The government had a clear choice this budget: they could spend $900 million placating the so-called ‘squeezed middle’ or use this sum to act decisively to reduce child poverty.
In spite of Treasury’s advice, and in the face of mounting evidence the social fabric is rapidly shredding they chose the former.
Budget 2022 will give a meagre $350 over 12 weeks to all and sundry who are not on benefits and can show a 2021 tax return of under $70,000. Don’t expect when it stops in November there will be a miraculous reduction in living costs and a political payback of gratitude.
And too bad if you don’t have a tax return. But how lucky are those who have a low taxable income and live in a high-income household? They don’t need this handout and may well spend in ways that contribute to higher inflation.
Not so the poorest families. They don’t get even the $350 from Budget 2022. But if they had enough money, they could relieve the supermarkets of their unsold wasted food and take the pressure of foodbanks. This is scarcely the kind of spending that would drive up prices, yet Grant Robinson suggested he could not help the poorest families because it would be ‘inflationary’. What immoral nonsense. Government policy has allowed the richest to get much, much richer with untaxed capital gains and accumulated savings during Covid-19 lockdowns. Inflation does not touch them and their lifestyles: instead market prices are no brake on their excessive spending on luxuries, travel or on hoarding scarce resources for their renovations in the midst of a housing crisis.
Currently many families who do not get the full WFF must borrow just to subsist. They fall further into that vicious poverty trap of repayments leading to less disposable income requiring even more borrowing. When families have no money left to feed their families and must borrow, beg for supplementary assistance and/or seek food parcels from charity we can expect disease, crime, domestic violence, despair even suicide to grow.
The budget’s own child poverty report analysis in the well-being budget shows that targets on child poverty are not going to be met with current policy. The $900m could have paid the In-Work Tax Credit, that part of WFF the worst off don’t currently get, to all families on benefits for two years. After that time, as it would be clear how important it is to make this payment permanent to achieving child poverty reduction goals.
It would mean an extra $4,000 per family per year for those so poor they need a benefit or part-benefit. It would be highly focussed spending that went to only the very poorest children. Come on Labour- you have the political capital, just to do it!
Sadly, the political gamble in not doing what the PM promised for child poverty has been judged less damaging than ignoring the Opposition’s faux concern about the ‘squeezed middle’.
But the ‘squeezed middle’ needs more analysis. The major problem for many working families is steep Effective Marginal Tax Rates, that is when they earn extra, after tax and loss of social assistance they are little to no better off. Low-income working families took an extra poverty trap hit this April when the government tightened the targeting of Working for Families with an increased clawback of 27% over the unadjusted threshold of household income of $42,700.
If the threshold was lifted to at least $50,000, where it should be, families could gain $1971 per annum. Instead, this budget offers these families an extra temporary payment of just $350 or $700 if there are two earner parents.
Shame on Labour who have just set up another review of WFF to revisit the issues for reform that are patently obvious. The committee will present ‘options’ to consider by the end of the year. How much time and money will this unnecessarily delayed review take? Perhaps there will be some changes announced in the 2023 budget for 2024? Oh wait, that assumes Labour are re-elected. If ACT have any say, expect things to be even more dire for families getting Working for Families.
Original Source: https://thedailyblog.co.nz/2022/05/23/2022-well-being-budget-will-not-feed-hungry-children/