Welfare and the Debt Culture

Over the last decade there has been an increasing trend in New Zealand towards ‘welfare debt’, where welfare recipients borrow, or are given, money from the government due to mismanagement of their welfare entitlements. With New Zealander’s being among the developed world’s poorest savers the last thing the country needs is a parallel ‘debt culture’ among its welfare recipients.

As someone who generally takes a fairly centrist stance on economic issues I have tended to assume that New Zealand’s post 1990 welfare system is 'firm but fair'.

Unemployment benefit for example, is related to prices not wages, so anyone on unemployment benefit receives a modest basis living allowance that takes care of basics such as food and accommodation costs. In contrast, in some European countries unemployment rates are related to previous wages, so many unemployed people receive benefits far above the minimum wage- a factor which can't be helping Europe's high unemployment rate.

However, today welfare recipients are routinely given additional money for living costs already covered by benefits. While a single mother might need to borrow money for a second hand fridge there is no reason why a single person should need to obtain extra money for things like food, clothing and accommodation for which they are already given money in their basic benefit- in many cases though, this is exactly what is happening.

A common area of abuse is the Sickness Benefit. For example, I know of an able bodied, reasonably intelligent 21 year male on the Sickness Benefit with an anxiety disorder caused by excessive use of sleeping pills. The sleeping pills were taken for insomnia and other minor problems caused by excessive smoking of cannabis (why his doctor was so stupid as to give him so many sleeping pills I have no idea). This guy receives enough money for food, accommodation and basic living costs yet he managed to get hold of 700 dollars from Work and Income Support to pay for unpaid rent, 250 dollars of which were lost when another slacker, who he stupidly gave his bank card pin number to, promptly raided his account. Naturally he’s got the money back through insurance of course. This individual also regularly violates his doctor’s orders by taking other substances such as hash and alcohol.

If welfare recipients in New Zealand are going to be the freedom to manage the money that is given to them they should also have to suffer the consequences of mismanaging that money. If they are given money for rent and waste it, then they should not be given more money for rent. If this ultimately means a few nights on the street then so be it. Repeat offenders should have the freedom to manage their money taken off them with rent money paid directly to landlords and food vouchers and bus passes instead of cash. Similarly, those on sickness benefits from self-inflicted drug abuse should have to sit blood and fitness tests to prove they are not violating doctor’s orders. If they are, then they should be put onto unemployment benefit instead.

Although these ideas may horrify many on the left I consider them to be reasonable centrist policies. The difference between my position and that advocated by the libertarian right (slash all benefits) is that I wish to discriminate between responsible and irresponsible welfare recipients in a way that most people would find reasonable. Such a distinction is essential in combating the pervasive culture of debt and irresponsibility in today’s society.