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Opinion: It's amazing how critical Labour is of its old policy in its Working for Families extension to beneficiaries; And it supports National's tax changes too

Opinion: It's amazing how critical Labour is of its old policy in its Working for Families extension to beneficiaries; And it supports National's tax changes too

By Alex Tarrant

I found it quite amazing looking through Labour's new policy of extending Working for Families credits to beneficiary families to read how critical the party was of the policy it brought in under Helen Clark.

Working for Families was implemented to give tax credits to low and middle income working households with children. The rationale was this would help alleviate child poverty, and Labour claims the policy has already lifted 130,000 children out of poverty.

But beneficiary families were not included - this was a policy for working families, with the design supposed to encourage those on benefits to enter work so they could access these tax credits.

Now Labour wants to include them at a cost of NZ$1.13 billion over the next seven years. I have no argument against focussing more on beneficiary families - surely if a policy is focussed on alleviating child poverty, then it should include those families on the bottom rung. Whether using tax credits to do so is another argument all together (which you're of course welcome to discuss in the comment section below).

Deputy leader Annette King said this was "unfinished business" for the Labour Party.

Well, if the policy was designed to try and alleviate child poverty, leaving the bottom rung until last seems to be the wrong way of going about it. The old cynic in me says this was therefore initially a policy to appease middle income voters.

Old rationale contentious

In its policy document released yesterday, Labour said a particular focus of concern was the lower rate of assistance those with little or no paid work (including beneficiary families) receive compared to families in paid work.

"This differential was introduced by National through the Child Tax Credit in 1996 and preserved as part of Working for Families, through the In Work Tax Credit which replaced the Child Tax Credit. The rationale for keeping this differential was to acknowledge the additional weekly costs associated with going out to work," it says in the document.

"This rationale was always contentious. Moreover, since the introduction of Working for Families, Labour continued to lift the Minimum Wage significantly over time, helping to 'make work pay' and avoid a 'poverty trap' that had previously existed where moving off a benefit was scarcely worthwhile for some families, once work-associated costs were taken into account. Labour is, as noted above, committed to lifting the Minimum Wage further to $15 an hour (from NZ$13 now) when it becomes government," it says.

So here we have Labour saying the rationale it previously used, of incentivising work over the benefit, was contentious, as it was scarcely worthwhile for some families to move off the benefit into work. But then Labour says:

"Current tax and Labour's future wage arrangements mean families in paid work are better off, and incentives to work are stronger. Benefits are already low and falling against average wages, and depriving benefit families of tax credit support on top of that means there is simply not enough money to go around – and both parents and children suffer."

So even though the incentives to enter work are now stronger, due to National's tax changes in Budget 2010, and the future Labour promise to immediately hike the minimum wage from NZ$13 an hour to NZ$15, instead of raising it in line with inflation, Labour now still thinks beneficiary families need more help.

If they need help now, surely they needed help back when the policy was first designed.

"In this context, we also consider that the ways the In Work Tax Credit stigmatises beneficiary families, undervalues care, and keeps poor families' income unnecessarily low outweigh any remaining issues about work incentives," Labour says.

"We therefore intend to move over time to phase out the In Work Tax Credit and extend this funding to all of those eligible for Working for Families, including families caring for children fulltime and receiving benefit support to do so. We estimate that this policy will effectively eliminate child poverty in sole parent families once fully implemented," it says.

The details

Labour released this policy as part of a NZ$2.6 billion package focussed on children. The policy would be rolled out in three tranches based on the age of the youngest child in the family. The timetable for implementation would be as follows:

April 2013: $6 a week tax free-zone introduced (applying to beneficiary families as well as others), and Working for Families increased by $60 a week for a quarter of families, which we estimate would cover those with a youngest child aged 0-2.

April 2014: Tax-free-zone increased to $10 a week per adult (which means $20 a week for a beneficiary couple).

April 2015: Working for Families increased by $60 a week for another quarter of families, which we estimate would extend coverage to those whose youngest child was under 5.

April 2018: In Work Tax Credit abolished and all Working for Families recipients qualify for the extra $60 a week, which will now be paid via the 'first child' component.

"Based on the Ministry of Social Development's Household Income in New Zealand analysis, there is good reason to believe that this would have a very significant impact on levels of child poverty. The impact is likely to be particularly significant for children in sole parent families who make up a disproportionate number of the children in poverty," Labour says in the document.

"Taking into account the number of children reliant upon benefit income and estimates of poverty rates for different groups as presented in the Household Income in New Zealand reports, it seems reasonable to expect that this policy will effectively lift at least 100,000 children out of poverty once it's fully implemented," it says.

"This is based on a measure of 50% of the median wage before housing costs. There are likely to be significant impacts based on the 60% line and taking into account housing costs as well, but these impacts are more difficult to estimate as they would require information about expenses and supplementary sources of income that is not readily available. Labour will also review recent changes to support for older children aged 16-18 years, to ensure this support is adequate."

???

If these families make up a disproportionate number of children in poverty, and this was initially a policy desiged to alleviate child poverty, shouldn't the initial focus have been here?

