Govt looked at freezing support to most needy

The Cabinet contemplated axing the inflation-adjusting of some Working for Families entitlements just weeks before the May Budget which had the Government proclaiming that protecting the most vulnerable was one of its priorities.

In his Budget speech, Finance Minister Bill English made much mention of how the Government had safeguarded entitlements.

"Low-income and older New Zealanders need security when times are uncertain. That's why this Budget maintains New Zealand superannuation, benefits, student support, and Working for Families."

However, previously confidential reports released by the Treasury yesterday reveal Mr English asked officials for advice on the removal of the indexing of family tax credits and rates of paid parental leave.

The officials reported back that around $550 million would be saved if income thresholds for the family tax credit and childcare assistance were similarly frozen at current levels.

Had the freeze gone ahead, a working couple with two children under 12 would have missed out on an extra $15.77 once indexation was triggered by quarterly increases in the consumer price index reaching 5 per cent. Someone on paid parental leave would have forgone nearly $26 extra a week.

Mr English said the indexing idea had been raised in the context of constantly worsening economic news. However, it had not progressed far.

The papers show the Treasury was worried that no longer indexing family tax credits would make child poverty statistics worse and might be challenged on human rights grounds.

The Ministry of Social Development - responsible for the Working for Families programme - also opposed a freeze on family tax credit payments, saying over time it would cause increasing hardship.

However, the ministry was also concerned that a UN review of New Zealand's human rights record was scheduled three weeks before the Budget. Removing indexing for some income-support payments might have been seen as a backward step.