One of the Government’s first moves to help poverty-stricken families by paying them to heat their homes this winter won’t actually help children in poor working families. Shane Cowlishaw reports.
A winter energy payment designed to help those in need heat their homes will be unavailable to almost half of the most impoverished children because it will only be paid to beneficiaries, rather than being widened to include poor working families, the Government has been warned.
The payment, part of the Government’s $5.5 billion families package, will deliver $450 a year for a single person and $700 for couples or a person with children on a benefit or superannuation.
It will be spread over three months beginning on July 1 and is not means tested, although wealthy superannuitants will be able to opt not to receive the payment if they wish.
A raft of advisory papers released on the Treasury website shows officials recommended the Government widen the policy to include those on lower incomes rather than just those on benefits.
They warned that, if not, “around 40 percent of the children in hardship would not be able to access WEP.”
The officials said a winter energy payment targeted only at beneficiaries and superannuitants would be “the only form of supplementary assistance in the social security system that low-income New Zealanders who are not on benefits cannot apply for.”
Excluding low income workers would also impact Māori the hardest, Treasury wrote.
“Data provided by Statistics NZ confirms that Māori are disproportionately represented in the cohort of those on low incomes but who are not receiving a benefit, and therefore will not be eligible to receive the WEP. Officials ask that you note this.”
If the Government did widen the eligibility it would increase the operational costs, while superannuitants would also have to be subject to the same income test so the policy was not discriminatory by age.
Highlighting other “potential unintended consequences”, the advice pointed to a perceived loss of income when the payments stopped and the “cliff-edge” effect when beneficiaries’ payments were halted when they moved into employment during the winter.
Last year, 45,000 people on jobseeker support with no children went off the benefit during winter, with roughly half leaving for employment.
Losing the payment immediately would give people less incentive to work and options such as keeping the payments going for those who found employment could lead people to sign-up for the benefit to game the system.
The Ministry of Social Development considered “these options do not fundamentally solve the cliff-face (only delay it), would likely significantly increase the number of recipients, would likely create further inequities between those eligible for the WEP and low-income working people who are ineligible and could create perverse incentives to enter the benefit system for a short time in winter.”
The spectre of electricity companies increasing their prices to profit from the payment was also raised as a risk, with officials suggesting monitoring by the Electricity Authority to pick-up on price fluctuations.
The Government’s families package is estimated to lift 64,000 children out of poverty by 2021, a reduction from the announced 88,000 after a coding error was discovered in Treasury calculations.
Alongside the winter energy payment it includes a Best Start baby payment and boosts to the accommodation supplement and working for families payments.
Finance Minister Grant Robertson said those measures meant those on low incomes would be better off, despite not receiving the winter payment.
Labour had not campaigned on extending the payment to workers and while it had been discussed, it was not seriously considered.
Most people would earn more by working rather than staying on a benefit and receiving the payment, he said.
“These concerns are always raised whenever there’s any increase in income support…it’s a commonly expressed concern by officials,” Robertson said.
Human rights worries
While officials were concerned about the payment discouraging people from entering the workforce, they also queried whether the policy was discriminatory.
Several reports, some of which were redacted, flagged possible conflicts with the Human Rights Act and the Bill of Rights.
“Because the WEP is targeted at those on benefits, but not available to low income earners who do not receive a main benefit, there is an argument that this will discriminate on the grounds of employment status.”
A subsequent report from the Ministry of Justice found the families package to be free from discrimination and Robertson said the problem had been worked through.
The Bill of Rights will soon be changed to allow New Zealand’s senior courts to recommend to Parliament it review and reconsider whether legislation contravened the bill, but any such directions would still not bind Parliament.