Our welfare system is more miserly than I thought and the government needs to get a move on, writes Janet McAllister
Exactly two years ago, I expressed scepticism about Labour’s concern for poor kids. Since then, Jacinda Ardern, minister for child poverty reduction, has convinced me via the Families Package that her coalition is at least mildly concerned about poverty and, also, nicer than National. She’s even made National itself become nicer than National, as they’ve signed up to the measure-setting Child Poverty Reduction Bill. Plus the newly-announced anti-loan shark legislation looks great.
But these initiatives, as commendable as they are, have just upgraded Labour’s snips to a sword when what it needs is a jackhammer.
It’s been easy to think everything’s going to be OK, now that we all agree that children are the future and we all know poverty is a problem. But this has been the case for years now. Unfortunately, we became complacent that someone would do something, and so we allowed the poverty problem to fester into something more enormous and urgent than any of us realised. And it’s still growing. Small – or even medium – top-ups just will not cut it, even if they might have, 10 years ago.
I have just started a research contract for the Child Poverty Action Group (CPAG). In getting up to speed with their superb academic wizardry, I have discovered several things that I think we all need to know.
New Zealand benefit levels are worse than inadequate
Shockingly, families who receive a core benefit still need roughly twice as much income after they’ve paid their rent than they currently get, just to reach the 60% poverty line (technical details in the endnotes).* According to research by CPAG’s Susan St John, and Yun So, a typical sole parent on a benefit with one child in Auckland needs about $266 more a week or nearly $14,000 a year to meet the “60% of median income after housing costs” poverty line; a typical Auckland couple on a benefit with two children need $459 more a week or nearly $24,000.
Those amounts that people are missing out on are eye-watering. In comparison, the highest Best Start payment available to families with children aged 0-3 is $60 a week or just over $3000 a year (as long as they were born on or after 1 July 2018; if your kid is 5 months or older right now, you miss out). That sounds generous – and it will be gratefully received – but the annual shortfall for the families above, if they receive Best Start, will still be around $11,000 and $21,000 respectively.
Due to inflation and rising rents, we do not currently have a welfare net; it’s more of a platform submerged so deeply in water that people who fall on to it can’t breathe, even standing on tip-toes.
We need to spend serious money to eradicate poverty, and the longer we do nothing (or not enough), the more it’s going to cost us
As well as Best Start and other initiatives and increases, July’s Families Package increased the money spent on “Working for Families” (WFF) family support by around $900 million to $3.2 billion. Again, that amount seems very generous and yet, alas, when the inflation erosion of the last 8 years is taken into account, the WFF total now only is not much more than the WFF total in 2010 – in real terms, annual spending on WFF was $700m less in 2017/18 (just before the Families Package) than in 2009/10.[ii] And of course we already had a serious and chronic child poverty problem in 2010. The current government has better, more visionary goals to live up to than simply “being a bit more generous to poor kids than the first-term Key government”.
Meanwhile, because it’s not indexed to inflation, the amount spent on Working For Families is eroding again, even as we sit here. The government could, and should index it immediately to wages – it’s possible, even under the government’s self-imposed fiscal restraints, because indexation is by its nature incremental future-proofing and doesn’t cost much right now.
Although, let us be clear: those of us on reasonable incomes need to be willing to pay more tax – willing to show more love – so that all of us can eat. Next election, we need to vote in a government who’ll make this happen. Even if the current government spends a good portion of its newly-announced $5.5 billion surplus on welfare –and it should, people need it now – we’ll still need more.
The Ministry of Social Development is still a wrong-headed nasty piece of work
There was fanfare mid-year that the number of benefit sanctions had reduced in the quarter to June 2018. Sure – but they were still higher than they were in two quarters in 2016. Even less forgivably, until July this year, MSD continued their years of expensive, destructive, seriously misguided and petty hounding of law-abiding people through court, moronically arguing that debt counted as income. And since then, they’ve shown little interest in finding out how many people have been refused entitlements because of this pig-headedness, let alone compensating any of them. Meanwhile, people are expected to pay MSD loans back from their already-inadequate benefits extremely quickly.
