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Welfare reforms reduce taxpayer costs

Welfare reforms reduce taxpayer costs

Social Development Minister Paula Bennett has welcomed the latest valuation of the welfare system showing a significant reduction in the liability.

The June 2013 valuation shows the current lifetime liability[i] is $76.5 billion.

“Of the $10.3 billion reduction in liability[ii], $4.4 billion is due to Work and Income actively exceeding expectations by getting more people off benefit for longer, and less people coming onto benefit,” says Mrs Bennett.

“This translates to benefit payments being $180 million lower than expected for the year.”

Just over $1 billion of the $10.3 billion liability decrease is due to more sole parents going off benefit and fewer going on during the year.

“I hear from sole parents every week who say they’re really grateful for the support from Work and Income case managers; who are often the first to ask them what they want to do with their lives and then help them find work.”

“We provide childcare assistance, training, assistance with CVs, handling job interviews and help with the actual work search,” says Mrs Bennett.

The value in investing close to half a billion dollars in welfare reforms over the last two Budgets is evident in the results.

The two most significant work programmes led by the Minister of Social Development are welfare reform and the White Paper for Vulnerable Children.

“These work programmes are interlinked, if we don’t get things right for those vulnerable children, the chances are extremely high they will end up trapped on welfare later in life.”

The June 2013 valuation shows 62% of 30-39 year olds currently receiving benefits; first went on welfare as young people and constitute almost 80% of the total liability for this group because they’re long-term dependent.

“What’s really interesting; is that two thirds of people who went on benefit aged 16 or 17 also came to the attention of Child, Youth and Family as children and 90% lived in benefit dependent homes as children.”

While most people are supported by welfare for a short period of time, the long-term liability approach allows us to focus support clearly on those who are likely to be long-term dependent.

“Breaking the cycle of intergenerational welfare dependence is hard. Some children have grown up with parents, grandparents, aunts and uncles and cousins all relying on benefits.”

“Reliance on welfare is ingrained for many and we have to turn that around, but the good news is we can and we are doing just that.”

I spoke to a sole mum who got herself a job after more than twenty years on the DPB. Her grown up children were so inspired they went out and got work too and now they all earn more and have pride in themselves and each other.”

A third of the total liability is attributable to those who entered the welfare system as young people under the age of 18 or as teen parents.

A further 40 per cent is attributable to those who first went on welfare between 18 and 20 years.

Youth Services introduced in 2012 allows specialist providers to help young people meet clear obligations, manage their money and gain independence.

Early results in the valuation are showing higher rates of these young people going off and staying off benefit. Over the year, projected costs of supporting young people dropped by 21%.

The June 2012 total liability was $86.8 billion, compared with the June 2013 liability of $76.5 billion.

Of the reduction in the liability, $3.8 billion was due to changes to forecast inflation and discount rates.

For the full valuation report go to: www.msd.govt.nz

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