Seems to me that they have realised middle class welfare to appease voters did not really help lift children on the bottom rung out of poverty.

Your view?

(Updates with video of Goff)

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47 Comments

Dont' think you will be invited to the Labour Party Xmas do Alex...then again perhaps you wouldn't want to go anyway...!

Greece here we come!!

I think NZ is screwed with either Govt,ie. Labour (making Benefeciaries richer) or National (making the rich richer)....

@HousesOverpriced

I totally agree.  I had decided to vote Labour, since the Nats won't change the brainless no-CGT policy, particularly regarding rental housing, or raise the age for superannuation

& then Labour comes up with a cretinous boondoggle like this, extending an existing distortionary & clearly unaffordable policy.  Plus of course the gormless GST-off-fruit-&-veges policy. 

So now I'm totally stymied.  Where is there someone with a rational suite of policies?

Cheers

It's like policy pass the hot potato at the moment. Each coming up with something more stupid or being more insulting than the other, upping the ante and waiting for the other party to become so emboldened as to drop a real election losing clanger. Unbelievable.

I'm thinking of voting Greens for the 1st time in my life.

But, I’m only thinking it so that they can go into a form of 'coalition' with National, & then they can be beset with the 'coalition curse’ & disappear like all the other minor parties have!!!!!! <<evil laughing>>

Hi voted for the Greens last election, and then wondered what made me do so!!!!

I voted for Winny last time!

Ok, call me crazy!

However, my reasoning was that if they got in, they might be a moderating coalition for the Nats, rather than the loonies in Act & the Maori Party. 

Bad fail, Philly!

Hello " crazy ".

... & your voting record is, Gummy?

Woeful ! .... just as in hoss racing , same as in voting , GBH has never picked a winner .....

..... anyone from NZ Labour wanna pay me to vote for Jolly Kid & Wild Bill ? ... My pen has the power of the jinx ...

They have elections in the Philapines?

 

regards

Let's not lose sight of the fact that the biggest group of beneficiaries by far are superannuitants.

careful, If they all vote for Winston....well..........

careful, If they all vote for Winston....well..........

Then  the expression Political Asylum would take on a whole new meaning MartinC .

All Winston has to do to get 100% of their vote (& win a lot of seats) is promise to make Coro St primetime, & add a channel to Freeview showing nothing but Coro st

Simple :-)

With NZ's rapidly aging population, maybe you're not joking.

And just following on that - Our Budget 2011 spending plan section shows NZ$9.6 bln to be paid out in NZ Super in the current year - 41% of the Social Welfare budget. DPB is NZ$1.9 bln

http://www.interest.co.nz/news/53505/budget-2011-social-welfare

Alex:  waddya mean "alleviating child policy"??

Cheers

Jeepers :) That one got through didn't it. Changed it now. Also updated with video now

Interesting remembering back about 6 years to a series of email exchanges that I had with Cullen where I was trying to encourage him to address the housing bubble, emigration, currency and the distortions of our fiscal policy.  Emphatically he did not believe there was a housing problem, there was nothing that he could do about the currency and get this, he did not care how many Kiwis left because there were plenty of others breaking their neck to come to NZ.  My impression was that they were happy riding the coat tails of the property bubble feel good factor

A valid point and Labour should be caned for that because the bubble damn near wrecked the economy. But why aren't National trying to fix it?

National would have been no better.....given Brash's 2005 tax bribes feeding into the speculation, quite possibly worse.

regards

I agree that National would have been at least as bad but my question still stands which is why aren't they even trying to fix the problem? One answer is probably because sheeplike NZ is too weak to hold their feet to the fire.

Meanwhile, everybody is bending over backwards to say how fantastic the Australian economy apparently is. Is that what you mean by 'unnecessary eruption'? Which Labour policies in particular where so critical an influence here. More pin the housing bubble on the political party you dislike like the most.

If you can't see the causal link between a global recession and a NZ recession you would have to be a complete idiot.

 

Very true...no need to make hard calls that might cost votes.....just get tax and spend it......National however would have been no better IMHO.

regards

A quote I like:

"Did you know that the word 'idiot' is actually derived from the origins of democracy in ancient Greece? Thousands of years ago, a Greek citizen who demonstrated disinterest in politics was labeled 'idiotes'; it literally meant 'private person,' which curiously enough was a term of derision at the time.

Fast forward to the pitiful excuse we have for a democratic process in the world today, and the opposite is now true: you have to be a complete idiot to invest yourself in these politics."

Labour continue to try and fix up old failed approaches with patch-ups. 

I am growing a little tired of wathching Closeup/Campbell interviewing single parents with 6 kids who ain't got enough money.  The never seem to be asked why the heck did you begin breeding ...and continue to breed when you aint built your nest first and secured a mate?

Unfortunately, making life bearable by increasing benefits for such people only serves to encourage more to come along and do the same.

Those on a half decent incme know two kids is about all they can afford if they are to provide oppurtunities for them.  Those on low income seem to think the more the merrier (family plannin.g. wuts dat?)..and then expect the State to pitch in.

