Tougher rules cut welfare bill $3b

Social Development Minister Paula Bennett said the new policies were "refocusing expectations and introducing new work expectations". Photo / Andrew Warner

Biggest long-term costs are payments to sole and young parents, while Jobseeker Support is the cheapest.

Tougher welfare rules have helped cut the future cost of the welfare system by $3 billion.

A new valuation of the future costs of social welfare, issued by the Social Development Ministry yesterday, shows the total lifetime liability of the system jumped in the year to June last year from $78.1 billion to $86.8 billion,

But this was almost entirely because of falling interest rates, which lifted the current value of future welfare costs.

Estimated future costs also increased slightly because the unemployment rate was 0.6 per cent higher than the Treasury had forecast when Australian consultants Taylor Fry prepared their first $1 million baseline valuation as at June 2011.

But the number of people on benefits last June was less than expected for that level of unemployment.

Taylor Fry said: "A key contributor to this is likely to be the impact of policy and operational changes related to earlier Future Focus reforms of September 2010."

Changes made then included requiring sole parents to look for part-time work when their youngest child turned 6, making people on unemployment benefits reapply annually for their benefit, imposing stricter criteria for the invalids' benefit, and making sickness beneficiaries look for part-time work as soon as they were medically able to do so.

Council of Christian Social Services director Trevor McGlinchey said the changes effectively made it harder to get on to a benefit and harder to stay on one - but did not create any more jobs to go into.

"If people are not on a benefit, where are they and who is supporting them?" he asked. "The demand for housing, the overcrowding and those sorts of factors all indicate that people are getting by the best they can."

The new valuation confirms that the biggest long-term costs come from people going onto the young parent payment, with an estimated lifetime cost of $289,000, and other sole parent payments, costing $234,000 in lifetime terms.

People on Jobseeker Support, which now includes temporarily sick people as well as the unemployed, have the cheapest average lifetime cost of $125,000, justifying a recent shift in Work and Income priorities away from the unemployed towards sole parents and those with longer-term health issues such as mental health problems.

Social Development Minister Paula Bennett said the new policies were "refocusing expectations and introducing new work expectations".

"On average 1500 benefits are cancelled every week because people get work, with another 2000 cancelled weekly for a variety of other reasons."

But Labour social development spokeswoman Sue Moroney said those figures showed more than half of those going off welfare did not have a job to go to.

"That is very likely to indicate that they come off benefit and have no income," she said. "That will have many other very costly consequences."

Lifetime costs*

Young Parent Payment: $289,000
Sole Parent Payment: $234,000
Youth Payment: $184,000
Supported Living Payment: $177,000
Jobseeker Support: $125,000
* Average expected cost per beneficiary