Ideas@TheCentre
Making people worse off
In January 2013, around 84,000 parents (mostly single mothers) of school-aged children will receive their fortnightly cheques from Centrelink that are up to $223 less than in December 2012.
This payment drop is a result of changes to eligibility for Parenting Payment recipients protected from the Howard government’s 2006 reforms and will save taxpayers $728 million over four years.
The reforms are a case study in the political risks inherent in any welfare reform that reduces payments to recipients, or generally makes people worse off than without the reforms.
The government’s reforms to Parenting Payment have seen an outpouring of grief and anger from affected parents fuelled by a scare campaign linking the impact of the reforms to the Christmas and New Year ‘holiday festive period’ because the reforms come into effect on 1 January 2013. The welfare lobby also labelled the reforms as an abuse of human rights.
With a saving of $728 million over four years, these reforms are a paltry sum compared to the $560 billion the Commonwealth will spend on social security and welfare from 2012–13 to 2015–16. Any substantial reform to welfare payments in Australia will have to tackle this rapidly increasing spending on welfare payments, particularly the Age Pension and Family Tax Benefits.
Herein lies the problem. The relatively modest changes to Parenting Payment have led to loud cries of future poverty and financial distress ... just imagine the venom that would come with a serious attempt to reform welfare payments, like abolishing Family Tax Benefit Part B or including the family home as part of age pension assets tests.
If we are going to be serious about reducing government spending and getting people off welfare and into work, we need to acknowledge that some people will need to be made worse off as a result of those reforms.
Politicians choosing to go down this route will no doubt entail the voter’s wrath but political bravery is no longer an optional extra, it is now a fundamental requirement for getting this country back on the path to prosperity.
Andrew Baker is a Policy Analyst at The Centre for Independent Studies.
