IRD, Treasury and MSD – Does the tail wag the dog?

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The long overdue review of Working for Families  has been signalled as part of the Government welfare overhaul work programme.   

The major review undertaken by IRD, Treasury and MSD is taking place behind closed doors. There are no published terms of reference, no timeline and no public consultations at this stage.

In the meantime, one-off policies such as the recent improvements to abatement for those on benefits  are clearly causing anxiety as to how they will interact with the big picture, 10 year vision.

Working for Families (WFF) is a $3 billion dollar programme of child-related payments, so complex few understand them. The 38 page treasury report, released this week  and disarmingly titled ,Increasing main benefit abatement thresholds on 1 April 2021 and consequential adjustments to the Minimum Family Tax Credit”  is revealing.   It shows little evidence that the real failures of WFF are understood. This does not bode well for the direction of this review.  

This indigestible technospeak in the report focuses on a tiny, anomalous  part of WFF.  Has anyone actually heard of the Minimum Family Tax Credit (MFTC)? CPAG has long stopped writing about the MFTC as it is so minor, its design so poor and the number of families affected so small. The MFTC is worth less than 0.5% of the total WFF spend.  

This odd tax credit provides a guaranteed income of $29,440 per annum.  The person has to be employed 20 hours a week (30 for a couple).  Any income reduces the guarantee dollar for dollar providing a maximum disincentive to work an extra hour get a pay rise.  Confused?  That’s understandable.  A payment supposed to incentivise people into paid work and off a benefit actually has a disincentive to work which is far worse than abatement of benefits. 

The MFTC has never worked well – it is claimed by only 3,200 families out of 370,000 who get some WFF.  Those who jump through the hoops to get it are usually on it for only part of a year. It has a rigid hours of paid work requirement—very inappropriate in the gig economy and very dangerous for sole parents who may lose entitlement by losing hours of work and then have to argue their way back onto a benefit. 

The MFTC should be abandoned and attention paid to what really matters. 

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WFF needs to be refocused to its primary role of supporting children, and not confused with incentivising paid work . 

There are two major problems with the current WFF 

It is supposed to alleviate child poverty, but the In Work Tax Credit that costs about $600m or20% of WFF is denied to the poorest families. This discrimination must be removed if government is serious about eradicating the deepest child poverty.    In 2021 there will be more than 170,000 children below the very lowest After Housing Costs 40% poverty line with Maori and Pacific children overrepresented. 

The second major problem is that indexation of WFF is seriously inadequate. All parts of it including the threshold income from which it starts to abate should be indexed to wage movements as is the pension for older citizens and core benefits for adults. 

Lets hope the review process stops going down rabbit holes and focuses on WFF’s proper purpose which is to makes sure all families have enough money to take care of their children’s needs

 

 

 

24 COMMENTS

    • This link to interest.co.nz has been posted on both main left wing blogs and has attracted over 400 comments. One poster was astounded the comments had spilled over two ‘pages’, something not achieved on interest.co.nz since Trumps’ election win in 2016. The comments are worth a read.

  1. Grant and Jacinda are retreating into themselves like frightened little hedgehogs. Cancelling radio shows because they are too afraid of criticism shows how this government is in serious trouble. Jacinda reminds me of Hitler in the bunker, he knew that it was all over but decided to allow his country to be destroyed instead of doing the right thing. She has pulled the protective blanky over all the speculators and slumlords and is quietly sitting their in the dark with them protecting them from the big bad world, whilst she leaves the renters to fend for themselves looking forward to an eternity of immense pain and struggle. Why is Labour now National on steroids?

  2. Shouldn’t business employing people and turning over millions of dollars pay their workers enough to survive on?

    The problem is NZ has been racing to the bottom for 20+ years and the inability to look carefully at how neoliberalism has changed work and society and change it back to be fairer, is a big part of the problem.

