A Good Start to WFF Changes, What Will Greens Have in Store?
There could finally be some real headway made with Working for Families (WFF) if all the latest policy announcements come into effect, says Child Poverty Action Group (CPAG). But more boxes need to be ticked before WFF can begin to have the desired outcome of reducing the numbers of children in poverty.
National’s Family Incomes Package lifts the maximum WFF Family Tax Credit (FTC) payments, and the Accommodation Supplement maximum for households with three or more residents. The most helped by National are the very low-income, large young families with high housing costs.
To stop their FTC increases going to higher income families National lowered the income threshold for WFF maximum payments to $35,000 (from the current $36,350) and increased the clawback rate to 25 cents for every dollar earned over that threshold (from 22.5 cents). This impacts severely on the working poor and reduces their ability to get ahead by working more hours or getting a better paid job. That is not a good work incentive.
Labour will adopt a higher income threshold of $42,700. This move goes some way to restore the threshold to where it should be had it been increased regularly with inflation since WFF was introduced in 2005.
This is better response to the needs of low-income working families, but they are still affected by National’s higher rate of clawback of 25%. Labour’s announcement falls short of addressing the need for an annual inflation adjustment, or a link to wages.
While both National and Labour policies will reduce child poverty a little, mainly in the largest families by the combination of increases to the FTC and the Accommodation Supplement, this is not the big boost that is needed.
On the top of the announced FTC increases, the best way to reach those most in need would be to pay the full WFF package to all families on the same basis. It means that families who don’t meet the minimum paid work criteria (20 hours of work per week for a sole parent or 30 for a couple), or who receive a welfare benefit would get the In-Work Tax Credit (IWTC) - a minimum of $72.50 each week.
CPAG says it’s time to stop using the IWTC, which is intended to recognise the extra needs of families raising children, as an incentive to work.
The In-Work Tax Credit doesn’t work as a work incentive because:
it can actually help one parent to stay at home longer, where there is a partner working more than the minimum hours requirement;
it can’t be received by individuals who don’t have children yet they need a work incentive more; and
it is grossly unfair to sole parents who have to meet 20 hours of work when couples only have to meet 30.
“The IWTC must be extended to beneficiaries and those in causal work to recognise the vital work of the caregiver and reduce child poverty,” says Associate Professor Susan St John, CPAG economics spokesperson.
CPAG would also like to see commitment to proper annual indexation including a link to wages for all parts of WFF such as is done for New Zealand Superannuation. The abatement rate should be returned to 20%, and the threshold should also be raised in line with wage movements.
“We are looking forward to the next round of policy announcements from the Green Party which will hopefully provide the final links in the chain for a restored Working for Families package, that will effectively reduce child poverty in New Zealand,” says St John.