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John Key

23 March, 2010

Prime Minister's speech notes on benefit reform

The Minister is going to talk about the details of our benefit reform package in a moment, but I am going to start by giving you a broad overview of what we are doing and why.

The first thing I want to say is that when Minister Bennett and I talk about the welfare system we are doing so with a healthy amount of first-hand experience.

When I was young, and my father died, my mother relied on the Widows Benefit until she could get back on her feet and into a job.

The Minister was a young sole parent who received the Domestic Purposes Benefit on and off for a number of years.

As a result, both of us have a strong commitment to the safety net that welfare provides.

We believe in a welfare system that supports people when they are most in need, encourages them to get back to work, and occasionally gives them a kick in the pants when they are not taking responsibility for themselves, their family, and other taxpayers.

Currently there are around 345,000 working-age people receiving a benefit.

Some people on a benefit will realistically never be able to work and the welfare system will continue to support them.

But for most people, a benefit should only provide temporary support until they can return to work. In fact there is little chance of a better future for beneficiaries and their children unless they do come off a benefit and work for an income. Long-term welfare dependency imprisons people in a life of limited income and limited choices.

Many people on a benefit can't wait to take the step back into work and we should applaud them for that. Some are fearful of it, however, and others are downright resentful. But the world of work is always going to offer more possibilities than the limitations of welfare.

There's another factor here, too.

People who receive a benefit are able to do so only because others are going to work every day, earning a wage and paying taxes. In many cases these are people who are themselves far from well off.

So it's not fair on working New Zealanders to have people receiving benefits but not making every reasonable attempt to pick themselves up, find a job, and stand on their own two feet.

For these reasons, our benefit reforms are squarely focused on getting people back to work as soon as possible.

These reforms will seem very familiar to many of you because they are, with a few tweaks, what we campaigned on at the last election.

Out of the whole package there are five aspects I'd like to outline briefly.

First, the Government is going to introduce part-time work obligations for two new groups of beneficiaries.

These are DPB recipients whose youngest child is aged six or over, and people on a Sickness Benefit who have been assessed as being able to work part time.

These people will need to be available for part-time work of at least 15 hours a week and accept suitable job offers, or undertake work-related training.

Work and Income will, however, have a good deal of flexibility around people's individual circumstances. And where people do not have the skills to get a job we will work with them to help them gain the skills they need.

Second, the Government will introduce more graduated sanctions for people who don't comply with their work obligations.

At the moment, case managers have only one real sanction and that is to stop benefit payments altogether.

The Government is going to give case managers more flexibility, and a better range of tools, by introducing an intermediate step of a 50 percent reduction in the person's benefit, followed by full suspension and then cancellation of the benefit.

Where beneficiaries have children in their care, however, they will face a maximum sanction of half their benefit.

The third part of the package I want to highlight is an increase in the amount that people on the DPB and Invalids Benefit can earn each week, without affecting their benefit, from $80 to $100. This will happen together with some other adjustments to abatement thresholds.

These changes will give beneficiaries an additional incentive to work a few hours a week, get into the work habit, gain some confidence, and start building work skills.

Fourth, the Government is going to change the rules around the Unemployment Benefit so it can only be granted for a 12-month period.

People who are still looking for work a year after going onto the Unemployment Benefit will have to reapply for their benefit.

As part of that process they will have to complete a comprehensive work assessment to determine what steps they need to take to move into or towards work.

These new rules will provide a strong signal that the Unemployment Benefit is a temporary support only, for people who are actively seeking work.

The last part of the package I want to mention is a system of more frequent reassessment for people on the Sickness Benefit.

The first two medical certificates issued to a sickness beneficiary will now be for a maximum of only four weeks each. This will ensure more attention from the person's doctor and case manager during the all-important first two months on the benefit.

People on a Sickness Benefit will also face a compulsory reassessment by their case manager after 12 months, and this may involve a referral to a designated doctor.

It is important to note that the reforms we are announcing today are not focused on saving money in the short term; they are focused on improving outcomes for beneficiaries.

Over the medium-to-longer-term, however, these changes will help with the sustainability of the welfare system. For example, if we were to assist just five percent of sole parents with a youngest child aged over six into work, there would be a saving of almost $200 million over the next 10 years.

While these reforms will improve the benefit system, there is still more work to be done. The Government remains concerned about the prospects of a growing welfare roll in the decades ahead, accompanied of course by an increasing welfare bill.

I signalled in my Statement to Parliament that we would be establishing a working group to advise us on ways to reduce long-term dependency on welfare. That process is going along well and we will soon be able to announce the membership and terms of reference for this group.

Today, however, is about the Government's package of benefit reforms and I'd like to hand over the Minister to talk through it in more detail.


  • John Key
  • Prime Minister