‘Eliminating’ (reducing) child poverty

There has pretty much always been poverty and child poverty throughout recorded human civilisation. It is significantly less of a problem in New Zealand than it was 100 years ago, and even 50 years ago, but is still a significant cause for concern.

Prime Minister Jacinda Ardern has virtually staked her political career on reducing poverty.

Simon Collins (NZH):  Reducing child poverty: How will Jacinda Ardern do it?

We have always had ­people who struggle to cope because of physical or mental impairments, a rough ­upbringing, illness and mishaps.

In pre-industrial times, and still in much of the world today, helping them was left to the wider family or hapū. Industrialisation and its aftermath have splintered those ­extended families geographically.

Gradually, over a century or so up to 1984, governments built a ­welfare safety net to fill the gap – ­often pushed by unions and other ­social movements, but also ­reflecting a ­realisation by ­businesses they ­needed workers who could afford to live and customers who could ­afford to buy their products.

As well as welfare benefits, the safety net included free or cheap healthcare and education, state-backed wage-fixing and arbitration, state rental housing and subsidised loans for first-home buyers. The state financed more than half of all new housing from 1936 until the late 1960s.

That safety net was dismantled after 1984 in a backlash against the “nanny state”.

Ruth Richardson’s 1991 Budget imposed part-charges in public hospitals and cut benefit rates to strengthen incentives to work.

I think it’s fair to argue that some adjustments were necessary, but it’s also fair to argue that measures may have been too tough.

The Government stopped lending for housing from 1992. State-house rents were raised to market rates and tenants were only partly compensated by an accommodation supplement.

Not all the reforms persisted. Hospital charges were abandoned quickly and Helen Clark’s Labour Government restored subsidised state-house rents from 1999.

Clark’s Working for Families package increased tax credits for children from 2005.

Bill English’s National Government raised benefits for families with children by $25 a week from April last year.

Further adjustments to try to achieve a sustainable balance between assistance and affordability have continued.

The MSD report shows housing cost a quarter of the net incomes of the poorest fifth of working-age households in 1990, but now eats up half of their net incomes.

A Cabinet paper prepared for this year’s Budget in May said net incomes after housing costs had fallen by 8 per cent since 2006 for beneficiaries, and by 2 per cent for all households on accommodation supplements.

Housing costs escalated after property values doubled under the last Labour led government and then after flattening out they nearly doubled again under the recent National led government.

I bought a house in 2001 for $108k, and sold it in 2007 for $245k with virtually no improvements done. It’s rateable value (July 2016) is $275k, but it’s market value estimate is about $335k.

The proportion of children in households earning below half of median household incomes is now only moderately higher than in the mid-1980s before housing costs – but is still roughly twice as high as it was 30 years ago after paying for housing.

By last year 140,00 children were in households earning below half the median income before housing costs – 210,000 (19 per cent of ­children) after housing costs.

National’s Budget had ­already signalled dramatic ­changes to take effect from next April.

In a pre-election debate with ­Ardern, English boasted if he could reduce child poverty by 50,000 once, he could do it again. “We said we’d reduce that number by another 50,000 within two or three years, because under good fiscal management the country could do it,” he told Parliament this week.

“So there’s the benchmark. Can they reduce it by 100,000 from ­today? Because there was a plan in place to do that.”

Labour has said it will scrap National’s tax cuts. Instead, it will match ­National’s changes to accommodation ­supplements and raise family tax ­credits even more – by $47 a week for our sole parent with two children, plus $700 a year ($13.46 a week) for ­energy, lifting the ­weekly income in constant 2013 dollars to $528, higher than at any time since at least 1980.

Labour will also lift the incomes of the “working poor”, who ­account for almost half the children below the poverty line, by raising the ­income threshold for reducing ­family tax credits from $35,000 a year to $42,700.

Beyond the welfare field, ­other Labour policies should reduce child poverty.

National planned to extend very-low-cost doctors’ fees to 600,000 people with community service cards, accommodation supplement or income-related social housing.

Labour has promised to match that and cut $10 off all ­doctors’ fees.

Labour’s coalition deal with NZ First promises to lift the minimum wage to $16.50 an hour next April and to $20 by 2021 and Labour has promised legislation enabling ­unions and employers to negotiate industry-wide “fair pay agreements”.

This risks initiating wage/price inflation that will impact on poorer households the most.

Wills’ expert group in 2012 proposed six “immediate priorities”, including ­subsidising food in schools, a low-interest loan scheme and more support for teen parents.

All of these have either been ­enacted by National or endorsed by Labour, except for a proposal to pass on to custodial parents $159 million in child support payments that are taken by the state to offset the cost of sole-parent benefits.

Current Children’s Commis­sioner Judge Andrew Becroft is still pushing for this last change.

“It would increase compliance by fathers and it would be good for the children,” he says.

The experts then proposed four “priorities over the longer term” to cut the numbers of children in ­poverty by 30-40 per cent.

Their first item, “review all child-related benefits”, is under way and the changes are due to take ­effect next April.

Labour’s Best Start policy goes halfway towards the experts’ ­second item, a universal family benefit for all children under 6.

Twyford’s promise of at least 1000 extra state houses a year also goes halfway towards the ­experts’ third item, increasing social ­housing by at least 2000 a year.

So moves in directions that will help alleviate financial pressures but not eliminate them.

Wills’ expert group in 2012 proposed six “immediate priorities”, including ­subsidising food in schools, a low-interest loan scheme and more support for teen parents.

All of these have either been ­enacted by National or endorsed by Labour, except for a proposal to pass on to custodial parents $159 million in child support payments that are taken by the state to offset the cost of sole-parent benefits.

Current Children’s Commis­sioner Judge Andrew Becroft is still pushing for this last change.

“It would increase compliance by fathers and it would be good for the children,” he says.

But Greens are pushing for a ‘no questions asked’ benefit system that would presumably make it easier for fathers to avoid financial responsibility for their children.

The experts then proposed four “priorities over the longer term” to cut the numbers of children in ­poverty by 30-40 per cent.

Their first item, “review all child-related benefits”, is under way and the changes are due to take ­effect next April.

Labour’s Best Start policy goes halfway towards the experts’ ­second item, a universal family benefit for all children under 6.

Twyford’s promise of at least 1000 extra state houses a year also goes halfway towards the ­experts’ third item, increasing social ­housing by at least 2000 a year.

Housing is going to be one of the biggest challenges for the Government.

Wills also believes benefits and taxes need to be reviewed, ­especially to guarantee adequate incomes for families with children.

“I look forward to the day when we see fewer poor Māori and ­Pasifika infants in our ­children’s ward with chest infections, when we see fewer children with ­permanent lung scarring and ­stunted growth,” he says.

“New Zealand is a wealthy country. We love our children. We do a good job of looking after our old people already and we can do the same for our children.”

As a country we already do a lot to assist children and families. More is obviously required, but healthy children require a healthy state with a healthy economy. as always it is a difficult balancing act.