Financial Review Debate — Ministry of Social Development

I will stick pretty much to the report itself, because I think this is far too important a time to ignore—as the Hon Mark Burton did—the actual report, and to talk instead about all sorts of extraneous matters. I want to draw the Committee’s attention to some of the issues raised by the Social Services Committee, which is, I must say, a very happy committee. The members get along very well and we deal with the issues.

The first issue is early intervention. Quite a lot has been said about early intervention programmes, and I think most members in this House would agree that early intervention for children who are at risk is a very important concept that we all want to support. A problem with early intervention has always been getting any evidence as to what sort of early intervention works—evidence about when, how, and for which families; particularly, for which children. The Social Services Committee has been very much concerning itself with the issue. We asked the Ministry of Social Development about the matter, and we found that programmes such as Family Start, Strengthening Families, and Early Start have been funded. Of course, Family Start was begun by National when it was last in Government, and the Labour Government has since taken that programme over—and good on the Government for admitting that it is a good programme. But in addition to that it is very important that those programmes, with large amounts of money flowing through them, get to the people who need them.

I have been very concerned to find out about a situation in Invercargill, where a Family Start programme seems to have been hijacked and taken over by a small trust. The main people in the trust are all family members, two of whom are very connected to, and part of, the Southland District Health Board. Why the Minister and the ministry should have been alerted to that situation was the fact that Barnardos lost the programme contract to that group. Most of us will have seen the work of Barnardos over the years and will have realised that that organisation has provided particularly good assistance in that area, so that should have been a warning bell to the Minister and the ministry. Unfortunately, that does not seem to have happened, so we are asking questions about the $3.6 million of funding for that programme, and what has happened to it.

We are also interested in the debt management situation of beneficiaries. This Government—or any Government, really—is not doing anyone any favours by allowing beneficiaries to run up huge amounts of debt that is owed to the very people who pay them the benefit. At the moment the debt owed to the Ministry of Social Development is $316.7 million. That money is owed by 186,000 people, or 49 percent of all beneficiaries. That is a shocking figure. It indicates to me and to other members of the committee that something is very wrong in the way that the debt situation is being administered, because we are not getting a reduction in those figures despite all the programmes we have been told about.

Another area of great concern is the numbers of people on the sickness benefit and invalids benefit, and the fact that those numbers have continued to grow under this Government. In the last year 73,813 working-age adults received an invalids benefit and 46,067 received a sickness benefit. That is an awful lot of people who are too sick to work—and it is an awful lot of people who are too sick to work despite the large increases of funding that have gone into the health budget. Again, that indicates something that is of real concern to me and to other members of the committee.

I was very concerned to see that the ministry tried to excuse the increase simply by saying that the increase was not as much as it had been the year before. Frankly, that answer is not good enough when there are jobs around, and when large amounts of money are being spent on health. We expect that people are not necessarily getting sicker, and that people are getting into work wherever it is available. There is a great deal of concern amongst some members of the committee, myself included, that the sickness benefit and invalids benefit have been used as a way of “parking” people who are not easily employed or who do not want to be employed. That is a real shame, because some people are very genuinely on either the sickness benefit or the invalids benefit, and it is very important that those people should not feel that their honesty is being compromised by the comments I am making.

We also note that employment figures have certainly increased. That is a very good sign and we are very pleased about that. However, we were somewhat concerned when the ministry assured those of us on the committee that as long as 2 percent growth is sustained in the economy, the current system will remain viable. We were very concerned, because we are not seeing much growth in the economy, and we cannot go around congratulating ourselves on employment figures all the time if the unemployment rate suddenly starts to rise. Some of us are certainly concerned that this Government does not have adequate answers on that issue.

What we have heard talked about as the great answer to beneficiary numbers is something called the single core benefit. Many of us on the committee have some grave doubts about just how that single core benefit will deliver a better system for beneficiaries—or, in fact, for the taxpayer, because it is very much a mutual situation. We have said that we would like to know how the pilot programme has resulted in considerable reductions in the staff, the resources, and the time spent on the administration of the benefits system, because that system was first wheeled out by the Hon Michael Cullen when he was Minister of Social Welfare back in 1989. It was to be the new cure-all, and it was going to be wonderful—and I can see that some members of the Committee who were there at the time are nodding. Then it was wheeled out again, I recall from memory, in about 2000 by the Hon Steve Maharey, and it was to be the wonderful new scheme. And it came out again last year after Don Brash’s Ōrewa speech on welfare. It popped up again, but now it seems to be suddenly fading a weeny bit, and some of us on the select committee feel that that may be because it is not quite the cure-all it was promoted to be.

