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Progressive Coalition goes to fight poverty

21 July 2002

Matt Robson MP, Grant Gillon MP, Progressive Coalition

Progressive Coalition goes to the frontlines to fight poverty

The Progressive Coalition says their comprehensive poverty package will see family support inflation adjusted, a winter energy rebate for those on low incomes, and free GPs visits to cover all children and the elderly.

Glenfield Foodbank workers are working in the frontline on poverty, that's why the Progressive Coalition candidates Grant Gillon MP and Matt Robson MP are meeting with them today to launch the effective, all encompassing Progressive plan to reduce and eliminate poverty in New Zealand.

"Almost one in every 3 children need our help to get their families out of a life in poverty. We will help them immediately with an inflation adjusted family support but we need to do more than just that. No-one will be left behind in the Progressive Coalition's plan to address poverty.

"We must fight poverty on three fronts at once: employment, health and education. When people have jobs, with decent rates of pay they can afford healthy food and good homes. When children have good health, they perform better at school and in the long term are more likely to get a good job. When education is free and after school care is affordable our children and our friends have a better chance of succeeding in their goals.

"The Progressive Coalition Poverty policy, 'No one left behind' sets out six cornerstone commitments which are achievable in a Coalition Government to make significantly more progress on eliminating poverty:

- Inflation adjustment for family support,

- Everyone under 20 in jobs or training by 2005,

- Winter energy rebate for beneficiaries, superannuitants and low income earners,

- Commission of Inquiry into balancing work and family,

- Free GP visits for school kids and superannuitants,

- Keep fees frozen and progressively remove fees for first year tertiary students.

"With the Progressive Coalition in government, we can make significant progress to reduce poverty. No one will be left behind with us in Government," said Grant Gillon and Matt Robson today.

***

No one left behind

The Progressive Coalition’s ambition is to bring everyone into the winner’s circle.

The extent of poverty in New Zealand

- Who lives in poverty?

“First, any analysis of poverty shows that the single largest group of the poor are households with children - not beneficiary households, not solo parent households, not Maori or Pacific Island households, not households with the sick or invalided, or ones which have low quality or expensive housing. Certainly these households have a higher incidence of poverty, but the largest group of the poor are those with children, many of whom are beneficiary, have only one adult, are Maori or Pacific Island, have members who are sick or invalided, and/or have unsatisfactory housing. But there are also poor households with two adults, dependent on wages, who may be Pakeha, live in modest to adequate housing, and in which everyone is reasonably well (although more prone to illness than more affluent households). So unless we address poverty in households with children we are going to miss these poor, and if we do address those households we will also relieve poverty in these other groups.”

- Nearly 1 in 4 people in New Zealand are in poverty.

- Nearly 1 in 3 children are in poverty.

- The NZCCSS Poverty Indicator Project research shows that people continue to require emergency assistance at foodbanks. The position of many on the lowest incomes is that they are in debt, faced with high housing costs and are missing out on basic necessities right now.

The New Zealand Council of Christian Social Services has said:

New Zealand currently has an entrenched level of poverty that is seriously undermining our efforts to develop a knowledge-based economy and increase economic growth A large proportion of the future workforce are children living in poverty whose education is being damaged by their life-circumstances.

Poverty and the growing gap between rich and poor are unacceptable in a just society.

The current government has begun to address this issue through developing the primary health care strategy, restoring income related rents for state housing, increasing the minimum wage and making adjustments to superannuation. They have a stated aim of ending child poverty. They have emphasised skill development and employment as the long-term solution for those in poverty and are looking to remove barriers to work.

However, poverty is a complex issue that cannot be solved through a focus on a single approach or the actions of a single sector. Ending poverty in New Zealand needs to be a priority for everyone. What is required is a multi-sector strategic approach that identifies a clear plan of action for the way forward.

A multi-sector response would enlist the co-operation of government, community groups and business. All of these sectors are affected by the impacts of poverty and all have a role to play in ending poverty in New Zealand.

