Baby bonus aims to cut child poverty

Labour says it will pay for policy through taxing the rich and a capital gains tax.

Labour leader David Cunliffe has rejected claims a new policy giving many parents of newborns more than $3000 a year is pandering to relatively well-off middle-class voters, saying a baby stretches most household budgets.

Mr Cunliffe outlined the payments for parents earning up to $150,000 a year in his State of the Nation address in Kelston yesterday, alongside a string of other measures aimed at the parents of young children, such as increasing early childhood education subsidies, more paid parental leave and free antenatal checks.

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Labour has costed the "Best Start" child payments at $151 million in the first full year and rising - adding up to almost $1 billion in their first four years. The full package of measures for parents of pre-school children is expected to cost an extra $528 million a year by 2017-18.

Most parents of newborns will get $60 a week until that baby turns 1, while those on middle and lower incomes will continue to receive the payment until the child turns 3.

Mr Cunliffe said the party had set the income threshold relatively high so that it would be near-universal, although its primary aim was to help address child poverty.

He rejected the suggestion middle income earners did not need the money, and it was simply an election bribe. "Nobody is going to make a profit on having children. It is extremely expensive for every family and every parent. During the first year, a lot of families face difficult choices about who stays at home, who works.

"Families on up to $150,000 are very much in the zone where they are making choices about both parents' roles."

It would be a simple monetary payment which parents could spend as they liked. "They know their needs better than us."

National's Economic Development Minister, Steven Joyce, said Labour was returning to its big-spending ways just a day after it had effectively also signed up for the Green Party's $100 million-a-year education policy.

"You're already at the thick end of three-quarters of a billion dollars a year. The problem is the money doesn't exist and he [Mr Cunliffe] has some explaining to do.

"The question has to be, 'Where's it all coming from, Sunshine?"'

Mr Cunliffe said Labour would pay for the measures by "unashamedly" taxing the most wealthy and imposing other taxes such as for capital gains. There would be an 18-month wait for the payments to be implemented to give time for those tax changes to take effect.

He said the plan would be a big investment, but money well spent.

Labour's Best Start

*Parents with an income of less than $150,000 a year will qualify for it for the first year of their newborn's life.
*Will begin April 1, 2016.
*Parents on modest incomes (up to about $70,000) will qualify for payments for two more years, abating after $50,000.
*Expected to apply to about 59,000 0-1-year-olds and 63,000 1 to 2-year-olds.
*Working for Families tax credits will not be affected.
*Cost of the child payments is expected to be $528 million a year by 2017-18.