ADDRESS TO THE SYDNEY INSTITUTE: FACES OF WELFARE – THE CASE FOR REFORM

Thank you ladies and gentlemen.

A child fidgets aimlessly in a classroom, his mind wandering off to other interests. He can hardly read, and just write. He has missed two days of school this week. He arrived without lunch, and was one of an increasing number for whom the school provided breakfast. This is the face of welfare.

A teenager passes most of his day at the local skateboard park. He left school as soon as he could, and hasn’t had a job for two years. His life is aimless. He has little prospects – and little hope. This is the face of welfare.

A young woman sits at the kitchen table. She has suffered episodic depression for a decade. Some days she is okay, able to go out, see her few friends and engage in life. But other days she just stays at home – alone and isolated. This too is the face of welfare.

An older man rests on a park bench. He lost his job five years ago, and hasn’t been able to re-join the workforce, despite many attempts. He has lost faith in the system – and is losing it in himself. He wants to contribute, but can’t. This is the face of welfare.

These are the faces of welfare: people not statistics; circumstances not systems.

There are many more of them: single parents struggling to raise children; carers looking after ailing partners or ageing parents; and the long term jobless struggling to maintain motivation to job search.

Like most of us, they aspire to the good life – a job, a sense of purpose, vibrant social networks and the opportunity to make a contribution to their family and loved ones.

These are some of the people that our welfare system let down. It neglects to insist that all children go to school regularly. It allows some young people to leave school without the skills to get a job. It places some people on a disability support pension, and then forgets about them. It ignores the plight of many older workers who feel left on the scrapheap.

Despite past reforms, our welfare system continues to let down many people. That is why we need to change it. Otherwise, these will remain the faces of welfare.

Almost a decade ago, I had the opportunity as Employment Minister to make some improvements to our social security arrangements. We introduced job capacity assessments; and we encouraged parents to return to work when their youngest child commenced school (while quarantining those already on the parenting payment).

At that time, welfare groups and the Opposition claimed thousands more would live under bridges. Now they claim the measures taken were enough to ensure sustainability.

And in Government, the Labor Party introduced measures, such as those effecting sole parents and applying for the Disability Support Pension, to address the system’s long term sustainability.

But deep down, everyone knows many challenges remain.

Indeed, the situation has become more urgent. The population is ageing, the workforce growth contracting, and the costs continuing to grow. It is time to revisit the issue.

Taking stock

The cornerstone of our approach to welfare reform is the Abbott Government’s strong commitment to maintaining a strong safety net for those who need help and cannot support themselves. But this comes hand in hand with our steadfast belief that the best form of welfare is a job.

The ageing of the population presents a fiscal challenge to Australia.

This makes it more important than ever to ensure that welfare spending is both sustainable and directed to those who genuinely need it.

The Government wants to ensure the welfare system encourages people to participate in work when they are of workforce age, and are able to do so, because the best form of welfare is a job and people are better off overall when they are active participants in our workforce.

Recent decades have seen substantial economic and social changes in Australian society; the structure of the economy and the labour market has changed, with unskilled work becoming increasingly scarce relative to skilled work which requires higher levels of education and training.

Societal norms have changed in relation to the workforce participation of women, working families, participation of people with disability and the needs of carers.

Therefore, it is important that we have the right balance of maximising incentives for workforce participation and self-provision while ensuring the adequacy of the safety net at the same time.

And it is important for the welfare system to remain socially sustainable and enable people to fully participate in society; the system must ensure that people who receive welfare payments and are able to work are supported to do so.

We need to ensure that the welfare system remains consistent with broader societal expectations to maintain community support and acceptance.

And the expectations that society has of people in receipt of welfare, the values that society has in terms of supporting those who are disadvantaged and the way the majority of society operates all have an important role to play in shaping our welfare arrangements.

There is a need to remove the unnecessary complexity of the welfare arrangements so that the system is well understood and encourages people to participate both socially and economically.

That’s why we needed a review of the welfare system.

And that is why I asked for a review of the system following the 2013 election.

