Lower welfare costs fund surplus

A reduction in welfare spending is funding the surplus.

Economic growth has helped but a faster than expected drop in the cost of welfare is the bigger contributor:

English told an audience of business people that in 2010 the Government had expected to be spending $11.5b on welfare this year.

However in following Budgets it trimmed the forecasts and this coming year it would be spending about $10.5b.

“The welfare bill is going down and going down faster than we expected. . .

English said governments in the past had been passive on these costs but National had tightened up the system and the expectations of people on welfare.

It got experts to work out what the 290,000 people on welfare would cost in the long run.

Their total liability was $76b. Apart from superannuation it was one of the big costs that underpinned the tax bill.

That is a huge amount of money, and National has proven that with the right policies it is possible to reduce it.

Two thirds of the liability came from people who first got a benefit under the age of 20. “So it confirms what grandma told you. “Don’t let those young people get off the rails because when they do it’s very expensive.”

The experts told the Government that if a person got a benefit once it made them much more likely to get a benefit again. If a young woman under 20 with a child went on a benefit the average length of stay on the benefit was 20 years.

“That’s expensive, very expensive,” English said.

A couple of years ago the Government put a supervising adult with the 4600 mostly young women under 20 with a child who were on a benefit. They typically had little education and lived in old, cold houses and had been left to sink or swim on their own.

That number had now shrunk by 40 per cent to 2600.

“And that’s going to save us hundreds of millions.”

Kiwiblog has a budget slide that illustrates the savings:

welfare

The savings aren’t just in welfare spending.

Health and educational outcomes are better for children in families supported by work rather than welfare.

Those savings aren’t just financial either – there are significant social dividends from stopping people going on to welfare and helping those who can work to work.

 

 

2 Responses to Lower welfare costs fund surplus

  1. Dave Kennedy says:

    We spend around $4 billion a year on Working for Families and the accommodation supplement. Only working people can access WFF and this is essentially a wage subsidy for employers so that supermarkets, rest homes and fast-food outlets etc don’t have to pay a living wage. The accommodation allowance is a subsidy for landlords and allows them to keep rents above what the market can actually support, the allowance will pay the difference of what people can afford and the artificially ramped up rent. We need to recognise business beneficiaries are expensive to maintain too.

    We are shifting people out of benefits and into subsidized jobs and housing.

  2. Mr E says:

    Dave are you suggesting that WFF is removed and replaced with a living wage.

    2 people the same in every way except one has 5 children – both get paid the same ‘living wage’? Is that your big idea?

    I am seeing this word you like to use – ‘subsidy’ in preference for ‘benefit’. Are the Greens anti-benefits?

    It is impossible to financially meddle with any part of society without affecting another – or subsidise as you might say.

    Take your lauded home insulation scheme. A family member of mine decided he wanted to insulate his house (ceiling only I think?).
    His morals – similar to mine, found him ignoring government funding, and doing it of his own accord.

    The quote for the Job -$8K. Doing it himself in a day to a higher standard – $2K

    Schemes like Healthy Homes create an artificial market by increasing demand, making it more difficult for those that don’t want a hand out from the government or are not eligible. But lets not call it a subsidy. Lets only use that word when it suits our politics, yes?

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