12 Jul 2017

Labour's plan labelled 'convoluted spaghetti of entitlements'

12:01 pm on 12 July 2017

Labour's new family package has been described as complicated by a poverty action group and a "convoluted spaghetti of entitlements" by the government.

Andrew Little speaking at Waitangi, 5 February 2017.

Labour leader Andrew Little said his party's policy package would do more to help low-income families. Photo: RNZ / Claire Eastham-Farrelly

The $890-million-a-year policy would boost Working for Families, give a $60-a-week payment to families with children under three, and help beneficiaries and pensioners pay for their heating.

The Labour Party would scrap National's tax changes that were announced in May's budget, which Labour said would deliver a disproportionate benefit to the top 10 percent of income earners.

"What we're going to the election with is a package that puts money into the pockets of low-income families and rebuilds our social foundation," the party's finance spokesperson, Grant Robertson, told Morning Report.

"That should be the priority in this election, and it's Labour's priority."

Child Poverty Action Group economic spokesperson Susan St John said Labour's families package was more generous than National's, but it did make the system more complicated.

She said the Best Start extra tax credit added to the complexity of overlapping 'clawbacks' - when tax credits start to reduce as a family income reaches a particular amount.

Finance Minister Steven Joyce said by not going ahead with the government's tax changes, Labour was fleecing billions of dollars from New Zealanders.

"Why don't they just trust people more with their own money? Let the thresholds move up to reflect the fact that wages are rising, and give superannuitants the benefit of that through the superannuation link to after-tax wages."

He agreed the extra entitlements would make it harder for people to know how much money they would receive overall.

"All they've come up with is a convoluted spaghetti of entitlements that will confuse everyone."

Ms St John said the boosting of Working for Families by Labour built on what National started and was a recognition from both parties that the current system did not work.

She said Labour should have also scrapped the in-work tax credit.

"[It is] an absurdly complicated tax credit supposedly for children but based on parental hours of work. It will have to be dealt with eventually, but Labour has parked it."

The in-work tax credit is not available to parents on the benefit or working part time - something advocacy groups say discriminates against children in beneficiary families.

The Labour Party campaigned in 2011 to scrap the credit by 2018, but deputy leader Jacinda Ardern said that was no longer the plan.

"What we're acknowledging is that there is some complexity with the way that things like the in-work tax credit interacts with other forms of payment.

"Doing it in isolation we didn't think was a good idea, so that's something that we thought would be better suited to looking at when we do our entire review of tax in New Zealand."

Ms Ardern didn't think the schemes announced in their families package made the system more complicated.

She said the money would help families in some of their toughest times.

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