Speech

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01 November 2011
Speech notes at welfare reform announcement

Good afternoon.

As you know, the Government has had a very strong focus on welfare over the last three years.

We introduced a number of changes to benefits in 2010 which are already having positive effects, and in August we announced a new approach to welfare as it affects teenagers.

What we are announcing today is a much bigger step forward – a comprehensive reform of the benefit system, building off the recommendations of the Welfare Working Group.

It is not the last of our announcements on welfare, and you should expect to see more in the future and into next year.

But it is probably the most significant.

I think it’s clear to almost everyone that the current benefit system is not working.

328,000 people are receiving a benefit, which is around 12 per cent of the entire working-age population.

In other words, 1 in 8 people aged 18 to 64 is on some form of main benefit.

More than 170,000 of those have spent at least five out of the last ten years on a benefit.

And there are 222,000 children living in benefit-dependent homes.

These are poor outcomes for beneficiaries, for their children, for society and for taxpayers, and I don’t believe it’s what the architects of the welfare state had in mind.

The stand-out feature of New Zealand’s benefit system is how passive it is.


For the most part it simply hands over benefits and leaves people to their own devices.

Most beneficiaries are not expected to be available for work, or to take up work if it is offered to them.

Naturally, many don’t.

The benefit system also lacks a focus on intervening early.

We know, for example, that the longer people stay on a Sickness Benefit the more it gets entrenched.

But the benefit system as it currently stands is not good at directing resources early on, to help prevent people from becoming long-term beneficiaries.

All this is going to change.

I want to be clear about one thing, however, and that is that there won’t be any cuts to main benefit rates, and these rates will continue to be adjusted for inflation.

We are, however, going to introduce a much more active benefit system.

We will expect a lot more people on a benefit to make themselves available for work.

But at the same time we will do more to help them into work through things like childcare, training, workplace support, and access to health and disability support services.

All of that will cost money.

But we are prepared to make an upfront investment because the pay-off is a better life for beneficiaries and their children and, over time, a reduction in the long-term costs of welfare.

Of course, some people on a benefit will realistically never be able to work, because they have a very debilitating and long-lasting condition, or are terminally ill.

The welfare system will always be there to support these people.

But they are in the minority.

For most people, a benefit is there to 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.

Some argue that people on a benefit can’t work.

But that’s not correct.

A lot of people who get up in the morning and go off to work are just like people on benefits – they are not well off, they are sole parents, and they have medical conditions of their own.
And actually, it’s these working people who are paying taxes to keep the benefit system going.

Paula Bennett will go through some of the details in a moment, but I want to give you an outline of what we are doing.

The new benefit system will consist of only three main benefits and I’ll go through these in turn.

First, we are going to introduce a new work-focused benefit, called Jobseeker Support, which will be the biggest benefit category.

This will include people currently on the Unemployment Benefit or Sickness Benefit, and sole parents whose youngest child is 14 or older.

Everyone receiving the Jobseeker Support will be expected to be available for work, either full-time or part-time as their capacity allows.

The only exception will be for people who cannot work for the time being, because of sickness or injury, and who will therefore get a temporary exemption.

This is quite a different approach from the way the Sickness Benefit, in particular, currently works.

We are going to work more actively with people towards a target return-to-work date, and we are going to introduce much more comprehensive work capacity assessments to get a better picture of what people can do and to determine what the right obligation is for each person.

The new approach recognises that most people will recover their health and ensures they receive the right help and support to be employable again.

And it also recognises that work can be a key part of getting well.

Sole parents will also be treated differently under the new benefit system.

As I just said, sole parents whose youngest child is 14 or over will be required to be available for full-time work, and are included in Jobseekers Support.

There is no over-riding reason why these sole parents can’t work full time – and in fact a great many outside the benefit system do.

The age threshold is also a fair one, because when children are 14 they can be left without parental supervision.

Other sole parents will go onto a new benefit called Sole Parent Support.

Sole parents on this benefit will have to be available for part-time work when their youngest child is five years old, which lines up with age most children start school.

Other sole parents, while they won’t face work obligations, may be required to undertake pre-employment activities that will increase their likelihood of getting a job in the future.

Parents who have an additional child while on a benefit will receive a temporary exemption from their existing work obligations, but that will only last for 12 months.

Part-time and full-time obligations will remain at 15 and 30 hours a week, and we will introduce more flexibility around these targets.

For both jobseekers and sole parents, we will provide more support earlier on, particularly for those groups most at risk of long-tem benefit dependence.

This support won’t be fully in place in year one, but will build up over time.

The third benefit will be called the Supported Living Payment, and will be for two groups of people:
• those who are permanently and severely disabled or terminally ill, and who currently receive the Invalids Benefit
• and people caring for someone who requires the equivalent of hospital-level care, who currently receive a benefit called the DPB – Care of Sick and Infirm.

People on the Supported Living Payment will not be expected to make themselves available for work.

I believe that changing benefit categories, and asking more people to make themselves available for work, sends a strong signal about the degree of change we are seeking – not just to beneficiaries, but also to case managers at Work and Income, and to the general public.

It will help to shift people’s attitudes and set genuinely different expectations about being available for work.

It is also part of the new investment approach we are taking to welfare.

If we can spend money in the short term to reduce dependency in the longer term, it ultimately saves the government, and therefore taxpayers, significant costs.

What is more, we improve the lives of many people by helping them become productively engaged in the world of work.

I’ve often said that you measure a society by how it looks after it’s most vulnerable.

But you also measure a society by how many vulnerable people it creates.

At the moment it is creating too many vulnerable people and trapping them in a life of limited income and limited choices.

By contrast, I want New Zealand to be a country of work, and enterprise, and self-reliance.

To do this, we need a benefit system that:

- focuses on what people can do, rather than on what they can’t do;
- that challenges people, not treats them as passive recipients of benefits;
- and that provides support, training and opportunities for people to return to the workforce.

That’s what our package of reforms is all about.

I’d now like to hand over to the Minister to talk through it in more detail.