Ideas@TheCentre

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Time for next generation DSP reform

Andrew Baker | 12 April 2013

andrew-baker

The recent reforms in the United Kingdom’s welfare system have so far led to 878,000 people being taken off the British equivalent of Australia’s Disability Support Pension (DSP). Hundreds of thousands of people are now off welfare because they chose not to have their eligibility reassessed after the Cameron government decided to reassess the eligibility for everyone on disability benefits.

Australia’s government introduced tougher eligibility requirements in early 2012, resulting in the total number of people on DSP drop from 831,000 in December 2011 to 824,000 in February 2013. The DSP costs around $15 billion a year to fund.

Australia’s relatively modest fall, while welcome, is largely the result of reducing the number of new entrants to the DSP rather than moving people off it.

When the Gillard government introduced the tougher eligibility criteria last year, it chose not to reassess existing recipients en masse – unlike the UK government.

Mission Australia chief Toby Hall said about 350,000 to 400,000 people on DSP are capable of re-joining the workforce. Most of these people can work at least 8 hours a week; however, because there are no participation requirements for the DSP, these DSP recipients don’t even have to look for work.

There is enormous untapped potential here. Already, 75% of the economic benefits of the NDIS are contingent on DSP reform, and we need to start looking at the next generation of DSP reform now.

Some of the more ambitious reform proposals suggest carving out those people on DSP who have a partial capacity to work and placing them on a new benefit similar to Newstart. Reforms along these lines would include modest participation requirements and provide a number of incentives to make it easier for more people to move off welfare and into work.

Over the last few years, the government has made it substantially tougher to get onto the DSP. To ensure future prosperity, it is essential to make it easier to get off the DSP.

Andrew Baker is a Policy Analyst at The Centre for Independent Studies and author of TARGET30: Tax-welfare Churn and the Australian Welfare State.