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Maharey: Social Development in Action Speech

19 July 2005

Hon Steve Maharey Social Development in Action: Working for Families & the Single Core Benefit

Presentation at Victoria University of Wellington School of Government

That you for the invitation to speak to you today. I’m going to talk about the social development approach to social welfare being undertaken by the Labour-led government, with particular reference to Working for Families and the move to a Single Core Benefit.

THE SOCIAL DEVELOPMENT APPROACH

The Traditional Approach to Welfare

The welfare system of the 1930s, 40s and 50s worked quite well for New Zealand. It formed one of the cornerstones, along with wage regulation and full (or over-full) employment, of the “wage earners’ welfare state” that seemed to guarantee a safe and secure existence, employed, and well housed.

But aspects of the system are dated. It was developed in the 1930’s to deal with a simpler society, where needs were more likely to be short term. In today’s less stable society, just passively paying benefits is no good for the person on the benefit – and it’s not affordable for society.

Alongside that, our welfare system did not respond well to the changing nature of employment and to fluctuating incomes, through more casual work, part time employment, seasonal work and contract work.

It did not assist people to take on the risks of an entry-level job or take the first step towards a new career. It could not give people certainty that getting a job would leave them better off. Nor could it respond quickly enough to changing individual needs.

The Social Development Model

It is against that backdrop that we need to see the move towards a developmental approach in general, and social development in particular. The social development model is about moving beyond the simple duality of social welfare and economic development to social policy that is investment-oriented.
How that translates into an approach towards the welfare state was set out in this government’s 2001 publication, Pathways to Opportunity, which summarises the difference between traditional welfare and social development. The shift is largely about a broader approach.

Social development approach widens the objectives of the welfare system from income assistance, with little focus on lack of skills or other problems, to helping and supporting people while they lift their skills.

The social development approach means moving the focus from individual care to social (community) development. We’re now looking at working with whole communities, to ensure that they are good viable social communities to live in.

Tradition welfare delivery tends to be centralised, and impersonal. Social development emphasises local partnerships and individually tailored assistance.

Our aims have also widened. We still provide income support to alleviate poverty, but we now see this as something we do while participation skills are developed.

And, finally, for a long time, success was judged on the basis of fast and efficient delivery of income support. We still want that, but our primary success measures now are about getting people into sustainable work, whilst ensuring that those who for good reason cannot work get the support they require to participate in society.

PATHWAYS TO OPPORTUNITY

Pathways to Opportunity set out the roadmap for the various reforms that we went on to undertake, culminating in the shift to a Single Core Benefit and new service model, which I announced this February.

It emphasised that, as well as providing security, the $5 billion or so that we spend each year on benefits must become an investment in people’s potential. It set out six new strategies for our reform of the welfare system.

A Simpler System – a social security system that is both more easily understood and easier to deliver. Clearly, the Single Core Benefit will be the main thrust of that, but we have already moved to ensure eligibility information about benefits is easily understood and accessible.

Making Work Pay and Investing in People. We want to actively assist people to make an effective transition from the benefit to the workforce, and ensure that a person is always better off if they are working than if they are not.

Supporting Families and Children. The system should support families and children through difficult times, especially when no family member is in paid employment. I’ll come back to Working for Families, our major initiative in this area.

Mutual Responsibilities. We accept Government’s responsibility to help those struggling to find paid work. However people must be prepared to take opportunities offered to them, and be aware of reasonable sanctions if they do not.

Building Partnerships. We want communities involved in social welfare issues to ensure that what we do is tied to their aspirations for a better life. We are working with local government through initiatives such as the 'Mayors Taskforce for Jobs', and working with Mäori and Pacific organisations and communities.

Tackling Poverty and Social Exclusion. We are building the capacity of New Zealanders to be part of the modern economy and addressing issues that trap people in poverty and prevent their full participation in society.

PATHWAYS IN ACTION

I’d like to outline just some of the initiatives we’ve undertaken to put Pathways to Opportunity into action.

Pathways to Inclusion

Shortly after Pathways to Opportunity, we also released Pathways to Inclusion, which aimed to achieve greater participation of people with disabilities in employment and in our communities.

Repeal of the Community Wage

Also in 2001 we repealed the Community Wage, the former government's 'work for the dole' scheme. The main problem with ‘work for the dole’ is that it did not work. It actually tended to lock people into life on a benefit by focussing them on ‘make work’ rather than finding a real job. An evaluation of the Community Work Scheme, carried out by the Department of Work and Income's Centre for Operational Research and Evaluation, found that beneficiaries in Community Work often had less chance of getting a real job than if they hadn’t been part of the scheme at all.

