Government's family income tweaks out of touch and deeply disappointing

The Government's family tax credit announcements today show little understanding of the plight of families and children in financial distress, particularly in the midst of this pandemic, says the Child Poverty Action Group (CPAG)

The family tax credit increase of between $13 and $15 per child per week from April next year includes a well-overdue obligatory inflation adjustment to compensate for price rises in the previous 4 years, said Child Poverty Action Group (CPAG) spokesperson Susan St John. "Overall, low-income families will be just $5 per child better off in April next year than they would have been without this announcement, and well short of the recommendations of the Welfare Expert Advisory Group."

Families receiving family tax credits whose incomes are over the abatement threshold will lose 27 cents instead of 25 cents of every extra dollar earned.

"This less generous abatement rate is a major policy shift, unheralded and very surprising, given the promise of a proper Working For Families review," said St John. 

Families earning over $48,000 will face an effective marginal tax rate of least 57%.

"The tweaks shows the Government is out of touch. We’re deeply disappointed," said CPAG spokesperson Janet McAllister.

"Low-income children and their families are in real distress, right now, and foodbanks are overwhelmed. Families needed a very significant payment well before now, let alone April next year. With Covid in our midst there has been no immediate financial relief in this lockdown," said McAllister. "We're still waiting for the full modest benefit increases which were promised in May -  they have been only partially implemented, contrary to reports. Children cannot live on promises of minor changes next year."

CPAG’s strong recommendation is to give all low-income families the full Working For Families package - currently children whose caregivers receive benefits (whether or not they are also in paid work) miss out on at least $72.50 a week.

"In contrast with the amount announced today ($68m extra per annum), CPAG’s recommendation would deliver $500m per annum to the very worst-off families," said McAllister.

CPAG also says Working for Families income support for children must be indexed annually to wages - in line with what happens currently for adult income support such as benefits and NZ Superannuation. Families in low-paid work with three children would have received up to $1900 more over the last two years if income support for children automatically kept up with wages, according to CPAG research released last May.

St John adds: "As Andrew Becroft said in his final speech as Children’s Commissioner- small incremental changes will not fix the problem of child poverty."

Before Covid-19 hit, StatsNZ figures show there were around 210,000 children living in poverty in Aotearoa NZ, after housing costs (level sampling error of 15,000).