PM Key announces initial support package for workers and businesses in Christchurch

By Alex Tarrant

Prime Minister John Key has announced a financial assistance package for Christchurch employers and employees, including plans for NZ$500/week for six weeks for employees of viable firms and NZ$400/week for workers of non-viable firms until they find new work or go on a benefit.

The initial package could cost NZ$120 million, Key said.

Meanwhile, Key said Tuesday's deadly earthquake could cost two or three times as much as the quake that hit the Canterbury region on September 4 last year. This could bring the combined cost of the two quakes to NZ$20 billion, including private insurance and government costs.

Key said the two quakes would amount to around 7% to 8% of New Zealand GDP, compared to the 1% of US GDP Hurricane Katrina cost in 2005.

More debt in the short term

Finance Minister Bill English said government would take on "a bit" more debt in the short term to help pay for the earthquake costs.

“Financially, New Zealand is well covered for disasters by world standards – through the Earthquake Commission disaster fund, the Government’s own finances and ability to borrow, and through insurance companies and their own global reinsurance arrangements,” English said.

“The Government has the resources and commitment to do what is needed. Supporting and rebuilding Christchurch will be the most important thing the Government does this year and into the future. We won’t be cutting corners," he said.

“Most of this spending will be on essential infrastructure such as roads, water and sewerage systems.

“We will pay for this work by prioritising spending on Canterbury above other areas of government spending, and by taking on a bit more debt in the short term,” English said.

After the six weeks

Key said government expected the nature of any future support was likely to change from the initial package.

"But we can’t rule out that this package or a form of this package will be extended into the future," he said.

"We know that there are some businesses in the CBD that will be off limits for a period of time likely to be longer than six weeks, or some individuals that simply won’t be able to find work.

"The idea of this is, a) to put money immediately into peoples’ pockets – give them some confidence, and b) also gives us a chance to also frame up the policies that we think are important as we go to the next stage of helping the recovery effort in Christchurch," he said.

The package was a non-means tested, universal payment to anybody whose company had essentially failed, Key said.

"The only companies that are outside this are multi-nationals, where we believe they’ve got the financial wherewithal to look after their own staff, companies that are nationwide in nature, or frankly government departments or quasi-government departments," he said.

"And even in the case of a nationwide chain, if they were for instance an owner-operated franchise, then we will almost certainly entertain making payments there as well. So it’s a very universal scheme."

No levy talk

Key said Cabinet did not discuss a specific earthquake levy today, but did say it was "almost guaranteed" that EQC levies would rise.

"The early indications are double to triple the existing levy is likely to be the order of magnitude that will allow us to restore a healthier balance to the EQC fund. I think it’s less likely that we will put on another levy on top of that," Key said.

"If you look at the initial estimates from Treasury, they are saying around about NZ$20 billion worth of cost for these earthquakes. I think we’ve got around about NZ$15 billion that we’ve provisioned," he said.

"Now that doesn’t mean there isn’t going to be an impact on the Crown accounts – there absolutely will be and you’ll see that now show up in the May Budget accounts, and that comes from a variety of different factors. I’m reluctant to put another levy on unless I have to, because I think it will slow the economy down."

Key said it was likely to be the case the Crown would then be left with the remaining NZ$5 billion in expected costs.

“It’ll vary – it could be paid out over a considerable period of time, you’d appreciate that the rebuilding will take quite some time," he said.

"What will knock our accounts around in May [are] a number of factors. One, tax revenue will be lower – it could be considerably lower in the May accounts because of the reduced economic activity in Christchurch. Secondly, this package alone is in the magnitude of, best estimate, NZ$120 million. There will be other packages so it’ll be hundreds of millions of dollars that will be unanticipated costs.

"And the other thing is as we go about supporting infrastructure rebuild in Christchurch, normally it’s a 50-50 joint venture with the local rate payer [council]. We can’t expect local ratepayers to meet that bill in Christchurch,” he said.

