16 Dec 2017

The battle of the 'Families Packages'

6:17 am on 16 December 2017

Power Play - Both Labour and National campaigned on multi-billion dollar social packages. Ultimately, both parties have been trying to achieve a very similar result.

Jacinda Ardern and Bill English

Labour's Jacinda Ardern and National's Bill English. Photo: RNZ

"Brothers from another mother" is how ACTs David Seymour summed up the two family income packages from Labour and from National.

And he is right, the two major parties both campaigned on multi-billion dollar social packages with the specific aim of funnelling more money to low and middle income households.

At the heart of both packages was an extension to Working for Families and a sizeable boost to the accommodation supplement for thousands of families.

National was proposing an accompanying package of tax cuts that would have benefited all taxpayers, to some degree.

In Labour's package, passed under urgency last night, there are also payments for families with new babies, and money to help superannuitants and most beneficiaries keep the heater on during the winter months.

Child poverty was a driving theme of the election campaign with the off-the-cuff promise of the National Party leader Bill English to lift 100,000 New Zealand children out of poverty, and the now Prime Minister Jacinda Ardern pledging to do the same.

It's a numbers game both parties have subsequently been using to prove their package would be more effective.

National said its package, which was due to have come in next April, would have lifted 55,000 children out of poverty, with a second package flagged during the campaign for 2020 to have a "similar" impact.

Labour announced its package would almost halve the number of children in poverty - according to Treasury estimates it will, but not until 2021.

But the most recent figures put together for Cabinet ministers give a direct comparison between the two packages and they show Labour's package will reduce the number of children considered to be living in poverty by 71,000 in 2019, rising to 88,000 two years later.

The same data shows National's package would have done the same for 55,000 in 2019 but then dropping away to 49,000 by 2021 - that of course does not take into account the second package National had signalled.

It also does not factor in the wider economic benefits the tax cuts would have delivered to people not living in poverty, but who still would have received an advantage by getting a bit of extra money in their pockets.

One expected knock-on effect of the tax cuts is a softening of growth in the near future, with less money being spent and fuelling the economy, but that's expected to improve in the longer term.

Officials did also point out leaving the tax thresholds where they are could be a disincentive to work because of high marginal tax rates, but they noted that had to be seen against the benefits of the broader package.

There has been an interesting debate - on both sides - about people benefiting from the policies who don't need it.

As a result MPs argued in the House universality is wrong when the other lot proposes it, but not when they do it themselves.

A case in point - Labour strongly criticised tax cuts that would benefit higher income earners but is happy to give all families with newborns a weekly payment for a year, and superannuitants a winter payment regardless of their financial status.

And even though National's tax cuts changed the two bottom income brackets, all taxpayers would have received a bit more in their pay packet, so it was in effect a universal policy.

That did not stop it railing against rich people being able to access Labour's policy of a free year of tertiary study, or the baby and winter energy payments.

While the House was sitting in urgency, National tried to find various angles to attack, and nuances to dance around, but at the end of the day both parties have been trying to achieve a very similar result, the shape of which was determined only by which party ended up calling the shots.

Get the new RNZ app

for ad-free news and current affairs