PM Christopher Luxon, Finance Minister Nicola Willis announce early childhood tax credits

Families will be able to receive up to $75 a week in Early Childhood Education (ECE) tax credits from October this year - part of National’s election campaign promise to ease the cost of living.

Prime Minister Christopher Luxon and Finance Minister Nicola Willis announced the measure at his Post-Cabinet press conference this afternoon.

The FamilyBoost credit means families will be able to collect up to 25 per cent of the fees incurred with a licenced ECE provider, after the 20 Hours Free and Ministry of Social Development’s Childcare Subsidy are taken into account.

All families earning up to $180,000 with childcare costs are eligible, with the maximum amount available to families earning up to $140,000.

“Parents and caregivers will be able to submit their ECE invoices every three months via myIR, with FamilyBoost refunded as a lump sum,” Willis said.

“Parents should start collecting invoices from July 1, so they can begin to apply and be refunded from October 2024.”

No costings were provided for the policy, with officials saying that the costs and benefits were “to be confirmed”.

In its pre-election fiscal plan, National estimated it would cost $249 million a year, or $996m over four years.

Childcare financial burden high for Kiwis

Luxon said childcare costs in New Zealand were relatively high.

According to the OECD, couples pay 37 per cent of their income towards childcare in New Zealand. The OECD average is 13 per cent of a couple’s income, while in Australia it is 22 per cent of a couple’s income and in the UK it is 25 per cent of a couple’s income.

Willis said National had wanted to directly reimburse parents every fortnight, but officials had told the Government that couldn’t be done, and it was “too long to wait” for such a system to be put in place that would enable this.

The trade-off is an “administrative burden” for parents, though Willis said advice is being sought by the end of the year on how to reduce this.

She said more than 100,000 families would be eligible for FamilyBoost.

Willis said 21,000 families would be entitled to the maximum rebate of $75 a week.

The cost was estimated to be $723m over four years, less than what National had planned for the policy in its pre-election fiscal plan. The difference was because of additional information from Inland Revenue, Willis said.

Asked why the Government kept getting its costings so wrong compared to its pre-election estimates, Willis said it mattered more that families would get the relief National had promised during the campaign.

She defended putting the onus on parents because it meant the policy could be rolled out this year, rather than waiting for the right system to be put in place.

Willis said it wouldn’t be inflationary as it would be funded from “reprioritisation” and new revenue measures.

“IRD have pretty good computer systems. The issue here is how well their systems talk to education systems.”

The costings assume 100 per cent uptake, she said.

Some families might not take it up because of the admin required, but IRD hadn’t provided a number on how many that might be, Willis said.

Inland Revenue officials said there were no existing information flows linking fee information with parents, childcare centres and family income. Building that system would take two to three years, so the Government has instead opted to have parents provide invoices.

This risked “lower take-up due to compliance costs on parents, integrity risks associated with invoices or disclosed personal incomes, the implementation date of 1 July 2024 sitting within Inland Revenue’s peak period of demand resulting in reduced levels of customer support”, IRD officials said in a regulatory impact statement.

“Finally, there is a risk that the basic refund model will become entrenched without a replacement model ever designed and implemented.”

The rebate rates will be $75 a week for those with household incomes up to $140,000, $56.25 for those on household incomes up to $150,000, $37.50 for those with household incomes up to $160,000, and $18.75 for those with household incomes up to $170,000.

“Many families are struggling with high housing, food, and childcare costs. One of our priorities is to support families to get ahead by helping them with the high cost of living, including help for those bearing the brunt of childcare costs,” Willis said.

“Being able to afford ECE fees can also be a barrier to entering the workforce, particularly for the second earner in a household. FamilyBoost will make it easier and more worthwhile for families with young children to work by directly assisting them to pay those ECE fees.”

When asked about prioritising tax cuts over a surplus, Willis said tax cuts were a pre-election promise. She again said the tax cuts would not be inflationary because they would be delivered in a fiscally neutral way.

“I believe that when New Zealanders see the tax relief we deliver at the Budget, and the responsible way we will deliver it, they will be grateful for it,” Willis said.

She agreed with the International Monetary Fund comment about New Zealand being in a structural deficit, and the Government was focused on fiscal sustainability and getting better value for money.

She said the IMF and the Treasury have long said it was necessary to broaden the tax base, but the Government was committed to the tax relief it promised before the election.

She said regulation was also on the Government’s radar because ECE providers say regulations were behind much of the higher costs.

Focus on police response after Gisborne deaths

Luxon said the violence in Gisborne was a tragedy and his heart went out to the loved ones of the two people who had been killed after a mass brawl of about 100 people in Gisborne over the weekend.

It comes as an increased police presence gathers in Gisborne following the fatal brawl on Lytton Rd on Saturday at the scene of a 21st birthday.

A resident who lived near the address of the party, who spoke to NZME on the condition of anonymity, said she heard screaming about 11.30pm and stepped outside to see what was going on.

“I just heard all the screaming. Women screaming. I came out and saw everybody on the road and they were just all in one pack. It was hard to identify who was who in the dark.”

She said she knew of the family who lived at the address and they were “lovely people”.

A 29-year-old man was set to appear in court this afternoon on charges of wounding with intent to cause grievous bodily harm.

Police from outside of the region had been sent to Gisborne to assist with public reassurance.

Police Minister Mark Mitchell has urged people in the Gisborne community not to consider retaliation and a local councillor said “there is no future in utu [to pay back]”.

Police Minister Mark Mitchell is in Gisborne. Photo / Mark Mitchell

Mitchell told Newstalk ZB the brawl occurred at a 21st birthday party, not a “gang meet conflict”.

“There might have been gang members there... but the scale of it was unusual,” Mitchell said.

Mitchell did not deny there was a large gang presence in the region, but fear of a gang war was unwarranted.

The risk of retaliatory attacks was always considered by police, Mitchell told TVNZ’s Breakfast this morning.

“It’s obviously an awful finish to what was a family celebration”, Mitchell said, so people’s focus should be on supporting family who were mourning.

“Any thoughts of retaliation should disappear immediately.”

Gisborne Councillor Colin Alder told Newstalk ZB’s Mike Hosking Breakfast he has it on reasonably good authority gangs are involved, but “they are not at war, as such”.

“It was an unfortunate event at a party where alcohol and possible drugs were involved... who takes a knife to a party?”

Adam Pearse is a political reporter in the NZ Herald Press Gallery team, based at Parliament. He has worked for NZME since 2018, covering sport and health for the Northern Advocate in Whangārei before moving to the Herald in Auckland, covering Covid-19 and crime.