Labour introduces major $5b plan to halve child poverty

The new Labour-led Government will spend $5.53b over the next four years on an ambitious plan to help low-income families and cut the child poverty rate by nearly 50 percent.

Its new families package - which was promised ahead of the election - will see around 384,000 households get an average of $75 extra per week.

The package is made up of three core components: Working for Families tax credit increases, a new payment for newborns called Best Start, and a new winter energy payment for all beneficiaries and pensioners.

Prime Minister Jacinda Ardern says the entire package is aimed at lifting Kiwi kids out of poverty, with the changes coming into force from July 1, 2018.

"The families package is projected to lift 88,000 children out of poverty by 2020/21," says Ms Ardern.

The Government's also given itself $6.6b of wriggle room over the next four years for new operational expenditure, meaning it has an average of $1.4b a year to cover unforeseen costs.

National's finance spokesperson claims the Government is spending too much.

"The coalition has set up very tight operating allowances for their future spending and have left very little room for dealing with the ongoing spending pressures that any Government faces," Steven Joyce says.

Best Start

This will cost $1.14b over four years.

Parents of every single newborn will get $65 per week for an entire year, with those earning less than $79,000 getting the payment for up to three years.

It applies to all babies born after July 1, 2018 and is estimated to cover 65,000 newborns each year.

It cannot be claimed simultaneously with paid parental leave.

Winter Energy Payment

All pensioners and all beneficiaries will be eligible for money to help pay to heat their homes in winter.

Those living alone with no children will get $450 for the winter or $700 if they have children. Couples also get $700.

Working for Families tax credits

This will cost $2b over four years.

An extra 26,000 families will be eligible to receive some kind of support from the Government's existing Working for Families package.

Households with kids earning an annual income of less than $42,700 are entitled to $5878 each year for their first child, and $4745 each year for each subsequent child.

This simplifies the previous rates and increases the amount each family can claim.

Other changes

The Orphan's Benefit, Unsupported Child Benefit, and Foster Care Allowance all increase by $20.31 per week.

The Government has reinstated the Independent Earner Tax Credit, which sees single people on low incomes given up to $520 per year.

Implementation difficulties

Revenue Minister Stuart Nash says around 670 families will be worse off under the changes because of "complex interactions in the tax and transfer system".

Those families will have between $1 and $25 less each week.

Mr Nash has created a transitional fund to help these families to ensure they can receive what they are entitled to.