The state of welfare: beneficiaries coming off quicker, costing more

Social Development Minister Anne Tolley has released the latest valuation of New Zealand's welfare liability.

Social Development Minister Anne Tolley has released the latest valuation of New Zealand's welfare liability.

Welfare reforms and ministry management have slashed a collective 1.3 million years off the time beneficiaries are expected to receive a benefit, over their working lifetime. 

But the estimated liability of the welfare system sits at $76 billion - $7.6b more than last year, according to the latest valuation of the future costs faced by the Ministry of Social Development. 

Much of that leap was due to economic factors outside the ministry's control - like low inflation, slightly higher unemployment rates and lower discount rates.

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And the Government's Child Material Hardship Package, which raised benefits for households with children by $25 a week and came into effect in April 2016, accounted for $1.5b. 

The estimated liability of the welfare system sits at $76 billion.
GRANT MATTHEW/FAIRFAX NZ

The estimated liability of the welfare system sits at $76 billion.

The valuation is the fifth such report, which looks at the behaviours of people receiving a benefit and the factors that influence their entry to the welfare system, in a bid to reduce welfare dependency. 

However, the report pointed to a $1.7b decrease in liability due to better than expected ministry performance, and since 2011 the total future welfare bill had reduced by $13.7b. 

Social Development Minister Anne Tolley said the ministry's focus on providing "targeted support and more intensive case management" for those most at risk of welfare dependence was responsible.

"Over $1 billion of this reduction in the last year is due to more sole parents moving off benefits, with fewer people returning to benefits making up most of the remaining reduction.

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"Both sole parents and young beneficiaries are now predicted to spend nearly three years less on a benefit compared to 2012."

Speaking from Japan, Prime Minister Bill English said despite the bigger up-front cost, raising benefits was a good investment. 

"We believe so - people need to have adequate income for their children. Even if that does push the long-term cost up a bit, it's for a good reason. 

"It means that at the same time though, we need to make sure that everyone who can be supported out of dependency, is supported effectively to get out of it."

The 2016 valuation found the number of people receiving the sole parent support benefit had dropped 24 per cent since mid 2013, and 17 per cent fewer children were living in benefit-dependent households. 

Youth welfare recipients - those aged 19 and under - were less likely to transition off the Youth Payment and onto the Sole Parent Payment and were more likely to stay off benefits; spending a projected average of 14 years on benefits, compared to 15.3 at the 2015 valuation. 

Interventions at the youth level had been prioritised to reduce welfare dependency, with that group accounting for 75 per cent of the total welfare liability. 

Mental health conditions increasing welfare burden

But mental health had been identified as the most common health condition among people receiving the Jobseeker or Supported Living Payment benefits. 

Mental health conditions were factors in 45 per cent of people receiving the relevant Jobseeker benefit, and 35 per cent on a supported living payment. 

"We find the average future lifetime cost is significantly higher for mental health clients than the average client with a health conditions or disability," the ministry's report writers said. 

That was an average of $33,000 higher for those on the jobseeker payment, and $52,000 for those on supported living. 

But that difference was not attributable the presence of mental illness itself. Rather, the valuation found that because mental illness tended to affect younger people, that in turn meant it was costing more. 

English said the actuarial data had not precipitated any new programmes of investment to be unveiled at next week's budget. 

"No, we'll just keep putting in more funding where we believe we can get some change.

"So we're pretty good at dealing with people who just lose their jobs, we're learning at how to be more effective with people with say, mild mental illness, or untreated mental illness, or mild disabilities." 

Social housing - welfare dependency overlap

This year was the first year Government analysts were able to include data from income related rent subsidies, to provide a picture of the welfare liability for people in social housing. 

Half of people in social housing were also receiving a main benefit. Of those not receiving any benefit, but living in social housing, a quarter were pensioners and a third were under 65 but had never received a benefit. 

While the new data was unable to point to any long-term expected trends, it did find 18-24 year-olds on a benefit with a social housing history, were twice as likely to have had an encounter with Child, Youth and Family as a child, twice as likely to have had a parent on a benefit for more than 80 per cent of their teen years and had a criminal conviction in the past. 

"Almost half of children who grow up in a benefit dependent household end up on a benefit before the age of 23, which is why we've invested millions in providing intensive support and training as well as help with study and childcare so sole parents can go into work," said Tolley. 

 - Stuff

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