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A Recipe For A Successful Welfare System

Weekly Column by Dr Muriel Newman

I would like to share with you ACT's vision for welfare, outlining why reform of New Zealand's welfare system is fundamental to creating a prosperous society that is based on individual responsibility.

The reality is that our entrenched Welfare state has now changed so much from that conceived by its creators, that without a completely new welfare philosophy, we simply cannot re-build a society of strong families, high average incomes, low crime, quality health and education services, that only 40 years ago made us the world's third most prosperous nation.

When the welfare state was created in 1940, we had just experienced a severe depression with real hardship. New Zealanders overwhelmingly voted for a vision of a society based on compassion for those, who for no fault of their own, had no income, no job, and couldn't pay for basic health services. In 1951, there were 29,601 New Zealanders on benefits. Paying for this were 716,000 full time workers. There was no long term unemployment, no DPB. The architects of the Welfare state had made it clear: Welfare was not a lifetime right. Fundamental to its sustainability, was the nation's ability to afford it. For 20 years, the numbers of working age beneficiaries remained small in relation to the full time work force who were paying for it. But from 1970, New Zealand began to change, slowly, steadily, and irreversibly, and at such cost to so many. In swept the Labour Government: the DPB was born, benefit levels were lifted, and new categories of benefit were created.

As a result, the numbers of New Zealanders seduced into the low income - 'here's money for no work' philosophy - grew and grew. Until this time, anyone unemployed was known by name by the Labour Department. There were jobs; there simply was no long-term unemployment. And fathers who deserted their wives and families were chased by the Justice Department, and made to face up to their responsibilities.

Today, there are 400,000 working age adults supported by benefits. Of those, 111,000 have been there for over 5 years. What have we done to our nation? In 1970, 36,000 beneficiaries were supported by 1 million full time workers Only 30 years later, 400,000 beneficiaries are supported by one and a half million full time workers.

Taking a conservative view and leaving out the partners on benefits, the 30-year dependency growth is staggering. In 1970, there were 28 fulltime workers for each full time benefit. Today, there are 4 fulltime workers for each full time benefit. If we look at the bigger picture, paying for 450,000 pensions, and 400,000 benefits - that's 950,000 adults - are one and a half million fulltime workers and 400,000 part timers. One and a half million fulltime workers to 950,000 on state incomes - that's around two people on a state benefit or pension to every three full time workers.

No nation, with this level of state dependency to fund by taxing a small workforce, can grow as fast as, or faster than its competitors. Of the $40 billion a year spent by this government, $14 billion goes to the welfare department on benefits and pensions.

As a Nation, we simply cannot hope to have the lower tax rates, high educational achievements, leading health services, strong families, and low crime rates, that we aspire to, when our welfare system prevents hundreds of thousands of working age Kiwis from contributing through the workforce.

The government's response has been to take a 'soft' approach to welfare - essentially removing the requirement for able-bodied beneficiaries to need to find work. Their forecasts show that all benefits - Unemployment, DPB, Invalid and Sickness Benefits - will continue to rise. Yet overwhelmingly, research here and overseas shows across all social indicators, that adults and children who are dependent on a benefit in the long term fail to do as well as those who work; and the human cost is considerable.

I recently asked the Minster of Justice how many benefits were suspended or cancelled due to imprisonment. He replied that with regard to a prison population of 6,000 inmates, some 4,600 benefits were suspended due to imprisonment. In other words, out of New Zealand's 2.8 million adult population, 6,000 have committed a crime serious enough to be sentenced to prison, and 60% of those came from the beneficiary population of around 400,000. These very serious statistics must however, be taken in the context of the fact that the great majority of the people on benefits are good New Zealanders, who want to work, and who are battling hard to raise their children well - often without much help and support.

I've been on a benefit and I can tell you that it is not easy - but then neither is life. Life is tough, and those on these benefits face a harsher day-to-day existence than many. But not necessarily harsher than many hard working New Zealanders on low incomes, where mum and dad hold down basic jobs and struggle day to day to put food on the table, clothe the kids and pay the bills. And they have to work so hard to keep their heads above water that I find it difficult to understand how we can accept as a nation, that it is OK that in our country we can have a family working long hours on $20,000 a year, while next door we pay a working age person the same, and ask for nothing in return - nothing.

