02-07-2025
David Seymour's hypocrisy over drugs and poverty
The state should spend more on pharmaceuticals like Wegovy because of the benefits to society as a whole, says the deputy prime minister. So why does he refuse to apply the same logic to other forms of spending?
On Tuesday, as the weight-loss drug Wegovy finally became available on prescription, Act leader David Seymour renewed his call for more to be done in just about the only area of government spending he likes: pharmaceuticals. We must, he argued, consider the 'whole of society' benefits from this spending, because without such analysis the state will – in his view – always underinvest.
Which would be fine, were it not for the colossal hypocrisy of his opposition to such analysis elsewhere.
Let us rewind briefly. In an interview with RNZ's Guyon Espiner last year, Seymour argued that, when it comes to pharmaceuticals, governments could save money by spending money. Not only was a new drug good for the individual, 'but it would probably increase their ability to work and pay tax, reduce the need for [welfare] benefits, reduce their admission to hospital and save money in a bunch of other ways'. Unless government did that 'whole of society costing', future spending on pharmaceuticals would be 'pretty tapped out'.
This is not an unreasonable argument. The problem is Seymour's refusal to apply it to other forms of spending – notably, those that might tackle child poverty.
In a press release last September, Seymour dismissed Treasury analysis that reaching our child poverty reduction goals – to halve hardship, in crude terms, by 2028 – would take around $3 billion a year. The last government had increased welfare spending by more than that amount yet child poverty was 'virtually static', he argued.
Seymour's analysis is flat-out wrong: official data showed very clearly that the big welfare spending increases, notably the 2018 Families Package, led to a noticeable drop in child poverty and the number of kids going hungry. The only real problem was that, when the pandemic hit, Labour didn't continue down the same path and do more to cushion the impact on the poorest New Zealanders.
More than that, though, Seymour's argument ignores the fact that a genuine 'whole of society' approach would commit a government to spending vast sums tackling child poverty. Early-years hardship, after all, shows up in later-life damage: children born into poverty typically have worse school results, and lower employment rates and earnings, creating a drag on economic productivity more broadly. They're more likely to be on benefits, they experience twice the rate of heart disease of richer kids, and they require higher spending on health, housing support and criminal justice.
Economists have produced various estimates of the total cost this imposes on society. The Poverty by Design conference last year heard that researchers had put the cost at 1-2% of GDP in Britain, 3.8-4.5% of GDP in Canada and as high as 5% of GDP in America.
In New Zealand, the estimates – from roughly a decade ago – were around 3% of GDP (Infometrics in 2011), upwards of 3.5% of GDP (Analytica Auckland in 2010), 2.8-3.7% of GDP (the Expert Advisory Group on Solutions to Child Poverty in 2012), and 3.8-4.6% of GDP (the Child Poverty Action Group in 2011). Child poverty has, admittedly, fallen since then, so the lower estimates are probably the most accurate. But even today, hardship in New Zealand is roughly the same as the European average, and a 2022 OECD study of 24 European countries suggested the cost of child poverty was typically around 3.4% of GDP.
Applied to the New Zealand economy, which was worth $415 billion last year, that figure implies child poverty costs us about $14 billion annually. If we take seriously this 'whole of society' approach – to use Seymour's words – we could justify spending a genuinely enormous amount of money to slash child poverty rates. Even just the increased tax take – generated from healthier and more productive workers – would cancel out the cost to government in the long run, quite apart from the wider benefits.
The only possible counter-objection is that even if tackling child poverty is so important, direct government spending is not the way to do it. But the evidence says otherwise.
Although we can't rely solely on the state putting more money in families' bank accounts, it is an extremely effective form of action. Decades of evidence show that when you lift family incomes, parents generally spend it on things that benefit their children. And the results are impressive. Just US$1,000 extra a year in family income, for instance, closes up one-quarter of the achievement gap between poorer and richer kids. In long-term US research, state payments made to families decades ago show up in adults' better health and higher earnings. The government recoups so much tax from those more productive adults that the payments quite literally pay for themselves.
Of course an anti-poverty strategy can't rely on welfare alone. Where possible, people should be supported to earn more through paid work. But even that, the evidence shows, requires greater investment in vocational education, mental health services and other welfare-to-work supports. (We also shouldn't forget that four in 10 poor children have a parent in full-time work; as it stands a job is not a guaranteed route out of hardship.) But when people don't have the option of paid work – when disability rules it out, child-raising has to come first, or individuals just need help getting their life back together – then they will need higher welfare payments to support themselves and their children in dignity, and to avoid all the damage that poverty can inflict.
Not that Seymour, of course, finds such arguments persuasive. Whereas he cannot blame cancer patients for their situation, he can blame poor parents for theirs, and this harsh moral judgment overrides the investment case. As do political pressures: in his interview with Espiner, Seymour notes that his Epsom constituents regularly complain to him about pharmaceutical underfunding. And those constituents are, of course, some of the richest in the country. Taking a 'whole of society' approach to funding cancer drugs is very much on their radar. Doing the same for child poverty? Not so much.
