Calls for changes to welfare system

As the recession bites there are calls for welfare rules to be rewritten as more people are refused the unemployment benefit based on the income of partners.

For tax purposes, partners' incomes are treated individually but when it comes to welfare, the other person's income matters.

Dr Susan St John of Auckland University and Keith Rankin of Unitec told the New Zealand Herald the system was based on "outmoded social concepts" such as assuming that everyone lives in single-income families.

Under the rules, the unemployment benefit is cut by 70c for every dollar earned above $80 a week by either the main earner or their partner. Anyone with a partner earning more than $534 a week cannot get any benefit.

In Australia, the dole is reduced by 60c for every dollar of a partner's income above A$387.50 ($485) a week, so a partial benefit is available until the partner earns A$1069 ($1340) a week.

Prime Minister John Key, speaking on Newstalk this morning, said the problem was not new.

"That is one of the challenges with the welfare system versus the tax system," he said.

"If there was a way of being able to address that more simply and in a less complicated way it would be worth exploring because there are anomalies in the system."

He said in some cases an unemployed person's partner may be on a very high salary.

"There are reasons why it has been established that way."

He said a tax advisory group could look at the debate.

Mr Rankin said NZ's much tighter treatment of partner income was probably the main reason a Ministry of Social Development analysis last week found that only 32 percent of the unemployed get the unemployment benefit in this country, compared with 99 percent in Australia.

A paper he has written with Dr St John, Escaping the Welfare Mess, argued that all main benefits should be assessed on the basis of individual, rather than household, income.

"Anachronistic requirements to meet hours worked or to force couples to aggregate their incomes for benefit purposes need to be progressively removed," they write.

Mr Rankin said the system created the "incentive to separate".

Sole parents were now allowed to earn up to $180 a week before the 70c reduction cut in, whereas the $80 limit for the unemployment benefit had not changed since 1986.

The conservative Maxim Institute said it would be better to assess income for both tax and welfare purposes on a household basis, rather than shifting both to an individual basis.

Maxim policy manager Alex Penk said allowing two-income couples to split their income for tax purposes would automatically reduce their taxes if one partner lost their job.

Social Development Minister Paula Bennett told the newspaper she sympathised with the plight of couples but that was how the welfare system had always operated.

The Green Party's social development spokeswoman, Sue Bradford, said the system financially rewarded couples who split up.

"If the Government is serious about keeping families together, even in times of hardship, then limits on what the working partner can earn should be raised immediately," she said.

"Financial pressures that attack the family unit lead to deepening poverty and emotional damage for all concerned, accentuating the impacts of an already tough situation."

Revenue Minister Peter Dunne said changing the welfare system would be a massive job and was unlikely to happen in the next couple of years.

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