Cuts in training subsidies for sole parents may be at least partially reversed under a world-first "investment approach" that is about to turn New Zealand's welfare system upside-down.

Cabinet papers supporting the Government's welfare reforms, which have been posted on the Social Development Ministry website, show spending will be switched over the next two years from relatively cheap benefits, such as the unemployment benefit, to more costly benefits for sole parents and the sick and disabled.

A valuation of the future cost of every kind of beneficiary, based on the average time each person stays on a benefit, has found that sole parents alone account for almost half of the whole future cost of the welfare system - $18.8 billion out of a total liability of $44.7 billion based on March 2011 benefit numbers.

Social Development Minister Paula Bennett says in the papers that cutting that cost in the future would justify spending more now on support such as childcare and training.


"I believe we need to provide some extra support for the small group of beneficiaries that may be identified by the investment approach as those for whom higher-level tertiary study at level 4 or above is the best way to reduce their long-term liability," she wrote on October 20.

"Evidence shows that support for beneficiaries to undertake study, such as the Training Incentive Allowance, can be effective in increasing the time participants spend off benefit."

The new approach appears to be a dramatic turnaround from the 2009 Budget, which restricted the TIA to courses at level 3 or below on the national qualifications framework.

South Auckland sole parent Tania Wysocki cited that cut last week as the reason she had to turn to prostitution to cover childcare and travel costs while she studied veterinary nursing. The papers say the Cabinet will make final decisions this month.

In another paper last July, Ms Bennett and Finance Minister Bill English told ministers the investment approach had not been applied to welfare anywhere else in the world, but Australian actuaries Taylor Fry had advised it was "feasible, based on a focus on employment outcomes as the primary measure to control costs".

Ms Bennett said the new system would change "whom we invest in", giving contractors higher pay for helping the costliest beneficiaries such as sole parents into work.

"The flip side could be some will get less money spent on them. There could be people who, if we did very little intervention, would still get jobs by themselves," she said.

She said "fierce discussions" were going on with the Treasury about giving her ministry flexibility to spend more about $130 million a year more now to save money in the future.