Welfare Reform

Welfare reform is a controversial subject.

I think we can all agree on that.

Often controversy stems from emotive arguments from different sides of the debate.

So let’s meet in the middle with the facts.

The fact is that the current welfare system was designed in the 1930s.

It’s been tinkered and toyed with and is now a conglomeration of add-ons.

It’s a mess quite frankly and it’s time we had a really good look at tidying it up.

So the fact is that 328,000 New Zealanders are currently on a benefit.

Roughly 30% have been on benefit continuously for four years or more.

About 100,000 are currently on the DPB looking after children.

Nearly 85,000 are on an ‘Invalids’ Benefit, a particularly dehumanising term that shows just how archaic this system is.

More than 58,000 people are on a Sickness Benefit – about 14% have been on longer than four years.

It is designed as a temporary benefit.

About 57,000 are on the Unemployment Benefit and while that number’s now declining, it’s still too high.

That’s because a recession literally sucked thousands of jobs out of the economy.

The fact is that around 63% of people on benefits have no work expectations on them.

That means, we sign 63% of people onto a benefit and we simply leave them there.

Before Future Focus changes it was 75%.

We know that just over 170,000 beneficiaries had spent five or more of the last 10 years on a benefit by mid 2009.

And that was through the good years.

Half of 16 & 17 yr olds who go on benefits, spend at least five of the next ten years there.

And 222,000 children right now, are growing up in benefit-dependant households.

Some of them are in families with third and fourth generation beneficiaries.

We all know that the Unemployment Benefit rises and falls with the economy, when the economy booms unemployment drops and it rises through a recession.

But that doesn’t explain why the Sickness Benefit and Invalids Benefit have continued to steadily rise.

Between 2005 and 2010, when our economy was booming, the number of people on Sickness and Invalids Benefit increased from 74,000 to 145,000. 

That’s almost double.

If you include their dependant partners, that’s 164,000 people dependant on SB and IB.

Sickness and Invalids benefits make up 43% of all working age beneficiaries.

Many have genuine and serious illnesses and some have disabilities that mean they’ll never work.

We must support those in genuine need. No one will argue that.

But the system means that people go on these benefits and then get zero encouragement or incentive to help them get well and move forward.

And that’s where we have let them down, because many can and want to do more.

Thousands of New Zealanders have disabilities ranging from mild to severe, but every one on an Invalids Benefit has been classed literally as an invalid - incapable of work.

I want more for New Zealanders.

I think we can do much better.

I think we can provide more opportunity and more support.

I think we can help more people into work, to earn more & have greater confidence.

Change is scary

Change is scary and I get that.

But the other option is to do nothing…and leave thousands of people in a welfare trap.

And I won’t do that.

I understand how hard it can be to back yourself.

We’re asking people to do exactly that and sometimes it’s a big ask.

But I’m backing people into work.

I’m backing people to get the support and training they need to be able to get meaningful jobs.

The welfare system

We all pay for welfare through taxes and we all have an interest in our welfare system.

But what kind of system do we want?

Who should get welfare and for how long?

How do we pay for it?

What does the welfare system mean to you?

To me, it’s a safety net….it is a system there for people in real genuine need.

For whom work is not possible for whatever reason.

But a safety net should not become a safety blanket.

It should not be so difficult to get back out of, that it becomes a trap.

WelfareWorking Group

I formed the Welfare Working Group to scrutinise our welfare system.

I asked the group to look at fairness, sustainability, long term welfare dependence, incentives, disincentives and access.

It was about looking at what is and isn’t working.

The Welfare Working Group consulted widely, wrote detailed reports about the issues related to welfare and finally presented 43 recommendations to the Government.

Cabinet has signed off on a work programme to make significant changes.

This will form the basis of the Government response to the Welfare Working Group recommendations and of this Government’s welfare policy.

A Ministerial Working Group will oversee the policy process.

At this point all but one of the recommendations made by the WWG remain on the table and are being considered through the work programme.

The WWG proposal to have parents who have subsequent children while on a benefit, look for work when their youngest child is 14 weeks old, has been ruled out as a step too far.

Welfarereform is difficult and controversial, but this Government’s prepared to make a difference.

Future Focus changes

Future Focus has been a good start, paving the way for significant change.

Since October, work test obligations increased for those on the Unemployment Benefit, and part-time work test obligations applied to those on the DBP whose children are over six.

Since May, Sickness Beneficiaries medically assessed as able to work more than 15 hours a week have been obliged to seek part-time work.

Since these Future Focus changes came into effect six months ago, more than 3,500 people on the DPB have cancelled their benefit and gone into work.

That’s a 22% increase on the same time last year.

The number of people on DPB earning $80 plus a week has also increased.

Remember we raised abatement levels as part of the Future Focus changes too.

These figures show many more DBP clients are moving off benefit and that those who remain on a benefit for now are engaged in more paid work.

These are impressive early results.

We now ask someone to re-apply for an Unemployment Benefit after a year.

In doing so, we’ve seen more than 5,000 people cancel their UB.

The reasons why:

• 27%% said they’d found work.
• 50% didn’t complete their application.
• 21% weren’t eligible (some were in prison or had new partners).

It was an interesting exercise that tells you 5,000 people who were on an Unemployment Benefit didn’t actually need it and probably shouldn’t have had it.

Substantial reforms will increase the focus on what people can do, not what they can’t.

 We need a system that backs people into independence, not dependence.

This will require more targeted upfront services for people who, with the right support, could get into paid work much more quickly.

Once the long-term costs of benefit dependency for an individual are compared with the cost of upfront investment to get them into a job, the argument is a no-brainer.

The economic and social costs of failing to reform the system and investing in independence are too high.

If we don’t support teen parents into work when they first seek to come on a benefit, we know there’s a good chance they’ll be on a benefit as will their children, for many years.

On average a teen parent on DPB will spend seven of the next ten years on welfare.

There are some vulnerable New Zealanders who are not able to work and the welfare system must always be there to protect them.

But the vast majority of people on benefits want to work and with the right support have the ability or the potential to work.

 Work offers the best opportunity for people and their families to improve their

social and economic wellbeing.

I want more for those 222,000 children in benefit-dependant homes.

As the economy continues to recover, we need to plan ahead so that when jobs become available, people will be ready to fill them.

No one is suggesting turfing people off welfare if there is no job to go to.

But we have to start working with people, providing training and preparing them for jobs.

This is a staged approach.

This Government is committed to a sustainable and fair welfare system.

We believe in the value of work and in supporting people when they really need it.

And these beliefs, commitments and values will be at the forefront of our thinking as we moved forward with welfare reform.

Thank you.