The system of tax-based family assistance does not link well with the benefit system. Without help of this type, it is difficult for people to move in and out of work without falling into the poverty trap of benefit or tax debt, sometimes both.

Sole parents moving from the benefit to the workforce face particular challenges. They need a decent working income and they need confidence that support is there to relieve the load when times get tough.

The Government sees support for parents as a key part of the social development strategy. Support for families, particularly families in work, is a good and necessary investment in New Zealand’s future.

We do not believe, however, that the Government alone should be responsible for providing this support. The Government expects parents who do not have custody to take greater responsibility for their children and to play a greater role in their upbringing.

THE NEW APPROACH

Childcare

The Government has increased parents’ access to affordable quality childcare services, so parents can be confident their children are well looked after while they work.

It has invested an extra $20.6 million over the next four years to continue the maximum number of hours that may be claimed for childcare and OSCAR subsidies at 37 hours a week, and extended development assistance for a further year for OSCAR services that were threatened with closure because of financial problems. The measures provide increased government support in this area to ensure there is a stable supply of quality services for parents.

Family Income Assistance

The Government will be setting in train a broad review of the family tax credit system. The aim is to better meet the needs of low-income families and improve the returns from paid work.

Review of the DPB Work Test

The Government is currently reviewing the work test for Domestic Purpose Beneficiaries, those on a Widows Benefit and the spouses of beneficiaries to ensure an appropriate balance between work and family responsibilities – with paid work being the goal when family responsibilities allow.

The Government is to trial active early assistance for around 4,500 Domestic Purposes Beneficiaries. They will be given the option of a home visit from Department of Work and Income staff where, for example, advice about getting or keeping a job will be given.

Paid Parental Leave

The Government has made a commitment to introduce a paid parental leave programme within the next year.

Working More For Less

Here’s an example of how the current benefit and tax systems provide no financial incentive for beneficiaries to join the paid workforce.

Julie, a sole parent with one school age child, is working 25 hours a week at the minimum wage, which brings her $161.03 net (after tax) a week. When her family tax credit, family support and child tax credit, and accommodation supplement are added to this, her net weekly income is $439.50.

When Julie is offered a full-time job at the minimum wage paying $250.90 net a week, she is going to be $1 worse off, despite the fact that she is going to be working considerably longer hours. This is because the family tax credit ‘top-up’ reduces by $1 for every net extra dollar earned, and the accommodation supplement reduces by $1 because of the increased wages. The result is that her total income will be $438.50.

Working full-time also means Julie needs someone to look after her child after school. If Julie uses an approved OSCAR programme, she will be eligible for a subsidy. But there will still be costs, making full-time work an even less attractive proposition.