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Ruth Richardson and Paula Bennett (Photos: Getty Images; design The Spinoff)
Ruth Richardson and Paula Bennett (Photos: Getty Images; design The Spinoff)

OPINIONPoliticsAugust 15, 2024

What happened last time we had a beneficiary crackdown?

Ruth Richardson and Paula Bennett (Photos: Getty Images; design The Spinoff)
Ruth Richardson and Paula Bennett (Photos: Getty Images; design The Spinoff)

A tough line on beneficiaries follows a National election victory just as night follows day. Soon after comes the evidence that it doesn’t work, writes Max Rashbrooke.

When asked earlier this week what happens to welfare recipients who have their benefit removed, social development minister Louise Upston said she wasn’t sure. There is, though, evidence from the past, because New Zealanders have been here before, and have kept the receipts.

A tough line on beneficiaries, after all, follows a National election victory just as night follows day. In 1991, Ruth Richardson slashed benefits by around one-fifth of their value. In the next National government, John Key’s welfare minister, Paula Bennett, sanctioned tens of thousands of beneficiaries – cutting their payments, essentially – in an attempt to force them off welfare and into paid work. Over 80,000 were sanctioned between July 2013 and September 2014 alone.

Bennett was not especially interested in finding out what happened to people afterwards. But others, fortunately, were. When Victoria University master’s student Alicia Sudden interviewed beneficiaries in 2016, she encountered many who found Work and Income’s punitive approach degrading. One said it “made me feel anxious that I would be doing something wrong all the time”. Another woman had her benefit cut for missing a Work and Income appointment because she had had to see her doctor urgently.  

Many of those Sudden interviewed had come off the benefit but returned relatively quickly. And this finding was borne out by a large-scale 2018 report on the impact of Bennett’s reforms. More people had moved from welfare to work in 2013-14 than in 2010-11, before the reforms, but that was “mostly due to the improved labour market”, the report found.

It also showed that, of those leaving the benefit, nearly half – 45% – were back on it 18 months later. Many had moved into low-paid, precarious work, or seasonal jobs, or study for low-level qualifications – and found themselves rapidly back on the benefit. Churn, in short, was high, even in a booming labour market. 

Other research has questioned the assumption that people’s lives will automatically be improved by paid work. Evidence reviewed by the 2019 Welfare Expert Advisory Group (WEAG) found that although, in general, employment improved beneficiaries’ mental health, low-paid and stressful work could have the opposite effect. Over the ditch, researchers on the Household, Income and Labour Dynamics in Australia survey have come to more or less the same conclusion: certain kinds of work are worse than being on a benefit.

Along similar lines, research by another Victoria University master’s student, Leah Haines, found in 2021 that the wellbeing of poorer mothers “is not systematically improved by employment”. Nor is this wholly surprising, given that childcare is often inadequate, the shift into work creates costs (for new clothing and transport needs, for instance) not covered by wages or government support, and jobs can be inflexible or precarious.

Also harmful are the widespread sanctions applied in welfare crackdowns, typically involving a benefit being cut by 50% or 100% for a set period of time when recipients fail to meet certain criteria. All welfare systems, unless they hand out no-strings-attached cash, will involve sanctions at some point. But there is a contrast between Labour’s limited use of them as a last resort and National’s more full-throated, first-resort approach. The latest crackdown does, admittedly, introduce softer sanctions – having Work and Income manage beneficiaries’ incomes, or compulsory community service – that can be used before benefits are cut partly or wholly. But it nonetheless envisages more punishment as a general principle.

‘Removing benefits increases hardship, destitution and foodbank use as well as damaging physical and mental health’ (Photo: Supplied)

Back in 2019, WEAG noted that increased sanctions had “compound[ed] social harm and disconnectedness” for parents. Overseas research comes to similar conclusions. A 2015 British report on the Conservative Party’s extensive sanctions found that “removing benefits increases hardship, destitution and foodbank use as well as damaging physical and mental health”. This extends to the children of beneficiaries, who – whatever one thinks of beneficiaries themselves – are obviously innocent in all this.

And while inflicting such damage, sanctions don’t even achieve their goal of speeding the transition from welfare to sustainable work. A 2016 review of the then-current evidence, by Britain’s National Audit Office, found that sanctioned beneficiaries may be “more likely to get work, but the effect can be short-lived, lead to lower wages and increase the number of people moving off benefits into inactivity”. (“Inactivity” is often code for “giving up on the system entirely”.) 

A more recent British report found that a sanction “leads the average claimant to exit less quickly into PAYE [regular work] earnings and to earn less upon exiting”. This is supported by 2022 Dutch research showing that threatening beneficiaries with sanctions “was still detectable in people’s lower employment and earnings [compared to those not threatened] three years later”. 

