May 16, 2005

Taxpayers Should Be Viewed As 'Clients'

A study released today by the New Zealand Business Roundtable suggests the government's Working For Families package will fail to achieve its stated goals - not least of which is to encourage more beneficiaries into work.

Greg Dwyer, expressing his personal viewpoint, believes that attempts to reduce welfare dependency need to be far more direct. As well as time limits and work requirements, he floats the idea that WINZ should consider, 'contracting out the administration of benefits and employment services, especially for long-term beneficiaries. This might help to sharpen incentives within Work and Income. Taxpayers should be viewed as their 'clients' rather than the beneficiaries.'

Petitioner for a Parliamentary review of the DPB, Lindsay Mitchell, concurs with Greg Dwyer's findings and congratulates him on his proposals. "Mr Dwyer is right on the button in his assessment of WFF. Because the redistribution package will make DPB recipients better off the chance is more people will be drawn onto it. He reminds us that Treasury predicts only 2 percent of these parents will move off benefit and into work. At the same time, because of the high effective marginal tax rates faced by couples with dependent children under the WFF package, second income workers will be discouraged from taking a job. If they do they will stand to lose family support or accommodation assistance."

"Also tackled is the programme's attempt to reduce child poverty. Again Dwyer's insight is worth quoting;' Over 25 percent of children are brought up in low income households because their parents or, more commonly, their sole parent is dependent on welfare. While income redistribution may alleviate poverty in the short run, it encourages more people to become dependent on welfare than otherwise and undermines acceptance of personal responsibility. If income transfers alone could overcome poverty, it would have been eradicated a long time ago.' "

"This study is to be recommended. Dwyer backs his findings with detailed analysis and international comparisons. He understands that broader policies to encourage economic growth are far more important than income redistribution. He writes, 'The performance of the economy in producing a growing supply of goods and services that consumers are willing to buy and generating jobs for everyone who is willing to work - not redistribution - ultimately determines the material standards of living of citizens. ' "

It is Mitchell's view that the WFF package is an example of government intervention at its worst. In the main, it discourages work and penalises effort." The long term economic prospects for all New Zealanders will be reduced by this programme."

ENDS

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