Payment reform must reduce poverty, complexity, and exclusion from employment

30 June 2014

In responding to the Interim Report of the Reference Group on Welfare Reform, ACOSS says reforms should ensure that no disadvantaged group is worse off, that payments are targeted to need and that the system supports employment participation.

“The current review is an opportunity for the Government to reset its income support reform agenda, away from reducing payments and towards reducing poverty, system complexity, and exclusion from employment,” said Dr Cassandra Goldie, ACOSS CEO.

“We will be looking to the Government to engage with the sector and affected individuals as partners in reform. However, we are concerned that the six weeks for consultation is inadequate to enable people to get to grips with these complex issues and participate meaningfully in the Review. The lesson from the Budget is that Governments have to listen the community and bring people with them if reform is to be achieved.”

“Real welfare reform is not about shifting people, including people with disabilities, sole parents or carers, from one payment to another. We need to change the system: from a labyrinth of higher and lower payments based on degrees of ‘deservingness’ towards a simpler one based on financial need. Once it meets people’s basic financial needs, income support should connect them with employment opportunities and supports.”

The strengths of the report are its focus on reforming the whole payments system rather than changes at the margin, its recognition that payments for unemployed people and students and many sole parents are inadequate, and its emphasis on building bridges between income support and employment through employment services and social supports.

The Report’s main weaknesses are that it does not take payment simplification far enough and it takes activity requirements too far. It proposes to retain different levels of payment for pensions, unemployment and student payments regardless of financial need. It advocates new requirements for people receiving income support that go well beyond training and finding employment, including requirements for the care of children and management of their budgets. The use of income support as a form of social engineering is unnecessary, intrusive and wasteful.

 “Like many reports before it, the interim report once again shines a spotlight on the inadequacy of Newstart and student payments. We welcome the recognition that the gap between pensions is unfair and counterproductive,” said Dr Goldie.

 “The interim report also recognises the disadvantage experienced by sole parent families as their children get older, when costs increase but payments fall. Child poverty in sole parent families is the fifth highest in the OECD and 286,000 children are living in poverty in sole parent households. Increasing support for these families must be a high priority in the reform process.”  

The interim report rightly argues for reform of the employment services system to make it more responsive to the needs of both jobseekers and employers. ACOSS shares this goal and has today released a joint proposal with the ACTU and the BCA to develop and pilot a demand-led employment model based on a partnership between jobs services and employers to achieve better results for disadvantaged jobseekers.

“The report recognises that Rent Assistance is currently not meeting the needs of many low income renters and should be increased for those with the highest housing costs. It is important that this issue is considered in the context of the Federal/State housing review later this year to ensure Rent Assistance is designed in a way which supports affordability and sustainability over the long-term as part of a comprehensive national affordable housing strategy.”   

While there are a number of positive reform directions flagged in the interim report, ACOSS is concerned that some proposals could leave vulnerable people at greater risk of poverty and with less autonomy over their lives.

The apparent retreat from the much simpler model proposed by Mr McClure in his 2001 report of a single payment benchmarked to basic costs of living standards with supplements to meet additional costs, for example those related to job search, disability, sole parenthood, is disappointing.

“The four tier system proposed is likely to retain unfair and complex distinctions between payment levels for students, those who are unemployed and pension recipients. Inherent in this model is the risk that people will continue to be moved from higher to lower payments as part of ‘welfare to work’ policies, a concern already raised by disability advocates. This would further impoverish people of working age on income support.” 

“People should not have to move to payments that are $80-$170 per week lower simply because their youngest child reaches 8 years of age, they have a disability and have moved closer to finding employment, or they have ceased caring for a family member with a chronic illness. The system should support these transitions, not make them harder for people.”

“ACOSS cautions against the attachment of further conditions on income support payments which are not linked to paid employment, such as the extension of income management or requirements to care for children. We should not turn income support recipients into second class citizens. Children should be protected, and people should be helped to budget, whether or not they receive income support. Beyond reasonable work requirements, people should not be treated differently simply because they need income support.”   

“Payment reform should be based on key principles: payments should be based on need, no disadvantaged group should be worse off, the system should support employment participation and any participation requirements must be relevant, reasonable and backed by employment and other supports.”

“Whatever road is taken, it is vital that the divide between pensions and allowances be reduced (including through a $50 per week increase in Newstart Allowance) and ultimately removed. This is the main source of poverty, unfairness and complexity in the system of working age payments.”

“In the next stage of the review, ACOSS encourages the Reference Group and representatives from the Government to engage directly with people who currently rely on income support payments to ensure their voices are heard in this process. We stand ready to assist in bringing individuals affected together with the Reference Group to enable this important engagement to occur.” 

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