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Speech to the Executive Committee

Step One On The Road To Welfare Reform

Tuesday 20 Apr 2004

Dr Muriel Newman

Speeches - Social Welfare

Speech to the Executive Committee, Whangarei Branch ACT New Zealand, 20 April 2004

There is no doubt that the greatest impediment to the development of New Zealand society is welfare. Welfare dependency has burgeoned since the 1970s, and is now debilitating and dividing our society.

Despite the major parties acknowledging the seriousness of the growing welfare problem - and the culture of dependency it has created - they have never been prepared to take the decisive actions that are required to halt its growth.

New Zealand is not alone in this problem - it is endemic throughout the western world. But the difference between New Zealand, and countries like the US, is that these other countries have realised that turning a blind eye is no solution. By fronting up to the issue and tackling it proactively, they have turned the situation around.

Their experience shows us that growing welfare dependency can be reversed, and that society as a whole benefits when the welfare underclass is reduced. Their experiences also tell us that muddling cannot solve this problem - decisive action is what is needed.

To take such action, we must firmly believe that able-bodied beneficiaries, who are capable of working, would rather be working. We also have to assume that it is the Government's role to encourage those who are dependent on the State, to achieve independence.

In order to achieve these objectives, it is imperative that fundamental changes are made to the welfare system. I would like to use this opportunity to map out the first in a three-step plan to transform welfare - not only in Northland but - throughout all New Zealand.

The first step is to require that everyone receiving welfare re-apply for their benefit. Those receiving pension entitlements, and those physically incapable of working, of course, would be exempt.

The re-application process would have two important advantages: the first is that the individual needs of each beneficiary, to help them get back into the workforce, could be carefully evaluated. By meeting those needs - whether it be for childcare assistance, transport help, relocation, or a loan to buy decent work clothes - the individual's barriers to employment could be pro-actively eliminated.

The second advantage is that, in requiring everyone to re-apply for their benefit -anyone who receiving a benefit inappropriately would be exposed. Whether they were receiving a benefit while ineligible, for lifestyle purposes, or fraudulently, improper welfare payments would be stopped.

It has been estimated that fraud could be costing New Zealand as much as $1 billion a year - both in welfare payments being fraudulently received and in taxes lost through the non-declaration of income.

It is a sad fact that welfare fraud detection has collapsed since Labour has been the Government. Driven by demands of the beneficiary unions, Labour claims that this fall is due to its focus on prevention - explaining to beneficiaries that they should not be committing fraud in the first place.

However, empirical evidence - backed up by people who work within the system - says this is not the case. As suspected, fraud is alive, well and undetected: a lack of manpower in the benefit control unit prevents leads from being followed up, privacy laws protect fraudsters, and there has been a recent court ruling which makes it more difficult to prove that a couple living together on the Domestic Purposes Benefit - the most common form of benefit scam and the most difficult to prove - are committing fraud.

Further, there is a real issue with a growing number of women on the DPB deciding not to name the father of their child. This allows fathers to avoid the financial responsibility of raising a child although, anecdotally, many of these women will have entered into fraudulent arrangements with the fathers whereby the money comes directly to them instead of being paid to the IRD.

With more than 18,000 - mainly Maori - women now refusing to name the fathers of more than 36,000 children who do not have their father's name on their birth certificate, this problem is reaching crisis proportions. Asking these women to name the fathers of their children, as a condition of their re-application for their benefit, may help to finally curtail this growing problem.

Here in Northland, over the years, I have reported all of the potential benefit fraud cases that have been referred to me for action, to the Minister of Social Welfare. I now believe, however, that unless other people have made complaints about those same beneficiaries, then it is unlikely that their cases have been investigated. This means there are literally dozens - if not hundreds - of potential benefit fraud cases that have escaped any form of official scrutiny. Requiring everyone to re-apply for their benefit will help to eliminate, once and for all, those who are committing benefit fraud and undermining the integrity of the benefit system.

As I mentioned at the beginning of this speech, my purpose today was to outline the first step of a three-step welfare reform programme - requiring people on welfare to re-apply for their benefits. The second step involving the introduction of time limits, and the third step involving participation in full-time work experience, will be discussed at future meetings.


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