Rates based revenue and Tax Working Group suggestions not in picture

Key said Cabinet had not “at this stage” looked at getting revenue through a broader rate-based system.

“Ultimately the economics of this would tell you eventually it feeds into rents and the likes, so we haven’t considered that, and I don’t think it’s likely, but in due course we can always consider those factors," he said.

"We will need to consider wider issues about EQC and its rules and regulations – how it works and whether its cover’s wide enough but that’s part of [a wider review in time]."

Asked whether government would reconsider any revenue gathering recommendations from the Tax Working Group, such as whether a capital gains tax was back in the open, Key said, “No, I don’t think that’s on the cards as a result of this”.

See the detail of the assistance package below:

Prime Minister John Key today announced an initial support package for Christchurch businesses and workers affected by last week’s major earthquake.

The six week package is made up of two parts:

·         An Earthquake Support Subsidy to help employers keep paying wages

·         Earthquake Job Loss Cover to support employees whose employer believes their business is no longer viable.

“This package is a first step to help the people of Christchurch rebuild their lives and livelihoods. It is designed to get people through the next six weeks, as the Government considers what measures will be needed in the medium-term,” Mr Key says.

“We have made the support package as simple and pragmatic as possible, so that it can be delivered quickly and reach the people who urgently need it.”

The Earthquake Support Subsidy will give Christchurch-based employers a contribution to help them keep paying wages while they consider the future of their business.

Eligible employers will receive a payment of $500 gross per week for each full-time employee, which will be paid to the affected worker. For part-time workers the payment will be $300 gross per week.

“This subsidy is designed to keep businesses connected with their staff during the first few weeks after the earthquake,” Mr Key says.

“This is about keeping people in jobs and supporting businesses through the next six weeks.”

Earthquake Job Loss Cover is a new programme to provide support to workers whose employer believes their business is no longer viable. It will also be available to employees who are unable to contact their employer.

Full-time workers in this situation will receive $400 net per week, to help them transition to either finding another job or seeking other welfare assistance. Part-time workers will receive $240 net per week.

Both types of payments will be back-dated to the date of the earthquake and Work and Income will begin taking applications today.

“Today’s announcements are the beginning of what will be a long process to get Christchurch back on its feet,” Mr Key says.

“More will need to be done, and the Government will do everything we can to support the recovery and rebuilding of the city.

“There are some workplaces now operating in Christchurch, and I’d like to encourage people where possible to go back to work if they can. Where their workplace is safe and their family is safe, the biggest contribution people can make to their city’s recovery is by going back to work.”

Here is more detail from Social Development Minister Paula Bennett.

ChristchurchEarthquake Support Package

Recognising the effect of the February earthquake on Christchurch business and workers, the Government has implemented an initial support package to support the recovery and rebuilding of Christchurch.

The Christchurch Earthquake Support Package provides support to employers and employees in Canterbury affected by the February earthquake. 

The Christchurch Earthquake Support Package is made up of two components:

·         Earthquake Support Subsidy – a subsidy for employers who believe they are going to remain in business and want to keep their staff. They’ll get $3,000 gross to cover six weeks per employee ($500 gross per week) or $1,800 gross to cover part time staff for six weeks ($300 gross per week).

·         Earthquake Job Loss Cover – a $400 a week in the hand payment for a period of six weeks paid to fulltime employees, ($240 in the hand for part time employees). This applies to those who are unable to contact their employer or the business has closed permanently.

The Earthquake Support Subsidy gives companies a few weeks space to get back into operation while keeping their staff.

The Earthquake Job Loss Cover is available as an alternative for those who cannot make contact with their employer, or whose employer has closed permanently.

Earthquake Support Subsidy – For employers

What is it?

Earthquake Support Subsidy is an initial payment for employers to assist them to pay their employees while they deal with the initial impact of the earthquake. The subsidy is also available to the self employed or business owners who draw a wage.