Reform of the Domestic Purposes Benefit

In March 2003 we introduced a new way of working with sole parents. Most people on DPB and Widows Benefit must now participate in a comprehensive planning process that focuses on education, training, and steps towards employment. Everyone is now getting help in planning for an independent future, not just those who were work-tested because of the age of their children.

The results for sole parent families speak for themselves. In June 1999, 102,842 working age sole parents were claiming the DPB. The number is now down to 97,882, despite increasing numbers of women of childbearing age. The proportion of sole parents leaving benefit for work has increased from 27% in February 1997 to 42% in February 2005.

Jobs Jolt

The Jobs Jolt package of initiatives, which we announced in August 2003, was designed improve the matching of job seekers to employment vacancies. This has included partnerships with industries that are facing skill shortages and a mobile employment services to reach people in isolated rural areas.

Sickness and Invalids' Benefits Strategy

In April last year we launched a new Sickness and Invalids' Benefits Strategy. The growth in the number of people relying on a benefit due to disabilities or ill health has become single biggest issue in welfare in every country in the world. In 2003, an OECD review of disability policies across 20 member countries concluded that “no single country in this review can be said to have a particularly successful policy for disabled people”.

Growth in Sickness and Invalids' Benefits has been underway in New Zealand for the past three decades. Approximately half the growth is due to population ageing, population growth, and the rise in the age of eligibility for New Zealand Superannuation from 60 to 65. Other factors are the increase in diagnosis of mental health conditions and the community treatment of people with such conditions, and increasing recognition of disorders like stress and depression.

Nonetheless, we simply can’t afford – fiscally or in terms of wasted human potential – to have these numbers continue to mount up. Our Sickness and Invalids Benefit Strategy recognises that, in the past, we’ve too often assumed people receiving the Sickness and Invalids Benefits weren’t able to make a contribution to the economy.

A New Service for Sickness and Invalid's Benefit Recipients, piloted last year, is now being rolled out in regions across the country. This includes enhanced case management; addressing medical needs; assistance to employers; and tailored career services and skills identification

The New Service is already achieving outcomes. For the first time, we are gaining employment for people who, in the past, would not have been considered part of the workforce. 3,445 more working-age clients left the Sickness and Invalid’s Benefits during June and December 2004 than over the same months in 2003. Enhanced Case Management has also seen an increase in declared earnings while receiving benefit; this means more clients are working and earning money.

The Overall Picture

We need to maintain the momentum of these reforms, and continue to do better for these groups. But it’s important that we recognise our successes as well as our challenges. We have, over the last five years, managed to reverse the trend towards an ever-greater proportion of the working-age population relying on a benefit. The total number of working age New Zealanders on all benefits has reduced by 80,000 since 1999, a 20 per cent reduction.

Overall, two million New Zealanders are now in paid employment, around 260,000 more than when we took office, and, at 3.9 per cent, New Zealand's unemployment rate is amongst the lowest in the developed world.

WORKING FOR FAMILIES

That’s no reason for complacency. We need to seize the opportunity that this strong economic environment gives us, and capitalise on it in a way that locks in prosperity and low rates of benefit dependence for a generation or more. That’s what the Future Directions programme, which forms the core of work emanating from Pathways to Opportunity, is all about.

The first phase of this, Working for Families, represents the biggest redistribution of income to people on low incomes in over 30 years and the biggest offensive on child poverty New Zealand has seen for decades.

By April 2007, it will deliver over $1.1 billion a year in extra assistance to New Zealand’s low-and-middle income families. 61% of all families will be better off by an average of $66 a week. The biggest winners will be families earning between $25,000 and $45,000, who will make average gains of around $100 a week.

Working for Families will go a long way towards ensuring families have the resources to meet the challenges of daily life. Using a poverty threshold of 60% of 1998 household median income adjusted for inflation, Working for Families is forecast to lead to about a 30% reduction in child poverty in the next three years.

Working for Families provides initiatives like the new In-Work Payment to ‘make work pay’ for low income families. The package provides the direct financial incentives that make moving off a benefit into employment financially worthwhile.

It’s worth noting that we couldn’t have done this through across-the-board tax cuts. A family earning $55,000 a year with four children would gain only $39 dollars a week even if tax rates were slashed to 20 per cent. Working for Families will provide that same family with an extra $70 dollars per week from 1 April next year, building to nearly $110 per week on 1 April 2006 and nearly $150 a week from 1 April 2007. Direct assistance ensures that the money goes were it is most needed.


THE SINGLE CORE BENEFIT AND THE NEW SERVICE MODEL

The Single Core Benefit

The second phase of Future Directions is the move to a Single Core Benefit and a New Service Model. These reforms reflect the culmination of all our work following on from Pathways to Opportunity. They send a clear message that we are increasing opportunities and support for all beneficiaries who are able to work. They also increase flexibility in the provision of active labour market programmes and support in the transition to work.