I will certainly ask more questions about the single core benefit, and about what it is delivering, because I think many of us would agree that it is great to get people who can work into work. But it is also very important that we do not just kid ourselves that if we shove together all the numbers of people on the unemployment benefit, sickness benefit, invalids benefit, and domestic purposes benefit, it will suddenly turn them all into one and hide growing increases in unemployment figures or in the number of those on the sickness benefit and invalids benefit. So we will be very interested to watch that situation. I see the select committee has in fact indicated that its members want to keep that system under very close review, and I can promise the Committee of the whole House that we will be doing exactly that.

As one might expect when dealing with one of the largest-spending Government departments, the financial review of the Ministry of Social Development has, as usual, highlighted a number of difficult issues. The most urgent area of concern right now for the Green Party is the fact that just after the review process was completed, the longstanding special benefit was abolished. As of 3 days ago, on 1 April, it has been replaced by the temporary additional support benefit, otherwise known as “TAS”. This is no April Fool’s joke, much as I would like it to be. I asked questions during the select committee review to try to find out more about how the department envisages the temporary additional support would actually work in terms of helping all those who will miss out, now that the special benefit has been terminated. The answers we got then, and continue to get, do not in any way allay my fears that in fact what will happen constitutes a major benefit cut.

Labour MPs should be very worried about what they are allowing to occur under their noses, and I do acknowledge those MPs on the select committee who expressed their concerns about what is happening here. Up until now, the special benefit has provided a third-tier level of last-ditch assistance for people for whom the gap between their income and the necessities of life is too big to bridge in any other way. Unfortunately, because the 1991 benefit cuts were never restored, and because income support and wages have been kept deliberately low since then anyway, far too many beneficiaries, and even some low-wage employed workers, have needed the discretion offered by the special benefit just to survive. However, from last weekend we will have the temporary additional support benefit instead.

There is no discretion. The formula used is fixed and inflexible. Case officers appear to be left with no capacity to take cognisance of peoples’ actual or individual circumstances, no matter how desperate they might be. The expenses that will be taken into account when calculating the temporary additional support benefit are extremely limited, and even when they are allowed, in most cases there are limits, which means the beneficiary pays the rest of the gap, no matter how badly off he or she is, or how high the costs are. The people likely to be most adversely impacted are single people and couples who do not have children, but who do have particular health and disability expenses.

The maximum levels of payment are reduced. On top of that, the temporary additional support benefit is, as the name states, a very temporary payment of 13 weeks, and there are huge issues about what will happen for people once their time limit is up, even if they get the help they need in the first place, and even if there is a system where they are constantly turned round through review after review at each 13-week point. How long will that go on for?

The current Minister and his predecessor, the Hon Steve Maharey, have reassured us over and over again that no one will lose out in the shift from the special benefit to the temporary additional support benefit. However, that assurance applies only to people who are already getting the special benefit, what is colloquially called “grandparenting”. For people who are in need of help for the first time, or who have been out of the benefit system for even a short while, only the new rules will apply, as far as I can ascertain.

As the Wellington People’s Centre stated in a report on the impact of those changes that it released just last Friday, the new system will mean, by its estimate, that when the provisions are fully enforced the cut will affect over 50,000 beneficiaries and other people on low incomes. The Wellington People’s Centre estimates that: “The axing of the special benefit will take $50 million out of the pockets of the poorest families in its first year of operation.” This saving is then being passed on in fact to some of our better-off families through the extension at the upper-income end of Working for Families, as was discussed in the House earlier this afternoon.

Is it fair that beneficiaries are losing out while higher-income people get more—and this, on top of the fact that Working for Families discriminates against beneficiaries anyway through the in-work payment? Is this about social justice? Is this helping the 20 percent of our country’s children who are still living in poverty, a vast number of whom are disproportionately in sole parent families and in Māori and Pasifika families? I think not. It is a total disgrace. Unlike the benefit cuts in 1991, which so many of us fought against openly, even some Labour MPs if I remember rightly, these new cuts are happening off the radar.

The absurdly complex nature of New Zealand’s ramshackle benefit system is allowing that covert slashing of hardship assistance to happen, and I call on Labour MPs, and the Minister, to look into the realities of what this will mean. Any members with a social conscience should be helping us to persuade the Minister that he must act quickly to ensure that real discretion is retained in the system for all beneficiaries who need it, not just some of them, and that tens of thousands of people will not be left in an even worse situation than they would be under the rules pertaining up until 4 days ago.