The Progressive Coalition agrees with this analysis, and we are committed to ensuring the Government plays its role in partnership with the community to reduce poverty.

Successes so far

Fewer families are living in poverty because the Clark-Anderton Government has:

- Introduced income related rents for state houses.

- Increased primary health care spending to make doctors visits and prescriptions free for those living in poverty.

- Replaced the Employment Contracts Act with the more balanced Employment Relations Act.

- Increased the minimum wage.

- Introduced paid parental leave.

- Reversed National’s super cuts, introduced a law guaranteeing a married couple 65 percent of the average ordinary time wage at 65 years of age, increased the married rate of superannuation by over $40 a week and introduced a secure superannuation fund.

- Restored the public service ethos to social security delivery - created the Ministry of Social Development, incorporating the Work and Income Service, to ensure services follow sound policy principles.

- Reinstated separate Unemployment and Sickness benefits so that different needs can be well catered for.

- Acknowledged that people who are job seeking but can’t find employment right away have a right to undertake voluntary work or activities to the benefit of their community.

- Introduced legislation to remove the work test from the Domestic Purposes and Widows benefits.

- Increased childcare and out-of-school care assistance including providing more hours of care and helping to develop and strengthen services.

- Worked with community groups to improve income support policies and services.

- Improved benefit administration to ensure it meets needs and treats people with respect

- Developed “making work pay’ initiatives to ensure taking a job leaves a family better off.

- Worked with business, local leaders and mayors to promote job rich growth and opportunities for those currently on benefit.

- Managed the economy to produce 104,000 new jobs over the last two years and the highest workforce participation rates since records began.

Growing the economy

Full employment makes the greatest contribution to reducing poverty of any single measure.

Jim Anderton has been working in partnership with regions, business and communities to create more good jobs and economic prosperity. A Ministry of Economic Development has been established to provide a development dimension to economic policy and Industry New Zealand has been created as the implementation arm of the government’s partnership policies.

Industry strategy groups are underway with high priority sectors and every region, for the first time, has a development plan underway. The government is committed to funding at least one major initiative in every region in each term of government.

More good jobs ensures that working New Zealanders have a higher income than they are likely to achieve on a benefit. When more people are working, the government has greater tax receipts and lower social welfare costs (as well as lower demand for social services such as health care, housing assistance and even police).

However, growing the economy alone won’t eliminate poverty:

- Even in a full employment economy, many people cannot work and rely on a benefit. They are entitled to an income that enables them to participate in and belong to their society.

- The economy cannot grow at its potential unless poverty is also addressed. For example, children living in poverty persistently under-perform in education. Education and increased skills are vital to the Government’s ambition to transform the industrial base of the economy and producing and selling more high-technology, high-value goods and services that rely on the skills of New Zealanders. Improving access to education and reducing poverty go hand in hand, as a virtuous circle increasing the well-being of New Zealanders.

- Studies by groups such as Child Poverty Action have shown that poor households with children “face very high effective marginal tax rates, so if their gross income goes up - perhaps because they have worked harder or longer - their disposable income will not rise to the same extent. The highest marginal tax rates are on the poor, although there is almost a conspiracy to ignore that fact.’ The result is that, unless inequitable effective marginal tax rates are addressed, economic growth cannot produce increased well-being for people stuck in poverty traps. Some poverty traps are so serious that higher incomes can leave very poor households worse off.

- It is little comfort to families living in poverty now to tell them that they will be much better off “when the economy delivers full employment.’ Even though unemployment rates have fallen steadily over the last three years, no one expects to be able to achieve full employment overnight. The position of families living in poverty is urgent now, and immediate steps are required to relieve their situation.

Progressive Coalition policy

Jim Anderton’s Progressive Coalition will make poverty a high priority in a new Clark-Anderton Government.

