Justice For Poor Children A Long Time Coming

- Susan St John

Economics spokesperson for Child Poverty Action Group, www.cpag.org.nz

At a recent session at the Readers and Writers Festival in Auckland Max Rashbrooke discussed his new book “Inequality: A New Zealand Crisis” (reviewed in this issue by Jeremy Agar. Ed.). It is to be hoped that this is the beginning of a serious look at why inequality is so extreme in New Zealand today and what can be done about it. In the discussion Max stressed how many middle income working families rely extensively on the Working for Families tax credits just to make ends meet. This alone is concerning. In 2013, even with Working for Families being accessed, two out of every five children that live in poverty come from “working” families. However, one must then consider how a low income family manages to survive when receiving only part of these child-related tax credits.

There is an important principle at stake here. Do we as New Zealanders believe that all children matter and that tax-funded social security that is supposed to alleviate child poverty should be available to benefit all poor children? Or do we believe in an exclusionary approach that says even if you are sick or are taking care of a young family, your children should be punished for your lack of paid work? Why have we allowed paid work to be seen as the only source of value in our society? Have we as a nation lost our sense of compassion and empathy for those in complex and difficult family situations?

The Working for Families package has been widely criticised for the speed at which it was passed into law, and then extended, in 2005 pre-election. There was a lack of transparency around its development: no public consultation; no Green Paper, no White Paper; no Select Committee process, and it was passed into law with little time for debate.  No account was taken of the 230,000 children who would miss out, despite New Zealand’s human rights commitments to protect all children.  While it is true that all primary caregivers of children in low income households are entitled to the weekly Family Tax Credit payment ($92 for the first child and $65 for each additional child with higher rates for older children), when Working for Families came in, much of the increased assistance for families supported by benefits was offset by cuts to their other assistance. Moreover there was another very significant payment for the children made to the caregiver that was denied to any family on a benefit. Misleadingly named the “In Work Tax Credit” (IWTC), it is worth $60 a week for one to three child families and an extra $15 per child for the fourth and subsequent children.    

Discriminates Against Beneficiaries & Working Poor

Exclusion from the In Work Tax Credit affects Māori and Pasifika children disproportionately and helps to perpetuate the high levels of child poverty for the worst-off children that have remained even after Working for Families was fully implemented in 2007. Child Poverty Action Group (CPAG) has been arguing in the courts that the In Work Tax Credit, a child-related family assistance payment, is seriously discriminatory. While children of beneficiaries have the right to be treated like all other low-income children, it is not only beneficiaries’ children. As low income families lose hours of work through the troubling redundancies we are seeing, or by losing work as a result of the 2010-11 Canterbury earthquakes, their children become un-entitled to this very significant payment even when no benefit is being accessed.

Worse, the caregiver in these families can get bills from the Inland Revenue Department for any overpayment. Sometimes this occurs when families try to support themselves outside of the benefit system for several months, not realising that they are being paid the In Work Tax Credit that requires them to meet the 30 hours for a couple per week or 20 hours for a sole parent of paid work.  A child’s needs don’t change just because of a change in the work status of their parents. The extra $60+ per week the family misses out on currently could make a huge difference to their well-being. Since 2006, when the IWTC was introduced as part of Working for Families package, around $3 billion dollars has been denied to the poorest families. It is no wonder we are seeing such a huge increase in families seeking assistance from foodbanks nationwide and other signs of distress.

Court Case

CPAG has been pursuing the issue in the courts since 2008. We argue that this policy discriminates against children on the basis of their parents’ work status, which is prohibited under the Human Rights Act. Our case was heard in the Court of Appeal in late May 2013. We are seeking a judicial declaration that this payment is discriminatory and thus illegal. CPAG believes one of the first steps needed is for us to return to the pre-1995 principle that tax-funded assistance for children is given to all low income children on the same basis. Specifically we are asking for the In Work Tax Credit to be joined to the First Child Family Tax credit rate as the most cost-effective way to deliver significant extra assistance, going only to those who most need it. It would cost about $450-500m per annum to take this first vital step to a more equal society.


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