John Key MP
National Party Finance Spokesman

30 March 2005

Labour rattled by rejection of ‘families’ package

“Labour is clearly rattled by the prospect of the public seeing through its sham Working For Families package, which fails to do anything for four out of five households,” says National’s Finance spokesman John Key.

“The Finance Minister is overtaxing middle income households on the one hand, then giving some of it back through the welfare system in a state sponsored money-go-round.”

Treasury papers show Labour’s redistribution package will be ineffective in delivering on its key target of ‘making work pay’.

“Labour claimed Working For Families was about making work pay, yet it‘s clear from international research and the Government’s own advice that high effective marginal tax rates have the opposite effect,” says Mr Key.

“Take a single income earner with a partner and two kids living in Wellington who is receiving the accommodation supplement and earning a little more than the average wage at $45,000. For them, after Labour’s redistribution package kicks in, a successful 5% pay claim this year will leave them better off by only about $4.67 a week.

“Or take a family with three children living in Auckland earning $38,000 and receiving the accommodation supplement. For every additional dollar they earn up to $70,000, they get to keep just 10 cents of it.

“In some cases, Labour’s model will see families earning $40,000 a year getting the same as those earning $60,000 after all the top-ups are included.

“Treasury suggests that fewer than 2% of sole parents will move off benefits and into work, and there will be no net change for couple families as a result of the package. Even the Labour Department advised Cabinet that the package would reduce incentives to work for middle-income families.”

Answers to written Parliamentary questions also show half of the people receiving the accommodation supplement are single with no children. Ref: PQ - 08943 (2004)

“So much for the ‘working for families’ slogan. The answers show 150 single people with no children who earn more than $40,000 a year will get the accommodation supplement. The figures also reveal that two single people and three couples earning as much as $80,000 a year are now eligible to receive the accommodation supplement.

“Hard-working middle and low income families will be asking why people with no children and earning up to $80,000 a year are eligible for this Government top-up.

“Labour’s spending millions of dollars on a propaganda campaign to convince New Zealanders to welcome this new welfare package for working families. My message to taxpayers, is don’t believe the hype,” says Mr Key.

Ends

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