Income Tax (FamilyBoost) Amendment Bill

We now come to clause 4. This is the debate on “Section MH 3 amended (FamilyBoost tax credit)”. The question is that clause 4 stand part.

Clause 4 and the debate to come on clause 5: these are where the major work of this bill is done, and I think where some of the policy issues are best discussed. I think it’s been reasonably well established that we have this bill in the House because the policy design was flawed from the start, and now we’re coming back to correct that policy design.

A particular way that the policy design was deeply flawed was that the rebate simply wasn’t going to enough families, and the amount that families could claim simply wasn’t enough. In looking at the regulatory impact statement, we do have some analysis on the rate of uptake and what it’s predicted to be in the new setting. Part of the problem—and I’m quoting from the regulatory impact statement here—is that the current FamilyBoost uptake rate to date is 52.8 percent. Now, it does say this reflects three or four quarterly payments and assumes gradual uptake growth over time.

One point there; just a slight point of clarification which we could have gotten from officials during a select committee process but not today: the way I’m reading that is that officials have collected that information over three quarters, and, over that time, 52 percent of the people who would have been expected to have taken up FamilyBoost have taken it up, rather than that somehow that 52 percent is spread over four quarters, even though there’s only three quarters available. I just wanted a slight clarification there to make sure that we’re talking about the same sorts of numbers. Of course, that 52.8 percent is very low for a policy which aims to put money in people’s pockets, and it’s a real shame that it’s worked out that way.

I guess, when doing social policy like this, there are two possible mistakes that a Government can make, and a Government has to decide which side of that mistake it’s going to err on. Either the Government is going to pay too little, so some people miss out who should have gotten it and needed it—and that’s in fact the mistake that has happened here—or a Government is going to pay too much and some people who don’t need the payment do get it in the first place. That’s just one of those things; it just goes that way. It’s very hard to get a policy that’s exactly perfect. Nevertheless, this one did fail quite substantially. Here’s the thing: by a lot, and perhaps that mistake is too big. It’s why we’re here back in it.

But the new costing and the new model—and this is sitting in the regulatory impact statement—assumes a 71 percent uptake rate over time. That’s still much, much lower than 100 percent and it is still erring on the side of reaching too few people rather than reaching too many people. I want to understand whether that was a deliberate decision made by Government, that they’d rather go under than over? It is a choice and it’s still under. The other thing, though, that I’m concerned about here is that Inland Revenue—and the officials are very open saying that, actually, they just don’t really have good data on this. So they’ve done the best they can with their forecasting, and having worked there, I know how good that forecasting unit is. Those people do a great job with the data that they have available to them, but they are nevertheless saying, “Actually, we can’t be sure about this information.” So we are operating with a fair amount of uncertainty here.

Again, I just want to understand from the Minister in the chair, given that degree of uncertainty that surrounds this policy, to what extent the Minister can be sure that this new set of changes will actually reach people—that people will actually get the benefit of the FamilyBoost policy. Or does the Minister anticipate that he’s going to have to use the new power that’s contained in the current tax bill, the current annual rates bill, of putting through an Order in Council? In fact, there’s that uncertainty that we’re seeing in this regulatory impact statement. Exactly why that new power for the Minister to adjust the settings for FamilyBoost by Order in Council—is that why that’s been included in this other bill? I appreciate we’re discussing this bill right at the moment, but, obviously, there’s an implication through that bill and it does sort of answer a few questions there, as well. I guess I’m looking for a little bit of discussion about the nature of the uncertainty and how it’s affected decision making here with respect to the FamilyBoost bill.

Thanks, Madam Chair; thanks to the member for the question. The inherent nature of any forecast is that it will change. The latest estimated uptake rate is at 64 percent based on 10 September. That is an increase, obviously, from the numbers that are included—that the member has been quoting—and that is because a new quarter’s worth of data is now included within that.

