In Question Time in Parliament yesterday Metiria Turei questioned Peter Dunne on in-work tax credits. This was just prior to the conclusion of the first reading on her Income Tax (Universalisation of In-Work Tax Credit) Amendment Bill which failed it’s first vote yesterday.
This has been a a loaded debate, with the Green Party promoting the ‘poor children in poverty’ meme.
Metiria Turei: Why will not the Minister support this potential solution at least being considered at select committee, when all the evidence suggests that it could make the crucial difference to a quarter of a million Kiwi kids, and that he today could be the difference between an empty and a full plate for many of these children?
Hon PETER DUNNE: I reject that assertion entirely.
Metiria Turei: You reject those children entirely.
Hon PETER DUNNE: I am not rejecting those children. That is a ridiculous statement.
Video: 7.11.12 – Question 5: Metiria Turei to the Minister of Revenue
Full draft transcript:
5. METIRIA TUREI (Co-Leader—Green) to the Minister of Revenue: How many parents have lost access to the in-work tax credit in the past year because they have lost their jobs or no longer work enough hours to qualify?
Hon PETER DUNNE (Minister of Revenue): The member should not be surprised that my answer is exactly the same as I gave to her written question No. 8951 barely 3 weeks ago—namely, the Inland Revenue Department does not specifically record why a recipient does not receive a particular component of Working for Families tax credits. Entitlement to each component can start and stop throughout the year, depending on the family circumstances, all of which cannot be accurately separated or identified to answer this question.
Metiria Turei: Why is the Minister content to allow this financial support to be taken away from children whose parents lose their jobs through no fault of their own?
Hon PETER DUNNE: What the member overlooks is that there are a range of other support mechanisms in place to help parents in that situation, and as a consequence of those other support mechanisms, the current practice, introduced by the previous Government, with regard to the operation of the in-work tax credit is appropriate.
Metiria Turei: How can the Minister claim that the current support for those families who lose their jobs is adequate for children, when the family tax credits and benefits combined still leave 70 percent of the children in those families in poverty, the jobs do not exist for their parents, and we know that the in-work tax credit amount alone can significantly relieve that poverty?
Hon PETER DUNNE: There are two reasons for my comment. The first is that the OECD has made it very clear in its judgment—and New Zealand is part of the OECD and generally respects its judgments in these respects—that child poverty is best helped through workforce participation and encouraging workforce participation. The second part of my answer is that the member is selective in terms of the benefits that she makes reference to. In addition to those that she commented upon, families in that situation would also be entitled to the unemployment benefit and they may be entitled to sole parent support, an accommodation supplement, an emergency benefit, various training allowances, a child disability allowance or disability allowance, and, possibly, after-school allowances. So if she wants to make the comparison, she should put the whole suite of measures on the table, and not just a selected number of them.
Metiria Turei: Is the Minister aware that every 3 months 75,000 hard-working people, including thousands of parents, become unemployed under the Key-Dunne Government, and how is it fair to take away the in-work tax credit from them and their children when they lose their jobs in those difficult times?
Hon PETER DUNNE: I have got no idea where the member draws her figure from. I think it is a figment of her imagination. The point—
Metiria Turei: From your own ministry.
Hon PETER DUNNE: The member says it is from my own ministry. In my original answer I made it very clear that because of the nature of the way in which these interactions occur it is impossible to identify the numbers involved. The member seems to deny that. But the point that I was making in my original supplementary answer—and I will make it again—is that the member is being very selective. She is drawing on a range of issues only. There are a number of mechanisms available to help families in that situation, and the member should put all of those on the table when considering this question.
Metiria Turei: How is it fair that the children of 40,000 hard-working people who lost manufacturing jobs in the last 4 years of the Key-Dunne Government should also be financially punished by having their in-work tax credit taken away as well?
