Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill

I present a legislative statement on the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill.

DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon LOUISE UPSTON: I move, That the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill be now read a first time.

The bill that we are considering amends the Social Security Act 2018 to ensure that income support responds directly to the increases in the cost of living by indexing main benefits to changes in the Consumers Price Index (CPI) for inflation. This change will revert the amendment made by the previous Government in 2019 to index main benefits to net average wage growth. In line with this change to the rate of indexation, the bill also amends the Income Tax Act of 2007 to adjust the minimum family tax credit threshold to ensure that it remains aligned with changes to the rate of main benefit. This ensures that low-income working families remain better off financially in full-time work than they would be on a main benefit.

These changes will protect the real incomes of benefit recipients and low-income working families in the years to come while also ensuring that the costs associated with the benefits system remain sustainable and manageable in the long term. In the short term, New Zealanders enduring the cost of living crisis can expect that main benefit rates will remain broadly similar. Over the longer term, New Zealand will gain from savings in benefit expenditure while benefit recipients retain a consistent level of real financial resources, and their purchasing power will be protected.

Making this simple change forms part of the coalition Government’s wider commitment to prudent financial management, and it is being progressed under urgency to ensure that the rate of main benefits will reflect inflation when the yearly indexation is implemented on 1 April 2024. It will also support our Government’s relentless focus on getting people who can work into work by improving the incentive to move off benefit in the long term. We know that having a job is the best way for New Zealanders to get ahead, and we want to make sure that the rates of main benefits reflect this.

Easing the impacts of the cost of living is also a priority for our Government which will benefit both people in work and those receiving benefits. The lower than forecast CPI figure of 4.7 percent for the year ending December 2023 shows that inflation is slowing, but it still remains outside the Reserve Bank’s target range of 1 to 3 percent. There is still more work to do, and this Government is committed to returning to within the target range to make sure that we ease the cost of living crisis for all New Zealanders. In recognition of these pressures, our Government has committed to providing income tax relief, increasing tax credits for working households, and introducing a new childcare tax credit to help address the cost of living pressures.

This bill fulfils the Government’s commitment to return the rate of indexation of main benefits to inflation, a measure which has also been used for 31 of the last 35 years. In doing so, it takes a responsible and common-sense approach to the ongoing maintenance of the income support system. As such, I commend the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill to the House.

The question is that the motion be agreed to.

That was a very difficult speech to listen to, because the Minister for Social Development and Employment stood up and spoke as if she was doing a favour to beneficiaries by making this change. It is not a favour. It is an absolute disservice to all of the beneficiaries that are accessing welfare now and to all of those New Zealanders moving forward who may need to access the welfare system at some point in time—and, let’s face it, that is actually most New Zealanders.

I’m going to start with a narrative for this change that concerns me. I want to then move on to the implications that the Minister failed to actually discuss, and I want to speak about the groups that will be disproportionately impacted by this change. The narrative behind this, and that that Minister has pushed out there during her interviews and when talking about this bill, has been mean-spirited and actually has gaslit beneficiaries. There is an assumption that there is a class of undeserving poor that that Minister continues to perpetuate, and we on this side of the House will not put up with it.

When we made the change, the change was an evidence-based change. We had been told by a number of key stakeholders, experts—people like the Children’s Commissioner—that this is one of the most important things that we could do to actually address child poverty and reduce child poverty in the medium to long term. And here we have a Government who are now reversing that change and putting us at risk for having increased numbers of children living in poverty moving forward. That Minister and those members on that side of the House should be ashamed of themselves.