Thank you, Madam Chair. Yes, forecasts are forecasts, but I actually want to ask some questions in relation to the actual data set that his officials used, on page 8 of the regulatory impact statement (RIS). Table 2 talks about the claims that have been denied. The total year to date, as of 11 June, was around 28,540. Does the Minister have any updated numbers on this? Again, we’re under urgency, and we don’t have a chance to ask officials for this information so we can analyse it a bit more. Of those claims denied, how many of them would now be applicable or entitled to the FamilyBoost changes due to the change in the income threshold? If the Minister or his officials have any advice on how many more people would now be covered, who were declined before, that would be quite an interesting statistic for us to understand so that we can ask some further questions on it.

Also, in relation to some of the data that’s provided in the RIS, we note some of the income distribution in figure 3, “Income distribution of families receiving FamilyBoost payment between $950 and $975”. I think it goes to an earlier comment from Dr Duncan Webb, in relation to high-income earners, that they are the ones who are actually accessing this much easier than lower-income earners. One of the comments in the regulatory impact statement from officials is their assessment about how the status quo is intended to develop over time—particular to the claim: “A late surge in claims may occur following 1 July 2025, when the final FamilyBoost payment for the 2024/25 fiscal year becomes available.”

My question to the Minister is: now that we are past that 1 July 2025 date—I accept this RIS was written back in June—do we have any updates to figure 3, which is the “Income distribution of families receiving a FamilyBoost payment between $950 in $975”? Once again, we haven’t had a select committee. It would be really good to understand that income distribution. Following our earlier points on other clauses, we believe that this bill could actually be made better, even though it was a bill trying to fix a failure, but it could be made better. We think that that income distribution for families is actually quite an important question that, hopefully, the Minister is able to seek some advice on from officials.

While he’s seeking that advice, one interesting aspect of this particular figure, figure 3, is the number of families with household incomes that are receiving the minimum $25 payment—sorry, that’s on figure 2, the “Number of claims by amount paid”. Officials in the regulatory impact statement talk about, at the lower-income levels, there being a high peak. Basically, at the low end, a number of families receive FamilyBoost—I think just under 6,000. That drops right back down until you get to the $925, and then it spikes back up to just under 5,000 families, or “Distribution of claims by amount paid”.

One of the interesting discussions I’ve had with a kindergarten out in Porirua, in Cannons Creek, when I visited was about how they’re going with their families who are eligible for FamilyBoost. They said in their first quarter that they got about 15 percent uptake—because they are a low-fee early childhood education centre, they had 15 percent uptake. They had to help their families through the first quarter. In the second quarter, that had reduced to 7 percent. The reason why it had reduced to 7 percent was that the families had to spend time to do the administration of this and were actually only getting between $7 and $15 back. I think that’s the reason why, as the regulatory impact statement sets out, a number of kindergartens and kōhanga reo families won’t be applying for the FamilyBoost. Now that officials have provided the Minister with advice, I just wanted to see if he’s had any response to my questions. Thank you.

Thank you to the member for the question. Based on the latest data that we have available, as of 10 September, there will be 15,636 unique households with declined claims due to their income being over the threshold, but below the new threshold that we are currently considering under this bill. As a result of this bill passing speedily through the House today—with the support of that party—then those individuals, those 15,636 unique households will be contacted by IRD to advise of that fact and have the opportunity to reapply.

Thank you, Madam Chair, I have a number of questions for the Minister in that purview—clause 4—but as well as to the regulatory impact statement. I want to start with asking in terms of the “Problem definition and options” on page 1 of the regulatory impact statement. The particular figure I want to draw attention to is the 71 percent. So on page 1, it says: “A more realistic uptake rate is 71% of eligible families, which is an estimated uptake of about 80,000 families”, and throughout this document, what we’re seeing is the new, assumed 71 percent annual uptake—for example, on page 5—and there was I think another one that I was looking at where they also make the assumption of 71 percent.

I guess the first question, of paragraph 50 on page 17, is: if a 71 percent uptake rate is assumed, I want to check with the Minister on where did the 71 percent come from? It seems, based on the regulatory impact statement, like a number that’s been plucked out of thin air. If the 71 percent is something that it is aiming at, I also want to check—the second question I have is whether the Minister is familiar with Goodhart’s law; whether the 71 percent is going to be a target or a measure, because those two things are also fundamentally different. So where does 71 percent come from, and is that a target or is that a measure? That’s my first series of questions.

