Combating child poverty - we can afford it!

Combating child poverty - we can afford it!

By Mike Treen, National Director, Unite Union

(Reprinted from The Daily Blog)

The government has opened or will be opening, some doors that will enable unions and other progressive movements to push for far more than is currently being offered.

The decision by the parties making up this government, Labour, NZ First and the Greens to adhere to a position of “fiscal responsibility” means that there will not be any new taxes imposed on the very wealthy for at least three years. The government is also committed to steadily paying off the existing government debt.

This means that the money available to the government to spend is not that much different to what would have been available to the previous National government. This means that very little can be done to fundamentally change the inequality and injustices that abound.

Actually, the government could simply seize the ACC investment fund which last time I looked was over $30 billion and it would have enough money to do almost whatever it wanted. This fund was built up by taxing working people through higher and higher ACC levies over the last few decades as a prelude to the eventual privatisation of the fund.

When ACC was established there was no fund needed to cover liabilities into the future. The system was deliberately established as a “pay as you go” system which meant this year’s liabilities were paid out of this year’s income. There was no need to change to the system we have unless you planned to sell ACC. That was the plan of the National party in the past. That plan no longer exists. The fund does not need to exist. The money should be returned to the people.

So when someone says “we can’t afford it” – that is actually a lie.


Similarly, there is no need to resume funding the Superannuation Fund. The idea that future government spending needs to be financed by a fund that is established by taxing people today is economically illiterate. Future government expenditure can be fully financed by the income that is taxed in the future assuming modest productivity growth over these years. If we are producing much more per person in the future then we can tax a bit more for expected expenditure. The only reason it was a potential “problem” was that Labour and National governments refused to tax the very wealthy in society to pay their fair share. All of the wealth created through economic growth and extra productivity was being captured by the one percent and hoarded here or overseas in forms that couldn’t be taxed.

If a government has spare Billion or so to spend each year then the whole society would benefit from the improved productivity associated with ending functional illiteracy for many adults or ending the traffic gridlock in Auckland.

So the announcement by Treasury that due to an accounting error on their part that the government targets for reducing child poverty will not be reached as soon as hoped should be seen as an opportunity to take more radical measures than already planned.

In particular, it is time to support the call by CPAG and others for all beneficiaries to be eligible for the $72.40 a week “in-work tax credit”. This change could start April 1and would cost only another $500 million a year – exactly what is planned on being paid to the Super Fund.

The exclusion of beneficiaries from accessing this benefit unless they worked at least 20 hours a week maintained an unjust distinction between the “deserving” and “undeserving” poor. If the beneficiary working 20 hours a week lost their job or their hours were cut they were doubly punished by the system by losing the “in-work” benefit.

It is good that the government is moving to remove the sanctions imposed on mothers who did not name the father of the child for whatever reason.

We could then move to end the punitive systems associated with WINZ investigations and prosecutions against women who have started a relationship with a man and not declared it.

The best solution is to individualise all benefits and not deny a benefit to someone if they are married or live with someone who is working if they are unemployed.

Thousands of families have been forced apart with a low-wage father living in a separate household while mum stays at a parents place with the kid to give access to a benefit. These are simply practical choices many people have to make.

That would also be a first step to a Universal Basic Income for those who support that idea.

The government is also making a small improvement in the real value of a beneficiary’s income for the first time in decades by paying a “winter allowance” from May to September of $140 a month. This can be spent on anything. So it is real increase in the main benefit (including for those on National Super) of $450 a year.

Finally, it is good that the government has re-established a near-universal child allowance available for babies born on or after July 1, 2018 except those on paid parental leave. This will apply to all children without means testing for one year then two more years for low and middle-income families.

We actually need to re-establish universal child allowances for all children. We used to have such a system in New Zealand for decades. After World war Two, when we were a much poorer society and families were larger, the value of the benefit was about $40 a child. You could also capitalise it’s value for 16 years to get a deposit for a home.

Combining a benefit for all those not working, and a universal child allowance for all children would eliminate most of the coercive and bullying character of the benefit system. The cost can be taken from the rich and super-rich through targetting income and wealth taxes.

It’s simple. And we can afford it.