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Leaving people behind; the investment approach in practice

I want to talk about two boring sounding things that have the potential to seriously impact on people’s lives. These things are future welfare liability and an investment approach. Both are very much “in vogue” at the moment. The Productivity Commission, which is currently looking at social services, is a particularly big fan.

Future welfare liability is where the government predicts the future welfare costs of people in benefit categories. This is based on how many years, on average, people in that category stay on a benefit. The government can then pick where to invest based on where the most reductions in future welfare liability could be made. Picking where to invest based on future welfare liability is called an investment approach.

The Productivity Commission believes that reducing future welfare liability should be the main focus of social services. The Commission believes future welfare liability matches what New Zealanders care about. The Commission also believes using an investment approach will improve the wellbeing of people who use social services and hopefully save the Government money.

Both the Productivity Commission and the former Welfare Working Group think an investment approach will lead to the government focusing on those with the greatest needs for support. This is because those with the greatest needs are likely to have the highest future welfare liability. The Ministry of Social Development has been using an investment approach based on future welfare liability for a few years now.  The question is what has it resulted in?

Despite the predications that an investment approach would shift attention to those with the greatest needs, this did not happen. Disabled people aged under 40 on the Supported Living Payment (Former Invalid’s Benefit, terrible name I know) have amongst the highest average future welfare liability (See page 130) and there has been little attempt to seriously invest in them.

In fact when the government assessed the future welfare liability of youths on benefits, they deliberately excluded disabled youth on the Supported Living Payment (See page 133). They were the only youths to be excluded. Presumably because it would draw attention to the lack of progress in finding disabled youth employment opportunities. I find it appalling that they would do this.

The Ministry of Social Development even recently attempted to restrict access to employment support for some disabled people. The Ministry proposed restricting access to employment support to disabled people who were likely to get employment within a relatively short period of time and will work 15 hours or more. This proposal was mostly likely driven by the concept of future welfare liability.

In reality the Government will not just make investment decisions based on which groups have the highest future welfare liability. Just like private investors, they will assess risk too. They will assess the chance of more support actually getting people into work. The trouble is disabled people face complicated social and environmental barriers, including employer attitudes and a lack of accessible buildings/transport. Addressing these barriers takes time and there is no guarantee of success.

If the Government thinks investment is unlikely to affect the future welfare liability of a group, especially in the short to medium term, they will under-invest or not invest at all. Unlike the private sector where this would cause a business to go under, it will be people going under, lacking the support to find appropriate employment.

This means that in practice an investment approach based on future welfare liability may further disadvantage those with the greatest needs. It is also likely to reinforce the negative assumptions and prejudices in officials and politicians about which people are worth investing in. This goes heavily against a rights based approach and the social model of disability as well as widely held views on the importance of a fair go for all (Equality of opportunity).

The Productivity Commission is asking for feedback on the investment approach and future welfare liability. If you have time, you should make a submission, it does not have to be long (Final due date 24 June). If you just want to focus on the investment approach and future welfare liability, just say your submission is about recommendation 9.1, which talks about applying the investment approach and future welfare liability far more widely. Make sure you tick “more effective social services inquiry” as that is the name of the inquiry.

Sam Murray
National Policy Coordinator