My second question is around consultation. My colleague Ricardo Menéndez March has asked previously why, if we’re going to be brought under urgency—this is something the Government is aware of—Mana Mokopuna was not consulted, as a part of that.

But I want to draw attention to paragraph 32 on page 14, about who have been consulted with. I’m surprised that in that list, the Early Childhood Advisory Committee, which isn’t much of a committee—the Office of Early Childhood Education, which, you know, has a particular, very important individual; but this Early Childhood Council, which is the organisation of owners of privatised and commercialised early childhood services. But what I’m not seeing being consulted is public- and community-based early childhood education (ECE) services for their feedback. I would like to ask the Minister: why has there been a cherry-picking of ECE service providers who have been consulted?

The example that I want to give, and this is just one example of many, is Kindergartens Aotearoa. They represent thousands of teachers and they also cater to 12,000 tamariki every single day. That is a substantial stakeholder that could have been consulted as a part of this, if there are already people who have been consulted with from the ECE sector. I do want to check with the Minister my second question, which is around consultation.

My third question is something that we consistently come up with, and I know that others will have more questions around: the availability of resources and reports when we are in urgency for a bill like this, for the House to have as much information, be fully aware of the context that we’re dealing with. The Minister has responded to a child impact statement, but I do find the Minister’s response of “Well, that’s not relevant because it’s an income tax bill.” does not address the bigger picture of the impact that this does have for children.

The one thing I want to address is the New Zealand Bill of Rights Act (BORA) report that has been submitted as a part of this. I understand that it is under urgency; I’m just currently looking at the BORA report now. There’s nothing in the BORA report that has been addressed. I want to check with the Minister if the Minister has actually engaged with the Attorney-General, or anyone else, to even consider the fact of whether there is an implication for section 19 of the BORA report, particularly in association with the Human Rights Act, section 21(1)(b) and (l).

That is my third question, which is: I do find the BORA report lacking for this bill, to be perfectly honest, and I would like to ask the Minister if the Minister had any engagement with either the Minister of Justice or the Attorney-General on the broader implications of section 19 of BORA, in conjunction with the Human Rights Act, section 21(1)(b) and (l).

CHAIRPERSON (Maureen Pugh): The member’s time has expired.

Just a quick response to those questions. With regards to the 71 percent rate, that’s based on the FamilyBoost uptake rates to date, as well as observed uptake for other Government assistance programmes. In regards to the consultation, the member asked around public kindergartens and other aspects: they are part of the Early Childhood Advisory Committee, which was consulted with.

Thank you, Madam Chair. I do have some questions that I want to get to when we discuss clause 5. I just want to foreshadow them here, because of course there’s two parts to the change to FamilyBoost: one is increasing the amount that a family can receive; one is increasing the number of families who are eligible, by shifting income thresholds. That’s in clause 5, and I do want to discuss some of the issues that are sitting around clause 5 there.

However, clause 4 is the one that does the work of increasing the amount that’s available. I guess I was wondering to what extent—it’s interesting, here, because the Minister had choices, which we’ll discuss under clause 5, around whether to try to get more families into the scheme in the first place or give those that are in the scheme more money. He’s chosen both of those, but in this bit, in clause 4, it’s giving them more money. I guess this relates to the comment that my colleague Dr Ayesha Verrall made earlier in terms of the pressure that, in particular, my colleague Barbara Edmonds has put on the Minister around whether or not anyone was going to get the full $250 a month that was promised by the Government, in the combination of childcare rebates and tax cuts.