A second major area of concern highlighted by the review process has been a big question for us about where the ministry is going with its work on moving towards what it has been calling now the single core benefit. The select committee was told that the ministry expected the single core benefit to be available from 2007. However, there are still many questions about how precisely this will work, about the extent to which it will really get rid of the current complexity of arrangements—up to 35 different income support arrangements—and whether it will mean the de facto cutting of benefits for some categories of beneficiaries.

While the ministry keeps saying that no one will be disadvantaged, a statement by the Minister in this week’s Jobs Letter that: “We are not prepared to say, ‘Well, sorry, no one will be worse off.’ ”, and the projected impact of the loss of the special benefit, do not give me any confidence that the planned new benefit system will maintain even modest benefit levels at the current rates. Again, I think that the people who will most likely be adversely affected are those with disabilities and on invalids benefits who are more likely to be dragged down to unemployment benefit levels, rather than having the reverse occur.

Recent concerns raised by people in the blind community are the first signs of what may well happen. It is a great pity that those with profound impairment should have to be like the canaries in the mine when it comes to predicting this particular future. I am glad that I was not the only committee member who stated a hope that no one in need would be disadvantaged under the projected new single core benefit system, but how all this will work, and when, remains a somewhat dubious and dangerous mystery.

Finally, a third area of this review I would like to briefly touch on tonight is around the supposed devolution of part of what was formally the Community Employment Group into the Ministry of Social Development, following the Community Employment Group’s demise in 2004-05. At that time we were told that some of the community-based economic development function of the Community Employment Group would be placed into the Ministry of Social Development. As a number of us feared at the time, it appears that in fact no such function has been transferred. What is left is a programme that is about working with local industry to address skill shortages, and something else called Enterprising Communities, which provides funding. That sounds interesting and possibly useful, but I do not think that many groups working at grass roots level—at least, the ones I worked with—know about it. I hope that the department will note the committee’s recommendation that any funding available through that Enterprising Communities scheme should be distributed in a transparent manner and in a way that organisations should know that it exists.

However, no matter what value either the Enterprising Communities scheme or the industry partnership programme may have, neither can substitute for the loss of a genuine community economic development function within the Government—a loss that will only become fully felt and understood when unemployment starts seriously rising again, which it inevitably will.

The Green Party remains committed to working with groups in the community economic sector to try to ensure that one day we will once again have a viable community economic development function within government, as we should, if we are to hold our head high in communities around the world that work in this area and Governments in places like Canada, which have made tremendous steps forward. We have now fallen even further behind, which is a real disgrace. I hope that some of us here in this House will one day work together to restore a community economic development function to government.

First of all, before I go into the detail of some of the comments that have been raised as part of the financial review, I would like to acknowledge the highly professional and successful efforts of the staff of the Ministry of Social Development. I guess it is a testimony to their professionalism that the chief executive, Peter Hughes, and one of his senior managers, Mr Craig, are here this evening. No one should be surprised at the commitment those senior managers put into delivering absolutely critical outcomes for our community.

I also want to thank the front-line staff of Work and Income, and the ministry in general, for their professionalism and their dedication to the people of this country. Whether they be in family and community services, in policy areas, or in management, the commitment to reintegration of previously separate Government functions has been extraordinary. It is because of the professional, thorough, and cost-effective way that the Ministry of Social Policy and Work and Income has been reintegrated, that Cabinet has made such a positive decision in respect of the further reintegration of Child, Youth and Family Services with the ministry. I am sure we can all look forward to the successes that will flow from that decision, and the same sorts of savings in efficiency—but certainly not in funding, because that was never intended as part of the decision.

I think, also, that management is reflected in the most successful delivery in all sorts of areas that we have seen in recent times—some have been announced; some are in policy development. I refer in particular to the concept and development of the new service model, the extraordinarily extensive work in benefit reform that previous speakers have referred to—and, as in the case of Ms Bradford, they will clearly be involved in some of that policy development—and most important, in the Working for Families package, which was so well received last year and over the last weekend by so many members of our community. I will come back to that in a little while.

I would like first of all, though, to go to the questions about early interventions that were raised by the National Party speaker. The ministry began work on early interventions in 2004-05 and developed a cross-sectoral strategy to improve outcomes for children. Those early intervention programmes are a comprehensive, coordinated support system for families and, most important, the strategies build on other Government initiatives that are simultaneous, such as early childhood education and social assistance in health.

