9. METIRIA TUREI (Co-Leader—Green) Link to this
to the Prime Minister
Does he stand by his statement “there is no question in my mind - someone would be better off in paid employment than on welfare. If they were not, that is a real indictment on the welfare system”?
Hon BILL ENGLISH (Deputy Prime Minister) Link to this
Is the Minister aware that a sole parent working part-time who earns an extra $100 a week currently keeps $80 in the hand, but under the recommendations of the Welfare Working Group would keep only $40, and is his Government considering adopting this recommendation from the Welfare Working Group?
The member has been speculating for a while on recommendations that are from the Welfare Working Group and not Government policy. The Government is working through all the recommendations of the Welfare Working Group, and, as it has signalled already, some of them it is likely to pick up and others it will not pick up. But we will certainly not be treating them individually. We will be looking at the recommendations in the context of a package of change that will improve the welfare system and reduce dependency.
Does the Minister agree that the benefit abatement rates should support and encourage sole parents to move to appropriate part-time work; if so, why would his Government consider adopting a recommendation—[ Interruption] Excuse me! I am asking the question. I raise a point of order, Mr Speaker. This is a question that has been set down. It is reasonable that I ask my question of the Minister and have him at least listen to the question so that he can answer it—which is what this process is for—rather than having a private conversation with another person—
Mr SPEAKERI am sure the Minister is listening and I am sure that the Minister will answer the member’s question. I invite her to start her question again.
Does the Minister agree that benefit abatement rates should support sole parents to move to appropriate part-time work; if so, why would his Government consider adopting recommendations from the Welfare Working Group that would punish sole parents for making that transition to work?
The Government does agree that the abatement system is there to help sole parents transition to work. In recognition of their circumstances we raised the thresholds—that is, the amount of income they are allowed to earn while staying on a benefit. But there has always been a trade-off in a benefit system between allowing people to earn more while they are on a benefit but not making it possible for them to earn substantial incomes or better incomes than people in full-time work. So, the system also has to try to encourage them to make the leap to full-time work. There is nothing new about these trade-offs, and people have different opinions about it.
Does the Minister agree that an abatement regime that provides for an effective marginal tax rate for beneficiaries of up to 92 percent is a massive disincentive for those beneficiaries to move into part-time work, and will he commit to reviewing the Welfare Working Group recommendations in light of a system that does not penalise but rather supports and encourages beneficiaries to move into appropriate part-time work?
Yes. Ninety percent marginal tax rates are of course undesirable; it is just that they happen to be better than the worse alternatives. One way to drop those marginal tax rates is to allow people who are getting a benefit to earn very substantial income in work, and that could easily put them in a better situation than being in full-time work. So that is the trade-off. No one wants 90 percent marginal tax rates, but it is extremely difficult to avoid them when one is making large cash payments to people who are, most of the time, out of work.
I seek leave to table a letter from Professor Innes Asher to the members of the ministerial group on welfare reform, showing how a beneficiary moving into part-time work would receive only $40 of every $100 earned under the Welfare Working Group recommendations.