One of the things that I was most relieved about when I was Minister for Social Development over those six years is that we had a shift in the public perception around beneficiaries in the welfare system. The polarisation of some of our poorest people seemed to reduce over that time. Some of it was because of the way we spoke about welfare and beneficiaries. Some of it was because of the circumstances we were faced with—things like COVID, where all of a sudden more New Zealanders were faced with the reality that they may actually lose their jobs and end up in the welfare system. That created a natural empathy and understanding of how difficult it actually is to be on the benefit and in the welfare system. We focused not only on the welfare system but we had an absolute priority set on reducing child poverty in this country, and New Zealanders care about that. Whether you’re in a family that experiences poverty or you live in a community where you see that poverty, or whether you just exist in Aotearoa and don’t want that to be something that is the reality for New Zealand or New Zealanders, it matters to New Zealanders.

Point of order, Madam Chair. How long do I have for this speech? Is it not 10 minutes? It’s five minutes.

ASSISTANT SPEAKER (Maureen Pugh): Yes. It’s the first reading.

Hon CARMEL SEPULONI: OK, thank you very much. Returning to my speech, we will be opposing this bill. I do want to point out that the supplementary analysis of this bill makes very clear that the people who will be most disproportionately impacted are actually going to be women, disabled people, Māori, and Pacific. This analysis points out that this will result in more children in Aotearoa living in poverty.

Let’s be clear about why the Government is doing this. They are doing this to make fiscal savings so they can pay for their tax cuts. Over the forecast period, by doing this, they will save $670 million, or thereabouts. That will go to the tax cuts, but they are taking from the poorest New Zealanders to pay for those tax cuts, and as far as I’m concerned, that is morally reprehensible.

We have instigated, whilst we were in Government, a number of measures that came about from the recommendations of the Welfare Expert Advisory Group on what our welfare system should look like, what is fair, and how people can be treated with dignity in the welfare system. This move runs completely in opposition to that approach, and what we’re seeing is the “same old, same old” approach of the right wing of National Governments, where they put the boot in to some of the poorest and most vulnerable New Zealanders to pay for things like tax cuts to actually serve their mates that have voted them in. That is the reality of what we’re seeing here.

Thank you, Madam Speaker. Let’s make it really clear that this is a Government that is ramming through a bill that will result in lower increases to benefits. Let’s cut through the spin of the Minister that this is about alleviating cost of living pressures, because the evidence shows that this bill will result in lower increases to benefits. What this means is this is a Government who wants to push people to need hardship assistance and put pressure on our front-line services at a time where people are doing it really, really tough.

The Minister has shown no regard for the evidence that has been presented to her, whether it was through the media interviews over the weekend or through the process in this legislation, despite all the language in the coalition agreement around being driven by evidence and best available information. That is just lip service, because this Government seems to completely disregard the fact that at a time where benefit levels have been set by successive Governments below the poverty line, all we are doing is slowing down the catch-up that enables people to be able to make ends meet. When we slow down the increases to benefits, all that we are doing is we’re sending families who are struggling to get by to get into debt, to go for hardship assistance, to go to the charities and front-line community organisations that are already under the pump.

So this is a Government that wants to punish those people doing it the toughest. To what? To provide tax cuts that will disproportionally benefit those on the highest incomes. This is a Government that is waging a war on the poor. To what extent? To just create more suffering. Not to support people into employment because, actually, there is nothing in this bill that actually proves that reducing the increases to benefits will result in more people being in employment. All that it does is it traps families in a cycle of debt and hardship, and that does nothing to support people meeting their aspirations.

So when they say that lower increases to benefits will result in more people being in employment, it’s nonsense. Quite frankly it’s spin, and it is not grounded in any of the evidence nor the papers that are in front of us. This idea that making it tougher for beneficiaries results in more people being in well-paying jobs has not proven to be true by successive Governments. The reality is that the political football around how we increase benefits and how we treat people on income support needs to stop.

This bill could have been an opportunity to actually ensure that whether economic conditions are good or bad, we do the right things for those who are receiving income support. We could have indexed benefits to inflation or wage growth—whichever was higher—to ensure that we stop this political football about the formula that we use to increase benefits on a yearly basis.

