18 Jul 2017

Family payment revamp could mean weekly changes - economist

7:48 am on 18 July 2017

Budgeting will become a lot harder for some people if proposed changes to Working For Families go ahead, an economist is warning.

Susan St John.

Child Poverty Action Group economics spokesperson Susan St John says the changes could affect the stability of caregivers' incomes. Photo: RNZ / Kim Baker Wilson

The government is proposing to change Inland Revenue's payment system because 40 percent of those receiving Working For Families are being underpaid and about 25 percent are getting too much. Part of the reason was parents with variable income having to effectively estimate their earnings over the year ahead.

Child Poverty Action Group economics spokesperson Susan St John said when families were overpaid and in financial dire straits they could, at present, have that debt written off.

"Where a family has a variable income the amount that is earned is hard to calculate - the Working for Families payment may not change.

"At the end of the year they may get a bill and sometimes that's written off."

She said the new system could mean weekly changes to how much a family was paid, bringing more financial uncertainty to budgets.

"Under the new policy it'll be a variable amount of Working for Families that's paid on a weekly, fortnightly basis to reflect the current income situation.

"The caregiver actually needs to have a stable income for children."

Ms St John would rather see payments based on an average of someone's previous three or six months of income, meaning regular, reliable payments.

"There's complexities with any programme you can suggest. But if your real desire is to give the sustainable, regular income support that families can rely on then looking at the previous three months, six months, income and basing the next payments on that ... is one way to do it."

Revenue Minister Judith Collins told Morning Report people were getting into debt with Inland Revenue though no fault of their own.

She said the department's computer system was very old and could not cope with the increasing demands placed on it by successive governments.

The system was set up to calculate income data on an annual basis, whereas many people's income varied from week to week, she said.

"The system simply can't cope with the way that people get paid these days."

'They really have no idea'

FIRST Union general secretary Robert Reid said the proposal missed the bigger point that too many New Zealanders didn't know from one week to the next what their working hours, and subsequently their income, would be.

"This really is no more than rearranging the deck chairs on a Titanic which is ploughing into that iceberg.

"It's drawn up by politicians and bureaucrats on well-paid standard 40-hour a week work.

"They really have no idea of the precarious work patterns that workers are forced under."

But Finance Minister Steven Joyce said the proposal was aimed at cleaning up mistakes that has led to tens of thousands of people having to pay Inland Revenue back at the end of the year.

"We have something like 80,000 people each year that end in debt to IRD because of Working For Families overpayments.

"It's a significant sum of money each year. This will give us the opportunity to change that - and that's what we're putting out for consultation."

Also included in the proposal was a move to ensure child support payments were deducted on pay day rather than at the end of the month or year.

The proposal would also bring contractors, casual agricultural workers and election day workers into the fold of having student loan repayments deducted out of their income by employers.

Submissions on the discussion document close on 15 September.