Government 'gives with one hand and takes with the other'

Basic benefits for families with children will drop by up to $21.40 a week on April 1, when increases in family support of $25 a week take effect.

The change, buried in the detail of last year's Budget, is part of the move announced last month to a new "single benefit" replacing separate unemployment, sickness, invalid and domestic purposes benefits.

The core rates of all benefits except the invalid benefit will be cut $17.14 a week for couples with children, and $21.40 a week for sole parents with two or more children, before allowing for the annual increase to compensate for inflation.

Couples with children on the invalid benefit will be unaffected, but the core rate for sole parents on the invalid benefit will drop $19.91 a week before inflation.

The cuts will be more than offset by family support increases of $25 a week for a first child plus $15 a week for every additional child.

But Auckland University economist Susan St John told a meeting last night marking International Women's Day today that the Government was "giving with one hand and taking away with the other".

"They want to have a single generic benefit where everyone gets the same amount, whereas under the old system there has been an extra provision built in where there are children, presumably because the core rate was just too low," she said.

"They want to get rid of that to make it nice and clean, so there will be a single core rate plus add-ons through family support if you have children and add-ons if you are sick or an invalid and so forth."

Dr St John said the new system would be sensible if the core benefits were high enough, but they were not.

Benefits will rise 2.7 per cent on April 1 to compensate for inflation, lifting the core benefit for a couple from $273.58 to about $280.97 a week.

But a couple with one child will see their core benefit drop from $290.72 a week to the same $280.97.

Their family support will rise on the same day from $47 to $72, so their overall income will rise by $15.25 a week, from $337.72 to $352.97.

Cabinet papers released to Dr St John show that the Government expects to spend an extra $1 billion on higher family support and a new "in-work payment" for working families by 2007-08, but will claw back $146 million a year from cuts in core benefits.

It will recoup a further $91 million in reduced special benefits.

A spokesman for Social Development Minister Steve Maharey said the Budget was "upfront" about the cut in the core benefit, effectively shifting part of the core benefit into family support payments that would continue when a beneficiary found a job.

"By allowing them to continue to receive some of their payments when they move off benefits, they are financially better off as a result of the move to work," he said.

All families with children would still be at least $7.86 a week better off after April 1, and a further $10 a week better off from April 2007 when the changes are fully implemented.