The Government’s $5.5 billion package of spending on families, pensioners and new mums kicks in from today. Thomas Coughlan explains how it works, and its quirks, even for new mum Jacinda Ardern.
The families package is the centerpiece of the Government’s strategy to tackle child poverty and it kicks in with new paid parental leave and a winter energy payment from Sunday. Over one million people and 384,000 families will receive an income boost.
Prime Minister Jacinda Ardern and her new baby Neve missed out on the universal 'Best Start' payment by 10 days, but they would be in line for extended parental leave if she extended her six weeks of leave to 22 weeks.
The Government’s biggest spend is the increase to Working for Families payments, which will get a $2b boost.
The increase comes in two parts. The payments will themselves increase, and the abatement thresholds are being raised.
The abatement threshold is the point at which a family’s earnings become high enough for the payment to be reduced. This means families will continue to receive payments as their incomes rise and will see their payments drop off at higher incomes.
The changes will mean that 26,000 more families are eligible for Working For Families this year. This increases to 39,000 by 2020/21. Even some families with a household income of over $100,000 will be eligible for a tax credit.
Parents of children born from today (or who had a due date after today, but were born earlier) will receive the Government’s ‘best start’ payment of $60 each week. The payment is universal in the child’s first year, and for low and middle incomes it will be paid out until the child turns three.
Paid parental leave will also increase from Sunday. Families will be eligible for 22 weeks paid parental leave. Money paid out will increase as well. Recipients will see a 4.7 percent increase with the maximum rate increasing from $538.55 to $563.83 a week.
Families will not be able to receive the best start payment and paid parental leave at the same time.
Overall, the package will affect around 385,000 families.
Winter Energy Payments will also be paid out from July 1. This is a $1.81 billion payment giving $450 a year to single people or $700 for couples paid over the winter months to help with heating costs. It will be paid to nearly 1 million people who already receive some form of state support.
Most of the payments will be automatic and paid through IRD.
The $5.53b families package was announced in the Government’s mini-budget in December. After campaigning strong on child poverty and homelessness, the Government moved quickly to implement its flagship families policy before its main budget in May.
The Government says that additional revenue comes from cancelling the previous Government’s tax cuts, which netted an additional $8.36b in revenue.
Will it work?
Even if the package is effective, it could be quite difficult for the Government to know.
A coding error meant that the initial Treasury projection for how many children would be lifted out of poverty by the package had to be revised down from 88,000 to 64,000.
The Government concedes that even this number is not accurate and has begun work at Statistics NZ to improve its surveying and measurement of poverty.
Working for Families was first introduced in 2004. It was once decried as “communism by stealth” by John Key, then in opposition, for encouraging parents to leave the workforce or work less to continue receiving tax credits.
But it was successful in reducing inequality in the country towards the end of the 2000s and Key kept the scheme while in office.
Social Scientist Dr. Jess Berentson-Shaw told Newsroom that Working for Families “works for keeping some families' heads above water as living costs just keep rising while both pay and income support does not”.
She said that another option for tackling child poverty would be to remove abatements for parents who did paid work in the first 10 years of a child’s life, “up to a point where work is less precarious, better paid, or parents have secured meaningful employment that give them choices”.
“Many families in New Zealand face pretty precarious employment situations and when coupled with caring for young children, the employment environment can be rigid and toxic for family wellbeing,” she said.
But Berentson-Shaw noted that more broadly, other forms of unpaid caring work needed to be included in economic measures.
“All types of work contribute to societal wellbeing, the country could not function if people were not doing work every day to care for each other, and raise the next generations,” Berentson-Shaw said.
“As long as caring work is invisible people in elected office will continue to insist that parents in particular change their behaviours to try and overcome problems that policy-makers created,” she said.