Eight Cornerstone Commitments have been announced, several of which are designed to reduce poverty or improve the position of families living in poverty as quickly as possible.

Cornerstone Commitments are the top priorities for the Progressive Coalition in a coalition with Labour.

More details on each of our cornerstone commitments are available in separate policy documents.

Cornerstone Commitment:

Inflation adjustment for family support.

Increasing family support is the best step we can take immediately to reduce the number of children living in poverty.

It makes the greatest contribution to the families with children, and increases with the number of children in a household. Families with children are more likely to live in poverty than any other group.

Cornerstone Commitment:

Everyone under 20 in jobs education or training by 2005.

As a step towards full employment, the Progressive Coalition wants to extend pilot schemes to ensure that all school-leavers under the age of twenty are in work or participating in training or further education.

The Youth Strategy pilot was developed in Christchurch as part of the Mayors For Jobs Taskforce and has proved highly successful. It is a partnership between the Canterbury Development Corporation and the Department of Work and Income.

The scheme works by tracking 18 and 19 year olds to find those who are not in work, training or education and case managing solutions for them. An employment service actively seeks out employment opportunities and provides support for young people to develop the skills needed.

The Progressive Coalition wants the scheme to open in other centres, and eventually to the whole of New Zealand as resources become available in local communities. Similar pilots are achieving success in other areas, such as Northland where an employment for young school leavers pilot has been developed for local conditions.

The Christchurch scheme works on a number of levels, and depends on co-ordinated action by the economic development agency, employment services, community liaison, the private sector and community networks.

It works closely with schools and takes a road show into schools to reach school leavers. Schools provide referrals for all school leavers who are contacted and tracked for six months. Referrals to the scheme are also made by DWI, parents and community groups.

Young people who are not in work, training or further education are placed in an “Action Works’ case management model, under the responsibility of youth specialists with reduced case loads. A community network tackles particular health and mental health issues in individual cases.

The Canterbury Development Corporation’s links to Canterbury businesses are used to secure vacancies by directly marketing young people to appropriate employers.

The scheme needs to be organised at the local community level to ensure the necessary co-ordination between networks and intensive focus on finding solutions tailored to individuals.

Costs of the scheme depend on existing services available, but are estimated in Canterbury as $1 million for 100,000 of population served. It would on this basis cost around $40 million for the whole of New Zealand. Considerable savings are made by the government in moving young people into skilled employment.

Further Progressive Steps

- Double the number of Modern Apprenticeships from 3000 to 6000 and over time extend the Modern Apprenticeships Programme to the point where all school leavers who do not choose to enter tertiary education can participate in it. In addition, it will be progressively extended to older workers who wish to change careers or enhance their skills.

- Ensure 100,000 people are in skills training by 2005 (up from 68,000 now)

Cornerstone Commitment:

Winter energy rebate for beneficiaries, superannuitants and low income earners.

A rebate averaging about $15 a month will reduce winter power bills by about a quarter.

The rebate is designed to make heating more affordable in the winter months for New Zealanders on fixed incomes.

The Progressive Coalition proposes making the rebate a priority because we don't want vulnerable New Zealanders to worry about the costs of turning up their heating to keep warm.

The heavy increase in energy costs over winter can play havoc with the budget of households on low fixed incomes.

The rebate is a direct cash contribution towards reducing poverty. It means there is a little less anxiety about the forthcoming bill every time someone who is cold turns on a heater.

Adequate heating is vital in reducing demands on the health system. Damp, cold homes also aggravate infectious diseases and allergies. These issues are specially pertinent in winter.

The rebate is relatively easy to administer compared to alternatives. It can be offered without administratively complex and expensive adjustments to tax and benefit entitlements.

We think that the simplest way for the rebate to work would be for eligible recipients to supply their social welfare number to their preferred energy company. The company would then automatically deduct the appropriate sum from energy bills and the government would reimburse the energy company.

We propose making the rebate available over the three winter months, June, July and August, in order to smooth out energy bills over the year.

