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English defends government record in bridging inequality gap

Wednesday 10th July 2013

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Finance Minister Bill English has defended the government's record in addressing income and social inequality, saying his administration's tax changes, welfare and housing policies are protecting vulnerable households.

About half the country's households, who earn under $60,000 a year, effectively pay no income tax when transfers including welfare, family tax credits, paid parental leave and accommodation support are taken into account, leaving just 12 percent of households footing three-quarters of the income tax bill, English told the Trans-Tasman Business Circle in Wellington. Since taking office in 2008, households earning less than $60,000 are paying less tax and households earning more than $150,000 pay more, he said.

"It's entirely appropriate to maintain a tax and income support system that helps low and middle-income households when they most need it," English said in speech notes. "These figures are a timely reminder to those who call for even greater transfers to lower income families, or who call for the top personal tax rate to be raised, just how redistributive the system already is."

His comments come after an Organisation for Economic Cooperation and Development report in June found "income inequality is higher than the OECD average" and that "the system of taxes and transfers reduces inequality less than in most OECD countries", leading the OECD to recommend New Zealand adopt a capital gains tax.

English said government policies "helped to reduce income inequality at the margin," though the 2010 tax switch of reduced income taxes and higher GST, more targeted support programmes such as Working for Families, and tougher tax rules on property investment.

The introduction of national standards in education was seen as another avenue to push equal opportunity, allowing teachers to measure a pupil's progress. English scotched suggestions "some children cannot learn because of their family circumstances" with schools and the government obliged to support them.

The introduction of new planning rules in housing is expected to reduce property inequality by producing cheaper homes for young and low-income households, and welfare reform is expected to lead to jobs growth, English said.

"The government's welfare and housing reforms have broad support in the social sector because they will have a positive impact on equality," he said.

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