"The Government's Housing Policy will create a poverty trap: which will leave tenants worse off if they try to get ahead," National's Housing Spokesman Tony Ryall said today.

"For every extra dollar a state house tenant earns, they could lose up to 91 cents. Where's the incentive to get ahead when the Government practically takes it all?

"This is a higher tax rate than Doug Myers pays! In fact, it's more than double.

"That sort of massive claw-back hasn't been seen since Ruth Richardson's short-lived 'Mother of All Budgets' superannuation proposals," Mr Ryall said.

Work by Auckland University economist Susan St John says that as soon as tenants' gross income rises above a government imposed cut-off, every extra dollar will cost them 38.9 cents in reduced rental subsidy (50 cents adjusted for tax), 30 cents in reduced family support and 22.3 cents in tax and ACC levies. These figures have been confirmed by Government officials.

"This claw-back creates a cruel poverty trap which will widen the gaps.

"Coupled with cheap rents for the lucky ones in state houses, this claw-back means no state house tenant will ever want to shift. So, how will Mr Gosche reduce the exploding waiting lists?" Mr Ryall said.

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