Budget to help working families

By KEVIN TAYLOR, political reporter

The incomes of about 300,000 low-to-middle-income households will benefit from the Government's centrepiece families package to be announced in the Budget, says Finance Minister Michael Cullen.

The Future Directions package being unveiled in the May 27 Budget will help about 48,000 more families than now.

The benefit and family assistance system for low-to-middle-income working families would be recast in the "largest single set of changes" since the 1991 benefit cuts, Dr Cullen told a business audience in Christchurch yesterday.

The package is expected to be worth about $2.5 billion over three years with the majority of the spending - around $1.1 billion annually - occurring in 2005-06 and 2006-07.

Dr Cullen told Parliament this week a working family with four children on $55,000 would get "a great deal more" than $60 a week in state assistance. Such a family is at present entitled to an estimated $16 a week, from the tax-credit system.

The system abates sharply on family incomes above about $27,000, but there are indications the package will push up the threshold at which abatement occurs to $60,000.

Dr Cullen's office refused to comment on speculation about the package yesterday.

National deputy finance spokesman John Key accused Labour of cynical vote-buying after four years accumulating a huge Budget surplus.

Last week the Government's books for the nine months to March revealed a $7.4 billion surplus, the biggest in history.

Mr Key said much of the Future Directions package would not be delivered until June 2006, effectively making some families wait six years.

He said reports some families might get an extra $100 a week were exaggerated and the reality was few families would get that much.

Dr Cullen said the package would take several years to take full effect. Its three broad aims were:

* To "make work pay" by supporting working families with dependent children, thereby increasing the gap between benefits and paid work.

* To ensure adequate incomes for low-to-middle-income families with dependent children.

* To help get people into work and keep them there.

Child Poverty Action Group spokeswoman Susan St John, an economics lecturer at Auckland University, was cautious about the package as there were no details yet.

But she was critical of Labour for waiting so long to deliver for children in poverty.

Children in low-income families had not had a boost since getting $5 extra per week per child in 1996.

"This is Labour's fifth Budget," she said. "The impact of this neglect and the effect of high rents has meant that despite economic growth, foodbanks are as busy as ever, and transience and Third World diseases are rampant."

The group has argued the tax-credit system should be indexed to inflation to stop its worth being whittled away.

Last year the group complained to the Human Rights Commission that the child tax credit of $15 per week goes only to low-income families in work - missing out those on state assistance. That complaint is still to be resolved.

Ms St John said it would be unfortunate if the discriminatory nature of the child tax credit was retained or, worse, strengthened in the pursuit of widening the gap between those in work and those on benefits.

Major Campbell Roberts, national social policy director for the Salvation Army, said he wanted to wait for the details of the package, but expressed frustration it had taken so long for Labour to deliver.

The Battlers' Budget

* Will deliver a family-centred package for about 300,000 low-to-middle-income households - 48,000 more than now.

* Is called Future Directions and will cost about $2.5 billion in the first three years.

* Will target the complex tax-credit system by simplifying it and boosting payments to families.

* Will simplify the benefit system and increase benefit rates, but the gap between welfare and work will be widened.

* Is expected to boost the accommodation supplement and make more students eligible for student allowances.