.

The second reason we will have an unrelenting focus on work is that people who receive a benefit are able to do so only because other people are going to work every day, earning a wage, and paying taxes. And, in many cases, these are people who are themselves, especially in the current economic climate, far from well off.

New Zealanders don't mind giving people in less fortunate situations a helping hand, but they equally don't like to feel that their helping hand is being taken advantage of. It's not fair on the people who pay the nation's welfare bill to have people receiving benefits and not making every reasonable attempt to pick themselves up, find a job, and stand on their own two feet.

Most people on a benefit do this. But it's clear that some have got too used to being on a benefit and see it as a permanent entitlement. They think it's their right to receive money from the state. Perhaps because it's been so long since they worked themselves that they really have forgotten or don't even know that someone else has worked to make their benefit possible.

So, in summary, National thinks the welfare system should be squarely focused on helping people get back to work as soon as possible, and ensuring that they do so.

To do this, we need a benefit system that focuses on what people can do, rather than on what they can't do; that challenges people, not treats them as passive recipients of benefits; and that provides support, training and opportunities for people to return to the workforce.

National's commitment as the party of work is evidenced by our support, over the years, for a "work for the dole" or "community wage" scheme.

We have never wanted to see people languishing for long periods on an unemployment benefit, effectively having a licence to sit around because there are few paid jobs available. The scheme we introduced in 1998 let the government compel people to work part-time for community organisations if they couldn't get a paid job and still wanted to draw the dole. And fair enough.

Here in 2008, we think that the number of people on the unemployment benefit for long periods of time has got down to such a level that it permits us to go one step better than "work for the dole". After all, why would you want people to be working and getting the dole when they could be working, earning their own income, not being dependent on the taxpayer, and being off the dole altogether?

In 2008, we are going to focus on the long-term unemployed by requiring them to get a paid job, and get off the benefit, rather than requiring them to do community work. That's because there are jobs out there and we're going to require people to take them. Healthy, able people on the unemployment benefit will no longer be able to choose not to work.

Within 12 months of a new National Government, every person who has been on the unemployment benefit for more than a year, of which there are around 5,000, will be required to re-apply for their benefit and undergo a comprehensive work assessment. All long-term unemployment beneficiaries will be required to do what it takes to secure employment. This may include practical training, attending a basic-skills course, or attending drug and alcohol rehabilitation.

After that, they will be required to actively look for a job, to go to any job interview they are referred to, and to accept any offer of suitable employment, whether full-time, part-time, temporary, or seasonal. If they do not comply with these obligations, they will have their benefit reduced in the first instance, then suspended, and then cancelled.

Now I want to talk about other benefits.

The evidence is clear from the unemployment benefit that work obligations are successful in reducing the number of people on a benefit. You might say that work obligations work.

But, currently, people receiving the domestic purposes, sickness, or invalids benefit do not face any work obligations whatsoever. This is a mistake, because many of them can and should work. It's the way out of poverty.

So, National's policy is to extend part-time work obligations to two groups of beneficiaries:

• DPB recipients, once their youngest dependent child is aged six or over, and
• People on sickness and invalids benefits who have been assessed as being able to work part time.

These groups will be required to spend at least 15 hours per week in employment, training, or job-seeking activities. It's in the long-term interest of sole-parent families to engage in paid work because this is the most effective way of reducing the risk of family poverty.

In 1999, a similar policy was implemented and DPB recipients faced work obligations when their youngest child turned six. The Ministry of Social Development studied the results of this policy and found that:

• There was an increase in the number of sole parents moving off the benefit.
• Most of those who moved off the benefit and into employment said they were eventually better off financially; and
• 60% of sole parents who moved off the benefit and into employment reported that the overall effect on their families of them obtaining paid work was positive or very positive, with only 4% describing the overall effect as negative or very negative.

So, the policy really worked. But by the time MSD confirmed that it worked, an ideologically driven Labour Government had got rid of the policy.

Opponents sometimes argue that requiring a sole parent to seek work is detrimental to his or her children. This is not borne out by the international evidence. In fact, I'd like to see the evidence that growing up in a long-term benefit-dependent household is better for children. It isn't.

The system of work obligations also has built in safeguards.  Work and Income already has the discretion to exempt parents from work obligations if, for example, they are caring for a child with a physical or intellectual disability, or a chronic or recurring illness. 

We will ensure that this discretion is exercised in a compassionate way and takes into account a sole parent's individual circumstances.

Our policy of introducing part-time work obligations for some sickness and invalids beneficiaries is a new and significant one.

Currently, doctors can indicate on the Work and Income medical certificate if they consider that the sickness or invalids beneficiary is able, in their opinion, to work part time – that is, to be regularly in employment for 15 hours or more a week. Based on this and other information, Work and Income has categorized 5,629 sickness or invalids beneficiaries as capable of working right now.

