Proposed Working for Families Changes May Leave Some Families Worse Off, Warns FinCap

Concerns are mounting over proposed changes to the Working for Families scheme, with financial support organization FinCap warning that some families could be left without enough money to cover their weekly expenses. The changes, part of a broader government initiative to address the issue of Working for Families debt, have sparked significant debate among experts and families relying on the program.

According to a recent report, only 24% of households receiving weekly or fortnightly Working for Families payments were correctly assessed by the Inland Revenue Department (IRD) at the end of the tax year. This has resulted in over $300 million in outstanding debt, with many families struggling to repay the amounts they owe. The government has proposed a quarterly assessment system to adjust payments more frequently and reduce the risk of overpayments or underpayments.

Fleur Howard, CEO of FinCap, has raised serious concerns about the potential impact of this change on vulnerable families. While she acknowledges that a quarterly assessment period is an improvement over the current system, she warns that the proposed design may not be suitable for all families, particularly those already experiencing financial instability. Howard emphasized that the current system is not adequate to cover basic living expenses, and the proposed changes could make the situation worse for some households.

One example highlighted in the government's discussion document illustrates the potential risks. A sole parent who takes on temporary work for a short period may see her Working for Families credits reduced by $130 per week for the following quarter, even if she is no longer working. This is due to the system using income data from the previous quarter, which may not reflect her current situation accurately.

Howard explained that this 'lagged income' mechanism, while designed to ensure accuracy, could leave families in a worse financial position. She stressed that many families rely on timely payments to cover essential expenses, and any delay or reduction in support could lead to increased hardship. Similar concerns apply to families who lose their jobs and are forced to rely on benefits, as their reduced income may not be reflected in the Working for Families calculation for another quarter.

Howard proposed a potential solution: adjusting the quarterly assessment period to look forward rather than backward. This would allow for more accurate and timely payments, particularly in situations where income fluctuates rapidly. She urged the government to consider the long-term impact of the proposed changes on vulnerable families and to ensure that the system is both responsive and fair.

As the government continues to review the Working for Families scheme, it remains to be seen whether these concerns will be addressed. For now, many families are left in limbo, unsure of how the changes will affect their financial stability.