Welfare Reform and Income Management
15 September 2010
Download a copy of the Welfare Reform and Income Management Q&A
Recent welfare reforms like income, management and the linking of welfare payments to school attendance have caused much debate. Some reforms like those in the Northern Territory Intervention have caused controversy because they have specifically targeted Aboriginal and Torres Strait Islander Australians. This factsheet answers some of the questions you might have about these policies.
- What is Welfare Reform?
- What types of welfare reform are there in Australia?
- Why do welfare reform policies seem to target Aboriginal and Torres Strait Islander people?
- What is compulsory income management?
- Who does compulsory income management apply to in the NT?
- How can welfare recipients in the NT spend the money that is kept aside?
- Is there any way for people in the NT subject to income management to avoid it?
- Why has income management in the Northern Territory been controversial?
- Are welfare reform policies, including income management, working?
1. What is Welfare Reform?
Welfare reform can take many shapes but it most often means the government placing conditions on regular Centrelink payments to promote behavioural change. The thinking behind these conditions is that ‘rules’ should be attached to the money of some welfare recipients—like the long-term unemployed, unemployed parents/carers, unemployed young people not engaged in education/training. These rules are usually intended to get the recipient off welfare and into employment or training or to try and ensure the payments are spent on food, rent, clothing and other priority needs for children and families. Welfare reform policies are currently being implemented or trialled in a range of sites across Australia. Both major political parties support welfare reform.
2. What types of welfare reform are there in Australia?
There are several different types of welfare reform in Australia. In Western Australia Child Protection and Voluntary Income Management measures were implemented in late 2008. Under the Child Protection measure, a Western Australian child protection case worker can refer a person to Centrelink for income management to address cases of neglect, to support family reunifications or young people leaving care. The Voluntary Income Management initiative allows income support recipients in metropolitan Perth and the Kimberley region to volunteer for income management, in order to help them meet their priority needs. The Improving School Enrolment and Attendance through Welfare Reform Measure (SEAM) trial has 30 participating schools in selected Queensland locations and 6 Northern Territory locations; where cases of non-enrolment in school or poor attendance can result in a parent/carer’s referral to Centrelink, where a decision may be made to suspend payments if non-enrolment or poor attendance continues.
In Queensland, The Cape York Welfare Reform began in 2008 and applies to four communities in Cape York with the intention of ‘restoring social norms’. Under the Cape York Welfare Reform a statutory body called the Family Responsibilities Commission (FRC) has been established with the power to make a range of orders in cases where a person on Centrelink payments is assessed as failing to meet their personal and social responsibilities. From August 2008 to the end of June 2009 a total of 616 referrals were made by the RFC to support services, including Wellbeing Centres which have been established in each of the four communities to provide generalist and alcohol and drug counselling. The FRC can also order that a person’s welfare payment be subject to ‘conditional income management’ to ensure that the priority needs of that person, their partner and their children are met.
Income management in the Northern Territory is discussed in later questions.
3. Why do welfare reform policies seem to target Aboriginal and Torres Strait Islander people?
There are many locations in Australia where there are high numbers of people who are on welfare payments and have been for long periods. Some people call this situation ‘welfare dependency’ because it is argued that welfare payments are becoming ‘the destination’ rather than an interim support between employment or training. Mostly these are very poor areas with very high unemployment rates and limited job opportunities. Because, overall, Indigenous Australians suffer higher rates of disadvantage (e.g. poverty, unemployment) a number of these locations are also Indigenous communities and areas with large Indigenous populations. This means that Indigenous communities are often labelled welfare dependent localities and have been targeted for welfare reform projects. The main welfare reform policies targeting Indigenous people are Cape York (QLD) Welfare Reform and the income management policies introduced as part of the Northern Territory Emergency Response (NTER). As you’ll read further on, the NTER policies have recently been changed so that they no longer just target Indigenous people. The Child Protection and Voluntary Income Management measures in Western Australia have always operated in both Indigenous communities in the Kimberley and metropolitan areas of Perth. The government has stated their intention to continue to target Welfare Reform at ‘disadvantaged locations’ meaning there will likely be an increase in Welfare Reforms in both Indigenous and non-Indigenous communities.
4. What is compulsory income management?
Compulsory income management, or ‘income quarantining’, was first introduced in 2007 for Indigenous people living in ‘prescribed’ Indigenous communities in the Northern Territory as part of the NTER, or what is more commonly known as the ‘Intervention’. The Intervention was introduced by the then Howard Government as a reaction to reports of child abuse and neglect in Indigenous communities in the NT. Under this compulsory income management policy, a part of the regular Centrelink welfare payments of Indigenous people (usually 50 percent) is withheld and can only be spent on priority items, such as food, rent and clothing. The intention of income management is to ensure that carers are meeting children’s needs and that less money is spent on things such as alcohol, gambling, tobacco and pornographic material. Under the original NTER policy, the government suspended the Racial Discrimination Act (RDA)—the law that protects all Australians from discrimination based on their race—from application to compulsory income management only to people living in prescribed areas in the Territory—primarily the 73 major indigenous communities, surrounding outstations and 10 town camps areas on the fringes of urban areas. You’ll see in question 5 below that some changes have been made to the original 2007 laws to make them comply with the RDA.