What sort of nation have we become? We are born to work. Work is a fundamental part of who we are. Work brings meaning and purpose to our days. Work makes us feel important, needed by our employers and colleagues. To give people money for nothing - so they can waste their days and their lives - is wrong. It sends a message to working age beneficiaries that society thinks so little of them that as long as they are tossed a pittance they can then be forgotten. Well I say that's not good enough. It's an indignity to hundreds of thousands of New Zealanders and we simply have to do better.

That is why ACT wants to overhaul the welfare system, and we have three major initiatives that will help to do just that. But I need to state, first and foremost, that in order to turnaround the present and future bleak welfare statistics, it is essential to put in place economic strategies that will lower taxes and cut red tape to create growth of over 4%. Growth is fundamental to creating the real jobs that are necessary to get our nation working.

The first of ACT's Welfare proposals is to introduce maximum life time limits to the DPB and the Unemployment Benefit, of 5 years. This includes a maximum spell of two years for any one continuous period on these benefits. This policy will be accompanied by guaranteed job placements for those who reach the time limit, with a small discretionary exemption for Regional Commissioners.

Extra childcare subsidies, intense individual placement support, and assistance with relocation expenses will all be available if needed. Secondly, all Unemployment and Sole Parent Beneficiaries who can work, will be required to participate in individually designed 40 hour a week programmes of work, training or organised job search - activities designed to improve their chances of getting a good job. As well, they will develop the habits, skills and disciplines needed in the workforce. Further, in line with the realities of the workforce, if they don't turn up or don't comply, they will not be paid.

This will initially involve around 200,000 people including 150,000 on the Unemployment Benefit, and 50,000 on the Sole Parent Benefit whose children are of school age.This move will fundamentally change the expectations of the welfare system for the able-bodied, re-establishing benefits as temporary financial support that must be earned.

Thirdly, ACT will not pay out the DPB to women who do not name the father of their child. It is extraordinary today that of 110,000 sole parents on the DPB, some 16,000 women say they cannot or will not name the father, particularly in this day and age where paternity testing through DNA hair samples is a simple and inexpensive procedure.

Again, ACT will provide a limited discretionary power with the Chief Executive of the Welfare Department, but we will not accept the increasing numbers of fathers who are either shirking their responsibilities, colluding with the mothers for financial advantage or who are being prevented by the mother from providing fatherly support to their children.

Those, Ladies and Gentlemen are three ACT welfare positions that, hand in hand with lowering taxes and cutting red tape, to attract investment and grow our economy, will re-create welfare in New Zealand as the temporary safety net that its creators intended. ACT's vision of society and welfare in New Zealand is so different from that of the government. Labour believes that welfare is a life-long right, and their policies are designed to deliver more and more working age New Zealanders onto the benefit system. ACT believes that the economic and welfare policies, that we are proposing will deliver to New Zealand: * Over 4% growth creating tens of thousands of real jobs; * A huge reduction in the numbers of able-bodied working age beneficiaries as people move back into the workforce with the eventual elimination of long term dependency; * The provision of dignity and organised days for those who still need benefit support.

It is an unashamedly tough-love approach to welfare, helping people to help themselves. We will not cut benefit payment rates, but we will place big expectations on working age beneficiaries who can work to take personal responsibility for their lives, their livelihoods and their future.

This policy will send the clear message that welfare is meant to provide temporary help in times of need; those who deserve help will get it, but in return, they will have the same 40 hour work week as the rest of adult society.

People who are in a position to work will no longer be paid to do nothing, and as a result, tens of thousands of our poorest New Zealanders will regain control of their own future through work and higher incomes. This strategy will work. It has produced unprecedented results overseas. But be assured, this is a New Zealand policy created for New Zealanders.

ACT's vision of welfare is of a truly compassionate system that gives people a hand up to work, independence and a better future. That is why I am so passionate about ACT. ACT is the only party that places the future of our poorest, and the children of our poorest, as our highest priority. We are the only party that has the plan to empower all New Zealanders to pursue success in their own way and in so doing help transform this country into one of the most prosperous nations on earth. Welfare reform is at the heart of that plan and I am privileged to have had the opportunity to share our programme with you.

Dr Muriel Newman, MP for ACT New Zealand, writes a weekly opinion piece on topical issues for a number of community newspapers. You are welcome to forward this column to anyone you think may be interested.

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