Reserve Bank lifts official interest rate to 3 per cent ... Read more

Don't work, and get more money

Last updated 14:00 08/11/2011

One thing Labour should be praised for is their willingness to come up with new policy, different from that of the last Labour government. They have produced plenty of new policies (as well as the normal recycled ones).

The new policies have been a mixture of good and bad (in the author's opinion). Raising the age of eligibility of superannuation is a good thing, as would be a capital gains tax (if it were not riddled with exemptions).

Up until yesterday I would have said the worst of their new policies was the return to 1970s-style national industry agreements, which would have the government impose terms and conditions on every single employer in an industry.

But yesterday Labour announced that every beneficiary with dependent children would become eligible for the in-work tax credit, and get an extra $60 a week.

This policy has been pushed by the Greens and Sue Bradford for many years. And Helen Clark and Michael Cullen always said no: they said that the in-work tax credit was for parents who were, well, "in work".

The reason for the distinction was twofold. One reason was to have an incentive for beneficiaries to move from welfare into work. The in-work tax credit made it easier to do so, as gaining it would compensate for an effective high marginal tax rate as benefits abate.

The other reason was a recognition that parents who work have greater costs, such as travel to and from work, plus clothing costs.

This is the second policy from Labour to promise more money for beneficiaries. Their tax policy is also going to give everyone on a benefit an extra $10 a week. This is again a departure from the last Labour government. All previous governments that have introduced tax cuts have not had them apply to benefits. The reason for this is that the level of a benefit is calculated on an after-tax basis. Hence when Michael Cullen cut the bottom tax rate in 2008, it did not affect the level of benefits (except superannuation).

However, Labour's tax policy says that their tax changes will give beneficiaries an extra $10 a week, even though they do not in fact pay any tax.

Now this policy will give a beneficiary with a child another $60 a week on top of that. So that is an extra $70 a week, for not being in work and not paying taxes. I would not have thought that at a time when we have record deficits and the path back to surplus is dependent on Europe not melting down, borrowing more money for this policy is not a great move.

Do you think the in-work tax credit should remain for working parents only, or should it be extended to parents not in work, as Labour proposes?

David Farrar is a centre-right blogger affiliated to the National Party. His disclosure statement is here.

» Follow NZStuffBlogs on Twitter and get fast updates on all Stuff's blogs.

Post a comment
danielle   #1   02:03 pm Nov 08 2011

They dont deserve any more money get a job! Get pai for doing nothing hows that fair

bob   #2   02:08 pm Nov 08 2011

This is a double cost. Now and in 15-20 years time when the extra children of those who see this as a income generating scheme become criminals in their own right.

If you are going to give money out it should be in way of a direct payment/subsidy for a service and proof has to be shown it is needed.

South Islander   #3   02:09 pm Nov 08 2011

There has to be a gap between what beneficiary families receive and what working families receive. Otherwise there is no incentive to work. When Michael Cullen brought in WFF it was designed to make sure families who were working did not receive less than beneficiaries. I think even Michael Cullen will be shaking his head with disbelief at Labours latest policy announcement.

When we have examples like Greece where the welfare state has got to such a ridiculous extreme that it has bankrupted the country (and threatens the economic stability of many other countries, if not the world) it is intellectually dishonest of Labour to come up with something like this and try to package it as "helping our children".

InMyDreamWorld   #4   02:09 pm Nov 08 2011

If more money must go to the kids of beneficiaries I would prefer it go to them through other agencies rather than a handout to their parents. I used to be staunch labour, now, not a chance. More money to the lazy slackers of NZ is not a clever move. My dream world plan is a debit card type thing for beneficiaries. Can't be used for alcohol or cigarettes, and essential bills come out at the same time as the money goes in - no cash, just monitored spending. Some control is needed here, not more and more cash handouts.

Label   #5   02:10 pm Nov 08 2011

If it's intended to help kids out of poverty, as stated by Labour, then it should just become an extension to the benefit or widen the eligibility for the DPB. WFF should remain for those in work, even if that is just a semantic difference.

Dean   #6   02:10 pm Nov 08 2011

I think the Right should admit they don't care about kids in poverty, rather than saying they do care and then opposing any policy that improves kids' quality of life.

I think that this investment in giving kids a decent start at life is a far better investment than borrowing $1.1 billion in the last year for tax cuts for the rich.

What do you think, David? Tax cuts for the rich more important than kids?

snakeinthegrass   #7   02:15 pm Nov 08 2011

This is another "vote-buying" move that screams desperation of the Labour Party.

As the election gets closer, just watch the increasingly desperate "policies" spouted by Labour and more increased "attacks" on John Key and National.

Labour should be held accountable for attempting to bribe the general populace during an election - surely there must be a law against that? Or do we just vote National... or the Greens.... or Mana... or *scoff, cough, cough at Goff* any other political party that has some credibility - like the legalise marijuana party - at least their members actually want their leader!

Chris   #8   02:18 pm Nov 08 2011

Labour are desperate for votes and will do anything to buy them.

This is terrible, and something that could do NZ untold damage for many, many years.

They seem driven to have people on welfare and keeping them there.

milarky   #9   02:19 pm Nov 08 2011

Tax really is a form of thieft. Those who work as an employee or who own a bussiness (small or large) are forced to forgo part of their income in order for it to 'redistributed' by their so called peers - the governement. As such who is really paying for this promise from labour - the ones who are paying tax. As it is 3/4 of the population take more out of the tax system than they put in. There is no accountablity for the money given nor any clear plan to see net benefit of doing so. So ulitmately where is this 'extra' money being generated from? Those stupid enough to vote labour and pay excess tax.

Michael   #10   02:20 pm Nov 08 2011

It's a bloody disgrace and they should never be on the treasury benches EVER

Show 11-60 of 155 comments

Post comment


Required. Will not be published.
Registration is not required to post a comment but if you , you will not have to enter your details each time you comment. Registered members also have access to extra features. Create an account now.

Maximum of 1750 characters (about 300 words)

I have read and accepted the terms and conditions
These comments are moderated. Your comment, if approved, may not appear immediately. Please direct any queries about comment moderation to the Opinion Editor at
Special offers

Featured Promotions

Sponsored Content