5. Who does compulsory income management apply to in the NT?
When compulsory income management was first introduced in the Northern Territory it only applied to people receiving welfare payments (including Youth Allowance, Parenting Payment, Age Pension, Disability Support Pension ) who lived in 73 prescribed Indigenous communities, surrounding town camps and outstations. In July 2010, legislation came into effect which reinstated the RDA (this comes into effect at the end of 2010). The new system applies in any area declared by the Minister. To date, the whole of the Northern Territory has been declared as subject to the new arrangements regardless of race or place of residence. Under this new model, those on Newstart Allowance and Parenting Payment for more than 52 weeks in the last two years will be subject to income management, along with people under 24 years who have been on Youth Allowance or Parenting Payment for three months of the past six months. There are also a range of other ‘triggers’ for income management. As at 25 June 2010, there were 17,952 people subject to income management . It is estimated that under the new model there will be 20,000 people subject to income management.
6. How can welfare recipients in the NT spend the money that is kept aside?
In the early stages of the Intervention, people arranged to allocate some of their income managed money to their local community store or went to a Centrelink office when they wanted to do their shopping in a major centre to pick up vouchers for stores such as Coles and Woolworths. In September 2008, the BasicsCard was introduced as another option. Each pay day 50 percent of the welfare payment is placed in a special account and used to pay for rent, electricity and other bills. People are also now able to allocate a portion of their income managed funds to their BasicsCard can be used like an EFTPOS card at stores that are licensed by the government to accept them. Stores or outlets must apply to get a license to accept the BasicsCard. Money on the BasicsCard cannot be spent on alcohol, cigarettes, pornographic material and gambling products or services. Money on the card can’t be taken out at ATMs.
7. Is there any way for people in the NT subject to income management to avoid it?
People subject to income management can apply for an exemption. Parents who support children can gain an exemption if they can show that they have done things such as immunised their children, and if they can show that their children attend school regularly. People without children need to demonstrate that they have been working part time, or are studying full time or doing an apprenticeship. Parents must also prove that they have not suffered from financial vulnerability over the last 12 months. Critics have argued that gaining an exemption from income management can be difficult, especially when the person’s first language is not English, when the Centrelink office is far away or when the person has to provide lots of evidence that they can budget and care for their children. If Centrelink makes a decision to place a person on income management and the person does not agree that this decision has been properly made, they can ask that Centrelink review the decision internally. If the person still does not agree with the decision that Centrelink makes after the internal review, the person can appeal to the Social Security Appeals Tribunal (SSAT).
8. Why has income management in the Northern Territory been controversial?
Since its introduction in 2007, compulsory income management in the Northern Territory has been controversial.
Reasons for this include:
- When the Northern Territory Intervention was first introduced, the Racial Discrimination Act was suspended to prevent any legal challenge on the basis that the measures could be applied to Indigenous communities only.
- Income management targets individuals based on the type of payment they receive rather than on evidence of wrongful behaviour.
- Income management was introduced without discussion with the people it would apply to and effect, such as Aboriginal communities and shop owners who had to change the way they do business.
- There was no solid evidence it would work in improving child safety and changing behaviour.
- Those being income managed are stigmatised and feel ashamed/embarrassed when they are shopping because of the links between income management and child neglect/abuse.
- There have been access issues for BasicsCard holders, especially those in remote communities. Shops and suppliers have to be approved to take the BasicsCard requiring them to meet a range of criteria to comply with terms and conditions. Shopping with a BasicsCard means that people can only shop at certain stores. For remote communities, these stores may be far away and travel can be very expensive.
- Concern has been expressed by welfare groups that both Indigenous and non-Indigenous victims of domestic violence will not ask Centrelink social workers for help in case they are seen as ‘vulnerable’ and put on income management.
9. Are welfare reform policies, including income management, working?
It’s difficult to assess the effectiveness of welfare reform policies because most of them are relatively new and some have not yet been properly evaluated. At this stage there are conflicting reports.
An evaluation of income management in the NT conducted by the Australian Institute for Health and Welfare (AIHW), which surveyed 76 income managed clients in four communities, found that three quarters of the people surveyed said that they are spending more on food, and half are buying more fruit and vegetables. Another study conducted by the Central Land Council (CLC) surveyed 141 people in 6 Northern Territory Communities that are subject to income management, finding that responses across survey participants were almost evenly divided between people in favour (51 percent), and people opposed to income management (46 percent) . Another study by the Menzies School of Health Research surveyed the sales data from 10 remote Indigenous stores and found that there had been no reduction in tobacco sales and no increase in sales of healthy food since income management was introduced.
The SEAM trial evaluations have yet to be made public but an evaluation of the Halls Creek Engaging Families trial where payments were tied to school attendance showed that there had been no increase in school attendance as a result of the trial.
Reports from the Cape York trial indicate that, together with other state and federal policies, there have been improvements in school attendance and reductions in some crime statistics like assault and reductions in violence and alcohol related hospital admissions.
A significant evaluation of the child protection and voluntary income management trials in WA is underway and a major evaluation of the new system in the Northern Territory is being developed.
Critics of welfare reform measures like income management argue that there needs to be a greater investment in education, training and other support services to assist people in moving off welfare and that these kinds of reforms ‘punish’ welfare recipients by restricting their payments while doing little to develop opportunities. Welfare reform is also very costly to implement, with the reforms in the NT costing $350 million over five years to implement, so it’s important that proper evaluations are conducted and released publicly so a genuine discussion over whether they are effective or not can take place.
