Raising living standards for children seen as key to future skilled workforce

Phil O'Reilly describes himself as "the opposite of a bleeding-heart liberal". So why has he signed up to a costly agenda to tackle child poverty?

The Business NZ chief executive was the surprise inclusion in a 13-member expert advisory group appointed by Children's Commissioner Russell Wills to report by the end of this year on "solutions to child poverty".

He sees it as a kind of long-term business strategy: if New Zealand Inc wants a highly skilled workforce in the future, it can't afford to let thousands of children fail at school because they are hungry, poorly clothed, live in cold, damp houses and suffer from third-world diseases such as rheumatic fever.

"I agree with the evidence that those countries that are prepared to invest in children in the very early years, 0 to 3, will reap the rewards later on," he said.


"I also see that New Zealand rather under-invests in that, and rather over-invests in the grey-haired end of the population, and I suspect that is because the grey-haired people get a vote and young people don't."

The group, led by academics Jonathan Boston and Tracey McIntosh, is seeking submissions by next Friday on a long list of possible solutions, including a food-in-schools programme, a "warrant of fitness" for rental housing, passing on child support to sole-parent beneficiaries, reforming housing subsidies and refocusing family tax credits to give more for younger children.

O'Reilly draws the line at only one proposal - to turn the tax credits in the long term into a $750 million-a-year universal child payment for the first few years, designed to let one parent in all families stay home with a newborn baby.

"The one area where I do think we need further debate is the universal child benefit," he said. "I must say I'm struggling a little bit with that because universal benefits are a kind of recycling of money. As a general rule we would not support those.

"I have stepped across some ideological boundaries to let some things get out in the report because I'm a firm believer that debate is important."

From Wills' point of view, having O'Reilly on the panel was crucial because the main route out of poverty is a well-paying job, and business generates jobs. "I can't see how you can solve child poverty without involving business," he said.

O'Reilly's hand can be seen in the employment section of the group's first report, which rules out raising the minimum wage.

"There is little room to increase pay via minimum wages as they are currently high in relative terms and they are not well targeted for reducing child poverty," the report says, in a line condemned as "weak" by John Ryall of the Living Wage Campaign.

Instead, the report proposes more flexible subsidies for childcare and after-school care.

"Is subsidising the number of free hours the right option, or is there some better way of doing things?" O'Reilly asks.

"Is there a way of encouraging large companies to invest in their own childcare, as we did at Westpac in Australia [where O'Reilly was head of employment policy early last decade]?

"Thirdly, is there a way to encourage more family members to do this, grandmothers and grandfathers and so on?"

He favours an "investment approach" to supporting parents into jobs, including subsidised education and training and giving parents priority for job subsidies.

He supports a food-in-schools programme if it is targeted at children in need without stigmatising them.

He endorses making landlords get a "warrant of fitness" for their houses before their tenants can get housing subsidies, although he warns that this should be phased in gradually and backed up by targeting insulation subsidies to rental housing.

He supports targeting housing subsidies and family tax credits to give more to families with young children, provided the changes are revenue-neutral and phased in gradually.

The report actually proposes spending an extra $300 million to $500 million a year on family tax credits to give more to young children without paying anyone less.

He is also persuaded that paying child support direct to sole-parent beneficiaries, instead of clawing it back to pay for their benefits, would encourage absent dads to stay more involved with their children - although the $159 million price tag means that should only be introduced "fiscal conditions permitting".

Yearly cost
* Universal child payment: $750m
* Higher family tax credits for young kids: $300m-$500m
* Pay child support to DPB parents: $159m
* Other proposals: Uncosted
* Estimated total net long-term costs: $1.5b-$2b

On the web: www.occ.org.nz