As I said earlier, New Zealand’s social assistance system was first designed in the 1930s. Adjustments, refinements, and additions made over the following years have left us with a complex system, with too many layers and administrative requirements.

In 2007, we are going to introduce New Zealand’s biggest and most positive social assistance reform since our system was designed almost 70 years ago.

The Single Core Benefit will remove the current raft of entitlements, categories, and administrative requirements.

It will roll seven existing benefits into one, with add-on assistance for things like housing and childcare. Case managers, who currently spend about 70% of their time on income support processing, will have the time and resources to provide targeted employment assistance focused on work for everyone who is able.

New Zealand’s social welfare system will always provide for people in need. No one will get less as a result of the Single Core Benefit. But the spotlight will shift from people’s barriers to work to their potential to work.

The Single Core Benefit rates will be based on your family situation – whether you’re single, or in a couple, and whether you have children. You will get the same rate regardless of the reason you’re on a benefit, but there will be add-ons to support people with higher costs because of things like accommodation, childcare, or disability.

Instead of paying people a higher rate of benefit if they demonstrate their incapacity to work, we are shifting the basis of extra support for people with ill health or disability to meeting extra costs, both in and out of work. This payment will incorporate Disability Allowance, which already provides some help in this area.

Two Streams

Everyone on the Single Core Benefit will be assigned to one of two streams, based on the two broad sets of outcomes that they can achieve: a rapid return to full-time work; or work, development and preparation for those– like sole parents caring for young children – balancing a range of responsibilities and goals that may take full-time work off the short-term agenda, but who can plan for employment in the future.

A few, including some people experiencing ill health or disability, may not be able to participate in paid employment.

The New Service Model


The Single Core Benefit will be complemented by a new service model across all benefit recipients with a greater emphasis on the right job at the right time, right from the start.

This will build on the success of initiatives such as the WRK4U seminar, which has reduced the number of people coming onto the unemployment benefit by up to 20%, by providing links to work before granting a benefit.

The new benefit system will focus on work outcomes for all beneficiaries, not just the 20 percent of beneficiaries on an Unemployment Benefit.

Work and Income is currently trialling a new service model in 11 locations around the country. The trial will pave the way for a smooth implementation of the Single Core Benefit.

NEXT STEPS


The Future Directions programme represents a major undertaking and a fundamental change in the area of income support. But it’s by no means our only area of focus in the Social Development portfolio. In fact, the focus of the Ministry of Social Development is now less on income support, and more on the wider issues involved in ensuring we have strong families and communities that function well. Let me give four quick examples

The earliest years lay the foundations for a child’s future wellbeing and whether they are able to maximise their potential. We are leading the development of a six-year strategy to improve outcomes for children by providing services and support for parents, families and communities in raising their young children.

It will build on the recent government investment in our children and families made through early childhood education, social assistance and health areas.
We have been adapting our Employment Strategy to take into account the changed environment. We are broadening its focus of to cover not only getting more people into work, but developing better quality jobs, and helping businesses and workers lift their productivity - helping them to work smarter, rather than necessarily harder or for longer hours.

We aim to ensure going to work is a real choice for all New Zealanders – men and women - and affordable, quality childcare is crucial to achieving this. We have doubled our investment in childcare subsidies in the last five years and we intend to do much more in the next three years.

Our aim is to provide practical universal childcare so that all men and women have real choices in the workforce. We also recognise the importance of education for young children, not just care. From 1 July 2007, all 3 and 4 year old children will be able to attend community-based, teacher-led early childhood education services at no cost for up to 20 hours per week.

Family violence is one of the most pressing issues we face as a country. Every year, 12 women and 10 children die in New Zealand as a direct result of family violence – this cannot be tolerated in our society. Since the 2002 publication of Te Rito – New Zealand's family violence prevention strategy – we have made significant progress in addressing the issue of family violence. Last week we took this forward another step with the launch of a programme that will see Work and Income case managers trained to better identify and support families affected by violence. Referral processes will be streamlined to make sure clients can more easily access community-based violence prevention services

CONCLUSION

The key point I would like to leave with you today is that technological, social and economic change is requiring us to rethink and renew the role of the welfare state. In these increasingly uncertain times, the welfare state is becoming more and not less relevant; a renewed welfare state is a necessity to meeting the challenges of a global knowledge economy.

Labour is committed to building a society in the future in which social outcomes continue to improve. A society characterised by opportunity for all to participate and achieve their potential.

Only by linking social and economic policy and taking a development approach, one that allows a more nimble response to changing circumstance, can we ensure that New Zealanders have the opportunities for paid employment and so to benefit from the knowledge society.

ENDS

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