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    Essential Information on an Essential Issue

    Letter No.128

    31 July, 2000

    Social Services Minister Steve Maharey on Benefit Reform
    on the Single Benefit

    Social Services and Employment Minister Steve Maharey has announced that the government is working towards a single benefit for everyone on welfare except superannuitants. He hopes to have plans for a "universal benefit" finalised by 2002, or the final year of this term of government.

    The plans for a single benefit mean that all beneficiaries, except superannuitants, would receive the same benefit ... and then have the ability to earn a "top-up" by doing training, voluntary work or study that improves their chances of getting a full-time job. There will also be top-ups for personal circumstances, such as dependent children.

  • Finance Minister Michael Cullen first looked at the concept of a universal benefit when he was Social Welfare Minister in the last Labour government. Maharey says that his reasons for the reform are the same as Cullen's — the benefit system is too complex. He says his reforms will develop a simple system that rewards people who make the effort to become independent.

    Maharey: "We want to make sure the system is always one that encourages people to do something, rather than encourages them to stay on the dole. People wanting to get more money than provided by the core benefit would know they had to take on extra responsibilities, such as training or education, to earn it."

  • For Maharey, the introduction of a single benefit will be the final stage of his reforms of the welfare system. The first stage, for which legislation will be introduced in the next parliamentary session, will include:

    — replacing the community wage with an unemployment benefit and a separate non-work tested sickness benefit from 1 July 2001. This reduce the number of benefit categories from seven (within the community wage) to a total of five (within the two new benefits);

    — embodying work-test obligations in an individual "job seeker agreement" developed between the beneficiary and the Department of Work and Income from 1 July 2001;

    — encouraging participation in community activity, voluntary work or suitable training;

    — making unpaid community work a voluntary encouraged activity from 1 December 2000;

    — replacing the complicated graduated sanction regime with a single sanction for serious non-compliance from 1 July 2001;

    — repealing the provisions relating to the failed work-capacity assessment trial; and

    — increasing the income thresholds for eligibility to disability allowance from 1 January 2001.

  • The reinstatement of the unemployment benefit and a separate non-work-tested sickness benefit will spell the death of the community wage, and the work-for-the-dole scheme, introduced in 1998 by Peter McCardle. McCardle's scheme was part of the coalition government demands by NZ First, and it made work-testing compulsory for most beneficiaries — including single parents and people on sickness benefits — who faced sanctions if they failed to do "community work" in return for their benefits. Maharey says that, under his reforms, community work will not be imposed arbitrarily on every jobs seeker. Subsidised voluntary and community work will continue, but he anticipates that numbers will stay at about 13,000 people ... the same as now.

  • Maharey is adamant that the introduction of a single benefit will not affect the existing income of beneficiaries: "That's a cast-iron guarantee. This government certainly doesn't see the benefit cuts that were made in the 1990s under national as something that we would like to see happening again..."

    The planned changes will also see a greater flexibility for decisions available to the front-line staff Winz who will gain the power to waive stand-down periods and use discretion to make decisions based on each client's personal situation. This discretion will be operated within budgets given to the Winz Regional Commissioners.

    Sources — The Dominion 18 July 2000 "Universal benefits on cards for 2002" by NZPA; The Daily News 18 July 2000 "Universal benefit on way, says Maharey" by Tracy Watkins; The Dominion 19 July 2000 "Single benefit plans praised" by NZPA; The Dominion 20 July 2000 "Maharey outlines benefit changes"; The New Zealand Herald 20 July 2000 "Revamp will not cut benefits, govt promises" by Vernon Small. The New Zealand Herald editorial 21 July 2000 "Can a single benefit be made to work?"; Press Release 17 July 2000 "Delay in axing work for dole angers Greens — Sue Bradford".

    Whether giving more 'discretion' to frontline Winz staff under a single benefit system will actually get the money to poorer people is a moot point, according to Wellington welfare advocacy groups. Last weekend, the Wellington People's Centre and the Downtown Community Ministry released a report, entitled "Still Missing Out", which claims that Winz has not paid millions of dollars in benefits to households that are eligible.

    The report estimates 170,000 households may be entitled to the Special Benefit based on the amount they pay for accommodation. Only 11,000 households receive the payment now. It is estimated that the rest are owed more than $130m per year in benefit payments.

  • Recent information, obtained by the advocacy groups from Winz under the Official Information Act, shows that two out of every three beneficiary households receiving the Accommodation Supplement are missing out on their entitlement for a Special Benefit. The advocacy groups say that Winz has ignored government guidelines on these payments, and is not telling people of their entitlement — a move that is leaving the average beneficiary household short of $1180 a year.

    The report: "Instead of alleviating the poverty experienced by NZ's most disadvantaged households, the Department of Work and Income has been significantly contributing to it. They have helped widen — not to close — the gaps..."

