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Welfare reforms: spend more now for savings later

Tuesday 13th March 2012

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The government’s so-called investment approach to welfare reform wants to directly link current spending on benefits to the future savings that comes from earlier and stronger intervention.

Finance Minister Bill English told reporters at a conference in Wellington that the investment approach being introduced in the two tranches of major welfare reform is about taking earlier and potentially more expensive action in the dependency cycle “so you can avoid costs and misery later.”

“Sometimes that will mean spending more money sooner. I don’t have to be persuaded about the virtues of that,” English said. “Part of the exercise is finding a way to connect future savings to current investment.”

Welfare Minister Paula Bennett last month unveiled the first tranche of reform targeting youth beneficiaries and tougher job requirements for parents on a benefit.

The government has been reluctant to provide detail as to how it will assess long-term liabilities against current investment, and has been sitting on a report providing actuarial advice on the issue since October.

Legislation for the second set of reforms will be tabled in Parliament in July, and will streamline benefit categories and clamp down on benefit fraud.

English said the larger work-seeker category will “broaden the base of people that we work with” and increase the need to focus on getting better outcomes from the system.

“We really want to focus on good results, so services that are nice but aren’t that effective need to be changed into services that are very effective,” he said.

The government spent some $5.23 billion on benefits and allowances in the seven months ended Jan. 31, some 41 percent of what it spends on transfers and tax credits, such as superannuation and Working for Families, and 13 percent of core Crown expenditure.

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