Cost of beneficiaries $78b - report

KATE CHAPMAN
Last updated 15:23 12/09/2012

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The lifetime cost of current beneficiaries is more than $78 billion, a new report has found.

An actuarial valuation conducted as part of the Government's welfare reforms shows the average total cost of all who had received a working-age benefit in the year to June 30, 2011 was $78.1b.

Of that, $17.8b came from those who started out on the DPB, $19.1b from those on an invalid's benefit and $7.2b to those who were on a sickness benefit.

Just five per cent of the total cost, or $4b, was from those who started out on an unemployment benefit.

The evaluation took in the cost of payments to beneficiaries as well as the administration of the scheme and other payments such as childcare subsidies and employment interventions.

An unemployed 35-year-old who had already been on the benefit for a year as of last June, would cost an average $59,000 over their lifetime.

Someone in the same situation but on an invalid's benefit would cost an average $136,000.

The data will be used to inform government policy and to target schemes to help people move back into work.

The report was conducted by Taylor Fry and cost $800,000.

It follows on from the recommendation of the Welfare Working Group that an insurance approach be adopted for dealing with beneficiaries.

The Government has already announced stricter work testing for sole parent beneficiaries and sanctions and incentives to get young beneficiaries into work or training.

Taylor Fry found young people, particularly those aged 16 and 17, would on average cost more than other beneficiaries.

That was because they were less equipped for work and had more potential years to be on a benefit.

It also found that those who started out on an invalid's benefit were more likely to remain dependent on the state.

Social Development Paula Bennett said the figures backed up the Government's investment approach to welfare.

"Taxpayers spend $22m a day on welfare payments and want to know we're managing the needs of individuals as well as the costs of this system."

The higher cost of 16 and 17-year-olds was not a surprise and the real question was what the Government did now, she said.

"The system to this point has left many alone to stay for long long periods on welfare."

Welfare reforms would target getting those who could work into work.

"We can do much better than this."

TIMELINE OF CHANGES TO DATE:

March 2010 - Future Focus reforms announced, including unemployment beneficiaries having to reapply after a year on the dole, working testing sole parents whose youngest child is six and part-time work testing for sickness beneficiaries. April 2010 - Welfare Working Group team announced.

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February 2011 - Welfare Working Group report released.

May 2011 - Cabinet agreed to welfare reform programme.

Nov 2011 - National unveiled welfare reform as a major plank of its election campaign.

Feb 2012 - Government announced welfare legislation to be introduced.

March 2012  - Legislation allowing for the first round of welfare changes passed first reading.

July 2012 - The first round of welfare reforms passed into law.

August 2012 - The first changes came into force: payment cards for young beneficiaries and teen parents, youth service providers incentivised to get beneficiaries into work, education or training and the young people themselves are encourages to take budgeting and parenting courses. And Government announced beneficiaries with work expectations could lose their benefit if they failed, or refused to take, a drug test.

September 2012 - Social obligations for parent beneficiaries announced yesterday. Earlier this month it was announced benefits would be cut to those with outstanding arrest warrants. Next week the second tranche of the welfare reform legislation, overhauling benefit categories, is expected to be introduced into Parliament.

October 2012- Work obligations come into effect: people on the DPB, Widow's and Women Alone benefits will have to look for part-time work when their youngest child is five and full-time when that child is 14. Work and Income will also be able to direct people to prepare for work early and sole parents who have another child while on a benefit will have to look for work after that child is one.

July 2013 - The last of the welfare changes are expected to come into force.

- Fairfax Media

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