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The changes described above should be seen as a minimum, immediate first step in an overhaul of the system of income support.
Our assessment of income adequacy has necessarily been limited. We acknowledge that income adequacy varies according to many factors, including family type and circumstances and region. We have not covered several family types or costs outside the locations included in the example families research. Time was also insufficient to adequately examine health and disability costs – and this is a significant gap.
In determining what is ‘adequate’, we have made various assumptions. We submit that the level of income required for adequate living standards and meaningful participation in the community should be the subject of discussion and agreement. While we have attempted to construct budgets noting a range of needs (for example, nutritional needs), we have had to use actual spending data for low-income families for some categories rather than determining what is actually adequate.
The level of income deemed to be adequate needs to be verified through robust data analysis and research, including consultation with a variety of New Zealanders through focus groups. We recommend this be done by an agency independent of government. Once the level of adequate income is established (across family types and in different locations), we expect income support levels be moved closer to such levels as soon as possible. The assessment of the adequate level of income (across family types and in different locations) should be updated regularly and income support levels adjusted accordingly.
Other recommendations include further review of the payment rates and settings for types of assistance that have not been included in the recommended package. The scale of the changes recommended in our package mean further review of this assistance is likely required, which will also provide an opportunity to better align these payments with the recommended principles. These detailed recommendations are briefly described below.
In relation to hardship assistance:
- increase income and asset limits to allow a larger proportion of low-income working people to access payments
- review and increase grant limits for items so they cover current costs (for example, the cost of emergency dental treatment)
- make a larger proportion of payments non-recoverable (for example, payments for the cost of school uniforms), to reduce indebtedness
- review the Temporary Additional Support formula, including the accommodation loading and maximum amount, so it adequately covers costs.
In relation to income definitions:
- align definitions of income and assets with those established by Inland Revenue, unless clear and robust reasons exist for different definitions – simplification and common definitions will improve understanding of the rules and reduce overpayments [43], [44]
- treat earnings-related compensation from the Accident Compensation Corporation (ACC) the same as other income from work in the benefit system, to ensure a consistent and fair treatment of income – this would replace the direct deduction based on the ‘one benefit’ approach currently in the legislation
- review how income is measured and allocated to people, including assessment periods and, especially the treatment of lump-sum payments, retrospective payments, joint investments and annual business income – different types of payments follow a variety of approaches, and better information around the payment of income coming from changes in the tax system provides an opportunity to reconsider these.
In relation to Childcare Assistance (including Childcare and Out of School Care and Recreation (OSCAR) subsidies):
- change the definition of income to remove other non-taxable transfer payments (that is, Accommodation Supplement, Disability Allowance and Temporary Additional Support), to make the income definition for Childcare Assistance more consistent with other supplementary assistance and remove circularity in the system (where increases in payments like Accommodation Supplement can result in people losing Childcare Assistance and being worse off overall)
- improve take-up by promoting greater awareness to working families, alongside Inland Revenue (given its role in administering Working for Families payments), because take-up of Childcare Assistance may be low (WEAG, 2019e)
- review subsidy rates and their interaction with minimum session times in childcare and OSCAR services, to determine if they are adequately subsidising costs to support labour market participation of low- and middle-income families, and increase the rates if they are inadequate
- consider increasing income thresholds to provide greater subsidisation of childcare costs for low- and middle-income working families and to ensure that effective marginal tax rates for these families are not too high.
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43 Some movement towards alignment has occurred over the past decade and this should continue, where appropriate.
44 The definitions should also be updated to reflect recent court cases concerning loans and gifts.
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