Labour claims National’s proposed changes to welfare will see main benefits drop an average $2621 a year by 2028 compared to what it is proposing, effectively pushing thousands more families and children into poverty.
Social development spokeswoman Carmel Sepuloni laid out her party’s platform today with a compilation of mostly existing policies but framed as a “line in the sand” when it comes to Labour’s approach to welfare compared to National’s.
“Our plan will continue to lift children out of poverty, increase incomes and ensure hard-working Kiwis are supported into employment, education and training,” Sepuloni said.
One new aspect is a pledge to fix abatement thresholds for people on benefits to be able to do part-time work. Currently, people can earn up to $160 a week, or about seven hours on the current minimum wage, before their benefit is affected.
Labour is pledging to increase that threshold by the same proportion as minimum wage increases from 2025-26.
“Labour will ensure low-income Kiwis, like our sole parents who want to work while their kids are at school, continue to keep more of what they earn by indexing abatement thresholds to increases in the minimum wage in the next term.
“For a sole parent, this means they can pick up extra part-time work without it affecting their income support.”
Sepuloni said Labour would retain fixing increases to benefits over time to increases in average wages.
Historically, wages have risen faster than inflation, meaning benefit rates have remained low as wages rise. This has increased the gulf between those in work and those who are not.
In 2019, the Government changed this, indexing benefits to wages. This backfired after 2021, when inflation rocketed ahead of wages, causing the Government to intervene and adjust benefits for inflation rather than wages.
Labour, the Greens and Act have said they will keep the existing indexation system.
National has said it would revert to the old calculation. The change would be quite significant. A single person receiving the over-25 rate of Jobseeker Support would lose about $33 a week by the end of the next Parliament if National reverted to the old measure.
Labour claims it would have a cumulative effect and would, on average, see benefits $315 lower next year, $1023 lower in 2025 and $2261 lower by 2028.
Sepuloni said Labour’s policies had led to 77,000 fewer children living in poverty.
Labour’s benefit increases since 2017 had restored them to pre-1991 levels, adjusted for inflation.
“Our changes have lifted incomes after housing costs for Kiwis on a benefit by 48 per cent over and above inflation,” she said. “We will continue this record by increasing benefits every year in line with average wage growth.”
Sepuloni claimed National’s policy would see thousands more children impoverished, and questioned its ability to meet child poverty targets, to which it has committed.
“The previous Children’s Commissioner said the single best thing we could do to combat child poverty would be to index benefits to the change in average wages each year.
“Despite occasional peaks in inflation, over the long-term, wage growth almost always outstrips CPI.”
She said Labour’s changes had lifted more than 5000 children out of poverty since 2020.
The policy document also outlined the party’s approach to tax credits known as Working For Families (WFF).
The main credits are the family tax credit (FTC) of $136.94 a week for qualifying families, with an additional $111.60 a week for every subsequent child.
On top of this, there is the in-work tax credit (IWTC) of $72.50 a week for families with one to three children (with an extra $15 a week for each fourth and following child).
Labour’s policy, which came out in August, has subsequently been matched by National.
Their changes would see a $25-a-week increase to the IWTC by April 1 next year. That means about 160,000 moderate-income families would get a boost.
Then, in 2026, both parties would raise the abatement threshold from $42,700 to $50,000. This means that, instead of starting to lose their tax credits once their incomes hit $42,700, families will begin to lose them at $50,000. The change would mean families keeping about $2000 if they earn above the threshold.
Sepuloni said Labour was not immediately looking at increasing the family tax credit, which would go to all families, not only those in work.
Labour had commissioned a review of Working For Families and recommendations were due to be delivered to the Cabinet in November. Sepuloni said that, if re-elected, Labour would consider any proposals.
She wanted to see those family tax credits increased, but it depended on the economic situation.
She said the same rationale applied as to why Labour’s proposed increases were far below those proposed by the Greens, which also seek to peg abatement thresholds to inflation.
The Greens want to replace WFF with a new scheme and lift the abatement threshold from the current $42,700 to $60,000, which is where it would be if adjusted for inflation over time.
The Greens are also promising a single payment for caregivers of $215 every week for the first child and $135 a week for every other child, replacing both the FTC and the IWTC.
Sepuloni said Labour would continue working to implement recommendations of the Welfare Expert Advisory Group and training and apprenticeship programmes.
“We’ve also reinstated the training incentive allowance, showing our focus on supporting people receiving a main benefit to participate in higher education and opportunities to upskill.
“Under Labour, we continue to see record numbers of people moving off a benefit and into work: 100,233 in 2022. That’s 25.7 per cent higher than the 79,737 who moved off a benefit and into work in 2017.
“And for the first time in New Zealand’s history, sole parents now receive their full child support payments, helping to lift an estimated 6000 to 14000 children out of poverty.”
National has been approached for a response.
National’s social welfare policy this week outlined harsher penalties for those on benefits who don’t meet their obligations to look for work.
The party proposed a traffic light system whereby, after two breaches (orange), there would be more regular check-ins and guidance. After three sanctions there could be benefit cuts or suspension, money management and mandatory community work experience introduced.
Jobseekers would be required to reapply for benefits every six months, show documents to prove they were applying for jobs and attending interviews. A one-month benefit stand-down would be introduced for those evading arrest warrants.
Social development spokeswoman Louise Upston pointed to record-high numbers of people on jobseeker benefits under Labour, peaking at 212,466 in December 2020 at the height of the Covid-19 pandemic, and a dramatic reduction in the number of benefit sanctions being applied.
The Welfare Expert Advisory Group (WEAG), established by the Labour-led Government in 2018, found there was no evidence to suggest sanctions at the level applied in New Zealand encouraged people back into work and had major social impacts.
Upston said the focus would always be on encouraging people to find work and matching them up with employers, with sanctions being a last resort and other options along with financial sanctions.
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