Good news for children in poverty
The final details of the Government’s much-touted Families Package have been released and will see a huge boost for families with children.
Labour promised a big effort to reduce child poverty pre-election and its announcement that the package of measures will, over the next four years, almost halve the number of children living in poverty will resonate with many.
Details of the policy were released at Treasury’s half year economic update, which painted a generally healthy picture for the economy but left little wriggle-room.
The economic setting was also the Government’s chance to relaunch its flagship Families Package, which flopped somewhat after a concerted effort from National to convince voters they would be better off with their proposed tax cuts.
Those cuts, an $8.4 billion cost that would have handed back between $10 to $20 a week to workers, will be scrapped to pay for the $5.3b Families Package that will be passed under urgency.
Finance Minister Grant Robertson said 384,000 families would be better off by $75 a week under the changes, with 88,000 children expected to be lifted out of poverty by 2021.
“Our priorities are different from the previous Government. We are targeting spending at the early years to invest at the time in life where the evidence shows it makes a difference,” Robertson said.
The package is largely unchanged from what was announced before the election.
Working For Families will be boosted, with the eldest child rate rising from $5303 to $5878 and the abatement threshold (the level after which welfare payments begin to fall) jumping to $42,700.
A planned rise to the abatement rate (the rate at which welfare payments fall as incomes rise) from 22.5 to 25 percent will be kept and the exact amount each family will receive will depend on how many children they have and their income.
The scrapped Independent Earner Tax Credit providing $10 a week to single people earning between $24,000 and $48,000 will return, while previously announced increases to the Accommodation Supplement and Accommodation Benefit will remain.
A new weekly Best Start payment of $60 will be given to all parents with a child born after 1 July, once paid parental leave has ended.
For those earning less than $79,000 a year the payments will continue until the child turned three and will replace the Parental Tax Credit for some families.
About one million beneficiaries and superannuitants will also be better off, receiving a winter energy payment that is ostensibly to pay for heating their homes but in reality can be used for anything.
Couples and families will get $700 spread over winter, while single people with no dependents will receive $450.
The payment will run for 13 weeks from July 2018, and in future years will start on 1 May and be payable for 22 weeks.
New initiatives that were not announced pre-election include an increase by $20.31 a week to the Orphan’s Benefit, the Unsupported Child’s benefit and the Foster Care Allowance.
Not all new families will benefit
While the Best Start payments will be universal for babies born after 1 July, many families who welcome a new arrival in the next six months will miss out.
If they are eligible for Working For Families they will receive the boost there, but those outside the threshold holding a new baby will be wondering why they get nothing.
Under Nation’s proposal they would have received a tax cut.
The Government will point out that its package is aimed at struggling families, but it will leave some middle-income families, many of who will be shifting to a single income, with no bonus at all.
Steven Joyce, National’s finance spokesperson, was quick to point to the large portion of the population who would miss out by not receiving the tax cuts they had planned.
When it was in Government National had also set a child poverty reduction target, but only projected numbers out to the first year, he said.
If comparing apples with apples, then they would have lifted 100,000 children out of poverty by 2021.
“It’s very strange for a Government that says it wants to increase the wages of hard-working Kiwis to start by taking more than a $1000 a year off them.
“National’s Family Incomes package was structured to lift 50,000 children out of poverty from April 1 next year. Labour’s 88,000 is not until 2021 by which time National would have undertaken its second similar package with a similar impact.”
Winter energy payments for both rich and poor retirees
The Government has scrapped tax cuts to direct the money to those on lower incomes, but will give the winter energy payment to superannuitants regardless of their means.
Following some criticism that rich pensioners who spend their winters in sunnier locales would still bank the payment a new clause have been introduced that cancels the payments if someone spends more than four weeks overseas.
Those eligible for the payment but who feel they do not need it can also opt out, but how many are likely to do so is unknown.
Social Development Minister Carmel Sepuloni said a lot of different options had been considered, but the Government believed the effort and cost of means testing the payment was not worth it.
“I think when we weighed it up in terms of the implementation costs and everything like that this was was the best way to roll it out.
“It’s fair, it’s the easiest way to do it and we’re happy with the way we’ve done it.”
As one of the few MPs eligible for superannuation, and therefore the winter payment, Deputy Prime Minister Winston Peters was naturally asked if he would be opting out of receiving it.
He was non-committal, saying he agreed there should be no means testing before remarking that his base in the far north got chilly as well.
“I live in a very warm place called Northland. They have winter in Northland too, sometimes it goes down to zero. Not often, but it does,” he said.