Australia — More
than one million Australians on welfare would see their
future payments eroded under a secret Coalition proposal
to save money and encourage people to enter the
workforce.
A leaked cabinet submission from
late last year proposes watering down indexation of
working-age pensions by increasing them in line with
prices, not wages. This would freeze the real value of
benefits at today's levels rather than rising, as age
pensions do, in line with workers' incomes.
The document also warns that the
system is headed for a cost blow-out and encourages
welfare dependency.
"The current social security system
undermines the goal of increasing participation and there
are some major structural problems that are worsening
each year and have to be fixed," the submission
says.
"The cost and difficulty of fixing
these problems will increase every year we delay," it
says.
A spokeswoman for Community
Services Minister Kay Patterson said yesterday there were
no plans to change the indexation
arrangements.
"This is the government that
introduced indexation to male total average weekly
earnings alongside the consumer price index in 1997," the
spokeswoman said.
Labor community services spokesman
Wayne Swan said: "This secret cabinet document shows the
Howard Government has secret plans to cut the future
value of pensions if it is re-elected."
But the submission, from Senator
Patterson and Employment Minister Kevin Andrews, warned
that cutting pensions could be politically unpalatable,
resulting in "considerable community
opposition".
The Coalition has been grappling
with a huge increase in the number of people getting
disability support pensions - about 5 per cent of the
working-age population, 662,600 people.
The submission, obtained by The
Age, suggests that working-age pensions - including
disability support payments and the single parenting
payment - should be merged with a range of allowances -
including the Youth Allowance and Newstart - to create a
single working-age welfare payment.
This would save the Government
about $1.3 billion over four years.
The problem is that since 1997
pension payments have been locked in at 25 per cent of
average male weekly earnings, while allowances have
always been linked to changes in inflation.
Because wages have been rising more
steeply than inflation, the gap between pensions and
allowances has been widening every six months.
Disability support pensioners now
get $37 a week more than people receiving the single
allowance, compared with a gap of $22 in 1999. The gap is
expected to widen to $50 by 2006 on present
trends.
Instead, the submission urges
cabinet to "seriously consider" the indexation
arrangements, suggesting that the Government's guarantee
to maintain pensions at 25 per cent of male earnings
should be abandoned.
"We will . . . need to seriously
consider indexation arrangements, as it is the growing
difference in rates which is creating structural problems
and which would be difficult to defend," it
says.
The Government spends about $24
billion a year on working-age income support, with the
cost rising about $1.5 billion a year.
Abandoning the linking of those
pensions to male wages would affect about 650,000
disability support pensioners, 450,000 single parents and
80,000 carers: almost 1.2 million people.
Australia has the third highest
proportion of jobless families in the developed world.
The submission blamed the welfare system, saying it had
led to a culture of welfare dependence by creating
disincentives to work.
"These differences in requirements,
rates of payments and income tests are becoming harder to
justify, especially as the gaps between payments widen
each year because of differential indexation.
"We have to seriously question our
existing policy settings for lone parents and whether it
is desirable, either for lone parents or their children,
to entrench them on income support and minimise their
labour force participation."
It also says that the growing
generosity of pension assistance for lone parents
compared with couples getting an allowance is
discouraging partnering, or at least the reporting of
it.
