Stories of New Zealand families that can't afford a decent life for their kids led Jacinda Ardern to enter politics at 17. She has staked her political future on reducing child poverty, and given herself a ministerial role to deal with it. Simon Collins explores how the PM can make a difference.

Children with "diseases of poverty" still walk into Dr Russell Wills' clinic in Hastings every day.

The paediatrician who made reducing child poverty his primary goal as Children's Commissioner from 2011-16 is delighted Prime Minister Jacinda Ardern has taken the new portfolio of "Minister for Child Poverty Reduction".

Professor Jonathan Boston, who co-led Wills' expert group on solutions to child poverty, has been hired to advise on the legislation to set child poverty reduction targets, promised by the Labour Party for within the first 100 days.

"So the new Government is committed to a policy and legislative agenda on child poverty that will be led by the Prime Minister, and I welcome that," Wills says.

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But he also knows the scale of the problem.

Even in a buoyant job market, 4.6 per cent of children were hospitalised in 2015 with poverty-related illnesses such as respiratory and skin conditions, down only fractionally from 2013's all-time high of 4.7 per cent.

"The numbers of children coming through children's wards with respiratory infections, in particular, has not decreased," he says.

"We continue to see very young, particularly Māori and Pasifika children, presenting with severe chest infections and growing numbers of children with ­bronchiectasis, which is permanent scarring of the lungs."

Ardern has said child poverty is the reason she got into politics at 17. It became a burning topic in the election and how the issue is dealt with may have repercussions on her political future.

But how is she going to reduce it? To work out what is required, we must first understand how we got here.

We have always had ­people who struggle to cope because of physical or mental impairments, a rough ­upbringing, illness and mishaps.

In pre-industrial times, and still in much of the world today, helping them was left to the wider family or hapū. Industrialisation and its aftermath have splintered those ­extended families geographically.

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Gradually, over a century or so up to 1984, governments built a ­welfare safety net to fill the gap - ­often pushed by unions and other ­social movements, but also ­reflecting a ­realisation by ­businesses they ­needed workers who could afford to live and customers who could ­afford to buy their products.

As well as welfare benefits, the safety net included free or cheap healthcare and education, state-backed wage-fixing and arbitration, state rental housing and subsidised loans for first-home buyers. The state financed more than half of all new housing from 1936 until the late 1960s.

That safety net was dismantled after 1984 in a backlash against the "nanny state".

Ruth Richardson's 1991 Budget imposed part-charges in public hospitals and cut benefit rates to strengthen incentives to work.

Labour will lift the incomes of the
Labour will lift the incomes of the "working poor". Photo / Mark Mitchell

The Employment Contracts Act turned wage-fixing over to the market.

The Government stopped lending for housing from 1992. State-house rents were raised to market rates and tenants were only partly compensated by an accommodation supplement.

Not all the reforms persisted. Hospital charges were abandoned quickly and Helen Clark's Labour Government restored subsidised state-house rents from 1999.

Clark's Working for Families package increased tax credits for children from 2005.

Bill English's National Government raised benefits for families with children by $25 a week from April last year.

But Ministry of Social Development (MSD) data shows the real ­value of the benefit plus tax credits has reduced.

As an example, a sole parent with two children is about $30 a week worse off in real terms than before the 1991 cuts - in 2013 dollars such a family got $500 in 1988 and $469 ­today.

Moreover, rents and other housing costs have risen much faster than inflation.

The MSD report shows housing cost a quarter of the net incomes of the poorest fifth of working-age households in 1990, but now eats up half of their net incomes.

A Cabinet paper prepared for this year's Budget in May said net incomes after housing costs had fallen by 8 per cent since 2006 for beneficiaries, and by 2 per cent for all households on accommodation supplements.

Dr Russell Wills welcomes the new Government's committment to a policy and legislative agenda on child poverty. Photo / Warren Buckland
Dr Russell Wills welcomes the new Government's committment to a policy and legislative agenda on child poverty. Photo / Warren Buckland

The proportion of children in households earning below half of median household incomes is now only moderately higher than in the mid-1980s before housing costs - but is still roughly twice as high as it was 30 years ago after paying for housing.

By last year 140,00 children were in households earning below half the median income before housing costs - 210,000 (19 per cent of ­children) after housing costs.

National's Budget had ­already signalled dramatic ­changes to take effect from next April.

Family tax credits for that sole parent with two children ­under 12 were due to rise by $36 a week, raising their total weekly ­income to about $504 in 2013 dollars - restoring ­pre-1991 benefit rates for the first time.

More, National planned astonishing increases in maximum accommodation supplements, ranging up to $140 a week in West and South Auckland, Tauranga and Queenstown - the first increases since 2005.

The Treasury said the total $2 billion package, including tax cuts, would lift 49,000 children above the poverty line measured at 50 per cent of median household ­income.

That's about one-third of the ­children now below that line.

In a pre-election debate with ­Ardern, English boasted if he could reduce child poverty by 50,000 once, he could do it again. "We said we'd reduce that number by another 50,000 within two or three years, because under good fiscal management the country could do it," he told Parliament this week.

"So there's the benchmark. Can they reduce it by 100,000 from ­today? Because there was a plan in place to do that."

