Budget Policy 2017: Make Housing Low-Income Families a Priority

In it’s submission to the Finance and Expenditure Committee on the Budget Policy Statement 2017 this week, Child Poverty Action Group (CPAG) said that reducing the rate and depth of child poverty must be the first priority in the 2017 budget.

There has been no notable improvement to the situation for children in poverty over the past decade, and it is imperative that significant extra funding be directed to improving the outcomes for all low-income children - not just a select few who meet the current ‘at risk’ criteria.

CPAG recommends making housing of low-income or ‘at risk’ families a priority.

The year end (Dec 2016) figures provided by the Ministry of Social Development (MSD) website disclose an alarming rate of increase for those households qualifying for “A” priority listing. “These are households the Ministry defines as ‘at risk’, they include households with a proven severe and persistent housing need that must be addressed immediately,” said Frank Hogan, CPAG housing and children’s rights spokesperson.

CPAG argues that the Budget must measurably improve incomes for low-income families whether supported by benefits or low wages. General tax cuts however are not the answer.

“Improved Working for Families (WFF) tax credits should be seen as the best and fairest way to offset taxes paid for the lowest income families with children,” says Susan St John, economics spokesperson for CPAG. “NZ has a very flat income tax system and a high GST on everything. The burden of high GST lands heaviest upon our lowest income earners. They are also repaying students loans and face other clawbacks from very low income levels.”

Tax credits for children have eroded markedly since 2010 and have never fully included the poorest children. “Another $1.2 billion needs to be spent immediately to restore Working for Families” says St John.

Under current settings WFF is not adjusted until cumulative inflation reaches 5%. This means there has been no adjustment since 2012 and none is expected until 2018. When the adjustment takes place there will be further reductions in the threshold and increases to the rate of abatement to make the adjustment fiscally neutral. “This is in sharp contrast to the annual adjustments for NZ Super that are linked to the average wage. We are failing to protect our families” says St John. 

Treasury’s recent budget analysis verifies the reduction in ‘social’ spending. Over time, as a percentage of GDP ('gross domestic product'), spending on education, health and welfare is decreasing, even as the population is increasing. Students are having to borrow ever more for living costs and carry ever more debt.

CPAG says while such policies of shifting costs to students may increase the surplus and put an asset on the on the Government balance sheet, the cost is unfairly borne. Many students will struggle all their lives to repay debt affecting their ability to parent the next generation well.

CPAG also believes that reducing net public debt to 20% is unnecessary, especially in light of the large assets in the New Zealand Superannuation (NZ Super) Fund. “An overemphasis on reducing public debt to very low levels is achieved at too high a social price,” says St John.  

Read CPAG's full submission here: Budget Policy Statement 2017.