Time for a multi-party focus on Working for Families

Most of us know that getting old is not for the faint-hearted, but readers may not know that older New Zealanders who aren’t well-off are better provided for than children growing up in poor families.

To our shame, at least 150,000 children live below the lowest poverty line in New Zealand, and more than 64,000 subsist in severe hardship. This means their families live in cold, damp, insecure, overpriced housing, and are often ill and poorly nourished. This Government’s solution, like the preceding one, is to get parents, especially sole parents, off the benefit and into paid work.

New Zealand, like most countries, provides a base income for the old and the young. The primary intent is to prevent poverty. Financial support for people over 65 is reasonably generous, underpinned by straightforward legislation. The programme that is supposed to protect or prevent poverty among children is a complex maze of eligibility criteria, of income and benefit thresholds and abatements. Clearly it has not protected children in the worst poverty.

I would argue that if you are poor, it is better to be old than young in New Zealand. NZ Super is unconditional (if you’re over 65, you’re entitled to it, whether you are in paid work or not), and though it gradually reduces for higher income earners through the tax system, there are no barriers to earn more. No one judges you for what you spend your NZ Super on or treats you like an undeserving beneficiary. In contrast, the base income for children is provided for by Working for Families, which, unlike Super, requires a forensic level of legal expertise to navigate.

Unlike NZ Super, Working for Families is not linked to annual rises in wages, and is only partially adjusted for price increases. NZ Super is a cushion to catch older people who lose their paid work. Where is the buffer zone for children in low-paid families in this recession?

Thanks to the Government’s work focus, the part of Working for Families called the in-work tax credit is rising to nearly $100 a week, with an extra $15 a week available for the fourth and subsequent children. Whether you receive this will depend on having a job, being off a benefit, knowing that you qualify. Rest assured, if a low-income family loses paid work and continues to receive the same Working for Families as before for their children, there will be a rude shock in the form of a repayment demand in store for them.

This is a problem that can’t be pinned on one particular government. No government has been willing to challenge the sustainability of NZ Super. And no government has seriously tackled the impenetrability of Working for Families.

Take a superannuitant who works part-time just to survive. Imagine they lost their job and because they had no paid work, their Super payment was cut by $100 a week. All in the name of providing them with an incentive to work. Who would think that was sensible policy?

Yet the in-work tax credit rewards those who get a job, but only if completely off any benefit. Those who lose their job will lose that credit after two weeks of not being in paid work even if they don’t go on a benefit – which means their children’s Working for Families will drop by about $100 a week. With the rising cost of living and in a recession this cut in income will increase child poverty.

There’s another even more fiendishly complex work-related benefit – the Minimum Family Tax Credit. This applies to only about 3000 sole parents, who must be in paid work of at least 20 hours each week. The design of the Minimum Family Tax Credit ties the Inland Revenue in knots and seems to be the tail that wags the dog. Despite being a ‘work incentive’, it really rewards getting off the benefit, but in a way that makes it the world’s worst work disincentive by reducing dollar for dollar when there is extra income.

What’s behind all the gobbledegook? The entrenched ideology appears to be that you are a better person if you’re not on a benefit or a part benefit. A solo mother, working 20 hours a week on a part benefit is stigmatised. But if she comes off the benefit and is topped up with the Minimum Family Tax Credit (which is a part benefit by another name), she can also have the in-work tax credit, and be perceived as somehow a more worthy member of society.

Lest we forget the 1991 Budget (the “mother of all budgets”): following that we saw an explosion in child poverty and hospital admissions for diseases more commonly seen in the developing world. The 2024 Budget may seem less harsh superficially – but the underlying sentiments are similar, and we have not yet seen the full effects of Government cuts. One of the key differences between now and then is that today the balance sheets of low-income families have been seriously eroded: fewer own homes, there is no cushion of cash assets, many rent precariously, and many have considerable debts to IRD, MSD, and student loans.

We can’t blame the current coalition. The future of our children cannot be left to the whims of elections. What is happening now, and is about to get worse, is the consequence of decades of party tinkering. It’s time to have a multi-party focus on Working for Families that aims to value the young as we do the old and puts the needs of children at the centre, not paid work.