'There are no pixies printing cash' Key tells Labour

Labour leader Phil Goff is calling on the Government to help workers laid off as a result of the recession. Photo / Mark Mitchell

Labour's call for the dole to be paid to redundant workers even if their partners were on high incomes would cost about $1 billion over three years, Prime Minister John Key said today.

"It demonstrates (Labour) haven't got their heads around what's happening in 2009," Mr Key said.

"It's not that I don't have sympathy for those people but in the end someone has to pay the bill - and there aren't little pixies at the bottom of the garden printing cash."

Labour leader Phil Goff is challenging the Government to seriously consider temporarily paying the full unemployment benefit to workers laid off because of the downturn regardless of the income of their spouses.

He said those losing their jobs were carrying a "disproportionate burden" of the recession and the National Government was not doing enough to help them.

Mr Goff yesterday said the Government was talking optimistically of the economy already coming out of recession even as forecasts had unemployment rising to 180,000 by late next year.

He described as inadequate the Government's "ReStart" programme, which provides short-term support to low- to moderate-income families with children and to people with high housing costs who have been made redundant since the election.

He suggested the requirement that a spouse's income be means-tested be suspended, if only during the recession.

The suspension would be dependent on an individual having previously been in employment for a set period, say five years.

"You are not talking about people bludging off the system. You are talking about people who have often never been unemployed in their lives but lose their job through no fault of their own."

Paying them the benefit would recognise their contribution as taxpayers while allowing them a fairer period of time to adjust to new financial circumstances and ride through the worst of the recession without losing assets such as the family home through forced sale.

Mr Goff's suggestion echoes Labour's election promise of a job search allowance being granted to the partner who loses their job regardless of the income of the other working partner.

That promise was criticised for being too limited and poorly targeted as entitlement was restricted to just 13 weeks without means-testing unless the person went into training.

Mr Goff said Labour was now looking at extending the 13 weeks to a "reasonable period of time", possibly for as long as a year. He emphasised that the party had yet to fully cost the potential policy change.

At present, anyone with a partner earning more than $534 a week cannot get even a partial benefit.

Social Development Minister Paula Bennett said that under Mr Goff's proposal, someone could be eligible for a benefit for up to a year while their spouse earned $200,000, for example.

"I doubt many Kiwis would consider that a good use of the considerably fewer resources this Government now has. I'd be interested to hear what Mr Goff would cut, or which taxes he would put up, to fund such an initiative."

Mr Goff said social service organisations such as the Salvation Army were reporting that the people coming under real mental pressure from losing their jobs were not the hardcore unemployed who had learned to adapt, but those who had previously been able to stand on their feet.

National's "ReStart" programme offers a payment of $60 a week for families with up to three children and $15 a week for each extra child no longer eligible for the in-work tax credit, an increase of up to $100 a week for those who qualify for the maximum accommodation supplement plus help with getting another job.

The entitlements last for a maximum 16 weeks, presuming a job is not found in the meantime.

* Additional reporting by NZPA