Package favours large families and workers

Big changes in family assistance which start taking effect this Friday will make most low-income families better off - but some will be much better off than others.

The Government's $1.1 billion "Working for Families" package will give the nine low-income families interviewed for this series pay increases of between $25 and $99 a week immediately.

By April 2007, when the changes are fully implemented, the biggest winners will be $157 a week better off - an impressive 31 per cent after-tax pay rise.

But the smallest winner will be a mere $19 a week better off in two years than she is now. Almost all of her increase in family support will be taken back in reduced accommodation supplement and special benefit.

The package gives the biggest boost to two groups: big families, such as Paul and Moana Scanlan and their six children who will get that 31 per cent godsend, and workers, such as nurse Michelle O'Connell, who will get a $141-a-week bonus by going to work while sole-parenting four children aged 4 to 8.

Paul Scanlan, 37, is on an invalid's benefit because of a rare condition that makes him swell up when he eats fruit or vegetables. He often has to be rushed to hospital, and takes weeks to recover.

He can eat meat, but it's expensive on a benefit of $341.98 a week plus family support of $204.54 for six children aged from six months to 12. Amazingly, their family support is docked by $2.46 a week because the invalid's benefit pays just above the minimal income level at which family assistance now starts to reduce.

"This week I bought two chickens. They have to last us the week," says Moana, 30.

"My kids were teased that they were poor. We need to buy school uniforms but we can't afford it, so they have to go like ragamuffins."

The family's Housing NZ home in Glen Innes has a wide-screen television and stereo but no other luxuries.

"Everything else is given from people or inorganic days when we pick up stuff," Paul says.

"We get clothing from the clothing recycling bins. It's illegal, but everyone is throwing it out anyway."

On Friday their family support will rise by a cool $100 a week - $25 for the first child and $15 each for the other five (although $4.57 will again be docked due to the invalid's benefit being above the point where the state begins to claw back family assistance).

Their invalid's benefit will also rise by the annual inflation adjustment, to $351.22 a week.

Their rent will rise too, from $97.25 a week to $107.13, because Housing NZ charges 25 per cent of income, including family support for the first child. But after allowing for the rent increase, the family will still be $98.57 better off.

In April next year, the anomaly of clawing back family support from the poorest families will end when the income limit for full family support rises from $20,356 a year to $27,500. The Scanlans will be $4.57 a week better off.

Finally, family support will increase by a further $10 a child in April 2007. Despite a further rent increase at that time, the Scanlans will end up $157.43 a week better off than they are now.

Asked what she will spend the money on, Moana says: "Food: fruit, biscuits, meat, bread, milk, juice. We will be able to actually fill our freezer up."

Working for Families

Major changes to family assistance and other subsidies come into force on April 1, including:

* Family Support up $25 a week for the first child and $15 for each other child.

* Main welfare benefits for majority of families down $17-$21 a week.

* Special benefit top-ups down by an average of $13.50 a week.

* Higher maximum accommodation supplement rates in urban areas.

* The package is designed to put more money into the pockets of many low and middle-income families and make work pay for parents who move off benefits

* More changes occur on April 1 next year and again in 2007.

More information:

Family assistance: Phone 0800 227-773.
Accommodation supplement and childcare assistance: phone 0800 774-004 or visit the the links below.