New Zealand's poorest families will get their biggest income boost in a decade when the Budget anti-poverty package kicks in next April.
Benefits for families on welfare will rise by $25 a week, and in-work tax credits for working families will rise by up to $12.50 a week depending on incomes.
The benefit increase is the biggest since family tax credits for all children were raised by the same $25 a week in April 2005 in Sir Michael Cullen's Working for Families package, although it will still leave benefit rates including tax credits lower in real terms than they were before sole-parent benefits were cut by about $43 a week in today's dollar terms in 1991.
The in-work tax credit for working families was introduced at $60 a week in 2006 and next April's rise will be the first time it has gone up since.
But Bill English's package is much more tightly targeted than the Cullen scheme, which cost an initial $1.5 billion a year. The cost of yesterday's package will peak at less than a sixth of that, $244 million in 2016-17, and will fall after that as inflation pushes more families above the cut-off incomes for tax credits.
Childcare subsidies for low income families will rise from $4 an hour to $5 an hour for up to 50 hours childcare a week - a change expected to benefit 18,000 families by about $23 a week. The subsidy is aimed at making it easier for beneficiaries and low-income workers to get and stay in work. It is available to those in employment, education or training and pays for pre-school, after school and holiday programmes.
Those with one child will get the extra if they earn less than $41,600 while those with three or more receive it if they earn less than $53,560.
Children's Commissioner Dr Russell Wills, who has pushed for a plan to cut the country's 24 per cent child poverty rate, said the package was a welcome surprise, but not enough.
"A weekly rise in benefits of up to $25 for families at the hardest end will be helpful for a family with one child, though less so for those with more children, as the increase is per family, rather than per child. It's also a pity these children have to wait another year - a year is a long time in the life of a child," Dr Wills said.
"Let's be clear, a one-off increase is not a plan for child poverty. For example, will the increase in incomes be linked to median incomes, as national superannuation is, or will the value be lost over time? Where is the plan to improve crowding and quality of housing for children?
"What we need is a comprehensive plan to reduce child poverty. A plan would set out exactly how we are going to do better for our children and how we're going to get there," Dr Wills said. "This Budget is not that."
The package was a surprise after Mr English said on Tuesday that there "won't be new initiatives" in the Budget to reduce poverty.
But it was in line with Prime Minister John Key's promise after last year's election to give top priority to tackling child poverty. A Budget fact sheet says an improving economy, and tough new rules requiring beneficiaries to seek work, have created "scope to increase benefit rates".
Those rules will be tightened further next April by a decision to make all beneficiaries seek paid work for at least 20 hours a week when their youngest children turn 3, up from 15 hours after children turn 5.
Working parents will also get increased childcare assistance of $5 an hour on incomes up to $800 a week, up from $4 an hour.
As Dr Wills noted, Mr English has contained the cost of poverty relief by raising base benefit rates per family rather than raising family tax credits, which are paid for every child. This also means they are cut by 30c for every dollar earned above $100 a week and by 70c above $200, compared with family tax credits which will fall only 22.5c for every dollar earned above $699 a week.
Mr English's office says the clawback rate for family tax credits will keep inching up until it reaches 25c in the dollar, while the income limit where the clawback starts will slip gradually to $673 a week ($35,000).
• $25 a week increase to benefits for parents with children. Expected to benefit 110,000 families with 190,000 children.
• $24.50 more in Working for Families payments for 4000 households earning less than $27,000. Takes base rate of In-Work Tax Credit from $60 to $72.50 a week.
• $12.50 a week more in Working for Families payments for 50,000 households earning $27,000 - $36,350.
• Childcare subsidies for low income working families increase from $4 an hour to $5 an hour - benefits 40,000 families.
• Parents on the benefit have to look for work when the youngest child turns 3 - down from 5 years old now.
• Expected to take 20 hours work a week - up from 15 hours now.
• Abatement rates for Working for Families rise, resulting in an average $3 a week cut in WFF payments for 18,000 households earning more than $88,000.
• Sole parents have to reapply for the benefit each year.
• The changes take effect from April 1, 2016
The jobseeker: Vera Brown
$12.50 extra 'not enough'
Vera Brown will be $12.50 a week better off if she gets a job after next April. She would have liked more.
Mrs Brown, 47, of Weymouth, is on a sole parent benefit which will rise by $25 next April from $522.59 a week now to $547.59, including family tax credits for her three youngest children aged 15,14 and 11.
But she really wants to find a job before then. She worked on call for a pie company until her contract finished, and has also picked strawberries every summer, and she is trying hard to find a job.
"I've been to Kelly Services. I was with them last year and I keep on ringing to see if there is any job for me, and they said I have to wait," she said.
"I rang yesterday for a cleaning job, but I would have to have my full licence and I only have my restricted. I haven't got transport anyway. That's why I'm trying to get a job so I can save up some money to get a car."
The cleaning job would pay $17 or $18 an hour, working fulltime either on a day shift starting at 7am or on night shift from 11pm to 8am. Assuming $17 an hour for 40 hours a week, she would earn $35,360 before tax, which is low enough to get the maximum family tax credits.
After allowing for tax and family tax credits, she would get $861.46 a week in the hand now, and $873.96 after the $12.50 increase in the in-work tax credit next April.
"To me, it's not enough," she said.
But it won't stop her continuing to look for a job.
"My kids are growing up. I don't want them to give up on finding a job," she said. "That's why I want a fulltime job, so my kids understand that it's not easy, it's hard for me. I don't want them to abandon their mum."