Budget 2015: Benefits up – but obligations are too

  • Breaking
  • 21/05/2015

The Greens have criticised the Government's moves to tackle child poverty, saying it is doing the "bare minimum", giving with one hand but taking with another.

In today's Budget, it was announced parents on the benefit will soon have a little bit more to get by on each week, but have greater obligations to find paid work.

The changes are a part of the Budget's package aimed at alleviating child poverty, in which the Government will spend $240 million on tackling a year.

Benefit-dependent families will be about $25 a week better off after tax, the first increase to benefits above inflation in more than four decades.

"Over many years, beneficiary family incomes have hardly changed in real terms, while those for working families have increased," says Minister for Social Development Anne Tolley.

"Two-thirds of children in more severe hardship have a parent on a benefit, and nine out of 10 of those are sole parents."

The catch is solo parents will have to be available for part-time work when their youngest child turns three – it's currently five. That's expected to affect around 18,000 families.

Beneficiaries with part-time work obligations will also have to find 20 hours' work a week, up from 15.

"Moving to paid work is the best way to lift more families out of poverty, while an increase in benefit rates will help address our concern about children whose family's resources have been falling behind other households," says Ms Tolley.

Solo parents will also have to reapply for their benefits every year, as recipients of Jobseeker Support already do.

In all, the Government expects around 190,000 children are living in families who will be financially better off once the changes kick in next year.

Low-income parents in work and receiving Working for Families support are also in for a boost. Households earning under $36,350 will get $12.50 a week extra, and the 4000 families earning below $27,000 getting up to $24.50.

Families earning between $36,351 and $88,000 will also get more, but it will be less than $12.50 and dependent on their exact circumstances.

At the top end, some families stand to lose some of their entitlements – on average around $3 a week.

"While two-thirds of children in more severe material hardship live in beneficiary families, the remaining third have working parents on low incomes, and the Government thinks those families could also do with extra support," says Ms Tolley.

Around 200,000 families and 380,000 kids are expected to benefit from the changes to Working for Families – 50,000 of the families getting at least $12.50 a week.

"Increasing the weekly payment for beneficiary families and lifting Working for Families payments to low-income households will make a real difference by allowing parents to better provide for their children," says Prime Minister John Key.

In addition to boosting benefits and Working for Families, today's Budget includes an extra $8 million for Child, Youth and Family (CYF) to meet the growing demand for its services, and $5.8 million to test a new operating model, based on the findings of the review the organisation is currently going through.

"The system must work with the needs of children at the very heart of its operations, and it must also support staff to do their job to the best of their abilities," says Ms Tolley.

The funding for CYF is included in a $58.6 million package aimed at supporting at-risk children. Of that, $2.3 million will be spent in Hamilton on a pilot scheme allowing agencies to share information.

Greens co-leader Metiria Turei says cutting through the spin of National's Budget shows those getting a modest increase in benefits and Working for Families will be negated in increased costs elsewhere.

"The Budget is not a solution to child poverty. That's what I was looking for.

"We didn't have the money when there was tax cuts for the rich. If they can do that for them, they can do better for our children," she said on The Nation this afternoon.

The increased obligations for parents to go into part-time work earlier and for more hours will only put more pressure on households, she says.

She believes the Working for Families changes will only amount to "a block of cheese a week" for affected families.

The party says increases to benefits are "40 years overdue", but increases in living costs mean it's still a "stingy" amount.

FIRST Union general secretary Robert Reid says bumping up benefits will do nothing to alleviate poverty or inequality without tackling rising housing costs.

"Many families will see their extra support eaten up by rising rents," he says. 

"Releasing public land for private development in Auckland may help cool the market. But without a corresponding commitment to more social housing and state housing the budget remains an empty one for struggling families.

"Many working people are also struggling with astronomical housing costs. But even if the market cools, house prices are already too high. Workers need a pay rise to help catch up."

Labour's Grant Robertson says while the extra money will be welcomed, in the long term it will make it easier to live in poverty, rather than lift people out of it.

UNICEF agrees, saying the changes are baby steps when it comes to dealing with child poverty.

"For years now, child health data has shown there is an urgent need to improve the standard of living for children, and evidence points to the central role of public policy in this," NZ national advocacy manager Deborah Morris-Travers says.

However, it welcomed the Government's focus on families on benefits and its work to improve Working for Families.

Clean slate for child support debtors

Revenue Minister Todd McClay says of the current $3.2 billion owed in child support payments, only $700 million of it is expected to be spent on children – the rest is penalties. Over the next four years, the Government will wipe up to $1.7 billion of it.

"This is the legacy of a penalty system that was overly punitive and which is now being changed," says Mr McClay.

"We need to get parents to start paying so that children, many of whom are in hardship, are better off. Liable parents are facing paralysing levels of debt from penalties, and as a result are not attempting to pay their outstanding amount, nor are they meeting their current obligations."

Of the $3.2 billion, a quarter is owed by people in Australia and another quarter by people neither there nor living in New Zealand. Most of it is penalties.

"This is in no one's interests," says Mr McClay. "We want child support paid so it goes directly to the children who need it, or back to the taxpayers who are paying it by default in the form of a benefit to that child's family."

Future penalties will be softer than the current regime. Rather than a flat 10 percent late payment fee, debtors will be charged only 2 percent if they manage to pay it within seven days. Monthly incremental penalties will drop from 2 to 1 percent, and Inland Revenue will adopt a 'fair and reasonable' test on deciding when to apply penalty relief.

Nearly half of those behind in their child support payments earn under $30,000 a year.

"Improving the rate of child support collected means more money going to low-income New Zealand families who rely on it to help cover the cost of raising children," says Mr McClay.

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