Jim Anderton advocates allowing families to capitalise their Family Assistance payment to provide a deposit to purchase a home.
Anderton’s pledge
* A family on $35,000 in 2007 would get $104 a week for their first child under Labour’s Working For Families package.
* Capitalisation of four years of family financial support would earn $21,632.
* With a 10 per cent deposit, a family could buy a house for $216,320 with a mortgage of $194,688.
Here is a summary of the Family Assistance program that Jim Anderton wants the government to take advantage of -
http://www.workingforfamilies.govt.nz/family-assistance/
and details of the actual amounts available to families with different incomes and family sizes -
http://www.workingforfamilies.govt.nz/income-gains/index.html#family-income
Comment
Noone will be surprised that Jim Anderton supports giving taxpayers’ money away to people. And if you’re going to do that, the idea of making a payment in a lump sum doesn’t seem completely unreasonable. But I see two problems. The first is that the the capital to support the scheme has to come from somewhere – i.e. from government borrowing. And since the proposal is to make the payment as a grant, not as a interest-bearing loan, the interest on the government borrowing has to be paid by taxpayers, not just the capital itself. So we can’t just say “let’s capitalise the Family Assistance payment” without acknowledging that there is an additional cost involved.
But this isn’t the only issue. In fact it’s not the most important issue. The deeper problem is with the Family Assistance program itself – which is straightforward income redistribution – from those without children to those with.
On one hand you could view this as a longitudinal tax adjustment – a way to enable people to front load their life-time tax obligations before they have kids so that they can afford to pay less later when their cild-rearing expenses are at their greatest – a compulsory saving scheme if you will.
But if that’s what this is then it could (and should) be structured to explicitly reflect that. In reality this is simply redistribution to those who don’t take responsibility for their own actions – people who have children without being able to afford that responsibility – from those who do – those without children or with adequate means to support their own families.
So fundamentally the subtext of this program is that you don’t have to take responsibility for the financial implications of your decision to have children – the government will force other people to take that responsibility for you.
I don’t mean to completely dismiss the merits of the scheme. I certainly don’t deny that it has real benefits for many children who might otherwise live in poverty. I absolutely applaud that. Yet it achieves that objective in a way that also communicates a clear philosophical message: there is nothing wrong with people who choose to have children they cannot afford to support. In the process it expropriates money from people who do take responsibility for themselves, and contributes to a diversion of funds that could alternatively be used for purposes that are more socially beneficial. And because the support is in the form of cash payments, it also does nothing to guarantee that the funds distributed actually get used to meet the most critical needs of the children. There is nothing to stop parents using the money in ways that do nothing for their kids.
I do believe that it is entirely appropriate for the government to provide support for those in real need. But it is also both possible and appropriate for that to be done in ways that limits the incentive one has to draw on the support and ensures that it is used in appropriate ways. Charity is a very good thing. State provided charity is a good thing. But let’s call it what it is: charity. It’s not an entitlement.