While this may seem counter-intuitive to some – how can a financial threat make people slower to leave welfare? – the answer lies in better understanding beneficiaries’ lives. The government’s mental model appears to be that if welfare recipients are doing the things that get them sanctioned – missing job interviews or Work and Income appointments, for instance – it is because they are lazy or abusing the system.

In point of fact, research suggests many beneficiaries lead complex lives beset by social forces beyond their control. They face a constant, daily struggle to pay bills, they often live in damp and mouldy houses that make them ill, their children have frequent health and behavioural issues, and they themselves are often in poor mental or physical health. 

Any sudden bill is a nightmare. Many hours each week are taken up explaining their situation to government agencies and charities. And they live surrounded by people whose equally complex lives will often suddenly impose on their own. (One beneficiary I know had to abruptly leave a contract job to rescue a friend from a domestic violence situation; such occurrences are relatively frequent for those in poverty.) Beneficiaries also live with a degree of hardship that means they may not be able to afford the petrol or the bus fare to get to a job interview or Work and Income appointment.

If they miss an interview, then, it is far more likely to be due to a sudden life shock than to sheer laziness. And imposing a sanction just adds a further element of chaos to an already chaotic life. It destabilises people even further, diverts even more of their attention to the struggle to pay bills and just survive, and limits even more sharply the time they can give to job-hunting or studying.

There are many ironies in the current crackdown. One is that Act, a supposedly libertarian party that believes people know how to spend their money better than the state does, is the biggest advocate of forcing beneficiaries to let the government manage their finances. Another is that the way to incentivise the wealthy is – apparently – to give them more money through tax cuts, but the way to incentivise the poor is to take money away from them. 

Yet another is that the government has set itself a target to get 50,000 people off the benefit even as our counter-inflation policy increases unemployment by exactly the same number. The final irony is that a government that prides itself on evidence-based policy is committed to a beneficiary crackdown that is not – as far as anyone can tell – supported by evidence.

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More shake-ups and job losses are coming to the public sector.
More shake-ups and job losses are coming to the public sector.

PoliticsAugust 14, 2024

Cuts, closures and a culture of ‘restraint’: What’s the latest in the public sector?

More shake-ups and job losses are coming to the public sector.
More shake-ups and job losses are coming to the public sector.

With more job losses and funding for care providers and data projects slashed, here’s the latest on the spending squeeze in the public sector.

Stretch, squeeze and suck in: listen closely and you’ll be able to hear the pop of the government forcing its belt-tightening measures over an already under-pressure public sector. Despite falling inflation rates and a glint of economic hope on the horizon, the government remains laser-focused in its mission to cut costs across its agencies and adjacent services, leading to nearly 6,500 job losses in the sector, with more expected to come.

A recent Workforce Policy Statement has outlined further spending expectations for government departments, while providers are forced to let go of staff or else close operations due to minimised funding. Between job and service losses and new directives, here’s the latest from the public sector.

‘Restraint and moderation’

A Workforce Policy Statement issued by finance minister Willis on August 7 has effectively halted every ministry from increasing spending above baseline levels, requiring each department to find funding for pay increases and other expenses by cost-cutting. Speaking with Newstalk ZB, Willis had already warned public sector workers not to expect pay rises as the sector was in a period of “restraint and moderation”. The decision has been criticised by the Public Service Association, the union for the public sector, which argued pay increases should not be funded by job losses.

A separate directive said chief executives and deputies of high-performing agencies should receive pay reflective of the service’s performance, in the interest of maintaining success and to “ensure accountability”. The statement also outlined agencies’ duty to offer payments on top of a worker’s salary to recognise skills or duties which are occasional, rather than core to the role”, including employees who use te reo Māori skills in the workplace. Despite Willis previously saying she did not support the bonuses, the directive specified these allowances “will be an effective way for the Crown to uphold its obligations including under Te Ture mō Te Reo Māori 2016/the Māori Language Act 2016 or any other Act or obligations”.

an orange background with a line going down and a fist with some cash in it
Image: Getty Images; additional design by Tina Tiller

Further job losses and restructures

The Environmental Protection Authority, which oversees management of hazardous substances, new organisms and the Resource Management Act, will lay off 16% of its staff – or one in five employees – in a belt-tightening bid to find $2.1m in savings. The redundancies will affect 42 roles, up from the predicted 20 reported by Stuff ahead of the May budget. Meanwhile, the Ministry of Justice plans to cull 127 net roles, which the PSA said would affect 11% of the ministry’s head office workforce.

Kāinga Ora recently had its proposed staff cuts upped to 232, following proposals to slash its Te Kurutao Group Māori, responsible for supporting Māori clients and upholding Treaty of Waitangi obligations, from 48 full-time roles to 27. Kāinga Ora saw a $435m cut to its house-build programme, and $1bn from its maintenance fund in Budget 2024.

