What Real Reform of Social Security Payments Would Look Like

In an age when every Government decision is marketed as ‘reform' it's hard to distinguish genuine reform from short-term budget fixes, says Australian Council of Social Service CEO, Dr Cassandra Goldie.

In social security policy, we've recently seen more than the usual number of budget fixes including depriving young people of unemployment payments for six months, a requirement to search for 40 jobs a month, and payment cuts for low income families. These ideas came as a shock to community organisations and people who rely on social security. They quickly attracted widespread opposition.

In the midst of all this, the Government's Welfare Review panel released a report on, among other things, reform of payments for people of working age. Despite the real concerns we have about many of the Government's recent social security policies, ACOSS is participating in the Review because it's an opportunity for real reform to solve a set of problems that have plagued the system for many years.

This is where the Government should have started: with a properly structured social security review that identified the problems to be solved, and worked with the community to find the solutions. In the end that's how reform is usually achieved.

The Review's Interim Report documents the main problems. These include: inadequate poverty-level payments among single people on Newstart and other allowance payments, people with similar needs receiving vastly different payments, gaps between payments that grow every year, and people on pension payments fearful of seeking paid employment in case they end up on the much lower Newstart Allowance.

Everyone would agree we need a simpler, fairer system that prevents poverty and encourages and supports employment participation for those able to do so. The challenge is how to get there from where we are now. The basic problem is not that there are too many payments – it's that payment levels are not based on financial need. Instead they are based on judgements about people's work capacity.

In the past, social security policies assumed that people caring for school age children, people with disabilities and their carers simply couldn't perform paid work. People with disabilities, carers, and sole parents received higher payments because it was assumed they would need income support for a long time and therefore ‘deserved' a higher payment. Those searching for paid work received lower payments because it was assumed they only needed short term support ‘between jobs' and were less ‘deserving' because their unemployment was partly their own fault.

Those views belong to the past but we still have a social security system that's based on them. Unemployment payments are $166 a week less than pensions despite the fact that the average period on Newstart Allowance is over four years. What's changed is that as more people with disabilities, carers, and parents are expected to seek paid work, they are being shifted onto the lower unemployment payments.

This is what happened to 80,000 sole parents last year, and most are at least $70 a week worse off. The same is happening to people with disabilities, at least 100,000 of whom are now languishing on Newstart. These are ‘welfare to welfare' policies not welfare to work.

In our submission to the Welfare Review ACOSS put forward a bold plan to overhaul the payment system for people of working age so that it's based on needs, not deservingness. A single ‘common income support payment' would replace the various pensions and allowance payments for people of working age. The age pension would not be affected. The level of the new common payment would be set with reference to an independent Commission, based on the cost of life's essentials. It would have to be much higher than the $36 day Newstart payment.

That would lift many single people on Newstart and Youth Allowances out of poverty.

In addition, supplementary payments would be introduced for people with disabilities and sole parents, and the Carer Allowance would be increased. Unlike the current pension payments, which are based on ‘inability to work', the purpose of these supplements is to meet the extra costs of having disability, caring for person with disability, and caring for a child alone.

Together with the common income support payment, that would lift total payments for these groups to at least the current pension levels.

That would ensure than people on pension payments are not worse off. Those people with disabilities and sole parents who were shifted from pensions to Newstart Allowance – for example sole parents whose youngest child turns 8 years – would be much better off.

For many people on pension payments, little would change. The common income support payment would have job search and activity requirements for those able to do so, but others would not face any requirements (as is the case now with pensions). The main change is that if they are able to seek employment they don't risk being shifted to a lower payment. If they get a full time job on a low to modest wage, they would keep all or part of the supplement because its purpose is to meet extra costs (such as costs of disability) that don't go away once people are employed. So the proposed reforms strengthen workforce participation without cutting payments.

The Interim Report stops short of this kind of reform. It suggests a fine tuning of the present system by adding an intermediate payment in between pensions and allowances for people who have limited ‘work capacity'. While this could see many people with disabilities and sole parents lifted up to this intermediate payment, others who are eligible for the Disability Support Pension (DSP) under the current rules would drop to the lower payment and be worse off.

The Review proposes that the DSP be restricted to people with a ‘permanent incapacity for work'. The idea that Governments can predict today who is ‘permanently' unable to work is old thinking. It underscores the need for more fundamental reform.

A key condition for our support of payment reform is that no group should be worse off and those on the lowest payments such as Newstart Allowance should be better off.

It's time for the Government to reset its social security policies to reform the safety net instead of shrinking it.

This is an extract from a speech delivered by Cassandra Goldie at the Australian Long-Term Unemployment Conference 2014 on the Gold Coast this morning.

About the author: Dr Cassandra Goldie joined ACOSS as CEO in July 2010.  Previously, she was Director of the Sex and Age Discrimination Unit at the Australian Human Rights Commission. She has extensive public policy experience and is a leading advocate and commentator on economic and social issues. In 2012, Cassandra was recognised as one of the Inaugural Westpac/Australian Financial Review 100 Women of Influence. She was selected as an AFR/BOSS True Leader in 2013.