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Op-Ed: A Reality Check On Welfare Spend

The Institute for Liberal Values.

A REALITY CHECK ON WELFARE SPENDING


By Lindsay Mitchell

In 1993 unemployment hit its peak in New Zealand, with an unprecedented 177,000 people drawing the unemployment benefit. That year government spent $1.639 billion on the dole.

Today, unemployment is at a fourteen year low and the government is attempting to use this fact to generate maximum good will in the electorate.

The public assumes that welfare spending will also have dropped significantly. In fact, it has not.

Last year the amount spent on the domestic purposes benefit was $1.634 billion - an amount almost identical to the dole bill of 1993.

What else happened between 1993 and 2003?

Core benefit expenditure

unemployment and emergency benefits - 19%

sickness benefit + 62%

invalid's benefit + 149%

domestic purposes benefit + 41%

superannuation + 15%

In 1993 total core benefit expenditure was $9.004 billion. By last year it had grown to $10.438 billion.

Additional and integral to the overall picture are the supplementary allowances. The second most costly of these is the accommodation supplement which provides assistance with rent or mortgage payments. This expenditure has risen by 238%. The government spent $200 million on the accommodation supplement in 1992/93. By 2002/03 spending had climbed to $700 million.

Family support rose from $580 to $862 million.

These supplementary increases are, in part, a reaction to the 1992 benefit cuts although they are generally ignored by beneficiary advocates who are still calling for a return to 1992 rates.

Of the core benefits, the invalid's has seen the greatest growth. The fastest growing reason for being on a sickness or invalid benefit is either a psychological or psychiatric disorder. Growing mental ill-health is certainly a factor. Some doctors are reporting pressure to sign patients off to benefits other then the unemployment.

Across the working-age benefits recipients are getting older. This partly reflects the aging population. It is also an effect of the lengthening time people spend on benefits. One interpretation might be favourable - fewer young people make up the stats. But as the benefit explosion is only a product of the last thirty years, we can expect the younger age groups to catch up over the next few decades.

There is also a clear trend for more women to appear in the statistics. While some of the explanation lies in longer female life expectancy, the ratio of females to males is also growing in the working-age ranks.

In 2003 sixty three percent of core benefit expenditure was on women.

As a percentage of the total, Maori and Pacific Island welfare receipt continues to increase while New Zealand European declines.

Outside of the core benefits there is one stand out. Unsupported child's or orphans benefit. This is a benefit paid to the caregiver of a child whose parents can't look after him, for whatever reason.

A 186 percent increase over ten years brought expenditure to $47 million last year. The 9,000 children reliant on this benefit are possibly behind a levelling off of numbers on the domestic purposes benefit.

Yes, welfare spending on unemployment has dropped significantly but growth in every other area has meant overall spending continues to climb. Treasury's expense tables predict a further growth of twenty percent between 2003 and 2008.

What accounted for 33 percent of total government spending in 1993 is now at almost 40 percent with the government super fund included.

Even Michael Cullen has conceded the Budget will mean overall government spending as a percentage of GDP, which had been falling, will now start to rise again.

For the forseeable future social security and welfare spending will continue to be the biggest consumer of taxpayer dollars - by a long shot.

Lindsay Mitchell is a Research Fellow for the Institute for Liberal Values ( http://www.liberalvalues.org.nz) and specialises in issues relating to welfare policy.

ENDS

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