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Newman Online: Welfare: the Problems and Solutions

“Newman Online”

Weekly commentary by Dr Muriel Newman MP

CONSILIUM SPEECH – Welfare: the problems and the Solutions

If you are concerned about New Zealand’s welfare culture you should read this speech, delivered to the Australian Centre for Independent Studies annual Consilium conference. Then, you should register for our 2004 Welfare Reform Symposium – to be held in Parliament on Saturday August 14 – where local and international welfare experts will speak about the problems associated with welfare and the solutions.

My role at this Consilium session is to examine the thesis “Welfare isn’t Working” from a New Zealand perspective.

The welfare system that arose as a result of New Zealand’s pioneering history was based on three principles:

Helping people to help themselves

Encouraging families to take responsibility for relatives in need

Expecting a contribution in return for welfare assistance

For 130 years, from 1840 to 1970, welfare worked well. In 1970, the ratio of full-time workers to each person on a full-time benefit was 28 to one. Today, that ratio is four to one.

The welfare dependency problem has arisen largely as a result of three well-intentioned recommendations by the 1972 Royal Commission on Social Security. Enacted by the Kirk Labour Government, they undermined the core values of the welfare system, changing it from a safety net and a hand-up to work, into a trap.

The first of these changes increased benefits’ value to a level equivalent to that of a working wage. This removed the age-old incentive that, to get ahead, you had to have a job.

The second was to abolish the commonsense discretion that had always existed in welfare, changing it into a universal right.

As a result, welfare officers could no longer give an alcoholic food and shelter instead of money, even though they knew the alcoholic would use the money to drink themselves to death!

The third change was to introduce a sole parent benefit, which effectively incentivised the breakdown of relationships and resulted in a serious erosion of marriage and the family.

The result was a ten-fold increase in welfare dependency in just 30 years – from fewer than 35,000 beneficiaries right up until the early 1970s, to 350,000 today.

If pensions are included, welfare accounts for more than a third of all Government spending, and is one of the main reasons that New Zealand’s living standards have slipped from third in the OECD to 20th, lagging behind Australia’s by around 30 percent.

The consequences of this increase in welfare dependency on children have been devastating. At a time when the research unequivocally states that long-term welfare dependency and sole parenthood damages children, a quarter of all New Zealand children live in single parent families – and one in three lives in families dependent on welfare.

But for Maori, who make up 13 percent of the population, the situation is much worse. Half of all Maori children are being raised in families on welfare and, if present tends continue, by the year 2010 three quarters of all Maori babies will be born into families without a father.

Maori are now over-represented in all of our negative social statistics: in child abuse, where 40 percent of all of the children in the care of the State child welfare agency are Maori; in crime, where 50 percent of all prisoners are Maori; in poor health; educational failure; teenage pregnancy; youth suicide; substance abuse, and all categories of benefit dependency. At every level, welfare is destroying Maori, and dis-located Maori are now an increasing cost-burden on our society.

You might ask what the Labour Government is doing to turn this situation around. The answer is to talk tough and throw more money at the problem. But you must remember that Labour is a socialist government, and its agenda is to expand the welfare state. That means that its legislative changes over the past four years have fundamentally weakened the system and softened welfare. As a result, when the economy turns down – as it inevitably will – the problems we face will escalate.

In public policy, as in other areas of life, you get what you pay for. If welfare pays people to do nothing, then that’s what they will do for 10, 15 or 20 years. If welfare pays women to have babies they don’t really want, then you will get an epidemic of abused children. And, if welfare pays families to split apart, we shouldn’t be surprised to see an epidemic of family breakdown with all of the associated adverse consequences.

On the bright side, the fact that the welfare dependency problems facing New Zealand are caused by poor incentives in bad legislation – rather than some fundamental decline in our core values as a society – is a cause of great optimism. The reason is that, with good legislation, the situation can be readily turned around.

But to do that, New Zealand needs a change in government. If we have a Don Brash-led National Government after the 2005 election, with ACT as a coalition partner, then welfare reform would become a priority.

Welfare reform is an issue I am passionate about – and not only in an intellectual and political sense. In the mid 1980’s, after 18 years of marriage, I found myself as a sole mother with two young children on welfare. I’ve lived the day-to-day existence. I’ve seen the wasted lives. And I’ve experienced the seductive grip of a system that begins by helping, but ends by destroying self-esteem, confidence and hope. I escaped, but many others did not.

So, what is the answer?

In my considered view, the answer is a system that integrates some of the good ideas developed by the Centre for Independent Studies, with the successes of the US welfare reform programmes, lacing them together with some good old-fashioned commonsense.

As a first step, we would require everyone on welfare to reapply for their benefit in order to review their eligibility and re-assess their needs. Experience suggests that such a move could reduce benefit numbers by up to a quarter – saving billions of dollars – as undeserving and fraudulent recipients disappear from welfare rolls.

A second step would be to introduce a six-month time limit on welfare for the able-bodied, providing a window of opportunity where the unemployed are free to find work in their own way. If they haven’t found a job at the end of those six months, they would then be required to sign on to a full-time work experience programme.

That third step – a full-time individualised work experience programme – is designed to support people, who have not been able to find work on their own, to become work ready. Requiring participants to engage in the programme for 40-hours-a-week would enable them to develop the habits, skills and disciplines of the workforce.

By providing participants with professional help and support – childcare assistance, transport help, financial planning advice, relocation costs and so on – individual barriers to employment would be overcome.

While these three steps would go a long way toward ending the long-term benefit dependency cycle, which has so debilitated New Zealand, more needs to be done to turn around the worrying trend in fatherlessness.

To reduce the growing rate of fatherlessness, family law is in urgent need of reform: the devastatingly unfair child support laws need to be overhauled and shared parenting introduced as a priority. Just as two parents are equal before a relationship breaks down, so too under shared parenting are they equal afterwards, unless one is proven to be unfit.

Under shared parenting, children who are the victims of family breakdown have the certainly of knowing that – once the dust settles – they will still have a mum and dad to love and support them on an ongoing basis.

Reforming welfare is, essentially, a process of liberation.

Firstly, liberating people from the dependency trap, and releasing their energy and creativity to enable them to achieve their potential in life.

Secondly, liberating the nation from the effects of a State-run system that debilitates and destroys people, into one that supports and empowers them into a future of contribution and independence.

And thirdly, welfare reform will liberate taxpayers from the overwhelming financial burden that keeps the nation poor, releasing them into a future of economic freedom and prosperity.

These are goals that are worth fighting for. That is my mission as a Member of Parliament.

Don’t forget to register now for the symposium by clicking here - Welfare Reform Symposium

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