If the workplace can re-open, we want to support employers to maintain their business and keep Cantabrians in work wherever possible.

The payment will be made directly to the employer who will then pay the employee.  The wage subsidy will be paid:

• for a 6 week period from 22 February 2011.
• at a gross rate of $500 per week per employee for full time employees (over 20 hours per week) or a gross rate of $300 per week per employee for part time employees (anyone working 20 hours a week or less).

Who does qualify?

• New Zealandowned business
• Christchurch City Council area based employer
• Self employed, sole trader, or contractor
• Be unable to access the workplace due to damage, a cordon, or an essential service is not available, or who can open but are experiencing significant loss of trade

Employers who have business interruption insurance should contact their insurance company in the first instance. If insurance payments will be delayed, employers can access the Earthquake Support Subsidy to cover the intervening period, but will be required to repay it when the insurance payment is received.

Who does not qualify?

• employers who can continue to operate and/or meet obligations to pay employees
• government or government-related organisations
• international and large national organisations

Those with staff who have been injured or bereaved and who are receiving weekly compensation from ACC, cannot also get the Earthquake Support Subsidy for those staff members.

What constitutes the Christchurch City area in terms of these payments?

The Christchurch City Council area, which includes Akaroa-Wairewa, Burwood-Pegasus, Fendalton-Waimairi, Hagley-Ferrymead, Lyttelton-Mt Herbert, Riccarton-Wigram, Spreydon-Heathcote, and Shirley-Papanui. There may be exceptions to this and employers are encouraged to call and discuss their circumstances.

How to apply

·         Online at www.workandincome.govt.nz.

·         By phoning the government helpline on 0800 779 997 (this line is operating 24/7). 

·         At a Work and Income office if there is no access to internet or phone

What information is needed?

Employers need to provide their business IRD number, business bank account number, and the details of the staff requiring the subsidy (employee name and IRD numbers). This information will be confirmed by IRD before payment is made.

Employers need to contact Work and Income and their employees and make them aware of what is happening.  Where employees have already applied for Earthquake Job Loss Cover before hearing from the employer, they will be transferred to the Earthquake Support Subsidy.

What if the business is Christchurch based but also has a presence outside of it?

Businesses with a presence outside of the Christchurch City Council area may qualify depending on the circumstances, and decisions will be made on a case by case basis.

What about those who are self-employed or rely on a wage from the business?

Self employed people or business owners who draw a wage from their business can receive the subsidy to support their own wages.

What if the business can open/operate but is experiencing a loss of trade?

Small businesses which can open but are experiencing a significant loss of trade can receive the subsidy for the initial six week period – this will be reviewed when decisions are made by government around continuing the subsidy.

Do employers have to pay GST, ACC levies, PAYE and Holiday Pay and other employment related expenses for employees if they get this subsidy?

Employers are required to pay ACC levies, PAYE, Holiday Pay, and all normal employment related expenses, but the Government has waived GST on the Earthquake Support Subsidy.

What if there is business interruption insurance but there are delays with payment?

Employers who have business interruption insurance should contact their insurance company in the first instance. If insurance payments will be delayed, employers can access the Earthquake Support Subsidy to cover the intervening period, but will be required to repay it when the insurance payment is received.

What about employers who haven’t decided what to do with their business?

We would encourage employers to apply for the subsidy, to help them get through the intervening period while they make decisions about the future.

What about employers with part time staff?

Employers will receive $1,800 gross per part time employee ($300 per week per employee).

Part time is 20 hours or less per week.

What if the employee applies for the Earthquake Job Loss Cover before the employer applies for Earthquake Support Subsidy?

The employee will be switched to Earthquake Job Loss Cover as soon as practicable. It’s important for employers to communicate with employees and let them know what they’re doing. 

When will payment go through?

Employers will receive an email/text advising when the payment is made.  If all information is provided and matches the IRD records then payment will be made quickly. People will be advised of the progress of their application automatically.

