Welfare Reform Needed Now

Speech to ACT Waikato/Bay of Plenty Regional Conference; Hamilton; Saturday September 4, 2004.

Last month in Parliament ACT hosted a symposium on the need for welfare reform. Bringing together a wide range of speakers from around the world, from academics, legislators, commentators, and providers, as well as victims of our welfare state, we explored the need for change.

As a party with a clear and positive vision for a more hopeful and prosperous New Zealand, ACT has always supported welfare reform as a means of strengthening the family and valuing work.

Today I would like to take this opportunity to share with you the case for welfare reform. To do that, it is necessary to touch on the past, examine the present and then to look ahead at future possibilities.

The welfare system that arose out of New Zealand's pioneering history, was based on three principles:

Helping people to help themselves

Encouraging families to take responsibility for relatives in need

Expecting a contribution in return for welfare assistance

For 130 years, from 1840 to 1970, welfare worked well. In 1970, the ratio of full-time workers to each person on a full-time benefit was 28 to one. Today, that ratio is four to one.

The welfare dependency problem has arisen largely as a result of three well-intentioned recommendations of the 1972 Royal Commission on Social Security. Enacted by the Kirk Labour Government, they undermined the core values of the welfare system, changing it from being a safety net and a hand-up to work, into a trap.

The first was to increase the value of benefits to a level equivalent to that of a working wage. This removed the age-old incentive that, to get ahead, you had to have a job.

The second was to establish welfare as a universal right, abolishing the commonsense discretion that had always existed in the welfare system that had traditionally enabled society to penalise indolence and other irresponsible behaviour. In effect, this meant that welfare officers could no longer give an alcoholic food and shelter. Instead they were required to give him cash, so that he could drink himself to death!

The third change was to introduce a sole parent benefit, the Domestic Purposes Benefit. Providing a secure income for a parent with children, who chooses to separate from their partner, or for a single parent who chooses to have another child, has seriously eroded marriage and the family.

As a result of these changes, there has been a ten-fold increase in welfare dependency in just 30 years. From fewer than 35,000 beneficiaries right up until the early 1970s, there are now over 350,000 today.

In 1973, 31 years ago, we had 7,000 on Sickness Benefits. Today we have 43,000 - over six times as many.

In 1973, 31 years ago, we had 9,000 Invalid beneficiaries. Today we have 72,000, eight times as many.

In 1973, 31 years ago, we had 12,000 sole parents. Today we have 112,000, nine times as many.

If you believe Labour, you would think that unemployment is no longer a problem. Yet, in 1973 - 31 years ago - there were fewer than 2,000 people unemployed.

Today there are more than 40 times as many.

But those numbers only tell part of the story.

Did you know that one in six sole mothers cannot or will not name the father of their child? That's over 18,000 women - a 50 percent increase in the time that Labour has been in power.

Not only are those mothers denying children the right to know their father, but they are protecting those fathers from having to front up to the personal and financial responsibility of raising a child.

And did you know that New Zealand is so sick - has been hit by such an epidemic - that there has been a 30 percent explosion in the total number of adults supported by the Invalids and Sickness Benefits since Labour became government?

Then there are the children. The consequences of this increase in welfare dependency on children has been devastating. At a time when the research is unequivocal, that long-term welfare dependency and sole parenthood have been identified as serious risk factors for children - damaging their life chances - more than a quarter of a million New Zealand children now live in families supported by benefits. That's one child in three. One in four live in sole parent families.

But for Maori, who make up 13 percent of the population, the situation is far worse. Not only are a half of all Maori children being raised in families on welfare, but if present tends continue, by the year 2010 three quarters of all Maori babies will be born into families without a father.

Largely as a result of this continual decline of the family, Maori are now over-represented in all of our negative social statistics: in child abuse, where 40 percent of all of the children in the care of the State child welfare agency are Maori; in crime, where 50 percent of all prisoners are Maori; in poor health; educational failure; teenage pregnancy; youth suicide; substance abuse, and all categories of benefit dependency. At every level, welfare is destroying Maori, and dis-located Maori are now an increasing cost-burden on our society.

If pensions are included in our considerations, welfare accounts for more than a third of all Government spending, and is one of the main reasons that New Zealand's living standards have slipped from third in the OECD to 20th, lagging behind Australia's by around 30 percent.

