Poverty debate clouded by government misinformation

CPAG supports the Expert Group on Poverty’s call for a debate on how we support low income families but is concerned that misinformation and inaccuracies will cloud the main issues.

Child Poverty Action Group says any debate on how we support low income families must be based on a comprehensive and accurate understanding of current policy.  CPAG supports the Expert Group on Poverty’s call for a debate on how we support low income families but is concerned that misinformation and inaccuracies will cloud the main issues.

Spokesperson Associate Professor Susan St John says recent comments by the Prime Minister John Key to the House showed a woeful misunderstanding of Working for Families.  St John says, “It is vital for informed debate that the Prime Minister and his government are well informed on basic policy.”

On August 28th 2012 John Key described Working for Families as “communism by stealth”.  When asked to elaborate he said, “Well, when it has an abatement rate that sees over 100 percent taken away from someone, I call that communism by stealth.”

The Opposition Leader David Shearer then asked, “if it is it to be communism by stealth, is he planning to amend or change Working for Families?”

The Prime Minister replied, “That is not necessary because this Government has done that. This Government has done that by lowering tax rates and, therefore, essentially, increasing the amount that people get to spend. But if that member thinks someone going out there and getting to keep about 5c in the dollar is an incentive, it is no wonder he does not want the unions in the lobbying bill”.

John Key was referring to a very small part of Working for Families called the Minimum Family Tax Credit. This tax credit tops up incomes for those who work 20 hours for a sole parent and 30 hours for a couple and who leave the benefit system.

For example a sole parent working 20 hours at the minimum wage might choose to come off the benefit, instead of staying on a part benefit.  In this case they would receive a Minimum Family Tax Credit of $192 a week.  They would then face the maximum work disincentive of 100% claw-back of any extra earnings or pay rises and receive more from the state than they would have if they stayed on a part-time benefit. Fewer than 3000 families receive this peculiar part of Working for Families.   

Bizarrely, John Key is actually on record praising this policy, which he clearly does not understand.  He has actually pointed to it several times in the House as the flagship of welfare reform that promotes work as the way out of poverty, contradicting his ‘communism by stealth’ disparagement.  

For example, earlier in the year he said,  "Well, if you look at the system that has been in place now through a number of Governments, you see that that system supports high levels of income for people in work. Let us take somebody who works 20 hours a week and leaves the domestic purposes benefit. They get the Minimum Family Tax Credit, which is $22,204 a year, and on top of that they get the in-work tax credit, which is $3,120 a year- all of which adds up to about $25,300 a year for 20 hours. The domestic purposes benefit for that person would be $15,000. That household will be considerably better off." (February 28th, 2012)

St John says Working for Families is not ‘communism by stealth’ any more than New Zealand Superannuation, or the health and education systems.  “The real problem with Working for Families is that the poorest families do not get their rightful share”

CPAG calls on the Government to support the Greens bill that will correct this discrimination and put more real cash in the hands of the poorest families immediately. “It is important for the country to debate long term solutions, but for the sake of children in poverty right now this is a practical and just solution for the short term.”