Labour to raise benefits to highest level in real terms since 90's

NZ Herald,
Publish Date
Sunday, 12 November 2017, 10:02a.m.
Beneficiaries using Work and Income will receive the most money since 1991. Photo/NZ Herald
Beneficiaries using Work and Income will receive the most money since 1991. Photo/NZ Herald

Welfare benefits for families with children are set to rise to their highest rates in real terms for at least 37 years, as the new Labour Government acts against child poverty.

A Herald on Sunday analysis of the family packages offered by both Labour and National in the election has found that both parties would have finally restored the real value of benefits to where they were before the 1991 benefit cuts for the first time.

Children's Commissioner Judge Andrew Becroft is now calling for a formal cross-party accord, similar to the 1993 superannuation accord, to commit to long-term targets to reduce child poverty based on the promises that both parties have made.

"It would be terrific for New Zealand children if the issue of child wellbeing was taken out of politics," Becroft said.

He said he was "ready, willing and available" to broker cross-party talks if asked.

The number of children in poverty, measured by those in households earning below half the median net household income after housing costs, more than doubled from 7 per cent in 1990 to 17 per cent in 1992, and was still 17 per cent last year.

Beneficiaries' incomes have been raised in real terms twice since the 1991 benefit cuts - by Michael Cullen's Working for Families package in 2005, and by Bill English's $25-a-week increase in all benefits for children from April last year.

But current benefits and family tax credits for a sole parent with two children under 12 are still about $30 a week below what they were before the 1991 cuts in real terms.

On top of that, housing costs have doubled from a quarter to a half of the after-tax incomes of the poorest fifth of working-age households since the late 1980s.

National's tax cuts package in its 2017 Budget would have lifted family tax credits for a sole parent with two children under 12 by $36 a week from next April, finally surpassing pre-1991 levels for the first time.

Labour has said it will cancel the tax cuts and will use the money partly to add another $11 to the family tax credit for a first child on top of National's $36 increase, and pay all beneficiaries a $700 winter energy payment worth an extra $13.46 a week averaged over a year.

The combination means that sole parent beneficiaries with two children under 12 will get more in real terms than at any time since at least 1980, and probably since the sole parent benefit was created in 1974.

However benefits are still much lower relative to average wages than they were in the 1980s, because benefits have been indexed to consumer prices which have risen less than wages over the long term.

A sole parent beneficiary with two children received 83 per cent of average after-tax earnings in 1988, but only 53 per cent today. National's Budget would have lifted that only marginally to 54 per cent and Labour will lift it to 58 per cent.

And that's before allowing for housing costs. Both parties have promised identical increases in accommodation supplements from next April that will only partly ease the pain.

Prime Minister Jacinda Ardern has personally taken a new portfolio of "Minister for Child Poverty Reduction" and has promised a bill to set child poverty reduction targets within her first 100 days in office - by February 2.

National opposed setting targets while in Government, but English said in a televised debate with Ardern on September 4 that his 2017 Budget would lift 50,000 children above the poverty line and added: "If we can get elected, within two or three years we can have a crack at the next 50,000 children, getting them out of poverty."

Last year there were only 140,000 children in poverty based on the measure he was using - households earning below half the median net household income, not allowing for housing costs. So lifting 100,000 children above that line would slash child poverty by more than two-thirds.

Ardern said this week that she will set targets based on several measures, which are likely to include some allowing for housing costs which currently count up to 290,000 children in poverty. Any targets allowing for housing costs will be much harder to achieve.

National's shadow minister for children Paula Bennett declined to say directly whether National would support Ardern's child poverty bill.

"For us to support any bill put forward by the new Government it would have to prove it works - and a very simple measure of that would be proof that its proposals reduce misery, rather than service it," she said.

"It is, therefore, both surprising and extremely disappointing that the new Government intends to abolish our family Incomes package. This would have lifted around 50,000 children out of poverty, by one OECD definition."

- NZ Herald

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