MSD think they’re doing a good job because they have been unveiling new feel-good principles, complete with artwork. Is that it, after a year of new political masters? The government should be breathing down their neck.
The government needs to get a move on
We haven’t seen nearly enough urgency from politicians or bureaucrats; they’ve forgotten what it’s like to struggle to scrape money together for bus fare, if they ever knew.
The Welfare Expert Advisory Panel is not due to release its recommendations until February. Yet haggling over next year’s Budget has already begun. So a large amount of next year’s Budget needs to be earmarked for welfare now, even before specific initiatives are known. Otherwise the government will unconscionably be making children wait yet another year for the relief that some of their parents needed 25 years ago.
And there are several things that the government could implement today, right now, without fear of pre-empting the Welfare Experts’ findings, such as a moratorium on sanctioning women on Sole Parent support who do not name the father of their children. This would fulfill a currently broken election promise at the low estimated cost of $25 million a year. CPAG is offering a number of other sensible and necessary ideas, to make “Welfare Fit for Families”. Removing the discriminatory criteria of paid work from the WFF In-Work Tax Credit is a no-brainer in a “fiscally constrained” environment – this would direct funding only to our very poorest families.
It’s still possible for Ardern and her government to be heroes – budget time in May next year will be their last chance, although ideally they’ll start saving the day earlier than that. And now that they’ve hit their debt reduction target four years earlier than expected, they can. For the sake of compassion, the time for politeness and complacency is over; the time for demands and action is now. My demand of two years ago remains: show us the money. And, in the form of tax, we’ll give you ours.
Janet McAllister is currently a temporary contract researcher for the Child Poverty Action Group, although her views and any errors here remain her own.
* In their 2018 working paper How effective are 2018 policy settings for the worst-off children? published by Victoria University of Wellington’s Institute for Governance and Policy Studies, Susan St John and Yun So calculate that families across New Zealand, with at least one dependent child, who are paying the rent at the level required to receive the maximum Accommodation Supplement in their area and who are receiving full entitlements of Job Seeker or Sole Parent Support plus the Family Tax Credit – that these families have only 21% to 35% of the equivalised median income after housing costs. Sole parent families on benefits with children sit at only 25-35% of the median, and couples with children sit at only 21-33%, depending on where they live and how many children they have. That’s between 1.7 and 2.85 times lower than the “60% of the equivalised median income after housing costs” poverty line measure – so saying they need “roughly two times” as much income after they’ve paid the rent to be on the 60% poverty line is a conservative estimate for most situations.
Many families will be receiving less than the amount these calculations are based on, due to benefit sanctions (for not naming the father, for example), and/or will also be servicing debt to WINZ and others out of their meagre budgets, in a vicious cycle.
On the other hand, many – but not all – families receiving benefits will also be receiving secondary payments such as Temporary Additional Support but that only covers a little of the shortfall in money required and – as the name suggests – it is supposed to be temporary, so it has to be reapplied for frequently. This adds complexity and insecurity to families’ usual budgets, which adds stress – and their incomes will still be inadequate. Many families will also be forced to go into debt and still not be able to pay for basic necessities such as food, warmth, clothing and sanitary products.
** See Figure 3 “Real annual spending on Working for Families” in March 2018 $, pg 8, in the St John and So paper. The authors note that: “Annual spending on WFF fell in real terms by $700m per annum since 2010 … both from a failure since 2012 to provide annual [Consumer Price Index] indexation to the levels of tax credits and thresholds from which WFF abates, and from deliberate cuts to the real and nominal value of the threshold.” And looking into the future: “Real spending on WFF will erode in the next three years as there is no commitment to annual indexation to prices, let alone wages.”