What are we to make of welfare and Working For Families reform now?

Last week in the house, Ricardo Menendez March asked some very pertinent questions in the Estimates Debate – Social Development. Amongst these questions was this:

I also want to get an understanding about whether Working for Families changes are still a priority for this Government. … As we know, there was a failed Budget bid that didn’t make it through and we think a Working for Families overhaul is a priority, and I just want to get an understanding of what work she intends to do this year to improve access to the full Working for Families package, particularly for people who are receiving main benefits. …”

The Minister’s reply to Ricardo’s question reveals actual reform is now in the never-never.

“The Working for Families review is ongoing and we continue to seek advice in respect of that. There was nothing in the Budget, as the member cited, but that doesn’t mean that all of that work has been cast away or parked for ever. The intention is certainly to continue doing that work and then to make changes in the future.”

Thomas Coughlan had previously outlined in the NZ Herald how serious thought had been given pre-budget to fixing flaws in the WFF design. In March 2023 he wrote optimistically “‘Fundamental’ changes to tax credit system could lift incomes of 350,000 families in Working for Families review – NZ Herald

The papers received by the Herald showed sector groups recommended broadening the number of families who receive the in-work tax credit, a payment of $72.50 a week for families with one to three children (and $15 a week for every fourth and following child).

Officials reported back to ministers that anti-poverty groups said this tax credit “should be paid to all families and not just those who are off a benefit and in paid work”.

“These stakeholders argued that the payment was discriminatory or unfair, particularly given children were unable to choose whether their parents were working. They also emphasised the need to value other contributions people make, such as caring for children or voluntary work,” the review said.

But hopes were dashed on budget day. Thomas Coughlan, also pointed out the other major flaw in Working for Families for low income families in full-time paid work 

“If the household has a sole earner, they will pay 30 per cent tax on each dollar earned above $48,000, as well as a 27 per cent abatement on their Working for Families tax credit.

This means for some of this person’s income, they will face an effective marginal tax rate of 57 per cent on income earned above $48,000.

They may also have a student loan, paid back at 12 cents on every dollar, and an accommodation supplement, abating at 25 cents in the dollar.

An Official Information Act response showed that in a Budget 2020 bid, ministers proposed lifting the threshold to $48,000. It was estimated to cost $220 million then and would benefit about 183,000 families to the tune of $23 a week on average.

So much for Working for Families being about incentivising work. The outrageous clawbacks remain, reinforcing a flood of families in low paid work to foodbanks and charities to survive as they can’t earn their way out of poverty.

Numerous other consultations on social policy that have involved a huge contribution of unpaid time from NGOs have also been ignored or sidelined. 

For example, all the consultation  diligently undertaken over the Purposes and Principles of the Social Security Act, 5 years ago, have come to naught.  There has never been any feedback to the NGO sector on this or on other consultations. Ricardo must feel deeply troubled by the Minister’s obfuscation in reply to his question on this fundamental aspect of welfare reform:

“Then, finally, the other question was put to me around the purpose and principles of the Act and when we are going to do that. That is certainly something that we would like to get on to in the next year, as well. Some people thought that we should have started there with the overhaul, but one of the reasons why we didn’t start with that at the beginning was because, unfortunately, given the nature of some of the policies in the legislation and throughout the welfare system, potentially any revised purpose and principles could have ended up being completely unaligned with the practice and what is happening in the welfare system. So we’ve been doing what we can to overhaul the whole system whilst in the back of our minds knowing we want to get to the point where we can change the purpose and principles in a way where everything aligns. 

Highly paid bureaucrats have spun out these reviews, ticked the boxes of so-called consultations, leaving the poorest families to suffer and all who care in despair that there will ever be the necessary systemic change.