Labour's family package: Tax cuts gone but more for Working for Families

Labour will scrap National's tax cuts and instead channel much of the money into a major boost of Working for Families and its "Best Start" policy for parents of newborn babies.

Labour leader Andrew Little outlined Labour's "Families Package" today, saying Labour would ditch tax cuts but keep National's increases to both Working for Families payments and the Accommodation Supplement.

It would also further boost Working for Families by increasing payments and extending it to 30,000 more families on middle incomes at a further cost of $370 million a year - meaning an overall increase for the scheme of $743m a year.

Little said Labour would use about $890m of the $1.5 billion saved from scrapping the tax cuts for a more generous Working for Families scheme and other help for low income families while putting the remainder into public services and infrastructure.

Little said families on middle incomes would get up to $48 more a week in Working for Families under Labour than under National.

Labour will also retain its 2014 policy for a $60 a week payment for parents of newborn babies, but that will be more generous than first proposed.

It would apply to all parents once paid parental leave had ended (previously it was for those on less than $150,000). Those on household incomes lower than $79,000 a year would continue to get the full $60 until their child turned 3. The payments would abate above that income. It is expected to cost $303m and Little said it would deliver a bigger income boost to about 70 per cent of families than National.

National's $2b a year family package was estimated to deliver an average of $26 a week to most New Zealand families from next April.

That was through a combination of tax cuts worth up to $20 a week, higher Working for Families payments of $9-$27 a week for children under 16 and increases to the Accommodation Supplement for middle to low income households.

Andrew Little said Labour will use about $890 million of the $1.5 billion saved from scrapping the tax cuts for a more generous Working for Families scheme. Photo / Sarah Harris

However, National will also reduce the income threshold at which Working for Families starts to abate from $36,350 to $35,000 and increase the abatement rate to 25 per cent.

Little said Labour's package was better targeted at low and middle income families and would leave money to spend on public services and infrastructure.

National's tax cuts delivered to those who were well off and did not need it, he said, giving $400m to the top 10 per cent of income earners.

"National's priority after nine years is an election tax bribe aimed at those at the top. At a time when we have crises in mental health and housing, now is not the time for tax cuts."

Labour would also keep the $10 a week independent earners' tax credit for people on lower incomes who did not get Working for Families or a benefit. National will scrap that, saying its tax cut compensated for it.

Those who miss out under Labour's package include middle to high income childless people, those on higher incomes who do not qualify for Working for Families, and those with older children aged more than 18.

Under National, pensioners would get about $13 a week more per couple ($681 a year) as a result of National's tax cuts on top of the annual super adjustment.

While they would not get that under Labour, Labour has compensated in its policy for a "winter energy payment" for beneficiary and super annuitant couples of $700 per winter - although people will have to apply to get that.

Single pensioners and beneficiaries will get $450 a winter from that.

National's families and tax cuts package got a good reception from the public after the Budget and Little will hope Labour's will deliver the same as he continues to struggle in the polls.

Labour did not vote in support of the changes National made in its Budget because of the tax cuts, but the Green Party did, saying it could not vote against legislation that was aimed at lifting families out of poverty.

The party had to go back to the drawing board to assess what the Budget meant for its own plans, and has ended up adopting much of National's steps.

While National has signalled it could campaign on broader tax cuts, Labour has previously said it will not increase income taxes but if in Government, it will set up a tax working group to make proposed changes for it to put to the electorate in future.

What Labour will do compared to National.

INCOME TAX:

Labour will scrap National's changes to the bottom two income tax thresholds, which would deliver tax cuts of up to $20 a week to all earners on more than $14,000. It will keep the Independent Earners' Tax Credit ($10 a week for those on less than $48,000 a week who did not get Working for Families or a benefit.)
Savings: $1.9 billion a year.

WORKING FOR FAMILIES:

Increase Family Tax Credit from $5303 to $5878 for eldest child. Keep National's Budget increase in the rate for younger children from $4822 to $5303.

Life abatement threshold from $36,350 to $42,700 - estimated to mean 30,000 more families get Working for Families. National will drop it to $35,000 but the higher payment rates mean most people will still get Working for Families for as long as they currently do.

Total cost: $743 million more a year (combination of National's Budget changes and $370 million for Labour's extras).

BEST START:

'Best Start' payments of $60 a week to all parents of newborns once paid parental leave runs out. Families on less than $79,000 will get the $60 until their children turn 3, and it will abate at a rate of 20.8c per dollar for those earning more than that.

Cost: $303 million, partly offset by dropping Working for Families parental tax credit.

SUPERANNUITANTS:

Superannuitant couples will get $13.10 a week more ($681 a year) as a result of National's tax cuts and singles $8.50 a week ($442 a year). Labour will offer subsidies for heating in winter worth $700 to a couple and $450 for a single.
Beneficiaries will also get the 'Winter Energy Payment.'

ACCOMMODATION SUPPLEMENT:

Labour will go ahead with National's proposed increases in the supplement, costed at $380 million a year.