Tax plans still leave children in poverty

About 36,000 children who would have been lifted out of hardship under Labour's Working for Families package will stay officially in poverty if the National Party wins next month's election.

National's tax package, unveiled on Monday, would cancel the final instalment of the Working for Families package - a $10-a-week increase in family support which Labour proposes for April 2007.

A principal adviser in the Ministry of Social Development, Bryan Perry, calculated last year that the extra $10 would cut the proportion of children living in families with less than half the country's median income from 7.3 per cent to 3.9 per cent - a drop of 36,100 children.

Under National's policy - all other things being equal - that means that 77,500 children will stay in families earning under half the median, an international measure of poverty.

Under Labour, that number is projected to drop to 41,400.

Economist Susan St John of the Child Poverty Action Group said the poorest families on benefits would fall even further behind the median under National because its tax cuts would raise the after-tax median income.

The party would increase superannuation rates, to pass on the gains from the tax cuts to old age pensioners.

But National welfare spokeswoman Judith Collins confirmed yesterday that other welfare benefits would not be adjusted, apart from the usual increases to pay for inflation.

"The bulk of our tax policy is clearly aimed at working people," she said.

Social Development Minister Steve Maharey said National's decision to axe the 2007 family support increase was "its most cynical and mean-spirited policy to date".

"The impact of this change would cut deeply into the pockets of low- income families," he said.

"The incomes of 125,000 beneficiary families would be reduced by an average of $20 a week, pushing thousands of children below the poverty line.

"A family with three children would get $30 less every week."

Dr St John pointed to a Unicef report this year showing that New Zealand had the fourth-highest child poverty rate out of 26 developed countries - measured by falling below half of the median wage.

Under Labour, if all other countries stayed the same, New Zealand would improve to the fifth-lowest child poverty rate, lower than all except the Scandinavian countries.

Under National, New Zealand would come in around the middle of the table.

"National really has to look at it because we are looking very bad on international comparisons. I don't think that really a developed country like New Zealand can get away with it," said Dr St John.

But Ms Collins said National's tax cuts would give beneficiaries an incentive to go back to work.

"A beneficiary getting a part-time job will pay 19 per cent tax instead of 33 per cent. That gives them a whole new incentive, and they don't have to turn up and apply for it," she said.

National would cut the tax rate on earnings between $180 and $240 a week from 21c to 15c in the dollar, and between $240 and $730 a week from 21c to 19c.