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Welfare reform group seeks feedback on 'paradigm shift' in benefit system

Wednesday 24th November 2010

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A government working group is proposing a fundamental shift in the way New Zealanders think about social welfare entitlements, along with a raft of possible measures to raise workforce participation and reduce the long term blow-out in sickness, invalid and domestic purposes benefit costs.

Among proposals released by the government-appointed Welfare Working Group are requiring sole parents to take part-time work once their infant turned one year old, or when a child turns three in alignment with access to state-funded early childhood education.

Chaired by former Commerce Commission chairwoman Paula Rebstock, the working group is seeking public feedback before it delivers a final report to the government next February. The discussion document released today follows an issues paper, on which the group has already received submissions.

"Many submitters noted that the benefit system is resulting in poor social and economic outcomes and long term benefit dependence," the discussion document said. "Incremental changes to the system have resulted in a complex and unwieldy system. Some queried whether it is time for a fundamental paradigm shift in the way we think about and provide welfare in New Zealand."

However, it concludes that 'staged reform' would allow initiatives to be more effectively evaluated, and would give existing beneficiaries more time to adjust to changes. A half-way house would be to treat existing beneficiaries under the current rules for longer, while dealing with new entrants to the benefit system under a new regime.

The group has focused especially on the DPB, sickness and invalid benefits, both because they have continued growing while numbers on the unemployment benefit have been falling. Beneficiaries are spending far longer on those three benefits than the unemployment benefit. As a result, they represent an on-going fiscal cost more than 10 times greater than the unemployment benefit.

The group also fears that there is "too much focus on incapacity, not enough focus on ability to work and as a consequence, employment-related issues are often medicalised."

It proposes making greater use of second opinions from doctors, streaming sickness and invalid beneficiaries in groups reflecting their likely ability to return to work, and aligning both benefits with the way ACC claimants are compensated.

The discussion paper also looks at the problem of at-risk youth, who face long-term benefit dependency without early intervention. Among proposals in this area is to pay benefits to parents or carers of beneficiaries under the age of 17, and to extend the Child, Youth and Family service up to the age of 18.

The discussion paper says the key components of a strong benefit system include:
• Early intervention with people known to be at-risk of long term benefit dependency;
• A focus on gaining paid work rather than a replacement income;
• An obligation to take reasonable offers of paid work or face sanctions;
• Affordable childcare for beneficiaries entering the workforce, with current childcare subsidies better targeted to ensure it reached people most needing help;
• Targeted assistance for people most at-risk of long term benefit dependence.

The document makes no recommendations, but proposes numerous possible changes to the way benefits are paid, some of them radical, including shifting to a guaranteed minimum income involving "an unconditional tax credit with a uniform tax rate that would replace all benefits and supplements".

Another proposal suggests just two benefits, one for people capable of working and another for those with no long term work capacity.

On the unemployment benefit, one proposal is to impose a six-month threshold, after which “long term receipt” status would trigger placement in paid or unpaid work.

As well as a part-time work obligation on DPB recipients when a child turns either one or three, the document also proposes that the beginning of work expectations could be tied to the age of the oldest, rather than the youngest child.

Sole parents moving into paid work could also be offered time-limited subsidies.

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