    "Still Missing Out: how welfare entitlement is denied" report prepared by Graham Howell, David Simmers and Kevin Hackwell, is available from the Downtown Community Ministry phone 04 384 7699 email

  • This week's Listener contains a special report by Gordon Campbell on the Winz Special Benefit payments. It shows that the numbers being granted the benefit have fallen away dramatically over the last five years. In 1995, 37,077 people were receiving the special benefit (at a cost of $77m), yet by January 2000 the number had dropped to 10,915 — a decline of 70.6% (and the cost has dropped to $29m). This has happened despite an increase in the numbers of beneficiaries by 10%, and without any major rule changes to restrict access to the Special Benefit.

    The Listener speculates that the government may be liable for retrospective payments to beneficiaries, dating back to 1995, with the potential claims reaching a billion dollars. The Listener: "As the winebox saga has shown, companies will fight tooth and nail to extract every ounce of legal entitlements owed them under the tax laws — and it is difficult to see why the poor should forgo the opportunity to seek payments to which they are entitled, and need."

  • Winz rejects the advocacy groups' report and says it has done nothing wrong. Winz National Commissioner Ray Smith says the Special Benefit payments are "highly discretionary' and not an entitlement. Smith: "It is not simply that there is a deficiency of income and therefore there is qualification, because it is not an entitlement as such." Smith says that the advocacy groups have given the Special Benefit "core benefit status" instead of looking at it as a third-tier benefit designed to alleviate temporary hardship.

  • Social Services Minister Steve Maharey is taking the advocacy groups' allegations seriously, and is calling for a second opinion on the Still Missing Out report. He will be asking the Social Policy Ministry and the Labour Department to clarify the status of the Special Benefit and determine what procedures he needs to follow before issuing any new instructions to frontline Work and Income staff.
    Sources — TV1 and TV3 News 30 July 2000; The Dominion 31 July 2000 "Millions withheld from poor, say reports" by Leah Hines; "Still Missing Out: how welfare entitlement is denied" report prepared by Graham Howell, David Simmers and Kevin Hackwell, Downtown Community Ministry; Listener 5 August 2000 "Rankin's Next Crisis" by Gordon Campbell.

    The Southern Institute of Technology (SIT) has launched a plan that will see students fully subsidised for their course fees. The fees will still be levied under the plan, but paid for by local community funds ... in effect, giving every student at the SIT a full-fee scholarship.

    SIT chief executive Penny Simmonds last week outlined the concept to a meeting of Project Southland, a lobby group of Southland business and political leaders. SIT wants $11.2m from community funding groups over three years to establish the scheme, after which the programme will become self-funding. Some of this money will be used in building a new arts centre to cope with the expected influx of students — projected to rise by 1,100 after three years.

  • Simmonds argues that the Southland community can expect high returns, in terms of local economic development, from an influx of students into the area. The Institute calculates that the students would inject an additional $19m into the Southland economy in its first year and up to $30m after three years. The economic impact of having the students in Southland is based on the "multiplier effect" of the way their money is spent in the community on accommodation, transport, and entertainment.

    BNZ chief economist Tony Alexander told the Southland Times that the SIT has used conservative figures in these calculations in the economic impact of a fee replacement scheme. He believes a multiplier figure of 2 or 2.5 could be used in the institute's case.

  • Local business-people have embraced the proposal. Chamber of Commerce president Wayne Affleck says it is a great concept. Afleck: "The proposition to optimise the SIT has got to be the ultimate dream. Students and new graduates would be a huge resource for the business community to use for developing new ideas and research..."

    The Community Trust of Southland says it has not received any official application for funding yet, and it would need to consider issues such as the commercial impact on the region, fairness to all southern students at tertiary institutions, and the Trust's existing bursary and scholarship schemes. The Invercargill Licensing Trust seems enthusiastic about the proposal, describing it as a "win-win" situation for the local community.

    Sources — The Daily News 25 July 2000 "Fee-free scheme for Southland" by NZPA; Southland Times INL Stuff Website 26 July 2000 "High Returns promised on tuition deal"; "Bank economist classifies institute stats as moderate"; "Free plan delights students" by Julie Asher

    Skill Shortages. NZ's tertiary institutions are only providing half the trained social workers that this country needs, adding to a national shortage, according to the Department of Child, Youth and Family Services. Chief social worker Mike Doolan told parliament's social services select committee last week that CYFS is losing a "worrying number" of young and qualified staff overseas. He says that NZ needs about 800 newly qualified social workers each year, but the tertiary institutions are only turning out about 400. Doolan: "As an employer, the shortage of graduates is a huge problem for us..."

  • The CYFS is presently staffed by a mixture of qualified and unqualified (but experienced) workers. Figures released to The Dominion show that less than 40% of its front-line staff have the level B or level six social work qualification that the CYFS wants its staff to have. About 40% have no tertiary education.

    The department says that the provinces and rural areas in particular have problems attracting graduates. In these cases, managers have to recruit applicants who have relevant life experience and other required attributes who are also prepared to study towards an appropriate qualification.

    Source — The Dominion 22 July 2000 "Social worker shortfall blamed on training gap" by Leah Haines

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