Family bonus will cost $3bn

By KEVIN TAYLOR political reporter

The Budget has delivered a boost to the wallets of low and middle income families but the money starts coming mainly after next year's election, leaving opposition parties labelling it an election bribe.

The "Working for Families" package will cost nearly $3 billion over four years and give an average of about $100 a week extra to families with children in the $25,000 to $45,000 income range.

Prime Minister Helen Clark said the package was the biggest offensive on child poverty in decades and showed Labour delivered for families. Finance Minister Michael Cullen said the package was the "centrepiece" of the Budget.

Half of all children aged 10 and under lived in households on incomes of less than $45,000, and they stood to gain the most.

Nearly 300,000 families will benefit when the package is fully in place by 2007, an estimated 61 per cent of all families with dependent children.

Income boosts will vary depending on the number of children in a family, their location, income level, and whether the source of their income is from work or benefits. About two-thirds of the money will go to working families with the rest going to beneficiary families.

Families who move into, or remain in, the workforce will get more than those on benefits as the Government tries to increase the incentive to move from welfare into employment. An inter-related set of changes to the family support, tax credit and benefits systems are planned starting this October and ending on April 1, 2007.

Parliament went into urgency yesterday to pass legislation implementing the changes. The bill will be supported by United Future, the Greens and Progressives.

Major changes are:

* Family Support payments for beneficiary and working families rise by $25 a week for the first child and $15 for each other child from April 1 2005. Payments rise again by $10 per child on April 1 2007.

* A new "In-Work" payment for working families replaces, and pays more than, the child tax credit. They will get up to $60 a week per family and an extra $15 per child for the fourth and each subsequent child.

* Abatement thresholds (the point where payments are cut back) for family support, In-Work payment, child tax credit and parental tax credit rise from $20,000 to $27,500 a year. After this payments reduce by 30c in the dollar.

* From October the accommodation supplement will not be reduced if beneficiaries get other income, and more working people become eligible. From April 1, 2005, rates rise in some areas, and a new tier of rates apply in central and north Auckland.

* From October pre-school and after-school childcare subsidies increase and are extended to families on higher incomes. From October 2005 this increases by 10 per cent.

Dr Cullen denied the Budget was trying to bribe voters, but National leader Don Brash dismissed the package as election year giveaways "cynically timed for maximum political effect". He gave no indication whether National in Government would reverse the changes.

National deputy finance spokesman John Key said four in five households would miss out under the package, and those getting extra would be waiting years.

Who to call

To discover your entitlement:

Phone the Government's free helpline on 0800 774 004

Visit the Inland Revenue and calculate your extra family income assistance