Perhaps because you voted for successive governments that empowered them to keep having kids. 

 

In a fair democratic system, we need a good reliable, honest opposition party to keep the ruling party in check.  Labour is an ideal party for that opposition role  - their ideas are just really out of whack but they do keep a good eye on the govertment (MMP also helps). 

Dear god, I hope they remained as oppostion party in this election - otherwise NZ will be the Greece of South Pacific!

You must be kidding, right?

In what way are Labour's ideas more out of whack than the National party's ideas and schemes?

Isn't it a good idea to tackle child poverty?  If the free market is not providing for these families, who other than the state will?  If your concern is whether we can afford it, ask yourself whether we can afford the social consequences of having a large group of underprivileged children in NZ.  Regardless of what Labour did in its previous turn in government, is it good policy to discriminate against children based on their parents' ability to find paid work?  In a previous era many of these families would have been employed by the Railways and other arms of the state.

And no, I did not vote for Labour at the last election.

Like many well meant social initiatives, they often have side effects that are very undesirable.  I know young couples who, while accepting overtime and wage rises, are converting the extra money into "time in lieu" because they are fearful of loosing working for families.  Start paying it with the unemployment benefit and people will be reluctant to move to employment especially when factoring in the added cost of transport, child care etc.

is it good policy to discriminate against children based on their parents' ability to find paid work?

No I don't think it is. And Labour seems to have come to this conclusion now, whereas the initial Working for Families package didn't include beneficiaries, who surely are on the lowest rung, and have more of a focus.

So it just made me wonder again about their intentions with the initial package. Sure it would have made some inroads on child poverty, but shouldn't you look to help those on the bottom first, and not decide to later, during an election campaign?

Poverty seems to mean different things to different people .For some it means pay of $2 per day say in some African or Asian nations, for some it is that  they cant afford to buy a lotto ticket,wide screen TV or booze etc .Others send their kids to school hungry but are smokers. Child Poverty is a symptom of fatherless families,generations of welfarism and societies wholesale abandonment of personal morality and responsability. Throwing more money hasnt worked in the past and aint gonna fix it in the future and Labours just building up false hopes with their reckless promises !

2 tix4conservatives...

well why not ?  nothing loike fresh ideas,mate

Coudlnt agree more goNZ! Its so true

Annette King needs to have a closer look at the Labour Party manifesto , the part that says

...  " the higher up a tree that a baboon climbs , the more of it's arse it shows to the world "......

...... stop climbing that welfare-tree , Klinger ....... we've seen enough , way way too much as it is .......

Oh for Sod's sake Gummy...thank you very much...how do I erase that image from me grey matter....bleeding cheek!............................see what you done...!

I agree Alex that the initial WFF package was partly politically engineered to win middle class votes.  I suspect the about face is due to Annette King's move up the party hierarchy and her new responsibilities since Labour's last term.   To be fair to her, she has maintained a fairly consistent line on the unfairness of dividing children into the worthy (offspring of working parents) and the unworthy (offspring of beneficiaries) and said so several times in Parliament in the 1990s.

Remember too that when Family Support replaced various child-related tax rebates in 1986 (under a hard right Rogernomics government), it didn't distinguish between children of employed and unemployed parents.  The whole concept of 'deserving' and 'undeserving' children only came in with National in 1996.  Labour then pledged to scrap the distinction but reneged once they gained power in 1999.

 

Welfare would be great if the country could actually afford it. For the next couple of years, it really can't.

They go on about the kids, our next generation, but when they're twenty the country will be bankrupt. 

How do you think the largest group of beneficiaries by far, the superannuitants, would feel if we said we cannot afford to keep paying them?

When you think that the usual targets of anti-welfare types --- the unemployed, sickness beneficiaries, solo mums, etc --- are a minority, any cuts to welfare would be pointless, futile, and counterproductive.

We should make it mandatory for retirement villages to have condom vending machines .....

...... paying a pension to the oldies if fair enough , but giving them the DPB is a step too far ......

Although I have a niggly-naggly feeling that the oldies will fill the condoms with mince-meat and cook 'em up for lunch........

How many people do you know who are on an unemployment benefit?

How many people do you know who are on a sickness benefit?

How many people do you know who are on a solo mum benefit?

How many people do you know who are gainfully employed?

How many retirees do you know?

Chances are that for every dole/sickness/solo mum benefit "bludger", you know fifty or more working people, and a lot of pensioners.

As exasperating as the longterm bene bludgers are, there aren't really a lot of them. The rabid Right will tell you that there are so many that they are seeping out of the walls and sucking the country dry, but it's superannuation that costs the most, and by "the most" I mean almost the entirety of the welfare budget.

But of course right wing baby boomers don't want to hear a word about that, not least because most of them are facing retirement very soon, and expect a nice juicy handout.

 

Exactly..........

regards

True but it doesn't make me stop wanting to shoot the lot of them. (Not the OAPs!)

Exactly right.

They also don't highlight that the entire pension system would be very healthy if NZ monetary inflation (the size of NZs money supply) had not run at 6% P.A for the last 20 years.