So you'd think there would be an obligation for these people to actually find work. But there isn't. There's no obligation for them to do anything more than simply plan for a possible return to work at some stage – and to talk to their case manager once in a while.

Under a National Government, sickness and invalids beneficiaries who have been categorised as work-ready will be expected and assisted to work part time. This means they will be required to spend at least 15 hours per week in employment, training, or job-seeking activities.

There are other changes we are going to introduce to help address the growth in numbers on the sickness and invalids benefits.

The first is that National will require more frequent reassessments during the first few months that a person is on a sickness benefit.  We believe it's important to have frequent medical assessments, and active and intensive case management, during the initial period of a person's benefit receipt.

Therefore, we will require that the first two medical certificates issued to a sickness beneficiary will be for a maximum of only four weeks. This will ensure more frequent assessments from the person's doctor, and from Work and Income, at the outset of their benefit receipt. The third, and any subsequent medical certificate, will continue to cover a period of up to 13 weeks.

The second change we are going to make is that if a person has been receiving a sickness benefit continuously for 12 months, Work and Income will automatically send them to a 'designated doctor' for a second opinion on their work prospects.

Currently, Work and Income has a number of designated doctors around the country which it contracts to give second opinions in some cases, but these second opinions are not automatic. Making second opinions compulsory reduces the pressure on doctors and case managers who may be reluctant to initiate second opinions.

Moreover, it's taxpayers who are footing the bill for the sickness benefit, which is supposed to be for a short-term medical condition. A compulsory second opinion enables Work and Income, on behalf of taxpayers, to seek assurance that the sickness beneficiary is appropriately receiving the benefit, even after a year's continuous receipt.

I mentioned earlier the subject of sanctions.  I expect that people who do not abide by their work obligations will suffer consequences and I have no qualms in saying that.

But currently, Work and Income case managers have, with few exceptions, only one option and that is to stop payments of a person's benefit altogether.
 
This is a severe sanction, and has very significant effects on people's lives. Consequently, case managers have to think long and hard about whether they apply this sanction, especially to single people and to people who only have part-time work obligations. It is a big call to stop a person's benefit altogether.

Therefore National is going to introduce a more graduated system of sanctions for people who do not comply with their work obligations.

We are going to introduce at least one intermediate step which will be a reduction in benefit, before a full suspension of the benefit applies. This step, or steps, will give Work and Income case managers more flexibility and additional tools to encourage beneficiaries to comply with their work obligations.

Details of these graduated sanctions will take some working through, given the complexity of the benefit system.  The system needs to differentiate between different benefit types, whether a person has a partner, whether a person has children, whether they face part-time or full-time obligations, and so on. We will make sure that sanctions are equitable across these different permutations.

And as a result of making sanctions more graduated we will expect to see them used more frequently, in cases where people are not complying with their work obligations.

National wants to see sanctions used, but we also want there to be appropriate incentives in the benefit system so that people on benefits actually want to work, and can better themselves by working. 

We are going to increase work incentives by making the benefit abatement regime more generous to beneficiaries.

Beneficiaries and their partners can currently earn up to $80 a week before their benefit is affected. Above that level of earnings, their benefit is reduced at the rate of 70 cents for every dollar they earn, unless they are on the DPB or invalids benefit, in which case it's initially reduced at 30 cents in the dollar.

Benefit abatement is a necessary part of the system, but the high marginal tax rates it creates are a disincentive for people to work even a few hours a week.

National's policy is to raise the earnings threshold. We will allow beneficiaries to earn up to $100 a week before their benefit begins to be abated.

We are doing this because we want to encourage work wherever possible. Raising the earnings threshold gives beneficiaries an additional incentive to work a few hours a week, to get into the work habit, to gain some confidence, and to start building work skills. That's an important step in the progression towards full-time work.

Ladies and gentlemen, I have long believed that you can measure a society by how it looks after its most vulnerable.

Yet you can also measure a society by how many vulnerable people it creates – people who are able to work, and able to take responsibility for their own lives and their children's lives, yet end up depending long-term on the state.

Good welfare policy involves supporting people when they are most in need, encouraging people when they should be thinking about getting back to work, and occasionally giving people a kick in the pants when they are not taking responsibility for themselves, for their family, and for other taxpayers.

I believe that the policy I have announced today achieves the necessary balance between supporting people in genuine need, and reassuring hard-working New Zealanders that their taxes are being spent wisely.

Mostly, though, this policy is about providing help for people to help themselves.

It's about encouraging those who can do so to take and create opportunities, to see themselves as something more than just the passive recipient of a benefit. Some can't wait to take that step. Some are fearful of it, and others are downright resentful. But the world of work is always going to offer more possibilities than the limitations of welfare.

A National Government will ensure that welfare is a safety net, but not a net in which people are too easily entangled and entrapped.

For most people, the real opportunity to improve their lives, and the lives of their children, is through work.

And we all prosper, and society prospers, by having fewer people languishing on the fringes, and more of us productively engaged in our communities.

