Cullen Michael: Motions — Family Support Tax Credit—Increase 
Cullen Michael: Motions — Family Support Tax Credit—Increase 
[Volume:638;Page:8323] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That this House endorses the Family Support Tax Credit increase of $10.00 per week per child that comes into force on 1 April 2007 
. This year 1 April will mark an important milestone in the Labour-led Government’s work for New Zealand families. The changes that are happening on that date are not just about talking about issues; they are about addressing them with positive changes to help hundreds of thousands of families and indeed millions of New Zealanders. 
The most important of those changes is very simple. The family tax credit increases by $10 per week per child on 1 April. That will assist some 360000 families by itself. Three-quarters of all New Zealand families with children will be getting assistance on 1 April this year. This is stage three of a process that began in Budget 2004 with an increase on 1 April 2005 of $25 per week for the first child and $15 per week for second and subsequent children. At that point the threshold for family support changed to $27500 and on 1 April 2006 it was lifted to $35000 with a cut in the abatement rate to 20 percent which means that people moving off the domestic purposes benefit for example do not face as high an abatement rate as they once did because indeed there is no abatement on their family support credits until they reach a total income of $35000 a year. 
 What that also means for a person supporting a spouse and two young children is that his or her weekly income now has to reach from 1 April around $800 a week before that person pays any net income tax. In New Zealand the tax-free income of a person supporting a spouse and two children after 1 April is in effect in excess of $40000 a year. That is why New Zealand will have about the lowest tax wedge for the average wage of a person in that position of any country in the world. That is real tax reduction delivered to the people who are most in need of it. 
From 1 April next year there will be regular adjustments to the rates and thresholds for the family tax credit. No longer will it continue to slip behind as inflation eats away at those rates and thresholds. Once the consumer price index reaches a 5 percent increase those threshold increases will be triggered. So in effect both rates and thresholds are indexed from 1 April this year onwards. There is a massive increase also at the same time in childcare assistance and in out-of-school care and recreation rates. 
The total effect of this package is to reduce by something like 70 percent the proportion of children living below the poverty line in New Zealand. That is a massive reduction and moves us back into the league of the northern European States whereas we were in the league of countries like the United States in terms of the incidence of poverty in New Zealand when this Government took office in 1999. This is not just about a quick visit to a poor neighbourhood jacket slung over one’s shoulder to look casual and scattering around a few muesli bars to impress the poor and the television cameras then running away and after running away deciding that one was not going to scatter around the muesli bars any more in any case because one had found out that it was not a very good idea after all—it was tasty at first but turned out to be tasteless after that. 
The fact is that this $10 a week per child tax credit was in the National Party’s election policy to be cancelled—to be taken away—in order to fund tax cuts for those on higher incomes. That is the reality of what National’s great tax cut promise was at the last election. It is a bit like Mr Key on the TV promising to an early childhood centre that it should have 20 hours’ free early childhood education then pointing out that indeed there would be equality under National—nobody would get 20 hours’ free early childhood education. It was not just about some centres deciding they wanted to be much better off and therefore not offering the free hours; nobody would get it at all—zero nothing zilch nada to quote myself in another statement about Mr Key last week. If he has done a U-turn on that I imagine that the next thing we know Mr Key will be getting the television cameras to turn up at about the end of this year to watch him sitting a National Certificate of Educational Achievement examination. The question of course is whether he will get an “Achieved” in that examination. He certainly will not get an “Excellence”; that is for sure. 
The family tax credit and the rest of the Working for Families package is about an active Government that is consciously leaning against the natural trend of our kind of society. In our kind of society inequality tends to increase naturally. We see that here we see it in Britain we see it in Australia we see it in the United States we see it in Canada. It is a feature of many countries that we have great similarities with. It is only if the Government consciously leans against those trends by interventions such as the Working for Families package that we do not see relative poverty rise and we do not see the Government reinforcing the natural trends of a modern market-based economy. 
That is why people on this side of the House are in politics. If there was one thing that drove most of us on this side of the House into politics it was the issue of social justice. Social justice issues led people into this House. [ 
Interruption 
] Naturally enough we hear from a National backbencher that to do something about poverty is to express some kind of greed and envy. The greed that I see is the greed of those who while already on high incomes want policies that will give them more. That is what Mr David Bennett of Hamilton is arguing for in this House at the present time. I bet he did not tell all those academics from Hamilton East that he would be voting in favour of those kinds of measures when he got elected last time around for his one-term visit to this place as an electorate MP. 
That is not all that happens on 1 April. On 1 April we begin 4 weeks’ annual leave for all workers. National Party members expect to have 3 weeks’ leave every time there is an adjournment in this House but they voted against 4 weeks’ annual leave for ordinary workers who could not negotiate that for themselves because they lacked sufficient muscle or sufficient economic power. Well from 1 April all workers qualify for 4 weeks’ annual leave. A Labour-led Government delivered that to New Zealanders. Furthermore the minimum wage goes up on 1 April this year. It has increased by 61 percent since 1999. It has been increased every year by this Labour-led Government at a rate higher than the rate of increase in wages in general. National managed I think one increase to the minimum wage from 1990 to 1999 and if memory serves me right that was only when New Zealand First was in coalition with the National Government. Left to itself it did nothing about the minimum wage and indeed cut benefits to ensure that the minimum wage could continue to fall back in real terms over the long term. 
Again I say that Labour does something about poverty and low wages. Labour members do not just turn up in a street and say: “Oh I’m very sympathetic because for a couple of years I was a bit hard up myself about 40 years ago.” which is what Mr Key does in this particular respect. 
Finally on 1 April this year a married couple on New Zealand superannuation gets an increase of over $20 a week. Superannuation has gone up every year under Labour. Under the previous National Government for 3 years there was no increase in New Zealand superannuation and in the last year of that Government Mr English cut the rate of New Zealand superannuation to pay for the tax cuts he had introduced that year. He cut the rate to 60 percent of the average wage. He shakes his head. He has forgotten. He has a kind of repressed memory syndrome about the National Government from 1990 to 1999. But I can assure him that over the next 18 months we are going to give him a lot of counselling so he can unlock those repressed memories and remember what it was like.