$790m package for children in poorest families

  • Bill English
  • Anne Tolley
Finance Budget 2015 Social Development

Budget 2015 includes a $790 million package to reduce hardship among children in New Zealand’s poorest families, as the next step in the Government’s commitment to address the long-term drivers of deprivation.

The package includes increased work obligations for sole parents on a benefit, more childcare support for low-income families, a $25 a week increase in benefit rates for families with children, and an increase in Working for Families payments to low-income families not on a benefit, Finance Minister Bill English and Social Development Minister Anne Tolley say.

“This package strikes a balance that offers more support to low-income families with children, while ensuring there remains a strong incentive for parents to move from welfare to work,” Mr English says.

“Moving to paid work is the best way to lift more families out of poverty, while an increase in benefit rates will help address our concern about children whose family’s resources have been falling behind other households.

“Over many years, beneficiary family incomes have hardly changed in real terms, while those for working families have increased. Two-thirds of children in more severe hardship have a parent on a benefit, and nine out of 10 of those are sole parents.”

As a result of this package, from 1 April next year:

  • Most sole parents, and partners of beneficiaries, will have to be available for part-time work once their youngest child turns three, rather than five as now.
  • All beneficiaries with part-time work obligations will be expected to find work for 20 hours a week, rather than 15 hours a week as now.
  • Benefit rates for families with children will rise by $25 a week after tax -  the first time since 1972 that core benefit rates have been increased by more than inflation.
  • Beneficiaries receiving Sole Parent Support will have to re-apply for their benefit every year – as people receiving Jobseeker Support already do.

Mrs Tolley says there has been widespread reform of the welfare system over recent years aimed at increasing people’s independence where possible.

“I am confident that these changes being outlined today will not contribute to further dependency, and will have a positive impact on the lives of beneficiary families and their children.”

It is expected that around 110,000 families, with 190,000 children, will receive the higher benefit rates.

“While two-thirds of children in more severe material hardship live in beneficiary families, the remaining third have working parents on low incomes, and the Government thinks those families could also do with extra support,” Mrs Tolley says.

“That’s why we are also making changes to Working for Families to give more financial support to lower-income families not on a benefit.”

Low-income working families earning $36,350 a year or less, before tax, will get $12.50 extra a week from Working for Families, and some very low-income families will get $24.50 extra.

Working families earning more than $36,350 will get extra from Working for Families but it will be less than $12.50 a week, with the exact amount dependent on their family income.

Some higher-income families earning more than $88,000 a year will get slightly less from Working for Families, with the average reduction being around $3 a week.

Mrs Tolley says the tax credit changes will benefit around 200,000 working families with 380,000 children. Around 50,000 of those families earn $36,350 or less a year and will therefore get the full $12.50 a week increase.

Recognising that lower-income working parents need affordable childcare, the package also increases childcare subsidies for pre-schoolers and the OSCAR subsidy for out-of-school and school holiday programmes.

“From April next year, the Childcare Assistance rate for low-income families will increase from $4 an hour to $5 an hour for up to 50 hours of childcare a week per child. This will lower the cost of childcare for around 40,000 low-income working families, and reduce barriers for those parents moving off welfare and into work,” Mrs Tolley says.

The child hardship package will cost $240 million a year once fully implemented and $790 million over the next four years.

Mrs Tolley said the exact impact of the package on any given family will depend on their individual circumstances and there will also be flow-on effects to supplementary assistance such as the Accommodation Supplement.

“This package is consistent with the Government’s extensive welfare reforms to support people into work, and also with the significant support we have provided to vulnerable families and children since we were elected in 2008.

“For example, Budget 2014 provided a $500 million package which included free doctors’ visits and prescriptions for children under 13, extra paid parental leave and an increase in the parental tax credit.

“Over time we have maintained a focus on paid work, invested in better case management and strengthened work obligations for people on a benefit. We have also introduced initiatives such as 90-day trials to encourage employers to give prospective employees a chance.

“We are seeing promising results, with the number of children in benefit-dependent households falling by 42,000 over the past three years.

“I am confident that, when implemented, the measures announced today will help ease the depth of hardship experienced by families and children in New Zealand’s lowest-income households,” Mrs Tolley says.