Dialogue: Next Budget should put children first, not last

This year's Budget represents a key opportunity for the Government to make a real impact on child poverty, writes SUSAN ST JOHN*. To do that, benefits for children should be adjusted for inflation.

Budget day looms. How good will May 24 be for our children?

Will there be some dramatic improvements for families and children, such as those evident in the recent budgets in Britain?

Tony Blair has made eradicating child poverty by 2020 one of the British Government's top priorities. Britain's Child Poverty Action Group claims that by the time of next month's general election, there will have been a substantial reduction in poverty, particularly child poverty.

It also claims that the reduction could and should have started earlier and proceeded faster, and that the first two years of Labour's term in office were dire for poor children. It is to be hoped that this is not the judgment that will be made on the first two years of our Government.

The rise of a significant level of child poverty in New Zealand began in the late 1980s as unemployment began to bite and a higher proportion of all children were found in families supported by a welfare benefit.

Then, in 1991, benefits were cut severely and conditions for eligibility tightened, but with less rather than more opportunities for full-time work. The casualisation of unskilled work and growing insecurity in the market place produced further downward pressure on low wages.

Being in work was no longer a guarantee of having sufficient money to bring up children without recourse to a food bank or going into debt.

As Tim Bale said in a recent Herald Dialogue article: "Sooner or later it won't be just us who notices our poor child health and education statistics, our tragic rates of injury and abuse, teenage pregnancy and suicide."

Despite the welfare cuts in 1991, the number of people supported by benefits continued to rise. With increasing numbers supported on reduced benefits, low wages for unskilled work, and increases in serious housing need, the pressure on voluntary agencies and food banks rose inexorably.

When the economy picked up in the mid-1990s, it might have been expected that families which bore the brunt of the 1991 benefit cuts would be compensated. But the tax cuts in 1996 and 1998 were of little, if any, benefit to these families, or to working families with two parents on low wages.

New Zealand helps low-income families with a tax-based credit called Family Support that goes to the main caregiver on the basis of the number of children and the level of parental income.

In the 1996 tax package, Family Support was lifted by just $5 a week for each child. While older children are more favourably treated now than they were in the early 1990s, the buying value of Family Support for young families has fallen markedly.

To the rescue, a new payment was introduced in 1996, but only for families who fulfilled the requirement of being independent from the state.

While, in effect, this Child Tax Credit of $15 a week for each child helps restore the real value of family assistance for those who qualify, the financial support for the 300,000 or so children who miss out continues to slip.

Reflecting its confused objectives, the credit was supposed to provide an incentive to be in work. It was, and still is, poorly designed to meet this goal. It does not reward an extra hour's work because a family either qualifies or it does not.

The credit is clumsy and costly to administer because it can be received only for the number of days of the year that families are not getting any state payment, such as a benefit, a state pension, ACC for more than three months or a student allowance.

Those who go on and off benefits during the year are likely to miss out even for the times they do qualify.

In 1996, the Child Poverty Action Group wrote to the Human Rights Commission pointing out that the credit discriminated against children on the grounds of the employment status of their parents.

There can be no justification for denying $15 a week to a child because a parent has the misfortune to be sick or unemployed or simply old.

Ironically, the architects of this anomalous provision, National Party politicians, are now themselves complaining to the Human Rights Commission that recent adjustments to the community services card discriminate on grounds of employment status.

Given National's stance on this issue, the Government can expect wide parliamentary support for an end to this discrimination.

It is to be hoped that this year's Budget will see the Child Tax Credit extended to all low-income children. This should please even the advocates of targeting because it would deliver extra income only to the most needy, the ones who are missing out at present.

While the cost of extending the credit to all families is high, even that would do no more than restore the real value of state assistance to low-income children.

Once catch-up is achieved, the Budget should ensure that all aspects of the welfare system affecting children are properly linked to an inflation index.

If proper indexation had been operating since 1988, the top threshold of $27,000 of joint parental income, from which Family Support abates at 30 per cent, would now be nearly $37,000. Community card subsidies for children over 6 would be about $24, not $20.

We inflation-adjust state pensions for all over 65, including the most wealthy even if they are still in the workforce. It is well past time that this Budget gave children the same consideration. We can then move on to making children our first, not our last, priority.

*Susan St John, a spokeswoman for the Child Poverty Action Group, is a senior lecturer in economics at the University of Auckland Business School.


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