Labour has said it will scrap National's tax cuts. Instead, it will match ­National's changes to ­accommodation ­supplements and raise family tax ­credits even more - by $47 a week for our sole parent with two children, plus $700 a year ($13.46 a week) for ­energy, lifting the ­weekly income in constant 2013 dollars to $528, higher than at any time since at least 1980.

Bill English's National Government raised benefits for families with children by $25 a week from April last year. Photo / Mark Mitchell
Bill English's National Government raised benefits for families with children by $25 a week from April last year. Photo / Mark Mitchell

On top of that, all families with newborn babies will get an extra $60 a week "Best Start" payment for the first year, regardless of income, and for two further years on an ­income-tested basis.

Sole parents who can't or won't name the father of their children will no longer have their benefits cut by $22 a week.

Labour will also lift the incomes of the "working poor", who ­account for almost half the children below the poverty line, by raising the ­income threshold for reducing ­family tax credits from $35,000 a year to $42,700.

Beyond the welfare field, ­other Labour policies should reduce child poverty.

National planned to extend very-low-cost doctors' fees to 600,000 people with community service cards, accommodation supplement or income-related social housing.

Labour has promised to match that and cut $10 off all ­doctors' fees.

Labour's coalition deal with NZ First promises to lift the minimum wage to $16.50 an hour next April and to $20 by 2021 and Labour has promised legislation enabling ­unions and employers to negotiate industry-wide "fair pay agreements".

Most importantly, its housing policy should reduce house prices by building 100,000 "affordable" homes over the next 10 years, banning foreigners from buying existing homes, taxing capital gains on homes resold within five years, and ending landlords' tax breaks.

Lower house prices will not necessarily mean lower rents, but ­Labour has agreed with the Greens to create a "rent-to-own scheme" and also promised to limit rent ­increases to once a year, ban letting fees and speed up requirements for insulating and heating rental homes.

Housing Minister Phil Twyford promised before the election to increase state housing by at least 1000 homes a year, although the party's official policy promised only "substantially increasing the number of state houses".

Wills' expert group in 2012 proposed six "immediate priorities", including ­subsidising food in schools, a low-interest loan scheme and more support for teen parents.

All of these have either been ­enacted by National or endorsed by Labour, except for a proposal to pass on to custodial parents $159 million in child support payments that are taken by the state to offset the cost of sole-parent benefits.

Current Children's Commis­sioner Judge Andrew Becroft is still pushing for this last change.

"It would increase compliance by fathers and it would be good for the children," he says.
The experts then proposed four "priorities over the longer term" to cut the numbers of children in ­poverty by 30-40 per cent.

Their first item, "review all child-related benefits", is under way and the changes are due to take ­effect next April.

Labour's Best Start policy goes halfway towards the experts' ­second item, a universal family benefit for all children under 6.

Twyford's promise of at least 1000 extra state houses a year also goes halfway towards the ­experts' third item, increasing social ­housing by at least 2000 a year.

Their fourth item was free ­primary healthcare for all children under 18.

National went halfway by raising the age of free healthcare from 6 to 13 in 2015. Labour has not yet gone further, apart from promising to cut fees by $10.

Although Labour is committed to legislation requiring targets to ­reduce child poverty, Ardern has not said what her targets will be.

"There won't just be one" was as far as she went in response to ­English's jibes this week.

Dr Mavis Duncanson, director of an Otago University unit that co-produces the annual Child ­Poverty Monitor, says New Zealand has signed up to a 2015 United ­Nations sustainable development goal to halve poverty by 2030.

The graph above shows what that could mean for a poverty line set at 50 per cent of median income.

Victoria University economist Dr Simon Chapple, who co-wrote Child Poverty in New Zealand with Boston, says "eradicating" child poverty will require reviewing the whole structure of welfare benefits as part of Labour's ­proposed tax review.

Treasury work for this year's Budget found 13,000 families are losing at least 77.5 cents out of every extra dollar - 30c in income tax, 25c in reduced accommodation supplement and 22.5c in reduced family tax credits.

Another 160,000 families are losing tax credits or accommodation supplements out of their extra earnings. And that's not counting anyone repaying student loans at a further 12c out of every dollar.

AUT economist Michael Fletcher called this week for a fundamental shift in the basis of the welfare system from households to individuals, in line with the tax system.

He says the current system scares sole parents off forming new relationships because they could lose their benefit even if the new partner doesn't support them ­financially.

This matters ­because 49 per cent of children with sole ­parents live in homes earning below half the ­median income, whereas only 11 per cent of ­children in two-parent families do.

Fletcher dismisses fears that paying individuals benefits would ­encourage millionaires' partners to sign up for the dole.

"If the person is ­genuinely ­actively seeking work and is willing to apply for the dole and be work-tested, I don't have a problem with it," he says. "It's outdated to say ­because you have a wealthy partner you should be dependent on them."

Wills also believes benefits and taxes need to be reviewed, ­especially to guarantee adequate incomes for families with children.

"I look forward to the day when we see fewer poor Māori and ­Pasifika infants in our ­children's ward with chest infections, when we see fewer children with ­permanent lung scarring and ­stunted growth," he says.

"New Zealand is a wealthy country. We love our children. We do a good job of looking after our old people already and we can do the same for our children."