Fewer on welfare but cost up

There’s good news, and bad news, for the state of welfare in New Zealand.

The good news is that 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 because of economic factors outside the ministry’s control – such as low inflation and slightly higher unemployment rates.

But 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 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 because of 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 $1b 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. Both sole parents and young beneficiaries are now predicted to spend nearly three years less on a benefit compared to 2012,’’ she said.

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

’’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.

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 to 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.

This 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.