www.cpag.org.nz
Media Release 8 February 2011

Peter Dunne fails his Report Card

In his ‘State of the Family Report Card’, Peter Dunne suggests that families should be allowed to capitalise their Working for Families (WFF) entitlements to buy first homes. While his intentions may be good, the Minister shows that he doesn’t understand how WFF actually works.

Capitalisation worked well with a universal Family Benefit based on the child but the Minister’s call overlooks the fundamental flaw in WWF, which was designed to reward parents to come off a benefit, not meet the needs of all children and their families. In the brave new world of WFF, the amount of the tax credit entitlement depends on meeting a minimum number of paid hours, whether any income is from a benefit, the level of joint parental income, and whether the parents are a couple or not.

These factors can change rapidly and unpredictably, substantially altering entitlement over a year let alone a longer period. There are especially complex issues around entitlement in the current flexible labour market, with no guarantee of employment from one week to the next.

As more and more businesses collapse into the recession, and incomes become increasingly erratic and uncertain, it is impractical to suggest that a family should or could be paid their WFF tax credit in advance of earning it. Even in less volatile times, many families prefer to collect their tax credits at the end of the financial year rather than risk having to repay any overpayments when income or circumstances change, such as separation or re-partnering.

The real problem is the highly complex, inequitable mishmash that WFF has become. WFF tax credits are supposedly designed to meet the needs of the child but in practice are conditioned on a range of other factors. Yet few politicians are willing to look at the design of WFF, and taskforces such as those for Tax and Welfare are specifically told not to go there.

CPAG thinks that at very least the Minister of Revenue should acquaint himself with his government’s policy before making unworkable policy pronouncements.

ENDS

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