Cunliffe to help poor families in new ways

20:07, Jan 22 2014

Labour is planning a new payment to help low income families with children, including beneficiaries, after freeing up $1.5 billion a year by axing promised tax breaks.

Leader David Cunliffe signalled the new policy after officially dumping two tax carrots dating back to Phil Goff's leadership - exempting fresh fruit and vegetables from GST and a tax free band on the first $5000 of income.

Launching the policy in 2010, Labour had said research showed it would prompt shoppers to buy about half a kilo more fruits and vegetables per household each week. However, former leader David Shearer had already made it clear over a year ago the policies would go.

Prime Minister John Key said they were "dumb".

Mr Cunliffe said the new approach, to be unveiled in his state of the nation speech on Monday, would better target struggling families than either of the dumped policies.

But he was coy about whether it would recycle the full $1.5b saved.


"While these were worthwhile policies, we believe there are better ways to help struggling Kiwi families," he said.

Labour would reinvest the money in ways more directly focused on needs.

Speculation has centred on a payment to families, including beneficiaries, with children.

But it is not clear if Labour will back away from extending the in-work tax credit to beneficiaries, which drew strong criticism at the last election.

A payment aimed at helping families with children could be targeted if it is capped according to household income - an approach that would echo the UK labour party's platform.

Mr Cunliffe said the GST exemption had been axed after new research showed fresh fruit and vegetables were mainly consumed by those who could afford more.

A spokeswoman later pointed to a 2013 select committee report citing Treasury's view that "those on higher incomes spend more on fruit and vegetables now, so would derive more financial benefit" from the move. The report went on to say, however, that those on low or limited incomes were more price-responsive, so had greater potential to increase their consumption of fruit and vegetables.

Mr Cunliffe said the tax-free threshold would also have delivered tax cuts to top earners as well as those on lower pay.

He confirmed the capital gains tax policy, exempting the family home, would stay, but might be fine-tuned, as would the policy to lift the state pension age gradually to 67. Labour was looked at how to ensure "social and gender equity" as the age rose.

He also confirmed Labour would lift the current $13.75 minimum wage to $15 within its first 100 days and said it would go higher over time. A living wage, defined as $18.40 an hour, would be brought in as it could be afforded, starting with the state sector. He reiterated Labour would change the law on deep sea oil exploration to ensure world's best practice on environmental standards, insurance and clean-up measures was applied here. If new consents did not meet the new legal standards they would not proceed, but there would be no "moratorium".

But Labour was not opposed to deep sea drilling in principle, he said, putting him at odds with allies the Greens who have opposed deep sea exploration on environmental grounds. He had looked at Norway's law and its standards and at the way it used income generated from mining for a sovereign wealth fund. It was an interesting idea, but Labour had made no decisions.

The Dominion Post