Monitoring report suggests progress, but worst-off children need next steps urgently

Child Poverty Action Group (CPAG) says that the Government’s Families Package Monitoring Report shows strong commitment to the intentions outlined in the Child Poverty Reduction Act, specifically with regard to reporting on progressing towards the Act’s targets.

“The Families Package was a start, but while on some level it’s had successes, it was nowhere near enough to lift the worst-off children out of poverty – and this really should be acknowledged,” says Associate Professor Susan St John, CPAG’s Economics advisor. 

“The Welfare Expert Advisory Group’s report,  Whakamana Tāngata, that the Government itself commissioned, discussed the ‘broken’ welfare state and the need for additional annual spending of $5.2 billion. We are not hearing yet what will be done about the recommendations of this report.” 

After years of erosion in the real value of Working for Families, a substantial boost was needed – and delivered  – with the Families Package. 

“But to prevent problems further along, Working for Families should be regularly adjusted in precisely the same way that New Zealand Super is adjusted, and in the future, it should not be presented as a major budgetary package,” says St John.

CPAG says that putting the building blocks in place to clean up an inherited mess is a very important part of the process to achieve the targets set for poverty reduction. But what’s most important now is the urgent next steps toward ensuring every child has the opportunity to thrive and to reach their potential by ensuring all families are properly resourced.

CPAG recognises that housing is a key issue for families in poverty.

“We are pleased to hear the Government is intending to ramp up efforts in this area,” says St John. “As we have learned from the Ministry of Social Development’s 2019 Household incomes report, half of all Accommodation Supplement recipients are spending more than half their incomes on housing, and it means they have to continuously cut costs in other areas – such as for food.

“As we heard at our Summit on Monday, there is a good argument for changing the structure of housing-related support so that it doesn’t contribute to increasing housing costs.”

CPAG welcomes the new Best Start payment for all families with newborns.

“Best Start is much better than the old Parental Tax Credit which was tied to work hours and excluded parents on benefits,” says St John. “And it is being extended to the second and third year of a child’s life for families earning under the income threshold. This is a marked improvement on previous discriminatory policy for new parents.”

But most children in families who are receiving a benefit, both sole-parent and two-parent families, have not had enough of a boost to put them over  – or even nearly close to – the 50% after housing costs (AHC) poverty line. Their core incomes look more like 25-28% of the after housing costs median – well below the lowest supplementary measure of 40% AHC in the Child Poverty Reduction Act.

“Many families try to supplement their meagre benefits with paid work but their efforts are harshly penalised with the earned income abatement threshold set so low,” says St John. “The fact that costs continue to outstrip low wages and benefits is a legacy of decades of poor policy around minimum wages and a lack of proper indexation of benefits and child-related tax credits.

“We need to see a plan around addressing the recommendations of the WEAG's report, Whakamana Tāngata, which is missing from the Families Package Monitoring report. There are some tangible changes the Government can make in the short term that are not only effective but affordable.”

CPAG says that there are steps the Government can take immediately to achieve a real change for families while being consistent with future welfare reforms: 

  • Reinstating the Winter Energy Payment so that it is a permanent increase to benefits.
  • Joining up the In-Work Tax Credit to the main Family Tax Credit, so this payment of at least $72.50 per week per family which is currently and unfairly considered to be a ‘work-incentive’, can benefit all of our most struggling families at annual cost of $0.5b.
  • Assisting the transition to work by immediately increasing the benefit threshold for earned income to $177 per week, equivalent to 10 hours of work on the minimum wage. In 1986 the threshold was set to allow for 15 hours of work on the minimum wage before benefit payments reduced, today it is roughly just over 4, and the recent changes will increase it to only roughly 5 by 2021.
  • Individualising benefit payments and not penalising couples with reduced payments and placing extraordinary expectations on new couples.

The Government’s Whakamana Tāngata and the Child and Youth Wellbeing Strategy have stressed the importance of adequate income and standard of living. These changes above are the next income steps needed towards the vision of Aotearoa-New Zealand being the best place to be a child and young person.