Welfare reforms are expected to save up to $1.6 billion over four years.
Social Development Minister Paula Bennett yesterday introduced the second round of reform legislation.
The Social Security (Benefit Categories and Work Focus) Amendment Bill replaces the current benefits with three new categories: Jobseeker Support, Sole Parent Support and the Supported Living Payment.
It also includes provisions allowing payments to be cut if beneficiaries fail a drug test, have an outstanding arrest warrant, or if parents who do not meet "social obligations" for getting their children into health and education programmes.
Labour MP Jacinda Ardern said the bill was a regurgitation of previously announced measures.
"It's time the minister faced the big issues: job creation, skills and training, genuine efforts to assist people from wellness to work, and access to childcare."
What is described as an investment approach - based on an insurance model - is expected to save between $900 million and $1.6 billion by June 2017, with 44,000 people expected to come off benefits and up to 6000 working part-time.
The original estimate put the savings at $1b; an actuarial report last week put the total lifetime cost of current beneficiaries at $78b.
Mrs Bennett said the savings would give the Government scope to spend more upfront to get people into work.
The welfare reforms package will cost $520m, $287.5m of which has already been allocated on rolling out targeted youth services, for childcare assistance to help parents being sent back to work and to fund 155 Work and Income staffers.
Negotiations are under way for Budget 2013.
Mrs Bennett said the "active work-based approach" to the welfare system was part of National's election promise.
"Jobseeker Support will include those capable of work and those who are temporarily exempt, but will soon be able to work."
Those currently on a sickness benefit will be classed as Jobseekers but may have exemptions, or part-time, work expectations.
There will also be stronger work preparation provisions and all beneficiaries, and their partners, will face assessments related to their work ability.
The first round of welfare reforms became law in July and began coming into effect last month.
From October, beneficiary parents will be expected to look for work when their children are over 14 and part-time work once they turn five.
Those who have additional baby while on a benefit will have to be work ready after 12 months.
The previous changes also introduced a payment card for young beneficiaries, including teen parents, which sees their expenses paid directly.
The new categories and what they cover:
Jobseeker Support (135,100 people); unemployment benefit, sickness benefit; DPB, Women Alone, and widow's beneficiaries with children over 14.
Sole Parent Support (87,100 people); DPB, Women Alone, widow's beneficiaries with children under 14. Those with kids over five will be expected to work part-time.
Supported Living Payment (91,300 people); invalid's benefit and DPB care of sick and infirm.
Youth Payment (1200 people); for 16 and 17-year-olds with no children.
Young Parent Payment (1500 people); for parents aged 16 to 18.
- © Fairfax NZ News
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