    Now we have major run on problems from exploiting the nature of work in NZ. AKA we have a growing workforce that are alienated from work as it is just not considered worth working – especially when you can be made redundant at any time, or have your status changed from an employee to a contractor/gig worker and then none of the provisions given to workers then apply. Obviously this government led ability, is driving more employers to change workers status downwards into contractor, non paid worker, self employed and gig economy. Work then does not become a desirable status when you can just be on a benefit or join a gang which bizarrely seems to be becoming more stable or profitable than a job in NZ.

    As people have become alienated from work in NZ, employers have responded by further lowering working conditions to bring people into NZ into a range of low end exploitable businesses. All the millions of new people then need to have housing, roads, schools, jails, hospitals, doctors, waters, sewerage, waste water upgrades costing billions of dollars… and with the new nature of work but often the workers, need social services almost immediately. Corporations don’t seems to be able to do a good and long lasting job anymore… aka housing and infrastructure is costing more but failing almost immediately by poor labour and material standards.

    Wellington a few years ago, wanted to emulate the immigration experiment in Auckland. They did (even paying money to recruit more people from overseas and get them to Wellington) and now they have Auckland problems. Aka massive increase in housing and waste water/infrastructure failing almost daily. Even if they solve housing, what about the rest of their problems?

    40% of people in NZ now don’t pay any taxes as they don’t earn enough!
    https://www.stuff.co.nz/business/81429047/small-number-of-taxpayers-bear-the-brunt-of-new-zealand-tax-bill

    Corporations don’t need to pay any taxes.
    https://independentaustralia.net/politics/politics-display/the-corporations-making-big-money-paying-no-tax-and-laughing-at-us,13419

    In fact give them more with wage subsidies as well as WFF!

    So who is making all the money

    The astounding profit Australian banks make in New Zealand every hour
    https://www.newshub.co.nz/home/money/2019/03/the-astounding-profit-australian-banks-make-in-new-zealand-every-hour.html

    Oh that’s where they get their profits from!
    https://www.scoop.co.nz/stories/BU1808/S00537/oh-thats-where-they-get-their-profits-from.htm

    • I heard an interview on rnz the other morning about the dearth of fruitpickers in Blenheim due to border/immigration restrictions. The interviewer mentioned high housing costs and the interviewee responded that the growers are ‘organised’ in this regard, with accommodation to provide for the workers. I saw one such accommodation facility for sale in Te Puke the other month. A workers’ camp with dorms and vans available for rent to the immigrant kiwifruit picking, pruning, packing gangs. This is how NZ operates. This is how orchardists get their fruit picked for cheap. Import temporary, bonded labour, pay them rubbish wages (not enough to afford a ‘market rent’), provide them with a rudimentary accommodation (and charge them for it). It’s an absolute disgrace. I work for such orchardists. The wealth is astounding. We get paid, technically I suppose – a ‘living wage’ to look after their elderly mother. They own residential rentals, multiple orchards, property development companies, commercial properties they develop and rent (childcare/retail), many luxury cars, overseas property (island retreat etc). It’s disgusting, the attitudes of the wealthy to the poor in this country. I suppose that’s how the rich get rich. Since I lost my rental (evicted because the place needed maintenance) and couldn’t afford ‘market rent’ on the ‘living wage’, I’ve been a bit depressed. One of them (employer family) suggested I volunteer at a food bank as a hobby because I might meet likeminded people who were also poor and homeless. To replace the Labour Party volunteer work I used to do before they betrayed their base. This is the mentality of the rich and clueless in this country.

      • Agriculture used to employ locals, teenagers, unemployed, casual workers, back packers, part time workers, parents and obviously worked hard themselves, but as agriculture has started to be corporatised, supermarkets take the profits, and when they realised that you could just pay a lump sum and get a contract work load of people from the Islands into NZ, that was way easier (and you didn’t have to worry about paying them the right wages or having good conditions)…. now big agriculture and the industry itself are addicted to the ease of cheap workers on one contract, and conditions are now so hard for the pay, they can’t attract locals who they use to employ. And this is also to the detriment to those locals that used to do casual work in-between being on the dole but I for one, don’t blame them. Fruit picking etc is HARD work and they should be paid appropriately.

