Activists slam $3b benefit review
Ministers are weighing up changes to the $3 billion Working for Families welfare scheme after receiving the first sliver of advice from a review, but anti-poverty campaigners are worried the Government is too focused on getting people into work rather than reducing poverty.
The scheme supports about 58 per cent of families with children through an often complicated network of tax credits.
The Government started reviewing the scheme last year, and went out to consultation this year. Social Development Minister Carmel Sepuloni said the Government had now received “initial information on the outcomes and insights linked from engagement from the Working for Families Review”.
She added that ministers were now “exploring potential options” with decisions “to be made in due course”. She did not detail any potential “options”.
The backbone of the system is the family tax credit of $127.73 a week for the oldest child and $104.08 a week for every other child in a family. It also includes an “in-work tax credit” for families who are also working. This is $72.50 for families of 1-3 children and $15 for each additional child.
The scheme has copped criticism from some sectors for its complexity, and the way it focuses on work rather than poverty.
Much criticism is directed towards the rate at which payments are withdrawn as people earn money from work, known as an “abatement rates”. The system works so that a person always earns more income from working than not working, but abatement rates are often so steep that people face little incentive to work.
Once a family earns $42,700 a year, their Working for Families payments “abate” at a rate of 27 cents for every
It confuses looking after children with work incentives. Associate Professor Susan St John
extra dollar earned, up from 25 previously.
Associate Professor Susan St John of the Child Poverty Action Group said a key problem with the current system was the Working for Families merged a benefit that is meant to alleviate poverty and help families with bringing up children with an the in-work tax credit incentive to help people get into work.
The two objectives often competed with each other.
St John was disappointed Sepuloni’s remarks appeared to suggest work incentives were still a clear part of the scheme.
“It confuses looking after children with work incentives,” she said. “The way the in work tax credit is structured is it only goes to families
with children — it is not well designed as a work incentive at all and doesn’t seem to have a lot with incentivising work and misses out people who might need an incentive like younger people,” she said. “Our recommendation was to drop the idea of trying to build a work incentive into working for families at all and attack work incentives through other mechanisms like lower taxes, higher minimum wages, less abatement.”
St John’s submission to the review called for the abatement rate to drop to 20 per cent.
Green Party social development spokesman Ricardo Menendez March agreed that the Government should not conflate an anti-poverty policy with a scheme designed to encourage people into work.
“We believe the Government should have gone back in terms of the terms of reference because the whole focus on transitioning people into work actually misses out what should have been the underlying principle which should be to eliminate poverty.”