We know that 244 families received the full amount of FamilyBoost, but we couldn’t find a single family who had received both FamilyBoost and sufficient tax cuts to get to $250 a fortnight. Now, by increasing the amount of FamilyBoost that’s available per clause 4, that increases the amount of FamilyBoost, so you need less tax cuts to get to that $250 per fortnight. I guess I’m worried that by making the choice to increase the amount of the rebate that’s available rather than trying to get to some of the families who aren’t receiving FamilyBoost and should be getting it—here, I’m particularly thinking of some of our low-income families, our Māori and Pasifika families, who are not claiming it—was that a really deliberate choice to go after that $250 a fortnight, rather than thinking about where the need is? It really worries me that this is a policy that actually makes those who are well off better off. Those who are not necessarily well off, but in the middle, they’ll get the extra money—that’s a good thing—but what about the people at the bottom end? It feels to me as though they’re missing out.

So a slightly meta-question—I probably won’t have to another question on the detail of clause 4—but just around the extent to which the thinking was around being driven by that $250-a-week tax cut and FamilyBoost target promised in the last election campaign, and the way to achieve it has been done through increasing FamilyBoost.

Tēnā koe, Madam Chair. This is my first call on clause 4, and I wanted to start by speaking to a tabled amendment by my colleague Dr Lawrence Xu-Nan, which, basically, would amend clause 4 to change the expenses claimable from 40 percent to 50 percent.

The Government has stated that the intention of this amendment bill is to provide more support to families who are struggling with the cost of living. As I pointed out in earlier speeches, obviously the Green Party believes that the best way to do that would be to have kept the extension of 20 hours’ free early childhood education to two-year-olds. In the absence of that—which, obviously, this Government has not done and will not do—we think that at least we should be making it possible for those families who are eligible to claim back more funding to support the very high cost of childcare.

What that would do is shift the maximum claimable amount from $1,560 to $1,950. It would make a difference. As the previous speaker, the Hon Dr Deborah Russell alluded to, as far as we know, there is no family out there that has received the amount per week that the National Party had campaigned on and claimed that they were going to deliver in the election campaign. I assume that the mandate they got at the election campaign is the reason for having FamilyBoost rather than a more effective policy that would make it easier for more families to access early childhood education and not have such high costs.

I have a question, but I want to speak to that tabled amendment, and there’s a further amendment paper that I will speak to in clause 5. This tabled amendment also amends clause 5, but it predominantly amends clause 4. I’m hoping that the Minister of Revenue can consider it. The question would be: was increasing the amount that was available to a higher amount—was that considered? I don’t believe we’ve had an answer from the Minister in this committee of the whole House debate to the question of whether there was a distributional impact analysis of the policy—both the policy when it was originally—

Suze Redmayne: More money to more people.

Hon JULIE ANNE GENTER: —brought through—yeah, but that’s not what a distributional analysis is, so maybe I can explain for the members opposite what a distributional analysis is. It’s related to other things that have been raised in this debate, which is: who is this going to get to, which people, and what income levels? Is this predominantly supporting people on low incomes, on middle incomes, on higher incomes? Is it reaching the families that are the most in need? That’s what a distributional analysis does.

I’m asking the Minister: has a distributional analysis been done, and would they or did they consider this sort of change of potentially enabling the expenses claimable to be 50 percent rather than 40 percent—which would provide more support with the cost of living and make it easier for families to access early childhood education, which we know is something that is good for everyone in Aotearoa.

Thank you, Madam Chair. I have just a really brief question actually, and it’s around clause 4(3); it says, “Subsections (1) and (2) apply to tax credit quarters commencing on or after 1 July 2025.” I just want to ask the Minister why he needed that specific subclause (3) to that clause when we already know that the Act comes into force from 1 July 2025. It would be great if he could just explain why it needed its own specific enforcement date. Maybe it’s a drafting decision, but it just looks unusual, given the shortness of this bill. I note that it’s also covered under clause 5 as well. Why is there a separate need to set out a commencement date for the subclauses, given that the commencement date of the bill is already covered under clause 2?

I move, That debate on this question now close.

The question is that Dr Lawrence Xu-Nan’s tabled amendments to clause 4(1) and (2) replacing “40%” with “50%” and replacing “$1,560” with “$1,950” be agreed to.