And the Minister also failed to admit—when she spoke about the bill, she spoke about the short-term impacts on people on the benefit, and those are well-documented and the papers are in front of us, but, again, she failed to acknowledge that over a period of four years, people on the benefit will be cumulatively $2,000 or so worse off. That $2,000 makes a whole difference for those who are already behind on their bills, on their rent, on being able to afford food. That cumulative $2,000 that people will lose over the period of four years will result in higher debts, less ability to engage in their communities, more toxic stress in those families, and more children growing up in poverty—all to be able to afford tax cuts for the rich.

So, again, the Minister needs to front up to the communities and be honest about what her intents are, which are to make peoples’ lives harder. She does not want to improve peoples’ lives—those who are doing it the toughest—because she has not presented anything to this House that would achieve those outcomes. She just thinks that there’s a correlation between punishing beneficiaries and therefore people entering employment. She needs to turn her face from the ivory tower that she resides on to the street and speak to people impacted by the legislation that she is ramming through the House under urgency, preventing people who are impacted by this bill to be able to speak about their lived experiences, rather than the Minister making assumptions and scapegoating a whole group of people who she has no connection to. Enough is enough of politicians talking about for decades all the experiences of being on the benefit, just to come to the halls of power and turn—

Hon Carmel Sepuloni: She’s been on the benefit.

RICARDO MENÉNDEZ MARCH: She’s been on the benefit, and yet she turns her back on the people who she’s supposed to serve. That lived experience is lip service; it doesn’t represent the communities who are doing it toughest right now.

Thank you, Madam Speaker. On behalf of ACT, I’m taking this call to support the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill. We believe that this bill doesn’t only bring a sensible approach but it also brings a very practical and equitable approach to this intent of the policy that the bill wants to bring—that is, to adjust main benefit by linking it to the Consumers Price Index rather than net wage growth. We believe that this is the right approach, because, ultimately, the main benefit or family tax credit is given to people so that they can afford those goods and services. So this is about affordability, this is about the purchasing power of people, this is about the real value of money.

We know the Consumers Price Index is the acceptable measure of inflation. So that is the average price change of goods and services that households consume. So it’s ultimately about making sure that people are able to afford those goods and services that they need to have a reasonable or efficient life.

I would like to remind members—those who spoke before me from the other side—that in 2022 when we experienced a steep increase of inflation, at that time the previous Government responded by providing a one-off top-up payment to main benefit to meet the percentage increase of Consumers Price Index for the April 2023 adjustment. So they have accepted, when they were in Government, that linking it to net wage growth didn’t work, so that’s why they had to make that adjustment to link it to the Consumers Price Index—not directly; just a one-off payment, but still they accepted it. So that is why we want to bring this sensible approach to this.

We have heard from so many people that the increase in inflation that we experienced in the past couple of years, it has been really brutal. I have spoken to so many people, and, obviously, when I’m talking to these people, I’m not asking what they earn, but I can tell from these conversations that some of these people must be earning above average or some of these people even own a house. Even those people, despite factoring in for fluctuations of inflation, have been experiencing a lot of financial difficulty. So it’s not just the current financial situation of these people that is being disturbed but their financial future as well, because they don’t know how many years it will take to regain where they were before the steep increase in inflation that we experienced.

So it’s about making sure that people are able to afford things that they want. We don’t want to see that people are taking a big bundle of currency to bring a small bag of grocery items back home. I know in some countries it happens—you take a big bundle of notes, a big bundle of currency, but in return you get only a small bag of maybe a couple of grocery items.

It’s about making sure that people are able to afford things, that the value of money is there, and that is what I think is important for members on the other side to understand. It’s because of this reason the ACT Party supports this bill. Thank you.

New Zealand First also rises to support the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill.

I’d just like to take issue with the Green member Ricardo Menéndez March who made the exact point in defence of this bill. He talked about how it lowers increases to benefits, the key word there being “increases”. We are not slashing benefits; we are protecting benefits in indexing them to inflation, protecting purchasing power. These are still increases. This is a Government that has a core focus of getting people off benefits and into the dignity of work. There has been almost full employment for the last number of years. Employers are screaming out for workers there but on the other hand we have seen an explosion in the number of people on the jobseeker benefit. Those things do not make sense.