Cornerstone Commitment:

Commission of Inquiry into balancing work and family

The biggest challenge facing working families is the competing demands of work and family. We made a start by introducing paid parental leave. But these are issues for the whole community, and not only for the Government, although Government has a crucial role. Jim Anderton’s Progressive Coalition will put all of the issues relating to balancing work and family to a Commission of Inquiry, and encourage the whole country to debate the issues.

The issues are also about how much we value families as a society, and how much importance we are placing on family issues.

Issues like childcare costs and after school care. Pay equity and employment opportunity. Hours of work, trading hours and holidays. Family taxation issues. And also issues about which partner in two-parent homes is the primary care-giver. What is the appropriate role for employers in supporting their staff. And what about self-employed and small business owners?

In Government, we will keep making progress on important issues affecting the balance between work and family. We’re committed to improving the new paid parental leave scheme, modernising the Holidays Act and better resourcing for childcare.

A Commission of Inquiry will ensure the whole community starts discussing the issues and talking about solutions.

In many two-parent families, there is pressure for both to work. Usually it’s a financial necessity for the family.

Choices for sole parents

Sole parent families are by far the poorest of all households with children. Some 320,000 children in New Zealand live in households supported by parents on a social welfare benefit. 190,000 live in sole parent households receiving the Domestic Purposes Benefit. Of all DPB recipients, 91 percent are women.

While the proportion of male sole parents has increased from 12 percent in 1982 to 20% in 1998, male sole parents are more likely to work full-time and have higher incomes on average. The gap between male and female incomes has widened over the last fifteen years. In 1988, female lone parents earned 87% of the mean income of male lone parents. By 1998, female lone parents earned just 62 percent of lone male incomes.

These figures show the very large number of families affected.

Many of the issues raised are related to the adequacy of benefits and benefit-to-work programmes.

The issues of balancing work and family are being confronted more by women, and women who are sole parents generally do not appear to have the same choices available to men.

Overwork and unemployment

The workforce overall is experiencing the twin problems of over-work and unemployment. While unemployment is lower than it has been for fourteen years, there remain far too many people unable to find a job. At the same time there is growing pressure to work longer hours. Even though forty hours remains the average working week for most, for many workers it has become a distant memory.

Family taxation

There are taxation issues where many single-income families see themselves as penalised. For example, a single-income earner paid $60,000 a year for a forty hour week pays far more tax than two income earners doing the same job for twenty hours a week each. But this anomaly cannot easily be resolved without creating harsh penalties that will particularly affect women re-entering the workforce.

Meanwhile parents in the paid workforce can face very high marginal tax rates.

It is common for low-income earners to pay marginal tax rates of 61 percent on entering the workforce. This is made up of:

- Income tax: 21%

- Family support abatement: 30%

- Student loan repayment: 10%

Meanwhile, DPB recipients are ineligible for the child tax credit, even if they work part-time.

Childcare

Parents in paid work face constant concerns over the effects of childcare on their child’s development, while those not in paid work face concerns over their career prospects and income.

The cost of childcare is often a disincentive to taking up a job. While many families were once able to survive and even prosper on the income of one working parent, these days most families need both parents to be working to maintain a decent standard of living. The Clark-Anderton Government has made progress in increasing the childcare subsidy, but there remains an issue of whether the costs of childcare are fairly spread and whether families are supported.

Paid time off work

New Zealanders generally don’t have as much paid time off work to spend with family. From Australia to Austria, the rest of the developed world is leaving New Zealand behind in the minimum entitlement to annual leave.

The last time the minimum entitlement to annual leave was increased was in 1974, when the minimum entitlement was increased from two weeks to three. Australia has four weeks minimum annual leave. Austria has around five. And nearly sixty other countries also have minimum leave entitlements better than those in New Zealand. Workers in countries like France, Germany and Sweden all have five to six weeks annual leave.

