John Key MP National Party Finance Spokesman

29 March 2006

Working for Families huge expansion of welfare state

The Working for Families extension on 1 April is a huge expansion of the welfare state that creates all the wrong incentives for working people to get ahead, says National Party Finance spokesman John Key.

"It's a massive expansion of the welfare state to the middle and upper classes - even to families with incomes as high as $142,000 and those living in the wealthiest suburbs.

"That's reflected in Labour's TV ads. Does it make sense for a family that can afford to text each other that dinner is on the table, while they fiddle with their iPods, to get welfare handouts?

"Michael Joseph Savage would have turned in his grave knowing the welfare state has extended this far.

"In a paper last year on the WFF expansion, the Social Development Ministry said that 'the largest gains will accrue to families earning middle to higher incomes' and 'the proposed package has no direct effect on poverty rates'.

"Not only that, but the package will be propped up by hundreds of thousands of low and middle income Kiwis who don't have children.

"Working for Families also imposes high effective marginal tax rates on families. These are a disincentive to work overtime and at weekends, and for partners to seek part-time work.

"That's because high effective marginal tax rates - the amount of additional tax paid for every dollar earned - mean it's not worthwhile to earn that extra dollar because it's taxed so highly.

"The 1 April expansion of Working for Families simply shifts the high effective marginal tax rate phenomena even further up the income scale.
"The extension of Working for Families will be recognised by New Zealanders for what it is - a last-ditch election bribe aimed not at alleviating poverty but at regaining control of the Treasury benches," says Mr Key.

ENDS

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