People, certainly at the moment, are not without the opportunity to change their own circumstances. For those whose own circumstances mean they need the security of the benefit, we are ring-fencing increases to inflation and indexing it within the benefit system. So the safety net is absolutely still there; it will be ring-fenced and protected for inflation. But New Zealand First, as we are absolutely famous for, take a balanced approach to this. While we see the merits of indexing to inflation and protection that purchasing power, we also see the absolute imperative of encouraging people to change their own circumstances, to get into employment, to have the dignity of work, and provide for themselves, and not rely on the State. So New Zealand First has pleasure in supporting this bill. Thank you.

Matua, Tama, Wairua Tapu me ngā Anahera Pono me te Māngai, āe. [Father, Son, Holy Spirit, and the Faithful Angels and the Holy Mouthpiece, amen.]

Tēnā koe, Madam Speaker. Tēnā tātou e te Whare. I’m taking this call as Te Pāti Māori spokesperson for social development. This bill should tell you all you need to know about the character of this Government. It should tell you who they are here to represent and who they are willing to sacrifice. Because instead of treating poverty as a matter of urgency, the Government is using urgency to make people poorer. We cannot policy people out of poverty. Indexing benefits to inflation will not solve the cost of living crisis; it will contribute to it. Let’s not pretend this bill is anything more than a benefit cut dressed up as a solution. It is just the beginning of this Government’s agenda to gut our welfare system and throw people off the benefit on to the streets.

No one should go hungry while supermarkets are making record profits. No one should be homeless when there are enough vacant houses to house everybody. Whānau should not have to choose between paying their bills on time or taking their babies to the doctor. And this Government’s strategy to get people into work should not be to make life on the benefit hell. Over 100,000 people are homeless in Aotearoa and 60 percent of them are Māori. Food prices are the highest they’ve ever been in three decades. One in 10 children and one in five tamariki Māori are living in poverty. Nearly 2 million earn less than 30,000 per year. Meanwhile, 2 percent control 50 percent of the wealth in Aotearoa. If you’re serious about addressing the cost of living in this country, those are the people you should be targeting, not our most vulnerable. People with disabilities should be able to live with dignity instead of having to constantly prove their condition to this Government so they can keep their benefit. Being on a benefit should not mean living in poverty.

We will no longer accept any excuses from the two major parties, who are fighting to keep people poorer, because it isn’t this Government who set the baseline. Benefit levels have been below the poverty line for decades. Labour were also complicit in condoning our whānau to poverty. It’s just that National are making it worse. The one thing I will give the previous Government credit for, though, is that it brought in the change that National are taking away with this bill. By indexing benefit increases to wages, they brought 5,000 tamariki out of poverty. However, they still left the 120,000 behind.

We are putting our pou in the ground. Now is the time for radical change. Our tamariki are literally hungry for it. I ask this Government: have you seen whānau struggle? I have seen whānau struggle. As the previous CEO of Manurewa Marae, every day I saw whānau, all day, every day, lining up for kai. There are so many whānau that are struggling. This bill will put more of our people in need and there is more hardship to come. And we’ve seen it. Manurewa Marae, they had no food bank. COVID came and 60,000 whānau they were feeding, and now, in the last 12 months, 12,000 kai packs are going out to whānau in need every day. That doesn’t include those that also come to collect a hardship entitlement through the Ministry of Social Development.

Te Pāti Māori, we campaigned on this and we will double our baseline benefits. We will raise the minimum wage to the living wage, remove income tax for low-income whānau, remove GST from kai, and we will invest in our mokopuna, in our tamariki. That is an Aotearoa Hou for Te Pāti Māori.

We are all aware that we are all living in a cost of living crisis, a very high inflation that many of us have not experienced before. The bill aims to index the main benefit to inflation, because indexing it to average wage growth has actually already failed. We want to make the main benefit predictable so that people can make plans and understand their way forward. We also, corollary to that, want to increase the minimum family tax credit, so when the main benefit increases, the family tax credit also increases.

