Number of electricity grants skyrockets, lines drawn in cost of living battle

Sunday, 3 November 2019

The National Party launch of the Social Services Discussion Document by party leader Simon Bridges.

The number of people who received hardship grants for energy bills skyrocketed this winter, increasing by 46 per cent on the year before.

In September 2019, 15,594 people received the grant, up from 10,656 the year before. It equated to $6.2 million in grants paid out.

National Party leader Simon Bridges said the increase in grants was due to the increased cost of living, which had forced people on low incomes to turn to the Government for help.

'A third of New Zealanders rent. They're paying $50 more a week in rent, and in Auckland they're paying more than that. Then you've got petrol with increased taxes - that [the price of petrol] moves round a lot, but it's higher than it has been.

Simon Bridges said the cost of living has pushed people to accept more hardship grants.

* This Government promised a war on poverty - is it gaining any ground?

* NZ stock-still: Welfare, child abuse, housing and maternity care show no gains**

Hardship grants are paid by the Ministry of Social Development for immediate needs that put people on low incomes into financial hardship.

The number of people who received hardship grants for energy bills skyrocketed this winter.

Rents have increased under the current Government's watch. Data from the Tenancy Bond Service, which measures the cost of each new rent, shows that median rent has increased from $400 a week when the Government was formed in October 2017 to $445 now.

In context, median rents increased from $340 a week to $400 a week under the last term of the National government, and from $310 a week to $340 a week in the term before that.

Bridges put the problem down to excessive regulation like the ban on negative gearing, which allowed landlords to write off losses on rental properties against their other income. He also cited the extension of the bright-line test (essentially a capital gains tax that applies to investment properties sold within 5 years of being purchased), and higher petrol taxes as things the Government had done to increase the cost of living.

Social Development Minister Carmel Sepuloni, in this May 2019 video, announced changes to the country's benefit system, including lifting a sanction on solo mothers who do not name their child's father.

The Government shot back, blaming the increases on the fact that it was operating a less punitive regime than National had done.

'We said we would provide assistance to those who need it and this increase demonstrates that we are,' said Minister of Social Development Carmel Sepuloni.

'The need has always been there but under this government people are willing to come forward because they know they won't be turned away,' she said.

She said that the increase in the number of grants was due to escalating housing costs, which were still high after the previous government had failed to build enough houses.

'The rise in grants is related to the costs of housing, so where housing costs are high like in Auckland that's where we see people coming in for assistance,' Sepuloni said.

'National's nine years of neglect - selling state houses and not building new homes - is still having an impact,' she said.

Median rent has increased from $400 a week when the Government was formed in October 2017 to $445 now.

But Bridges said the increased cost of living is mainly to do with higher taxation and the unintended consequences of increased regulation flowing on to consumers.

The Government passed a 3.5 cent per litre fuel tax increase this year, and Aucklanders are currently charged an additional 10 cents a litre to fund Auckland-centric roads.

Fuel prices tend to be more responsive to external factors, predominantly price changes on international markets, but nearly half of the cost of fuel is tax. Petrol prices themselves fell 2.9 per cent nationwide over the past year, according to inflation data from Statistics NZ.

'This is a tax and regulation story with unintended consequences coming from what the Government has done. If you tax things that are passed through to lower income earners they'll feel it and they'll feel it,' Bridges said.

He said his party would light a bonfire of regulations, which would reduce businesses compliance costs. Those changes would be passed on to consumers in the form of lower prices.

His party also promised to index tax brackets to wages, to stop people getting caught in higher tax brackets as incomes naturally shift upwards.

Arguments around the cost of living are gearing up to be a strong feature of the next election. The Government has argued that increases in the number of people receiving different forms of benefits and hardship supplements are due to the fact it does not discourage people from taking their full entitlement.

Unemployment is also at a 10-year low, while wages have started to grow at above the rate of inflation.

The Consumers Price Index (CPI) which measures the changing cost of living, grew by just 1.5 per cent, while wages grew by 4.4 per cent.

Meanwhile the Government has beefed up the transfers regime through its $5.3 billion families package.

The cost of electricity is actually down. Data collected by MBIE said that real cost of a kWh of electricity for residential consumers is down 1.3 per cent on last year, and the average household pays $100 less per year in electricity than they did five years ago.

Nevertheless, rents have increased more steeply than under the previous government, and the petrol prices would be a lot lower than they are had the Government not legislated its price increases.

If rents continue increasing at the current rate, the median weekly rent could hit $475 by the next election.