  3. Have said from WFF’s introduction that it is counterproductive from a class left perspective. People in receipt of it are effectively getting pay increases or top ups from other taxpayers, when they could more constructively join a union and organise to get their own wage increases from the employing class.

    And yes, the PM and Mr Robertson’s innards will turn to water if the review remotely improved the lot of beneficiaries and their children.

    • I do not agree. WFF tax credits were Labour’s alternative to Nationals across the board tax cuts. They simply dispersed more of then surplus to families and less to working singles and empty nesters.

      It has nothing to do with wage levels.

  4. While I deplore this ladies lack of medical treatment in prison, should NZ taxes increasingly be supporting justice, police, jails and medical care for the growing amount of foreign visitors turned permanent residents/citizens in NZ, who are coming in and then never leave and doing massive social harm to others in NZ https://www.stuff.co.nz/national/124513956/auckland-woman-dies-of-lung-cancer-in-prison-after-being-undiagnosed-for-months while competing with NZ’s local high needs people for services here. https://www.nzherald.co.nz/nz/cyfs-report-social-workers-should-have-checked-richard-royal-uddin-within-24-to-48-hours-after-concerns-raised-just-weeks-before-baby-was-killed-by-surender-mehrok-in-tauranga/RPYRJR75JPOTPCX4KXQFBOSKMY/

    After Tarrant his social harm while enjoying his $3 million jail upgrades, daily stories of constant hand-outs and special treatment paid by NZ taxes to criminal foreigners who are having a laugh while victimising people in NZ.

    It’s time NZ tightened up social welfare conditions and residency to Australian standards. We should have reciprocal standards to the other countries regarding other countries residents accessing our welfare. Then we can put money into our own growing social problems rather than expanding the demand for it.

    Also help to clean up the growing ‘cash’ businesses and workers operating in NZ and taking over.

    This family manages to get a mortgage free house while being overstayers and running a cash painting business. Cash workers and cash led business are out competing those paying taxes.
    Teenage Kiwi fears deportation because parents are overstayers
    https://www.nzherald.co.nz/nz/teenage-kiwi-fears-deportation-because-parents-are-overstayers/JV5ZNSD74TGTYTDNIIWVNBKYAA/

    Work and building standards are so high in NZ,(sarcasm) don’t worry, pay cash, ACC will pay out. NZ won’t prosecute the houses site, workers, employers and people involved in this workplace death. https://eminetra.co.nz/illegal-working-overstay-dies-at-work-acc-paid-to-chinese-widow/148294/

    Can’t even get a hospital built without remedial work.
    https://www.rnz.co.nz/news/national/437310/hundreds-of-hot-water-valves-to-be-repaired-at-new-christchurch-hospital?fbclid=IwAR0VkhCegqk3iWP0Uh-hCJJ3FdUmWsvkgKJjpQCJAIkZIsSpfC-xAZYKJuA

  5. I am currently trying to get a flight out of here. The flights that go on the Air NZ website fill up within a few minutes. So many people are leaving this hellhole Jacinda has created it is not funny. I phoned Air NZ and they have said they are shocked with the demand and are looking at putting more flights on. NZ is becoming a failed state. Jacinda needs a vote of NO CONFIDENCE!!!!!

    • Air NZ just added extra flight on 16th and I got on it. I am done with NZ too. The dear leader has destroyed NZ for me, simply because I am not a rich homeowner. If you are poor or renting jump ship too. Leave it to the greedy rich boomers and their fake Queen

      • Tragic. As a battling boomer I wish you luck. My family has built a life without much money and enjoyed much of our great little paradise. Politicians suck.

