New Supported Living Pension would provide greater fairness

The final report of the Review in Australia’s Welfare System recommends what is probably the most comprehensive restructure of Australia’s income support system since its inception. One of the most important proposals is to replace the Disability Support Pension (DSP) with a new Supported Living Pension (SLP) and suite of working  age payments better targeted at recipients with different work capacities.

This recommendation is particularly welcome as it addresses the significant, and growing, problem of the gap between unemployment benefits and DSP. To be eligible for DSP a claimant must have a sufficient level of impairment that impacts their ability to work, this level of impairment must prevent them from working at least 15 hours a week. In addition, this condition must be such that would prevent them from working for at least 2 years even if they were retrained.

Under current policy, if you have a disability you are either eligible for DSP or moved onto a significantly less generous payment that was always intended for those on a pathway to full-time employment.

In contrast to allowances such as Newstart, DSP recipients do not have to be looking for work, or engaged in education or training, to receive payment, as it is intended for people with a permanent inability to undertake paid work at the level that would be required for them to support themselves. This is reflected in the maximum annual rate of DSP for singles which is $20,194 – significantly more than the $13,405 that a single Newstart allowee would receive.

This large, and growing, gap between Newstart and DSP has some unintended consequences.

First, it presents an incentive for long-term Newstart recipients to try and move onto DSP. Secondly, those on DSP have less incentive to look for work for fear of being placed on the lower Newstart allowance should they find themselves unemployed in the future entrenching permanent reliance on income support.

The new SLP would retain a broadly similar definition of work impairment with eligibility tightened to include only those whose work capacity was less than eight hours. Only those whose condition would prevent them from being able to work for the next 5 years would be eligible for.

Those no longer eligible for a disability pension would not be moved onto Newstart, but would be eligible for a new tiered working age payment with a requirement to look for work that reflects their work capacity.

The ‘upper tier’, those with a work capacity of between 8 and 14 hours a week, would receive more support to find work than other jobseekers. Those with a greater work capacity of between 15 and 29 hours would be placed on a ‘middle tier’ working age payment.

Most importantly, the rates of payment under the new system would better reflect recipients’ ability to support themselves though paid work. Those who can work, but who have disabilities that preclude them from working full-time, would no longer have to get by on Newstart. Those with severe disabilities would continue to receive the maximum amount of support without job search requirements.

These tiered payments represent a fairer approach to supporting those with disabilities that would remove the stark gap that presently exists between DSP and Newstart.

Not only is this a fairer approach, but it will better align the objectives of income support for people with disabilities with the National Disability Insurance Scheme (NDIS). In its final report to the government, the architects of the NDIS made it clear that “the current design of the DSP…discourage the social and economic engagement of people with disabilities, and is inconsistent with one of the central goals of the NDIS.”

If the $22.2 billion NDIS is going to be successful in its objective to “…increase the economic and social participation of people with disabilities” it is imperative that the income support system encourage that participation.

Good income support policy is that which recognises that one size does not fit all. Disabilities are diverse and impact upon individual’s work capacity in different ways. The review’s recommendations recognise this and are focused on how to get them the best form of welfare: a job.

Matthew Taylor is a Research Fellow at the Centre for Independent Studies.