Fairness risks in payment scheme

Fairness risks surrounding the cost of living payment were made clear to officials before it was authorised, a new Cabinet paper shows – and about 5% of the highestearning households were expected to receive the payment.

The Cabinet paper sets out the rationale for the payment of $350, which is being paid out in three instalments to individuals who earn up to $70,001 and would not otherwise qualify for the winter energy payment.

The payment is expected to cost about $816 million, including $16m in administration costs. But so far 800,000 fewer people have received the payment than initially expected. In most cases, that is because tax returns have not yet been filed. About a quarter of recipients are expected to be selfemployed.

The $70,001 threshold meant it would be received by 51% of income-earners aged over 18, the Cabinet paper said. Treasury modelling suggested about 21% of the value of the payment would go to the bottom 30% of households, 54% of the total payments to the middle 40% of households, with 19% going to the eighth and ninth household deciles and the top household decile receiving about 5% of the payment. ACT leader David Seymour said it was not a good outcome that high-earning households would receive it.

‘‘The fundamental problem with the scheme is that almost by definition it decided to give money to the exact people that the five previous governments decided not to give money to. Part-time workers in high-income households are an obvious category of people that for various reasons we don’t give money to.’’

National Party deputy leader Nicola Willis said Government claims that the payment had been targeted were ‘‘not supported in any way by the facts. The facts are clear that it has ended up supporting a proportion of higher-income households.’’

She said indexing tax thresholds would have been fairer.

‘‘Only people who are actually paying tax would have benefited. It would have allowed for the fact that inflation has pushed more New Zealanders into higher tax brackets.’’ But researcher Jess Berentson-Shaw of thinktank The Workshop, said approaching the payment from a household perspective would create unfairness for women in particular.

‘‘It would be 100% appropriate not to assume that a woman has to rely on a man she lives with – it’s exactly the same issue we face with married super payments or disability payments.

‘‘It assumes financial interdependence which is a pretty outdated analysis that tends to disadvantage women and people with disabilities especially.

‘‘There are risks and benefits to all social policies and you have to decide whether it is better some people who don’t need it get it in order to ensure you are not further locking particular people into difficult circumstances,’’ she said.

The paper noted that some people who had experienced a recent income drop would not receive the payment because they had earned more than $70,000 the previous year.