New Zealand's only district that achieved zero youth unemployment through most of the recession has lost its Government funding because of its success.

Otorohanga District Council, which even now has only six people under age 25 on the unemployment benefit, has decided not to bid under a new tendering system which allocates funding for youth services based on the numbers of young people who are unemployed or on benefits.

Mayor Dale Williams said the Ministry of Social Development had advised him that there were not enough unemployed young people in Otorohanga to support the services the town has provided to help them get jobs and apprenticeships.

"Essentially it would appear that we are being penalised for achievement up to now, and unfortunately the new contract will incentivise those who have large numbers of young people who fit the new criteria," he said.


"The new provider will be based elsewhere and they will put as much service into this community as the funding will allow, which will be nothing."

Legislation setting up the new youth services is being rushed through Parliament to take effect from July 30. Tenders for regional contracts closed yesterday.

Bids were invited for two services:

A "connections" service to help 16- and 17-year-olds who are not in employment, education or training ("NEET") with payments to providers based on the numbers who achieve level 2 of the National Certificate of Educational Achievement (NCEA) and do not go on a benefit within three months after qualifying for a benefit at age 18.

A beneficiary management service for 16- and 17-year-olds on independent youth benefits and teen parents aged 16 to 18, whose benefits will be paid mainly through direct payments to landlords, power companies and other services.

The tender document said Otorohanga had just 17 NEET youngsters aged 16 or 17 and zero youth on independent youth benefits or teen-parent beneficiaries aged 16 to 18.

In contrast, nearby Hamilton had 376 NEET youngsters, 33 teen-parent beneficiaries aged 16 to 18 and 27 other youths aged 16 or 17 on benefits. But Mr Williams said Otorohanga had found in the past that a regional service did not work.

"Technically Otorohanga falls under the [existing] Hamilton-based connections service, but it's 45 minutes away with one college. We were never getting any service, so we set up our own," he said.


Work and Income head Janet Grossman said the new system would "focus our efforts on those that need extra support to transition" from school to work.