      • Not exactly sure where you are planning to go. You get no social welfare in Aus as far as I understand and I thought rents were just as bad…Unless you are heading back to Asia.

        • d.s. Don’t you know it’s the skilled workers leaving NZ due to our poor wages and conditions, I know people even going to Thailand to work now because you get paid more in construction there!

          The people coming to NZ and staying in NZ are income less and can therefore go for benefits aka superannuation, DPB, working for families, students etc… get the dole and then get a cash job to make ends meet seems to be the modern way to work and live in NZ. Or be seriously rich and not need to work.

      • Good luck. The grass is indeed greener at times. I can attest to that. But the world, away from the quiet backwater of the shaky isle, is at times a hostile place. Still, hard work can be rewarded for the brave or opportunist. Better still to have a skill marketable on the global stage.

  6. In past careers I have run ‘courses’ funded by MSD to assist people receiving benefits (exclusively women, moving in to care giving roles) ‘off-benefit’ as they say. This means, moving ‘off-benefit’ onto ‘other benefit’ i.e. WFF and MFTC and AS and TAS. It’s a total rort. An employer and landlord subsidising rort. People like Jacinda, on 1/2 a million a year and her minions on 160k + benefits and upwards have No FUCKING IDEA what it is like to live in this strata of society. We actually cannot depend on them for the solutions. I, personally, am trying to free myself from such a ‘crutch’ of magical thinking (i.e. vote for the ‘party of the working class’ – it’s not). God only knows what the real solution is. We’re not going to have a socialist revolution of any kind. I’ve got no answers yet. Most frequent advice appears to be ‘move out of NZ when the borders open’ and ‘stop being poor’.

    • Years ago government ran a system where you could apply to create a small business and you got paid the dole, You put in a business plan, and the government had advisors to give you help aka someone to give you tax and business advice. You had this for 6 months and you could earn income in this time from your business while getting the dole. After 6 months they did an assessment and let you know if you could go another 6 months. Was very useful, a good way to understand how to run a business and what was involved and a good way to help people become self employed, especially the tax and business advice, while receiving the dole was a safety net.

      I have said before I think people should be able to earn money while on DPB and dole and student allowances up to $25+k without being penalised. Seriously has anyone noticed the cost of living in NZ!!!

      • SaveNZ– you re so right. Where is that help now? Let people stay on a part benefit and earn extra– allow sole parents to receive Child support directly while on a benefit.

    • CR Agree The MFTC, IWTC et al to get people off benefit is a total rort. A dead end to go down.
      Where is the consultation in this ‘review’ ?

  7. The government introduced WFF tax credits at the 2005 election campaign as an alternative to across the board tax cuts). This when combined with the MW increase to $12 by April 2008 was of a plan to get families out of poverty through work.

    But National 2008-2017 held the MW down.

    https://www.employment.govt.nz/hours-and-wages/pay/minimum-wage/previous-rates/

    Since 2017 the MW has been boosted up to $20 from 1 April – closer and closer to the LW (now looking inadequate because of rising rents of late). There are also fair wage and industry award efforts.

    So the landscape within which WFF operates is changing. For some adjustment of AS bands – as rents in provincial areas rise to urban levels is becoming important.

  8. CR Agree The MFTC, IWTC et al to get people off benefit is a total rort. A dead end to go down.
    Where is the consultation in this ‘review’ ?

  9. Labour screwed us at the referendum and the medicinal cannabis scheme, right now its not much different to when National were in control – too expensive, hard to obtain.
    They did a review (do nothing time wasting) on poverty, housing and disability and did nothing.
    They blamed Winston for cock blocking them so they couldnt do more and now here they are governing alone and still cant do jack shit.
    They gave normal working people a gold plated benefit during covid with statements that they couldnt pay regular benefits because it would affect peoples lives too much, but its ok to treat beneficiaries and the disabled like that?

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