We hear a lot of heart-tugging words about rich and poor. We’re talking about benefits and we’re talking about having a long-term plan to be able to implement in a predictable manner so that people can expect what they have in hand as they live on through this crisis that actually is a result of some very poor policies and decision making in the previous Government.

So what we want to do is actually give help. While there is no easy solution for people who have been unable or disabled to work, we on this side of the House and in this Government believe in helping people come off the benefit—there’s science behind that—and into full-time employment, which is good for the integrity of everyone. I commend this bill to the House.

Thank you, Madam Speaker, for the opportunity to take a short call on this bill. As the spokesperson for children, I am particularly concerned about what the Minister is proposing today, because we know when the previous Labour Government made changes to the indexation of main benefits to wage growth as opposed to inflation, we heard the Children’s Commissioner commend that move, saying it was one of the best things that we could do to address child poverty in this country. Labour has a proud record of lifting over 77,000 children from poverty in our time. I am worried, deeply concerned, that this change is going to put more children in poverty.

And why is this change being made? The change is being made so that it can fund the tax cuts that this Government campaigned on. That is shameful, and I challenge the Minister, and she should be challenged on it because she is saying that people will be better off because of this change. Yet in the information that we have before the House, it says that the long-term impacts of this, based on the predictions that inflation is actually, in fact, going to be lower than wages, means that beneficiaries—those on main benefits—are going to be receiving less. That means that more people are going to be in poverty. In a cost of living crisis—with a Government who apparently says that this is its number one focus, but I haven’t seen them do much in terms of that at all—they are proposing to make these changes, which are going to make it more difficult for our families.

As the information which we have before the House says today, those who are going to be disproportionately impacted by these changes are going to be women, are going to be people with disabilities, and it’s going to be our children who are part of these households who receive these main benefits. I am concerned that the information that the Minister has been giving is not understood by those who this is going to impact. They are, effectively, going to have a cut to their benefit, not an increase to their benefit. And I heard the Minister say—

Tim Costley: No, they’re not. No one’s having their benefit cut. You want to talk about misinformation—be honest!

Hon WILLOW-JEAN PRIME: I heard the Minister say that her main goal is to get more people into employment. Yet the prediction shows that there is going to—

Tim Costley: No one’s having their benefit cut. Come on, be honest—be honest! Who having their benefit cut? Who’s having it cut? No one.

Hon WILLOW-JEAN PRIME: Read the detail! Read your own rushed statements that have been presented to the House, because this has been done under urgency, and there hasn’t been sufficient time to provide more robust advice. But what the advice does say is that it is going to have an impact, and a disproportionate impact, on women, people with disabilities, Māori, and Pasifika. There was no consideration of the Treaty, they didn’t have time for that, and there was also rushed reporting and information provided to this House on these changes that has been made because this has been done under urgency. So there was no consultation taken either.

These are significant changes that are going to impact our families, our children, significantly in a cost of living crisis, and I join with our spokesperson for social development and child poverty reduction in opposing this bill to the House.

It’s a pleasure to rise and take a brief call in support of this bill, the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill. This side of the House supports the social safety net approach that has been longstanding in this country over many generations. That’s why we support an increase in main benefits by Consumers Price Index, which is, actually, quite high at the moment, as we know from the cost of living crisis. The cost of living is actually quite high and therefore beneficiaries will be better off under our changes.

But just let me remind this House that on this side, we don’t believe that being on a benefit is the end game. We actually want people in a job because we have a strong belief in the dignity of work. Under that side of the House we saw 67,000 more people on a jobseeker benefit—67,000. That’s more people than fit in Eden Park stadium. So we’ve got a huge task to get those people into work, to make their lives better off, because that is, in fact, the real way we make these people’s lives better off by getting them into work and letting them take charge of their lives. I commend this bill to the House.