Hon PETER DUNNE: My answer is the same as it has been to previous iterations of this type of example. But I would make one other point: what the member’s legislation proposes is creating a disincentive for low-income working families to remain in employment. One of the whole reasons why the Working for Families in-work tax credit was introduced in the first place was to actually make it more palatable and more attractive for those low-income families to be in employment. The member wants to actually turn that on its head, and make more people reliant on the system as beneficiaries, rather than do what every other country does and seek to encourage them into paid employment.
Metiria Turei: If the Minister is so worried about incentivising people who work, why does he then deny the tax credit to up to 40 percent of sole parent beneficiaries who are in part-time work, whose children are very likely to suffer the worst effects of long-term poverty?
Hon PETER DUNNE: I should point out to the member that there are a number of other tax credit mechanisms available to help families in the type of situation she refers to—for instance, the family tax credit, the minimum family tax credit, and the parental tax credit. When you add all of those things together—and they are regularly adjusted for inflation—they provide a substantial uplift for families in that situation. They also ensure that low-income working families are recognised for their efforts and, as a consequence, encouraged and incentivised to remain in employment.
Metiria Turei: I raise a point of order, Mr Speaker. My question was not about other kinds of tax credits. It was an explicit question about working people who are denied the in-work tax credit, and I do not believe that the Minister answered that question properly.
Mr SPEAKER: If I recollect correctly, the member started her question with “Given the Minister’s such-and-such, how can it be fair …”, or “How does he believe it is fair for something …”, and the Minister answered that he believed it was fair because these people have other things available to them.
Metiria Turei: Why did the Minister dismiss my compromise to him to extend the in-work tax credit for 6 months to those who lose their jobs—a compromise that would relieve some of the worst financial stress for children and for families at a very difficult and insecure time when their parents lose their work?
Hon PETER DUNNE: Two reasons: firstly, the point I made earlier about employment and encouraging people into workforce participation, and, secondly—again consistent with OECD strategy—employing policies that make work pay. What the member’s bill does is create a disincentive for people at that low-income margin to be in full-time employment. I think that is wrong.
Metiria Turei: Does the Minister agree with economics professor Susan St John that extending the in-work tax credit to all children below the current income threshold, even if their parents are
looking for work, are caring for grandchildren and receive superannuation, or are studying, would be an effective way to reduce poverty and income inequality?
Hon PETER DUNNE: I seldom agree with Associate Professor St John.
Metiria Turei: Does the Minister agree with the statement from United Future leader Peter Dunne when he pledged to Closer Together Whakatata Mai to “actively support policy measures that reduce income inequality”; if so, why will he not support my bill at least to select committee, which is just such a measure he pledged to support?
Hon PETER DUNNE: I do agree with that statement. The fact that as Minister of Revenue over the last 7 years, under both Governments, I have been part of seeing the biggest shifts in personal tax rate reductions for the bottom two income steps is proof of the point that I make.
Metiria Turei: It’s not relieved poverty for the worst.
Hon PETER DUNNE: The member says that does not relieve poverty. What that interjection proves is that this is a highly subjective rather than objective argument. My focus has been on ensuring that our tax system works fairly for those at the bottom of the income scale. The last thing I want to see is a disincentive created for low-income working people to remain in full-time employment, as the member’s bill would do.
Metiria Turei: Why will not the Minister support this potential solution at least being considered at select committee, when all the evidence suggests that it could make the crucial difference to a quarter of a million Kiwi kids, and that he today could be the difference between an empty and a full plate for many of these children?
Hon PETER DUNNE: I reject that assertion entirely.
Metiria Turei: You reject those children entirely.
Hon PETER DUNNE: I am not rejecting those children. That is a ridiculous statement. What this is about is a good policy environment that the previous Government put in place called Working for Families. This Government is committed to it. It ensures that low-income working people are rewarded for the fact that they are in employment, consistent with international standards. The best way to boost the incomes of those households is through full-time employment, not through loading them up on the beneficiary train, which the member wants to do.
Turei’s final speech on her bill: Income Tax (Universalisation of In-Work Tax Credit) Amendment Bill – First Reading – Part 11 ›