The ministry is currently evaluating the take-up and effectiveness of all those programmes. Some of them have been detailed in the report so I will not waste the House’s time with that. But the key factor is that over 4 years, expenditure of $43.7 million has been allocated towards those initiatives. Nothing could state more convincingly or powerfully the commitment of this Government to breaking some of the cycles of violence in our community through early interventions—both early in the age of the problem and early in the life of those involved.

In terms of the issues raised about debt management, it is important to separate the two streams. The first one is recoverable assistance, which is loans approved for costs that have to be repaid. These debts have increased—I guess reflecting the increased costs of living and unplanned expenditure. However, the second stream, overpayments of benefit entitlements and so on, has remained stable over the last 4 years and, in fact, it reduced slightly, by about $8 million, between 2001 and 2005.

Policy changes in respect of the Working for Families package will make a huge difference. I think we already acknowledge that in the extraordinary media coverage of families, young and old, that are responding to the recently discovered reality over the last few days as to what Working for Families means for them. Clearly, those initiatives will make absolutely enormous differences to beneficiaries with families, by assisting in reducing the demand for that sort of recoverable assistance.

I would like also to talk more expansively about the comments that were made about growth in sickness and invalids benefits. This is an important focus area through the whole of the OECD. In the last year to December the growth rate of sickness and invalids benefits in this country fell to 2.7 percent. Those benefits grew at a rate of 69 percent and 84 percent respectively under the National Government. That is not to mention that unemployment at the same time in the 1990s grew 11 percent. This Government is getting on top of a trend that was clearly out of control under National. It was the National Government that in 1995 introduced the stress and depression categories, so it is pretty rich for those members to criticise, as they do, the fact that people are succumbing to stress and depression, and receive benefits as part of that.

The thing that saddens me the most about this is the constant attack by the National Party on doctors. Work and Income staff who assess applications for sickness and invalids benefits are absolutely reliant on the professional medical opinion of clinicians. Work and Income staff are not doctors, and they operate under strict instructions that it is the role of medical professionals to determine the state of a client’s health as it might relate to that client’s benefit application. While I understand it is not unusual for the National Party, and particularly Ms Collins, to attack beneficiaries, I am rather surprised and disappointed she has taken that attack and extended it to medical practitioners.

I guess the example of the figures from my own electorate in Dunedin show the clear improvement since Labour took office. Between 1999 and now the total number of people receiving an unemployment benefit in Dunedin has dropped by 4,046. That is a 74 percent drop. Between 1999 and 2005 the total number of people on all benefits—unemployment, domestic purposes, sickness, and invalids—dropped also by 33 percent. That is a decrease of one-third—3,870 fewer people are receiving benefits. Can I say to the Opposition, for whom beneficiaries are such an easy target, that behind the statistics—and they are improving all the time under this Government—are the realities of Kiwis getting on with supporting their families, working towards their individual goals, and making real contributions to our communities and local economies. They are the real success stories that we all should be so proud of.

In the remaining minutes available to me I would like to spend a little time talking about the Working for Families package. Alongside the other changes that I have alluded to and the matters that are discussed in the financial review—reviewed so positively, I must say, by the Social Services Committee—the Working for Families package has to be the single greatest support in this country for young men and women, especially working people, and their children. That package is delivering very welcome targeted tax credits to Kiwi families to help them raise their children. Most people in this House are aware that children deliver extra costs to families, and that is why the targeting is so appropriate.

Around 85,000 more families will benefit from the 1 April changes, as a result of the family tax relief package, and that takes the total to around 350,000 families receiving tax relief in 2006. Almost three in every four New Zealand families with dependent children are entitled to family assistance tax credits as from last Saturday. Almost all families, with children, earning under $70,000 per year will become eligible for family tax relief, and many families earning between $70,000 and $100,000 will also be eligible—at much lower levels, of course. This package is costing an enormous $1.6 billion over its term, and families access their tax credits, which is 90 percent of this income, through the Inland Revenue Department.

For example, as from last Saturday a family with two children aged 11 and 16, earning $67,000 a year and paying, say, $350 a week on their mortgage will get an extra $68 a week in the hand from their family assistance tax credits. From 1 April next, when there is a further increase in family assistance, that amount will increase by another $20, to $88 week. Contrast that with across-the-board tax cuts, which deliver the highest gains to people with the highest incomes, regardless of whether they have children.

Of course, the new in-work payment will be introduced to provide more support to low and middle income working families with dependent children, to make work pay. Not many people in our community have any doubt about whose policy is the more desirable in these matters.

Report noted.

Department of Corrections