How long will it be before the first payment is made?

The first payments will be made from Wednesday 2 March 2011.  People will be notified when payment has been made.

Earthquake Job Loss Cover – For employees

What is it?

The Earthquake Job Loss Cover isa $400 a week, in the hand payment for a period of six weeks paid to employees whose employers are no longer able to operate. It is backdated to 22 February 2011. For part time employees a $240 a week in the hand payment is available.

Employees need to talk to employers about whether they feel that the business is still viable. Employers should get the Earthquake Support Subsidy to assist them in paying wages as the first option. If employees can’t contact employers and are not working or being paid, then they can apply for the Earthquake Job Loss Cover payment.

Payment will be made direct to individual employees’ bank accounts:

• $400 net per week for full time employees(over 20 hours per week) or $240 net per week for part time employees (anyone working 20 hours or less per week)
• paid weekly
• for up to 6 weeks from 22 February 2011

Who qualifies?

• those who were employed on 22 February 2011
• worked for an employer who was based in the Christchurch City Council area
• no longer have an employer (they have not accessed the ESS and have decided not to operate) or cannot contact their employer.

Those receiving a benefit, ACC weekly compensation, or a Civil Defence Payment for loss of livelihood are not eligible for the Job Loss Cover. Employees cannot get the Earthquake Job Loss Cover payment if their employer is already getting the Earthquake Support Subsidy.

How do to apply

·         Online at www.workandincome.govt.nz.

·         By phoning the government helpline on 0800 779 997. This line is operating 24 hours a day. 

·         At a Work and Income office if there is no access to internet or phone

What information is needed?

Personal details, bank account and IRD number. This information will be confirmed by IRD before payment is made. If people are unsure of their IRD number, they should contact IRD on 0800 227 774.

What constitutes the Christchurch City area in terms of these payments?

The Christchurch City Council area, which includes Akaroa-Wairewa, Burwood-Pegasus, Fendalton-Waimairi, Hagley-Ferrymead, Lyttelton-Mt Herbert, Riccarton-Wigram, Spreydon-Heathcote, and Shirley-Papanui. There may be exceptions to this and people are encouraged to call and discuss their circumstances.

What if the employee wasn’t at work on 22 February 2011?

Those who were employed on 22 February 2011 will be eligible for the Earthquake Job Loss Cover, regardless of whether they were at work on that day.

What if the employee has already registered for a benefit?

Those who have applied for a benefit as a result of the February earthquake can choose to receive either the Earthquake Job Loss Cover or benefit. The application process will identify if people are already receiving a benefit and someone will be in contact to discuss options. 

Are there work obligations for those who receive Earthquake Job Loss Cover?

No, there are no work obligations attached to receiving Earthquake Job Loss Cover.

Is there an income and asset test for the Earthquake Job Loss Cover?

No, there is no income or asset testing. People will receive support regardless of their other income, their partner’s income, or their assets.

What if I have accessed Civil Defence Payments for loss of livelihood?

You are not able to receive both payments, your Civil Defence Payment for loss of livelihood will need to stop before you can then get Earthquake Job Loss Cover. You can however still receive Civil Defence payments to cover accommodation costs if required.

What about people who have been injured and have applied for, or are receiving ACC weekly compensation payments?

People cannot receive both payments and will not be paid Earthquake Job Loss Cover.

When will payment go through?

Where possible employees will receive an email/text advising when the payment is made.  If all information is provided and matches the IRD records then payment will be made quickly.  People will be advised of the progress of their application automatically.

How long will it be before the first payment is made?

If people apply and their IRD number is verified they should receive payment quickly.  The first payments will be made on Wednesday 2 March 2011.  People will be notified when payment has been made.

(Updated with Key comments on financial aspects, levies, on non-eligible companies, on after six week period, Bill English comments, detail on cost of package from Alex Tarrant inside the news conference, Paula Bennett release)