Jonathan Boston: child hardship package will have only a marginal impact on child poverty

The child hardship package in the 2015 Budget is a welcome initiative by the National-led government. However, the modest increases in benefit rates and tax credits for low-income families will have only a marginal impact on child poverty and material deprivation, however measured. The reasons for this are as follows.

First, Table 4.1 (taken from Child Poverty in New Zealand and downloadable as a JPEG) provides data, in 2012 dollars, on the gap between the weekly income of four different kinds of beneficiary families and four income-based poverty measures (i.e. 50% and 60% of median disposable incomes before housing costs, and 50% and 60% of median disposable incomes after housing costs). With the exception of the 50% before housing cost poverty line, there are large gaps between the weekly incomes of beneficiary families and each of these poverty lines.

For instance, the Table highlights that the additional income weekly income required by a beneficiary family to cross the 60% poverty line (before housing costs) is around $30 to $110 a week, depending on the size and composition of the family. The amounts required to cross the 50% and 60% poverty lines (after housing costs) are very much larger. An additional $25 a week, therefore, will not be sufficient to move any of the family types in Table 4.1 above three of the four poverty lines.

Hence, with the exception of beneficiary families who secure income from paid employment for part of any specified period, the changes to benefit rates announced in the Budget will not reduce rates of child poverty measured on the basis of family income. The changes may, however, have a marginal positive impact in due course on child deprivation rates.

Second, the changes in tax credits for low-income families may have a positive impact on child income-poverty rates and deprivation rates, but this impact is likely to be very marginal.

Third, there are no changes to the structure of the Accommodation Supplement or the level of assistance provided. Yet this is an important source of income for many low-income families, and rates have not been adjusted for inflation since 2005.

Fourth, the changes to benefit rates announced in the budget are modest, short-term and ad hoc. They do not involve an integrated, ambitious long-term strategy to reduce childhood poverty and deprivation in New Zealand to low levels. There is no fundamental review of how benefits are set or structured. And there is no proposal to link benefits to average wages, as applies to New Zealand Superannuation.

Accordingly, without further reform to welfare assistance beyond 2016, families dependent on a welfare benefit are very likely to fall further behind those who secure their income from paid employment or New Zealand Superannuation. The gap is already very large. The child hardship package will reduce this gap only fractionally and probably only on a temporary basis.

It is a great pity that the opportunity for more fundamental and far-reaching reforms has been missed. We are not serving our children well.

ENDS

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