Thank you very much, Madam Speaker. I’d just like to take the opportunity to clear up a few points to make sure we are keeping this debate on track. With the changes proposed in this legislation, officials do expect that indexing main benefits to inflation will result in benefit rates potentially being increased marginally in the short term—so the 1 April 2024 adjustment—than if they remained indexed to the net average wage growth. However, and this point is incredibly important to those members opposite, main benefit rates will be lower in the long term, with smaller increases expected from 1 April 2025 and adjusting onwards.

So long term, beneficiaries will be worse off and the estimated savings of that is $670 million. That is where this Government’s programme comes in place because we know there’s a significant shortfall. The gambling overseas tax has fallen through, they’re struggling with the smoking stuff because no one in New Zealand likes that. So there’s not enough money in the pot to pay for the tax cuts that they have promised middle New Zealand. So this is where they’re finding these savings, by making those people in New Zealand who are struggling the most have even less to look after themselves and their children.

So since this Government has come into power, they’ve scrapped free prescriptions. They’ve also scrapped free early childhood education for two-year-olds and under; they’ve given a tiny 2 percent increase to the minimum wage; and now, with three waters legislation out the door, we’re going to watch our rates go up and up and up across the country. So for a Government that so strongly campaigned on addressing the cost of living crisis that Kiwis are having to deal with, all I see is measure after measure after measure to make life tougher for those people struggling to pay their bills every single day. This bill is just another one on the pile to make life even more difficult for those New Zealanders.

So to go back to that point I was making in terms of how the long term for beneficiaries will be worse. For example, the rate for the job seeker over 25 years old is expected to increase an additional $2.60 a week under this change, under this legislation for the 1 April 2024 adjustment under the Consumers Price Index (CPI). However, by the end of the forecast period in 2028, the rate is expected to be $18.15 less per week than if it was indexed to net average wage growth. So in the face of a cost of living crisis, you are going to make it different to the point that there will be $18.15 less per week than if it was indexed to net average growth. That $18 a week is significant for a family who want to buy bread and milk and put lunches in the school kids’ bags and make sure that kids are looked after. That makes a significant difference to families who are already struggling to make rent or to pay mortgage repayments.

The forecast indicates that from 1 April 2025 onwards, the average wage growth will be higher than the CPI, therefore indexation to wage growth would have seen beneficiaries having more money in the longer term. We agree with those members opposite that people should have opportunities to get off benefit and into work, and that is exactly why this Government put a whole lot of investment into great programmes like Mana in Mahi. That’s why we have more people in work; whether they’re part time or full time, what we did was to pay that employer the equivalent of the unemployment benefit and provide support to both the worker and the employer to make sure those people who were in long-term unemployment got off that benefit.

Another key area that is very important is making sure that young people have their driver’s licence. One of the key inhibiting factors for a young person being able to be employable is to make sure we are providing that right support, and that’s exactly what this Government did. So instead of beneficiary bashing, instead of trying to score some quick points by saying that people are not helping, they should be focusing on those mechanisms that get people into work and show them the benefits of bringing home a higher wage and a higher minimum wage so that New Zealanders are better off. Sadly, this Government is more fixed on tax cuts.

I rise to speak to this bill, the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill.

I just want to say that there’s no magic going on here. Essentially, one of the main things we’re doing is we’re going back to a true and tried method of indexation where we’re basing it on the Consumers Price Index. We’re not doing any experiments with the New Zealand people. We’re going back to what has been tried and true under successive Governments, including Helen Clark’s.

As the Minister Louise Upston said, this Government has a relentless focus on a few things. First, what we campaigned on, on prudent financial management; second, that working families are going to be better off, because we want to support our working families with our family tax credit and with our childcare tax credit. Again, we want to make sure that people that can work do go to work, but at the same time there’s that approach where we understand there are always people that are in those difficult positions that cannot work and they are supported, but we also support people that can work. I commend this bill to the House.

This bill is set down for second reading immediately.

Second Reading