Saturday, April 01, 2006

John Armstrong: Working for middle class

It sounded like an April Fool's Day joke: an MP flush on the backbencher's salary of $118,000 qualifying for a Government-paid income top-up of $22 a week to help her pay the bills.

It was something of an April Fool's prank on the part of Heather Roy, the other Act MP.

With five children, she would qualify for such "family income assistance" from today. But her husband works, so she clearly does not qualify.

Still, she made her point. The facts did not get in the way of a good story.

Labour's targeted tax relief now reaches into ever higher income brackets, ostensibly to help large families struggling to balance household budgets.

However, Act and National argue that the welfare state has been turned from a safety net into a drift net ensnaring the middle classes.

Roy's close-to-home example was evidence enough that Labour's flagship Working for Families policy would be better titled "Welfare for Families".

The architects of Working for Families never envisaged an Act MP becoming eligible for an income top-up when they began the overhaul of income assistance policy more than four years ago.

But then they did not envisage the scheme they developed - which targeted low-to-middle income families - getting a subsequent election-driven, Auckland Harbour Bridge-style clip-on which makes some well-off families eligible.

That extension comes into effect today, along with a suite of measures, including interest-free student loans and four weeks' annual leave. These items are being heavily promoted by Labour in a propaganda blitz designed to show the party is still addressing the fundamentals of people's lives and still true to its social democratic roots.

For the governing party, the communications offensive is also an opportunity to focus back on Labour basics after a difficult start to the year where the Government's agenda has been derailed by a series of distractions.

A flurry of photo-opportunities during the week culminated today in the Prime Minister visiting the Otara market - true Labour heartland.

MPs have been given special "April 1" information packs which offer them "key lines" to rebut critics.

Their laptop computers have been programmed with a Working for Families calculator enabling them to instantly work out a constituent's entitlement.

Labour's strategy is to link the April 1 measures with other social policy initiatives, such as cheaper doctor visits.

The party is trying to establish a simple equation in voters' minds. Labour equals income assistance plus investment in social infrastructure. National equals tax cuts for the rich and cuts in social services for everyone else.

However, the extension of Working for Families to large families whom many people would deem to be well-off at least in terms of salary carries political risks as well as bringing a potential political dividend in votes.

Labour was naturally uncomfortable defending an Act MP's entitlement to money she did not need. It was furious when it discovered she had not been eligible in the first place.

However, such quirks were bound to arise as Working for Families has progressively clawed its way up the income brackets.

From today, another 60,000 families potentially come under the scheme's umbrella, adding to the 288,000 families which already qualified. All up, nearly three-quarters of all New Zealand families are now eligible.

Labour's difficulty is that Working for Families is trying to meet two political goals.

A policy that had a primary focus on alleviating poverty and getting people off benefits and into work has become a de facto tax cut policy.

The switch is evident in the way the Government's language has shifted from "income assistance" to "tax relief" and now "tax credits" as Labour tries to neutralise National's simple "tax cuts".

National has sought to counter this by painting Labour's tax relief as welfarism in drag.

However, while the debate about tax will continue, the implementation of the latest phase of Working for Families shifts the dynamics more in Labour's favour.

Many of those newly eligible for assistance will take the money in the form of an annual tax rebate and are unlikely to see the payment as some kind of welfare benefit.

Labour also expects that by the time National gets the chance to cut taxes - 2009 at the earliest - the payments will have become a fixture in family budgeting. Labour's hope is that people will consequently hanker less for a simple tax cut.

But a tax cut is money in the pocket immediately. National will also point to those wage and salary earners who simply miss out from Labour's targeting of assistance to families only.

National also doubts people will complain about it axing the Working for Families extension as long as that scheme is replaced by something which delivers the same or better financially.

Much of this battle for the crucial election-tipping middle-income voter hinges on families signing up to Labour's entitlements - something which is automatic with universal tax cuts.

Labour has had to endure jibes about Michael Joseph Savage rolling in his grave after TVNZ's Agenda revealed the advertisement promoting Working for Families was filmed in the leafy Auckland suburb of Epsom in a house with a capital value of more than $700,000.

However, the advertisement featuring a white, nuclear family in upmarket abode, the daughter complete with iPod and cellphone, was deliberate. It was designed to jolt higher income earners who expect nothing from Working for Families that there may be something for them.

So far, actual take-up figures do not appear to have matched expectations. Last year, the Government was talking of 260,000 families having signed up by now. The latest figures have the number still below 200,000, but that does not include families which will take the money at the end of the financial year. The figures reflect the relatively low take-up rates for such assistance. Hence the saturation advertising.

There is some irony that while Labour has been pilloried for raiding parliamentary funds of close to $450,000 to pay for the production and distribution of its election pledge card, the blanket promotion of Working for Families entitlements has gone largely unremarked.

The difference is that this taxpayer-funded advertising campaign is done at arm's length from the Beehive by Inland Revenue and the Ministry of Social Development under guidelines stipulated by the Auditor-General.

But the net effect is the same - the advertising is highly political. And with a $13 million budget promoting Working for Families over three years, it is no joke, April Fool's or otherwise.


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