Forecast surplus of $1b from drop in welfare

The Government's forecast surplus for the coming year was a result of a $1 billion drop in welfare spending.

That was one of the key messages of Finance Minister Bill English who was in Christchurch yesterday selling the Budget message of continued restraint in Government spending.

English told an audience of business people that in 2010 the Government had expected to be spending $11.5b on welfare this year.

However in following Budgets it trimmed the forecasts and this coming year it would be spending about $10.5b.

"The welfare bill is going down and going down faster than we expected.

"That's why we've got a surplus because over that four years the welfare bill for this year - because of policy change and a little bit because of faster economic growth but not much - has dropped by $1b."

The Government forecast in Budget 2014 a surplus for the June 2015 year of $372 million.

English said governments in the past had been passive on these costs but National had tightened up the system and the expectations of people on welfare.

It got experts to work out what the 290,000 people on welfare would cost in the long run.

Their total liability was $76b. Apart from superannuation it was one of the big costs that underpinned the tax bill.

Two thirds of the liability came from people who first got a benefit under the age of 20. "So it confirms what grandma told you. "Don't let those young people get off the rails because when they do it's very expensive."

The experts told the Government that if a person got a benefit once it made them much more likely to get a benefit again. If a young woman under 20 with a child went on a benefit the average length of stay on the benefit was 20 years.

"That's expensive, very expensive," English said.

A couple of years ago the Government put a supervising adult with the 4600 mostly young women under 20 with a child who were on a benefit. They typically had little education and lived in old, cold houses and had been left to sink or swim on their own.

That number had now shrunk by 40 per cent to 2600.

"And that's going to save us hundreds of millions."

The Press