Poverty battle begins

The Government is estimating its Families Package will lift 88,000 children out of poverty and hand 385,000 families an extra $75 a week.

But the Opposition has already slammed the new policy, saying the changes could leave some Kiwi families paying more than half of any extra income they get in tax, and branded its child poverty figures ‘‘smoke and mirrors’’.

Finance Minister Grant Robertson yesterday lifted the lid on how he plans to finance the Government’s election promises, presenting a ‘‘mini-Budget’’ alongside the country’s half-yearly economic and fiscal update.

His update detailed a $15.1 billion price-tag for the policies of the threeway Government, which featured a centrepiece $5.5b package targeting the poorest New Zealand families.

It includes a ‘‘winter energy payment’’ of up to $700 per year, boosted incomes, and a new child payment.

The Government plans to repeal $8b worth of planned tax cuts to pay for much of it. National finance spokesman Steven Joyce said that meant ‘‘hardworking Kiwis on the average wage will no longer receive the $1060 extra money they were due to receive’’.

Operating allowances to 2021 would provide for $21.7b in new expenditure across the next four Budgets.

There appeared to be about $660m per year of unallocated funds, which would likely pay for future policies.

The Government is forecasting its suite of measures will give the poorest 385,000 families with children an extra $75 per week, once it is fully implemented in the 2020-21 financial year. A further 365,000 can expect an extra $39 a week, while 650,000 families will gain about $14 a week more in their wallets.

Robertson said his Families Package was expected to lift 39,000 more families out of poverty than the measures announced by National in May.

But it’s a number that National’s children spokeswoman, Paula Bennett, called ‘‘bluster’’.

‘‘National’s Family Incomes Package was projected to lift 50,000 children out of poverty on April 1, 2018. It would have given 1.2 million working Kiwis an extra $1060 per year in the hand – and, we had committed to undertake a further package in 2020 that would have had a similar impact.

‘‘The mini-Budget ... outlines its plans to lift 88,000 children out of poverty – but by 2021. So, comparing apples with apples, during the same period National would have lifted about 100,000 children out of poverty, whereas Labour only plans to lift 88,000,’’ she said.

Other changes include, from July 1, 2018, a ‘‘Best Start’’ tax credit of up to $3120 a year, giving parents of newborns $60 more a week for the baby’s first year.

Families earning less than $90,000 will continue to receive some payments for up to three years.

For anyone on a main benefit, including superannuitants, a winter energy payment will help with the power bill.

Single people will get a flat payment of $450 per year, and couples $700 per year. About 1m people were expected to be eligible for it.

The Government has retained a major feature of its predecessor’s families package, which was a boost to the accommodation supplement.

The Government was also planning a $2b capital injection by 2020 to deliver 100,000 affordable homes in 10 years. Treasury had not forecast how many homes it expected to be built but had assumed a 10 per cent increase to the level of nominal residential investment.

Robertson also laid out a promise that the costs of delivering on the commitments Labour made to its partners, NZ First and the Greens, would be met within the Government’s operating and capital allowances over the next four years.

‘‘On current estimates, beyond the 100-day plan, the Government’s policy programme is expected to result in $15.1b of additional operating spending across the forecast period.

‘‘This includes the costs of the commitments in the coalition agreement between Labour and New Zealand First, the confidence and supply agreement between Labour and the Green Party, and remaining policy elements.’’ Families gamble, A2

New powers, Editorial A10 Outlook ‘‘optimistic’’, Business A12

In theory this was a miniBudget. In practice, this was Finance Minister Grant Robertson’s first Budget.

The kitchen sink may not be there but there’s not much wriggle room in there either for his May Budget.

Labour has taken a huge gamble front-loading its election promises, including its flagship families package.

But it had no choice. Parliament was heading into urgency last night to scrap National’s April 1 tax cuts and, so far, Labour has been on the losing side of the argument about it being an old-fashioned tax grab.

Robertson’s mini-Budget was a chance to re-announce a $1.8 billion package to boost family incomes, through an increase to Working For Families payments, a $60-a-week baby bonus, and rolling out National’s previously announced increase to the accommodation supplement.

There are winners and some losers but this is a package that delivers on Labour’s promise to halve child poverty. That will resonate with more than its core supporters.

But the gamble is in the timing. The package does not come into effect until July 1 – a good month after the May Budget.

And, thanks to yesterday’s announcements, there won’t be much more than crumbs left to spread some mid-winter cheer.

Once other coalition commitments are accounted for in the new Government’s spending allowances, including the flagship Kiwibuild programme, Robertson will have a paltry $600 million a year for new policies and to deal with building pressures in the state sector.

Compared with some recent Budgets – like the infamous zero Budgets under John Key and Bill English – that might seem like money to burn. But the economy Labour has inherited is very different.

Delivering Budgets in the good times comes with its own pressures, including higher expectations of government spending from unions and the public sector. Robertson acknowledged that.

National will argue those rosy forecasts are the dividend of nine years of its economic stewardship, making them the benchmark by which Labour will be judged.

The prospect of a business backlash to Labour’s industrial relations policies is just one of the risks that Treasury has touched on.

But Labour’s focus will be on stamping its mark on the end of the parliamentary year.