A single core benefit: the brave new dawn
by Susan St John, April 2005
 

While the introduction of the new single core benefit is not until 2007/8, the toughest part of the reform was carried out under the cloak of the Working for Families package last week. It was deft and clever; a bit of inflation adjustment to the parent benefit, a dollop of increased Family Support, a promise that no-one would be 'worse off' and who would notice the core benefit had been cut?

For readers who may have missed the barrage of expensive advertisements (goodness knows how) increased rates of Family Support, the weekly payment for children in low income families, came in on 1 April. The last time there was an increase was in the 1996 budget at which time the poorest families with young children got only an extra $5 per child, per week. At last, nine years on, the real value of Family Support has almost been restored to its 1986 levels with an increase of $25 for the first child and $15 for subsequent children. The new rates are $72 for the first child and $47 for subsequent children under 13 with higher amounts for older children.

But let's not give too much credit to the government here. It might look like a lot of extra money but it is hardly generous. Sadly, if you leave things long enough the catch up will inevitably look huge. There is no compensation for the loss of spending power due to inflation during the past two decades, nor does the increase reflect the increased growth in the economy.

Quite frankly a substantial boost to Family Support was the least the government could do in light of the neglect of the income base of the poorest families in New Zealand. But they just couldn't resist the opportunity the apparent largesse allowed to pursue the goal of the single core benefit. At the same time Family Support went up, the child-related component of between $17 and $21 in core benefits was quietly removed. So the publicised increases are more form than substance for most beneficiaries with children. Most of these families get a net increase of only $7.50- $11 per child.

Families keeping afloat with a Special Benefit - as the neediest are - will find this, too, is cut at their next Work and Income NZ review, by an average of $13.50. Families on benefits are expected to feel reassured that special arrangements will ensure no one is actually worse off as a result of these two factors. Further downward adjustments to hardship provision are signalled for 2006.  This cut-price policy might have been convenient for the policy analysts, but with the poorest children gaining the least have justice, common sense and balance flown out the window?

The Minister claims the good thing is that now the core bit of the old benefit related to children can go with the family when parents get back to the workforce. But poor kids actually don't care how the package is structured, they needed their parents to get a proper income boost, and that did not happen.

Working for Families also leaves in place an internationally failed model of discrimination in the payment of child-related supplements. Currently about 300,000 children miss out on the Child Tax credit (CTC) that in every other respect is just like Family Support. This infamous weekly per child payment of $15 is only for those children whose parents are independent from the state. In 1996 the Labour opposition railed against the unfairness; this from Annette King:

Rather than take the long overdue opportunity to redress this outrage, the Child Tax Credit remains until 2006 when it is replaced by an equally divisive and discriminatory 'In Work Payment'. Families getting the 'In Work Payment' in 2006 will be significantly better off with an extra $60 a week or more than others not in work. But what happens when the next recession strikes, as it will? In good economic times or bad if a sole parent cannot sustain 20 hours in employment a week, a big ask for a mother with young children, she will lose the $60+per week In-Work-Payment. So much for the seamless system for children's payments claimed by the Minister to result from his child-related core benefit cuts. Her children have the same needs as they had before but now will have to drop out of activities that their mother can no longer support.

Presumably after the single benefit reforms she would go back to a very low single core benefit. Actually it is inevitable that a sole parent supplement will still be needed so where then is the simplicity of the single benefit? So few details are available but like Working for Families, the core benefit reform is all about work. There is nothing wrong with making work pay, but under neither package is it clear that an extra hour of work will actually be made more worthwhile. Lump-sum payments like the 'In Work Payment' are clumsy and hugely administratively complex. As they substitute for an adequate child supplement for all children, they are discriminatory and unfair.

Only Italy tries the same trick of using children as a work incentive. Perhaps it is no co-incidence that NZ and Italy are in the 4^th and 3^rd bottom places in the UNICEF child poverty stakes. Countries like the UK and Australia are not only far more generous than New Zealand but have packages that treat all children the same whether parents are 'in work' or not.

New Zealand had the best chance it is has seen for decades to get its policy on family incomes right for the future. In the Minister's hype about how the core benefit reform is the 'most significant reform to the welfare system since 1938' must the poorest of New Zealand's poor kids miss out yet again?