You might ask what the Labour Government is doing to turn this situation around?

The honest answer is that while they have talked tough and thrown more money at the problem, the changes they have made to the legislation have fundamentally weakened the system. Those changes include scrapping work for the dole, softening sickness benefit eligibility, and expanding the DPB to sole parents until their youngest child is 18, with no official requirement for them to take on a job.

As a result of these changes, Treasury have projected that - in spite of our strong economy - welfare numbers will grow by more than 24,000 over the next three years, and when the economy turns down - as it inevitably will - the dependency problem New Zealand will face will escalate.

In public policy, as in other areas of life, you get what you pay for.

If welfare pays women to have babies they don't really want, then you will get an epidemic of abused children.

And if welfare pays families to split apart, then we shouldn't be surprised to see an escalation in family breakdown with all of the disastrous consequences.

If welfare pays people to do nothing then that's what they will do for 10, 15 or 20 years.

On the bright side, the fact that the problems of welfare dependency that New Zealand faces are largely caused by poor incentives in bad legislation - rather than some fundamental decline in our core values as a society - is a cause of great optimism. The reason is, that with good legislation, the situation can be readily turned around.

But to do that, New Zealand needs a change in government. If we have a Don Brash-led National Government after the 2005 election, with ACT as a coalition partner, then welfare reform would become a priority.

Welfare reform is an issue I am passionate about - not only in an intellectual and political sense - but because in the mid 1980's, after 18 years of marriage, I found myself as a sole mother with two young children on welfare. I've lived the day-to-day existence. I've seen the wasted lives. And I've experienced the seductive grip of a system that begins by helping, but ends by destroying self-esteem, confidence and hope. I escaped, but many others did not.

So, what is the answer?

In my considered view, the answer is a system that integrates some of the good ideas developed by Professor Peter Saunders from the Australian-based Centre for Independent Studies, with the successes of the US welfare reform programmes, lacing them together with some good old-fashioned Kiwi commonsense.

As a first step, I would propose that we require everyone on welfare to reapply for their benefit in order to review their eligibility and re-assess their needs. Experience suggests that such a move could reduce benefit numbers by up to a quarter - saving billions of dollars - as undeserving and fraudulent recipients disappear from welfare rolls.

A second step would be to introduce a six-month time limit on welfare for the able-bodied. This would involve providing a six-month window of opportunity where the unemployed are free to find work in their own way. If however, they haven't found a job at the end of those six months, they would then be required to sign on to a full-time work experience programme.

That third step - involving a full-time individualised work experience programme - is designed to support people, who have not been able to find work on their own, to become work ready. Requiring participants to engage in the programme for 40-hours-a-week would enable them to develop the habits, skills and disciplines of the workforce.

Crucial in this process is the need to provide participants with professional help and support to overcome the difficulties they face in finding a job - whether it's unfamiliarity and fear, or physical problems with childcare, transport, financial planning help, relocation costs and so on - it is essential that we invest in beneficiaries to help them overcome their individual barriers to employment.

While these three steps would go a long way toward ending the long-term benefit dependency cycle, which has so debilitated New Zealand, more needs to be done to turn around the worrying trend in fatherlessness.

To reduce the growing rate of fatherlessness - which sees more children in New Zealand today lose a father every three months as a result of family breakdown, than lost a father during the entire period of the Second World War - family law must be reformed: our outdated and devastatingly unfair child support laws need to be overhauled, and shared parenting introduced as a priority. Just as two parents are equal before a relationship breaks down, so too under shared parenting they are equal afterwards - unless one is proven to be unfit.

Under shared parenting, children who are the victims of family breakdown have the certainly of knowing that - once the dust settles - they will still have a mum and dad to love and support them on an ongoing basis.

Reforming welfare is, essentially, a process of liberation.

Firstly, liberating people from the dependency trap, and releasing their energy and creativity to enable them to achieve their potential in life.

Secondly, liberating the nation from the effects of a State-run system that debilitates and destroys people, into one that supports and empowers them into a future of contribution and independence.

And thirdly, welfare reform will liberate taxpayers from an overwhelming financial burden that keeps New Zealand poor, releasing them into a future of economic freedom and prosperity.

These are goals that are worth fighting for. That is my mission as a Member of Parliament.

ENDS

Dr Muriel Newman MP

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