Ideas@TheCentre – The Centre for Independent Studies


Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Mead: Dutiful but defeated

23 November 2012

Whenever anyone suggests tightening up welfare eligibility rules, the welfare lobby invariably attacks the idea as unnecessary and mean-spirited. People on benefits would much prefer to be working, they tell us. Life on benefits is hard, and nobody would voluntarily choose that over employment. There is therefore no need to tighten eligibility rules, for if jobs were available, benefit recipients would surely take them.

Statistics released last week suggest that, in the UK at any rate, this argument is wrong.

One set of figures relates to people claiming the Incapacity Benefit (the equivalent of Australia’s Disability Support Pension). There are 1.5 million people on this benefit in Britain, and it costs the taxpayers £13 billion every year to support them. Some of us have long suspected that a significant proportion of these claimants are perfectly capable of working, and so it has been proven now.

All existing incapacity benefit claimants are being reassessed in Britain, and those found capable of working are being transferred to the (less generous) unemployment allowance, where they are expected to look for a job. In the 18 months to February 2012, 431,100 claimants were re-assessed, and 145,000 of them were found to be fit for work. Almost 40,000 of these claimants had been claiming Incapacity Benefit for more than 10 years.

Many of those assessed as 'fit for work' appeal against the decision, and 9% of assessments are eventually reversed, but this still means almost one-third of claimants have been using the Incapacity Benefit to avoid looking for a job.

A second set of figures relates to unemployment benefit (the equivalent of Australia’s Newstart Allowance). A scheme was introduced in May last year under which unemployed claimants deemed lacking the ‘personal skills’ necessary to find and keep a job (i.e. those thought to be work-shy) are required to undertake a one-month work placement. If they refuse, or fail to complete the placement, they can lose their benefit for three months; repeated failures trigger longer sanctions.

In the first 15 months of the scheme, 90,000 claimants were referred to a work placement – but only 33,000 turned up. The rest either found themselves jobs, or simply stopped claiming (some undoubtedly already had jobs in the ‘black economy’ so they couldn’t fulfil the work placement as well).

Welfare analyst Lawrence Mead suggests that most people on welfare say they would prefer to work, but when it comes to the crunch, many fail to accept the employment opportunities on offer. Mead says they are ‘dutiful but defeated’ – they know they should be working, but they have given up.

These latest UK figures strongly support Mead’s analysis. The welfare lobby’s assertion that the vast majority of people on benefits would prefer to be working reflects what welfare claimants say but not what they do. To get welfare numbers down, it’s not enough to help claimants find jobs. You also have to hassle them into taking them. And that is the compelling case for tightening eligibility rules.

Professor Peter Saunders is a Senior Fellow at The Centre for Independent Studies.

In Soviet Australia defence is welfare

23 November 2012

Russian comedian Yakov Smirnoff is famous for starting the ‘in Soviet Russia’ meme, where he joked about how backward things were in Russia (for example, in the United States you can drive a tank, but in Soviet Russia the tank drives you).

I’m not sure whether Minister for Defence Materiel Jason Clare is a fan of ‘in Soviet Russia’ jokes, but I’m hoping there is a punch line somewhere in his recent speech at a Submarine Institute of Australia conference.

Talking about the $40 billion Future Submarine project (which will replace our six ailing Collins Class subs with 12 Future subs) the Minister noted, ‘We are not just building 12 submarines – we are building an industry … that could potentially last for a century or more.’ The Future Submarine project is billed as the ‘biggest and most complex defence project’ ever undertaken in Australia. Yet apparently that level of complexity is not sufficient – it now also needs to create and support an entire industry for a century.

In the rest of the world, defence safeguards the welfare of citizens. In Soviet Australia, it seems defence is welfare for some groups (companies in politically sensitive industries and regions).

Unless you are a Bond villain, grand schemes should be a last resort, not the first choice. How can one justify starting an extremely risky nation-building project ‘potentially the same size as the national broadband network’ without examining all options?

In my recent paper I made it clear that I believe Australia should investigate leasing US nuclear submarines. This position has received a great deal of support – and a fair bit of criticism, particularly from those who want to see the submarines built in Australia.

Debate on the relative complexities and capabilities of submarine options is fine, as is consideration of issues such as safety and strategic objectives. However, what should not be acceptable is blindly supporting local jobs, especially not with this price tag.

Australians need to start asking hard questions on government spending. Do we need home-built subs more than we need the National Disability Insurance Scheme? Call it the ‘NDIS test’ – is this cause more worthy than wheelchairs for kids with disabilities?

When seen in that light, corporate welfare doesn’t look like such a good idea, does it?

Simon Cowan is a Research Fellow at The Centre for Independent Studies and author of Future Submarine Project Should Raise Periscope for Another Look.

An NDIS tax?

23 November 2012

Those who call for raising taxes to fund their pet projects and programs implicitly assume that all existing government spending is completely justifiable.

They also implicitly assume that there is no waste, no inefficiency, no superfluous program, and no possible spending reductions to fund their obsessions, hence warranting more taxes.

In short, arguments favouring increased taxation are also arguments defending current spending – and the Commonwealth will spend around $376 billion this year alone.

With the carbon tax and mining tax in effect, and the flood tax behind us, calls for more taxes to help fund the National Disability Insurance Scheme (NDIS) are starting to ring louder.

At the COAG meeting in July, Queensland Premier Campbell Newman suggested the Commonwealth should introduce a new tax like the Medicare levy to fund the NDIS.

At the next COAG meeting in December, the Commonwealth and the states will discuss how to pay for the NDIS, which will cost around $22 billion a year by 2018–19. I made the case that we can find money for the NDIS by going through government spending program by program and assessing this expenditure based on the services and supports the NDIS is supposed to provide.

Could the $4.5 billion spent on Family Tax Benefit Part B be better spent on supported accommodation for people with disability? Could the $850 million spent on the Baby Bonus be better spent on respite care for family carers? Could the $1.2 billion spent on the Schoolkids Bonus be better spent on wages for attendant carers? I think the answer to all these questions is yes.

These examples are just a few of the dozens of state and federal government programs that could be cut to fund the NDIS.

More money can be found in the billions the Commonwealth hands out in corporate welfare – abolishing subsidies for the auto industry would be a good start.

The ‘NDIS test’ could also be applied program by program in the states to find billions more to help fund the NDIS.

We should not be frightened of the $22 billion-a-year price tag for the NDIS. But we should be frightened by lazy politicians who lack the courage to make the tough decisions to cut spending and see the NDIS only as another opportunity to raise taxes.

Andrew Baker is a Policy Analyst at The Centre for Independent Studies and author of The New Leviathan: A National Disability Insurance Scheme.