In the nearly-thirty years since annual leave was last increased, our working patterns have changed considerably. There are far more sole-parent families and families where both parents work, meaning there is far less time for parents to spend time with family.

Pay equity

Women in the workforce earn less than men.

Although some commentators believe the ratio for pay rates and earnings is improving the disparity remains marked. In May 2001, women’s average ordinary time earnings were 83.9 percent of men’s (Women earned $16.32 per hour, men earned $19.46). Ten years previously women’s earnings were 82.7 percent of men’s (women earned $12.77 and men earned $15.43).

The gender pay gap raises questions of whether the gap is closing, whether it is closing quickly enough and whether there is more that can be done through pay equity legislation, an employment equity bureau or other mechanisms to close the gender pay gap.

In the context of the balance between work and family, the gender pay gap particularly raises the issue of the pressure on women rather than men to take on primary care-giving responsibilities to protect the higher family income. These days, more and more fathers want to be the primary caregiver in a family. Closing the gender pay gap could make it an easier choice for many families.

Cornerstone Commitment:

Free GP visits for school kids and superannuitants

Next year we will achieve free GP visits for all school children, followed by free visits for superannuitants after that.

But only if the Progressive Coalition is in Government with Labour.

Timely access to primary health services is a crucial factor in improving the health of children. However, the cost of these services to families is frequently a barrier. We believe no one should be denied health care because of the cost of accessing it. No parent should face an agonising choice between taking a sick child to the doctor and meeting the family bills.

Removing the cost barrier to primary health care will contribute significantly to improving child health.

Cornerstone Commitment:

Keep fees frozen and progressively remove fees for first year tertiary students.

The Progressive Coalition has an ambition of free education from pre-school to tertiary.

Free education provides equal opportunity for all young people.

Tertiary fees impose a lifetime burden of debt on some students and deny young -people from poor families the opportunity to maximise their abilities.

Strong relationships exist between how well children achieve in education and social indicators, such as whether they live in poverty.

Removing the fees barrier will help to break the cycle of poverty.

Further Progressive Steps to reduce poverty

Education

- Ensure the income support childcare subsidy will continue until free provision is available.

- Improve funding for out of school care programmes to be run in primary and intermediate schools, or other approved venues.

- Expand adult education and literacy programmes especially in workplaces.

- Progressively abolish existing student loans by a combination of: reducing the interest rate on remaining student loans in real terms; raising the threshold for paying back loans so that low-income workers are not harshly penalised for doing tertiary study; waiving loans in return for service in key regions or industries; and explore other incentives for speedy repayment of capital.

- Progressively fund a tertiary student allowance to enable living costs to be met without having to borrow money.

- Support, develop and promote more industry training, increasing the size of successful schemes

Health

- Trial a screening programme for diabetes (an epidemic of diabetes is particularly affecting poorest households).

- Increase funding for Well child care and immunisation programmes, including Plunket and Tipu Ora, as essential promotional and preventative health services targeted at maintaining the good health of children.

- Extend present health services in primary and secondary schools, to provide a range of free health care and health education, preventive care and medical and dental services.

Housing

- Expand the state housing portfolio by appropriate building, leasing or purchase to meet changing circumstances and need.

Social Security

- Progressively lower abatement rates to allow extra earnings before benefits are reduced, so that beneficiaries keep more of their supplementary income and the transition from part-time to full time work will be encouraged.

Workplace

- Retain the Employment Relations Act.

- Extend minimum annual leave entitlement to four weeks.

- Press for a statutory minimum code of conditions to be introduced for all workers covering such matters as sick leave, bereavement leave, redundancy, protection of casual and temporary employees, and workers’ rights in the event of the transfer of ownership of enterprises. This code will be adopted following consultation with employers and unions.

- Set the minimum wage at a level that reflects the need for all workers to live decently. Increases will be made following negotiations with unions and employers and consideration of any employment and industry impact.


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