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What needs to be in Budget for NZ Children


11 May 2001

“What needs to be in this Month’s Budget for New Zealand Children”

This is the issue recently raised in a letter to the Minister of Finance, Hon Michael Cullen, by child focussed charity Barnardos New Zealand. The letter paints a vivid picture of the child poverty that currently exists in New Zealand. Perhaps more importantly it provides what is essentially a check-list of the changes which need to start happening now – with this Budget – if any form of serious in-roads are to be into the problem.

Barnardos will be assessing the success or otherwise of the Budget, in terms of facilitating the eradication of child poverty in New Zealand, against the measures outlined in its letter to Dr Cullen. We invite you to do the same.

For further information please contact:
Mike Coleman
Barnardos Family Advocacy & Information Resource Centre

04 385 7560


3 May 2001

Hon. Dr. Cullen
Minister of Finance
Parliament Buildings

Dear Dr Cullen

Budget 2001

Here at Barnardos, we look forward with considerable interest to the presentation of your second budget to Parliament on Thursday 24 May. As you would expect, we will be assessing its value from the perspective of New Zealand’s children. And let’s face it, economic restructuring since 1984 has made life very difficult for many children.

In this letter, therefore, I shall outline a little of what we see as the effect of those changes on children and then what Barnardos is looking for from the Government this year.

Today, approximately one in three Kiwi kids, 284,266 in July 2000, live in households where income support is the principal source of income. Add those others who are in very low earning households and you have the size of child poverty in this country.

Many of these children will be living in sub-standard, overcrowded and unhealthy homes. In many instances they will be missing out on essential nourishing food. In other instances they will be inadequately clothed for the coming winter. Inevitably their health will be deteriorating and some will be victims of childhood diseases which the first Labour Government believed they had largely eradicated. This is the face of child poverty in New Zealand.

Perhaps the worst deprivation child poverty provides is the denial of opportunity, loss of hope, and ultimately, alienation - one important reason why our social indicators relating to children and young people are so poor internationally.

It is an essentially gloomy picture, but one those dealing with the nation’s children - teachers, CYF social workers, Plunket nurses, and Barnardos Family Support workers - are accustomed to seeing.

For most of us though, it is an image which makes us very uncomfortable. Can this really be New Zealand? How can it be, when unemployment is at is lowest for many years and the economy is growing at more than 3 percent per annum?

Several reasons occur to me, none relating to economic growth, belt tightening, personal profligacy and such like. Rather they relate to the development of economic policies in the latter part of the 20th century which have not supported children and families.

First, a pre-occupation with inflation, debt and GDP at the expense of social responsibility. The monetary and fiscal policies pursued since 1984 have been unintentionally damaging of families and children. It has been heartening therefore to see the Labour-Alliance Coalition relax some of these policies.

Second, the rundown in benefit levels and income support in New Zealand. For the last 16 years successive governments have been mean-spirited in their provision for those in need. This reached its nadir in1991 when benefits were actually cut, while tax concessions were awarded those in middle and high income brackets.

Third, targeting. There are two large sectors of the population outside paid employment - the elderly and children. And, of course, children don’t vote. It is no co-incidence therefore that National Superannuation for the elderly is a universal benefit (and I don’t for a moment begrudge that) whilst benefits for families with children are all rigidly targeted with the exception of free health care for the under sixes.

Since coming into office, the Clark administration has shown a heartening commitment to children both in its election pledges and also in some of its decisions. Promptly calling a conference to develop a national child policy was an excellent step and an acknowledgement of the problem. Ridding Housing NZ of its market rents policy is having a tangible effect on the incomes of families in state houses, and the children involved will benefit. Similarly, the programme for enlarging some state houses to reduce overcrowding can only better the conditions of children currently living in unhealthy overcrowded homes.

But there is much which remains to be done - and that brings us to your Budget. You can not rectify 16 years of neglect in one Budget and, in the absence of a national child strategy, it may be tempting to do nothing. But the nation’s children can’t wait. So at Barnardos we will be looking for several changes which will have a material impact on the well-being of the one in three children living in circumstances which are, or should be, unacceptable. Our list isn’t original and draws upon the excellent work done by the Child Poverty Action Group and published last month. (Our Children: the priority for policy).

We will, therefore, be looking for the following in your Budget:

• Raise the ceiling of the 15% tax rate from $9,500pa to $12,000pa

As you know the first $9,500 of income is taxed at 15%. Despite inflation since 1986 of over 60%, the threshold for this bottom rate has not been adjusted in this time. Meanwhile the top threshold has been adjusted from $30,875 to $38,000. A similar adjustment would raise the bottom threshold to $12,000.

• Increase basic benefits so that they are adequate for living costs

Most main benefits were cut by between 5% and 27% in 1991 in a move intended to reduce state dependency. In practice it proved to be a move which hurt the well-being children. Those cuts have never been restored and children continue to be deprived.

• Extend the Child Tax Credit of $15 per child per week to all low income families and not just those families “independent “ of the state

When introduced as the Independent Family Tax Credit in 1997, this tax concession explicitly discriminated against beneficiaries dependent upon the state. Again the victims of this fiscal policy were the innocent children of beneficiaries.

• Place an obligation on the IRD to ensure families access their tax credits

One consequence of targeting both benefits and taxation policy is the public’s difficulty in knowing what their entitlements are.

• Institute an amnesty on accumulated beneficiary debts from Dept of Work and Income

With the move to targeting and the reduction in benefits in 199, families increasingly rely on supplementary assistance - mostly in the form of recoverable loans. In effect the Dept of Work and Income has become the principal money lender for the poor. Not only do these loans have to be paid back, but there are also limits on such loans. In other words, the poor become too poor for the state to help. Along with other beneficiary services, the Family Advocacy & Information Resources Centre of Barnardos has heard some shameful stories as a consequence of this policy.

• Eradicate all aspects of the distinction between “deserving” and “undeserving” poor from taxation and income support policy.

The end result is that innocent children have been the unwitting victims in the debate over the merits of targeting versus universalism.

The low participation rate of sole parents in paid work is a particular cause of child poverty - in fact New Zealand’s rate of sole parent participation in full-time paid work is low compared to Australia. As a consequence, nearly 70% of all sole parent households fall in the bottom 40% of households when ranked by income. Several measures can be taken which would encourage the transition of beneficiaries, especially sole parents, back into paid employment, including:

• Increasing the money a beneficiary can earn before their benefit is abated from $80 per week to $130

The present figure of $80 a week was set years ago and is in urgent need of revision. Just to maintain its value requires an increase to $130 per week. It would be an important step in enabling beneficiaries with families to make the transition back to paid work.

• making childcare provisions, including before and after school care, more generous .

Underpinning all these specific initiatives is the acknowledged need to pursue macroeconomic policies which increase the number of jobs available and reduce the incidence of unemployment. More than any other single policy objective the availability of adequate family income reduces the deprivation so many of our children are currently experiencing.

So that you are aware, I should let you know of our intention is to release a copy of this letter to the media in the hope that it will engender some informed debate on the need to act now in addressing the plight of New Zealand’s needy children.

Best wishes as you put the final touches to your Budget and we await it with anticipation.

Yours sincerely

Ian Calder
Chief Executive

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