That is the philosophy on which National's policy is based, and that is why I'm pleased and proud to have announced these measures today. 

Read the related press release.

National's Benefits Policy will have an unrelenting focus on getting beneficiaries into employment, says National Party Leader John Key. 

"National is committed to a benefit system that is a genuine safety net in times of need.  We also recognise that many people on a benefit will never be able to work because of illness or disability," Mr Key said today in a speech.

"National is going to have an unrelenting focus on work.

"Paid work is the route to independence and well-being for most people and is the best way to reduce child poverty.  Long-term welfare dependency locks people into a life of limited income and limited choices.

"National will extend the part-time work obligation to two groups of beneficiaries – DPB recipients, once their youngest dependent child is aged six or over, and people on sickness and invalid benefits who have been assessed as being able to work part-time.  About 5,600 sickness and invalid beneficiaries have been categorized as capable of working right now.

"These beneficiaries will be required to spend at least 15 hours per week in employment, training, or job-seeking activities.

"National will not be introducing a 'work for dole' or 'community wage' scheme.  Instead, we will be going one better and will focus on long-term unemployed by requiring them to get paid work and get off the benefit.

"Within 12 months of taking office, National will require everyone who has been on the dole for more than a year to re-apply for their benefit and undergo a comprehensive work assessment.

"All long-term unemployment beneficiaries will be required to do what it takes to secure employment.  This may include practical training, attending a basic skills course, or attending drug and alcohol rehabilitation. 

"After that, they will be required to actively look for a job, go to any job interview they are referred to, and accept any suitable offer of employment.  If they don't comply with these obligations, their benefits will be reduced in the first instance; then suspended, then cancelled.

"Currently, Work and Income case managers have, with few exceptions, only one option and that is to stop payments of a person's benefit altogether.
 
"This is a severe sanction, and has very significant effects on people's lives. Case managers have to think long and hard about whether they apply this sanction, especially to single people and those who have only part-time work obligations.

"Therefore, National is going to introduce a more graduated system of sanctions for people who do not comply with their work obligations. We will introduce at least one intermediate step which will be a reduction in benefit, before a full suspension.

"This step, or steps, will give Work and Income case managers more flexibility and additional tools to encourage beneficiaries to comply with their work obligations. Details of these graduated sanctions will take some working through, given the complexity of the benefit system.

"National also wants appropriate incentives in the benefit system so those on benefits actually want to work.  National will therefore make the benefit abatement regime more generous.

"Beneficiaries and their partners can currently earn up to $80 a week before their benefit is affected.  Above that level of earnings, benefits are reduced at the rate of 70 cents for every dollar earned, unless they are on the DPB or Invalids Benefit, in which case it is initially reduced at 30 cents in the dollar.

"Benefit abatement is a necessary part of the system, but the high marginal tax rates it creates are a disincentive for people to work even a few hours a week.  So, National will raise the earnings threshold and allow beneficiaries to earn up to $100 a week before their benefit begins to be abated."

National will also:

• Introduce more frequent reassessment during the first few months a person is on a sickness benefit.  Anyone on a sickness benefit continuously for 12 months will automatically be sent to a 'designated doctor' for a second opinion on their work prospects.
• Enshrine in legislation CPI adjustments to welfare benefits so they rise each year in line with inflation.  Currently this is only done by convention.
• Reject Labour's planned new benefit terminology.  Labour's pursuit of a 'single core benefit' has ended in a complete farce.
• Require the most frequent applicants for benefit advances to attend a budget advisory service at the Government's expense to get qualified, experienced, non-judgmental budgeting advice to help them manage their finances.  Those not attending will not be eligible for any further benefit advances.

"At a later date, National will announce policies on other aspects of the wider welfare system, including vulnerable children and families, child support, and the community and voluntary sector."

For background document go to: http://national.org.nz/files/2008/benefits_backgrounder.pdf

John talks about the very successful Annual Conference and the challenges ahead, passing the 5,000 supporter mark on Facebook, and dirty tricks in the campaign.

National Party Leader John Key today challenged Helen Clark to distance herself and her government from the dirty tactics being employed against National.

"The dirty tactics used by those who infiltrated the National Party conference at the weekend and secretly bugged MPs' personal conversations are disgusting.

"I call on Helen Clark to say whether she condones or condemns these tactics.

"Is this what she meant when she told Labour activists recently to put on their 'hard hats'?

"The contrast between the two major parties is revealing.  National is focused on what really matters to New Zealanders.  At our weekend conference we outlined our 10-point blueprint to build a stronger future for New Zealand.

"At the same time the Labour Party is showing they have no plans for the future and no vision, beyond descending to the lowest level to cling on to power.

"Helen Clark needs to tell the country whether the level of dirty tactics now being revealed is what we can expect from her Party up the election.

"National does not intend to descend into the gutter.  I intend to run a clean, positive campaign, focused on the issues that really matter to New Zealanders."