Hon Anne Tolley

Minister for Social Development

28 January 2016

$12 billion reduction in benefit liability

Social Development Minister Anne Tolley has welcomed the latest benefit valuation which shows a $12 billion reduction over four years in the welfare system’s future lifetime cost, which equates to clients spending 900,000 fewer years on benefits over their working lifetimes, compared to pre-reform expectations.

“Welfare reforms have had a significant impact over the past few years in helping more people into work as well as providing substantial savings for the taxpayer,” Mrs Tolley says.

“The report says that over three quarters of the reduction in future years on benefits can be attributed to policy and operational changes.

“The June 2015 Taylor Fry valuation shows the impact Work and Income is able to make through working intensively with clients to overcome barriers to work, with a $2.2 billion reduction in liability in the year to June 2015, taking the total cost of the current benefit liability to $68.4 billion.

“Over half of this reduction in the last year relates to those receiving Sole Parent Support, with higher exit rates for those receiving Jobseeker Support and fewer people returning to benefits making up the remaining reduction.

“The valuation also identified an overstatement in the exit rates for Youth Payment clients under 19 published in the 2014 valuation. The 2015 report shows that the proportion not on benefits by 19 actually grew from 47 per cent in June 2012 to 53 per cent in June 2014, and now sits at 55 per cent.

“All regions have seen reductions to their liability, except Canterbury which has had very low unemployment, and with large numbers of people still going to the region coupled with a slowdown in the rebuild this year, has seen its liability rise marginally.

“Additional data from Child, Youth and Family (CYF) and Corrections has been included for the first time, giving a clearer picture of benefit dependence for those with CYF or criminal conviction histories.

“It shows that 38 per cent of beneficiaries under age 25 have CYF history, and their average liability is $47,000 higher than those without CYF history. The valuation also shows that the average liability of beneficiaries who have criminal convictions is $37,000 higher than those without criminal convictions.

“We have introduced a Bill to extend the Youth Service to support our young people for longer, focused on helping them into education, training and employment, and I’ve appointed an expert panel to lead a complete overhaul of CYF so that vulnerable children have the best chance of a successful and independent future.

“The valuation is an important tool for ensuring we are providing the right support to those who need it most, and that the support is working to help them lead successful lives.

“We have set a tough revised target as part of our Better Public Service (BPS) Results, to ensure we’re focused on improving outcomes for those receiving a benefit.”

The BPS Result 1 target is to reduce the total number of people receiving main benefits by 25 per cent (from 295,000 people in June 2014 to 220,000 in June 2018) and reduce the long-term cost of benefit dependence by $13 billion.

The full valuation report is available at: http://www.msd.govt.nz/about-msd-and-our-work/newsroom/media-releases/2016/2015-valuation-of-the-benefit-system-for-working-age-adults.html

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