On Tuesday, Māori development minister Tama Potaka announced a major restructure for Te Arawhiti, also known as the Office for Māori-Crown Relations, and Te Puni Kōkiri (TPK), responsible for policy advice to the government on Māori wellbeing and development. Te Arawhiti will focus solely on historical Treaty settlements, while TPK will pick up new responsibilities, including leading post-settlement relationships on behalf of the Crown and monitoring its implementation of Treaty settlements, making it the leading agency for Māori development. Te Arawhiti had announced in July that 13 roles would be cut, but it remains unclear whether these roles could continue in the restructure.

Bad news for providers and projects 

Contracts to 190 care providers receiving funding through Oranga Tamariki have been discontinued as the ministry for children undergoes a reprioritisation of funding, while 142 more providers will have their spending reduced. Compared to the $577m spent on 554 service providers in the 2024 financial year, Oranga Tamariki has reduced its spending to a minimum of $438m with 480 providers in the current financial year. The agency’s spending will be finalised within the next six months, expected to pass $500m.

The ministry began its annual review of contracted funding in March, targeting what it considered underspending and under-performing providers. Children’s minister Karen Chhour said she asked the agency to review its hundreds of providers “line by line”, accusing some providers of treating Oranga Tamariki as a “cash cow” and claiming there would be “no reduction in frontline services” caused by cuts. Her comments have led children’s commissioner Dr Clair Achmad to call for “documented evidence about how these decisions are being made … so that I have assurance that children are at the very centre of these decisions”. Achmad said she hadn’t been provided any information that children who were accessing services now cut may be transitioned elsewhere.

The review reportedly left many providers in the dark, with some contracts – one priced at $300,000 – cancelled with little warning. On Tuesday, Stuff reported that in June, Oranga Tamariki had cancelled Auckland counselling service Friendship House’s contract with just four hours’ notice, leading at least 70 people being turned away. OT apologised for “a lack of clear communication” and said a regional manager would now contact Friendship House and “support them in winding down the service and to transition any children or families to other services”.

Another provider facing funding cuts is Nelson-based Family Start, a home-visiting service for pregnant families or those with infants, where almost 40% of staff will lose their jobs following a 25% cut in funding from Oranga Tamariki. The New Zealand Association of Counsellors (NZAC), alongside other agencies and service providers, has criticised the funding cuts, arguing the $30m drop in contract spending will likely worsen mental health and disengagement from young people in schools and increase family violence.

Photo: Getty Images

Certain providers could instead turn to the government’s Mental Health Innovation Fund, which has had its own funding slashed from $10m to $5m just a couple of months after being announced in Budget 2024. Ingrid Leary, mental health spokesperson for the Labour Party, claimed tender documents from Health NZ required applicants to have a minimum of 80 staff and $250,000 in co-funding. She said these requirements would shut out many providers, and accused minister for mental health Matt Doocey of “once again pre-empting the outcome as he did with the Gumboot Friday procurement, and picking winners”.

Science is another area affected, with government agency Toitū Te Whenua Linz (Land Information New Zealand) pulling out of a group that works on marine geospatial data. Simon Upton, parliamentary commissioner for the environment, wrote to Linz minister Chris Penk that “the savings in question – effectively one FTE [job] – are tiny in comparison with the value that the MGI working group is providing to New Zealand”. Upton said that our marine landscape was “still poorly understood. Increasing the accessibility of marine environmental datasets is critical for environmental monitoring and the sustainable management of the ocean’s resources.” This followed Linz in June dropping a project to build a shared system for emergency management data.

In a written response to Upton, Penk said Linz’s decision to cease the marine data work was “considered carefully” in conjunction with the department’s cost-cutting goals. Penk said Linz needed to “find savings and reprioritise resources in line with government expectations”. The department has already disestablished 54 vacant positions and six filled roles.

Meanwhile,  an email sent to staff at Wellington Hospital on Monday has stipulated there would be no funding for new projects and put a question mark over projects already in the works. The email, leaked to The Post, said projects with an approved business case would go ahead only if they had been through the procurement phase, while any other approved projects would need to be resourced from somewhere else. This has put a cloud over the future of a major mental health facility planned for Lower Hutt.

Where do we go from here?

As of August 12, job losses in the public sector were at 6,419 – not far behind the expected 7,500 roles Act leader David Seymour predicted would be lost last November. With further cost-cutting efforts, more roles could disappear from the sector. However, the PSA is taking the Ministry of Education to court over plans to disestablish 755 roles, and the union will also challenge funding cuts to Family Start.

Critics have argued that the immediate effect of these cost-cutting measures will be a loss of services for vulnerable New Zealanders, who depend on care provided by agencies such as Family Start. Already, job losses in the public sector have been linked to a significant rise in job applications, with people competing for fewer positions, while other former public servants have opted to leave the country entirely

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