The McClure Review

I commissioned Patrick McClure to lead a three member reference group, also comprising Sally Sinclair and Wesley Aird. Yesterday the group’s interim report, a discussion paper, was handed down.

The Interim Report outlines four pillars for reform to ensure our social support system is sustainable, effective and coherent, and encourages people to work to their capacity.

The four pillars are: firstly, a simpler and sustainable income support system; secondly, strengthening individual and family capability; thirdly, engaging with employers and finally, building community capacity.

Each of these pillars is important in its own way.

The first pillar aims to address the complexity and inefficiency of our welfare system. There are, at present, some 20 income support payments and 55 supplements to recipients with endless different permutations and combinations.

This creates confusion and uncertainty and can lead to inequities and unfairness as people in similar situations receive different levels of financial support, and have different participation requirements.

We know that many people also find the system hard to access and to understand.

There are too many payments and supplements and there is scope for reform.

The Interim Report outlines a four payment system for discussion, including a tiered working age payment, a disability support pension for people with a permanent impairment, a child payment structure that brings together Family Tax Benefits, student and other payments, and the Age Pension.

A tiered structure would benefit people with disability who have a current or future capacity to work and would tailor participation requirements to better reflect different work capacities.

It would also help address the gap in the payment rates for pensions and allowances.

At the moment there is a $300 a fortnight gap in the rate of payment between the Disability Support Pension (DSP) and the Newstart Allowance.

This gap creates an enormous incentive for people on unemployment benefits to test their eligibility for the DSP.

The government has already taken action to reduce the growth in this gap, as we are moving to a common approach to adjusting payments from September 2017 onwards.

This will help ensure that the income support system is sustainable into the future.

The report also proposes that the DSP only be for people with a permanent impairment and no capacity to work.

This would better target the DSP and help ensure that those with some capacity to work get the encouragement and the support they need to participate to the best of their ability.

People with a temporary impairment should be supported to prepare for work so that when their impairment reduces or ends that are in a good position to return to work.

The Interim Report also proposes a child payment structure which would bring together Family Tax Benefit, Youth Allowance, ABSTUDY and other payments, which would effectively consolidate payments for dependent children and young adults.

The Age Pension would continue as the primary payment for eligible people of Age Pension age.

As the Interim Report rightly acknowledges, an individual’s personal resilience and family support are important in ensuring economic and social participation.

While taxpayers might ask people on income support to look for work and improve their chances of getting a job by either earning or learning, we also need parents to provide a good start to children to help break intergenerational welfare dependency.

That is why strengthening individual and family capability is the second pillar of welfare reform.

The Interim Report looks at broadening mutual obligation to include building life skills, promoting parental responsibility and improving outcomes for children.

In addition, income management helps families make sure money is available for the essentials, like food, bills and rent by quarantining a proportion of their social security payments.

It also helps to break the cycle of child neglect and protect people from financial abuse by family members, particularly in Indigenous communities.

Income management is a useful tool to help people get back on their feet and the Government is committed to using income management to help stabilise the lives of Australia’s most vulnerable.

I am also interested in the investment approach to welfare reform; the approach that operates in New Zealand, which uses an actuarial analysis to identify the long run costs to the social security system and to identify and address cost drivers in the system.

The New Zealand reforms arise from that nation’s experience with its accident compensation scheme which has been in existence for many years in that country, which they’ve now modified and adapted to their welfare arrangements.

What they are able to do in New Zealand is divide the population of people who come for their services into many cohorts to try and look at individual circumstances of any particular person, and by that look at which are the groups of people that actually need more investment up front.

They can tell, for example, from doing their empirical work and from looking at the data over a period of time that if someone’s on welfare at the age of 35, there’s a good chance that that person was on welfare at the age of 18 or 19.

So, if we can obtain that data and divide our population into various cohorts, it is possible then to make investments in each of those cohorts that are appropriate to the circumstances of the people in those cohorts.

To take the clichéd example, the young person of 18 who didn’t finish school, who left school as soon as he or she could and has not completed secondary education, has got no skills and is therefore finding it difficult to get a job.

If we can invest in that person and we can look at what we can do for that person to get them the skills that’s more likely to leave that person on a trajectory towards employment, rather than on a trajectory that leads towards long-term welfare.

And we know that if a person is on welfare for a lengthy period of time they’re more likely to stay on welfare or return to welfare throughout different stages of their life.

Ladies and gentlemen another aspect of the report is the importance of employers, as you can’t move from welfare to work without getting a job.

That is why the third pillar is engaging with employers.

The Australian government is committed to a strong economy that makes it easier for employers to employ and for potential employees to become employed.

The report acknowledges that employers are the key to providing jobs for marginalised and disadvantaged people.

However, there is always more that can be done.

Building Capacity

The fourth pillar looks at building community capacity.

Two weeks ago, I addressed the C20 conference on issues facing civil societies in G20 countries and the role of the state. In the audience were many of Australia’s largest civil society organisations as well as international representatives.

In that address, I cited from Lord Beveridge’s Report of the Inter-Departmental Committee on Social Insurance and Allied Services which was published in December 1942.

Known as ‘the Beveridge Report’, it would become the blueprint of the United Kingdom’s post war social security consensus and in time it would be adopted to similar countries such as Australia and New Zealand.

The post-war ideal was very distant to where social security systems have travelled and arrived.

Rather than a confident assertion of ‘government-knows-best’ paternalism, the ‘Beveridge Report’ reflected the virtues of a constrained welfare system. The Beveridge Report stated this:

“The state in organising security should not stifle incentive, opportunity, responsibility; in establishing a national minimum it should leave room and encouragement for each individual to provide more than that minimum for himself and his family.”

In other words, Lord Beveridge made it abundantly clear that any new initiatives by government to address abject poverty were meant not to supersede existing social institutions but to complement them.

For too long, successive Australian Governments have allowed our welfare system to grow in complexity and dysfunction, allow it to stifle civil society as well as personal responsibility.

We are helping to build community capacity by reducing the burden on civil society. By easing contracting and administrative arrangements, by providing longer term agreements, for example, establishing five-year funding contracts.

For adopting a “report once, use often” approach and by not collecting information for information sake.

We are also abolishing the Australian Charities and Not-for-profits Commission, because we approach civil society with trust, not distrust.

And we want to encourage giving.

That is why are re-establishing the Prime Minister’s Community Business Partnership, which operated under the Howard Government.

This partnership will bring civil society and business leaders together to advise government on what red tape we need to remove, what constraints we need to dismantle in order to promote and encourage philanthropic activity in our community.

The next steps

Ladies and gentlemen, it would irresponsible of this Government and this Parliament to leave the current welfare system with its dysfunctionality and complexity unchallenged.

There are no easy fixes here.

There are no simple solutions.

As elected representatives, it is our duty to take the hard decisions, so that we can secure a national system that is understandable and fair minded whose default position to recipients and applicants is to enquire: what is your capacity to participate?

To help answer this question, yesterday I also announced a consultation process for welfare reform so that all Australians can make a contribution to the national conversation about reforming our complex and unsustainable welfare system.

Over the next six weeks, there will be a series of roundtables and online forums for people to put their views to the welfare consultative group. The review is also accepting written submissions and more information can be found on the Department of Social Services website.

The Abbott Government remains committed to its goal to make our welfare system sustainable and to improve the pathways towards social and economic engagement.

Australia finds itself at a demographic and social crossroads now more than ever.

Moreover, thousands of Australians on benefits or low incomes who have or will become disengaged seek reform.

The cameos I mentioned at the beginning of this speech: the neglected child; the listless, directionless youth; the socially isolated women with psychological injuries; and the long term jobless mature aged man.

These people, they should be the faces of opportunity and support; not the faces of welfare dependency.

These Australians expect our leadership to shape a meaningful social security system that supports but does not stifle them.

Our task is to replace the faces of welfare with the faces of opportunity, hope and reward that comes from being a full participant in the Australian society.

Thank you.