How much does it cost to make sure income support recipients don’t waste their money?

Nobody knows exactly how much it costs to administer Income Management. But government estimates suggest that it could be as high as $150 a week per person in remote areas. According a recent report from the Australian National Audit Office:

… departments were aware that providing income managed services to people in remote areas would be more costly than providing services to those in rural and urban areas. The estimated costs were:

  • remote areas—between $6600 and $7900 per person, per annum;
  • rural areas—between $3900 and $4900 per person, per annum; and
  • urban areas—between $2400 and $2800 per person, per annum.

The estimated cost in urban areas works out at around $50 per week per person. The same amount welfare advocates want government to add to the single rate of Newstart Allowance.

Meanwhile the Coalition has proposed extending Income Management to all long-term unemployed people. Assuming income management was extended to all long-term Newstart and and all long-term unemployed Youth Allowance recipients, this could cost well over $1 billion a year (DEEWR data on recipient numbers).

It seems unlikely any government would end up applying Income Management so broadly. But there’s a risk of kindling unrealistic expectations. In the UK Demos, left of centre think tank, reported the results of a poll showing "the majority of people believe the government should start controlling how welfare recipients spend their money". Over half of respondents in the Demos poss agreed that the government should prevent people from spending welfare benefits on unhealthy items like cigarettes and gambling and 46% opposed welfare being spend on branded items like Nike trainers.

In Australia the leader of the opposition, Tony Abbott, has called for the BasicsCard to be extended across Australia. He has also created the misleading impression that the card cannot be used to buy unhealthy foods such as soft drink and chips:

And they’ve got a card which is issued to people. I think it’s called the BasicsCard and basically with this card you can go into Woolworths or Coles or the community store and the card will work for food and it will work for essential items like clothes and linen and stuff like that, but it won’t work for cigarettes, it won’t work for soft drinks, it won’t work for chips, it won’t work for booze and so on. So, it’s a bit like if you’ve got a petrol card and you go to the service station and you try to buy your newspaper on your petrol card it won’t work.

Under current rules there are no restrictions on what kind of food or non-alcoholic drink recipients can buy with their BasicsCard (aside from a restriction on home brew products). But in the future there may be pressure to exclude items voters see as unhealthy or luxurious. To many people it seems obvious that if the government can prevent people buying alcohol or scratch lottery tickets, it can prevent people from buying soft drink, chips or pies.

In the US there are calls to prevent Food Stamp recipients from using Electronic Benefit Cards to buy junk food. In 2010 New York City, Mayor Michael Bloomberg proposed a demonstration project excluding sweetened drinks from the Food Stamp program (known as SNAP).

As the public become more familiar with products such as fleet cards and government purchasing cards, expectations may grow. Fleet card systems can be highly restrictive and capture data down to the item level. This would be difficult and expensive to do with a product like the BasicsCard but explaining this to voters might look like excuse making.

Once political leaders promise to roll out the BasicsCard to suburbs around Australia, it may be difficult to manage expectations. As a result, Australia may become locked into a system that is hugely expensive and designed to solve problems most recipients do not have.

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15 Responses to How much does it cost to make sure income support recipients don’t waste their money?

  1. Alan says:

    Australia may, more importantly, become locked into an expensive and wasteful system that abolishes any dignity or economic choice for welfare recipients. Why should economic misfortune render you less than a citizen?

    I happen to think listening to Alan Jones is bad for your intellectual well-being. Let’s require welfare beneficiaries to buy radios that don’t receive him. Actually, most radio and TV content is pretty under par so let’s just ban them buying TVs and radios. And we can’t have them read books critical of the government. There are any number of admirable and improving self-denials that we can shove into these untermenschen’s lives.

  2. murph the surf. says:

    Tony in touch right there.

  3. nottrampis says:

    I agree with Alan.

    Let them spend the money how they wish.
    Of course people spending money on cigarettes would have to listen to alan jones 24/7!

  4. john r walker says:

    1 billion dollars is a lot of extra government management employment- perhaps we could use the money to employ a percentage of the unemployed as trusties, to supervise the rest, and thereby achieve a reduction in unemployment as well as increase in net national moral superiority?

  5. mary jenkins says:

    What a paternalistic view to discredits poor people as not being able to manage themselves. Some do need help but not like this There is help from the Christian charities that do a fine job helping folk. Poor people have no choice. Choice is only for those that can afford to choice. Your choice runs out when your money runs out.The problem is a lot of services thta used to pick up those with a need have been defunded. Abbott would defund many more of these if he takes over.Family planning should be free. This would help to control poverty. Everythinbg today as such a high cost poor cannot access what they need . From John Howard it has been Middleclass welfare. Sadly the ALP has folowed his path.

  6. Alan says:

    We know the prime minster is concerned with alarm clocks and getting up early. Perhaps Centrelink could raid a percentage of households each day and cancel all benefits to anyone found in bed after 7am.

  7. Paul Bamford says:

    Interesting post Don. Not sure that I agree with your conclusion – Australia is already locked in to an expensive system designed to solve problems most income support recipients don’t have.

    I doubt that income management is the only area where Centrelink wastes money on policing its clients’ behaviour. This ANAO report on Centrelink’s tip-off line makes interesting reading:

    In 2007–08, Centrelink received 101 5953 tip offs via a range of channels including the Internet, call centres, the Australian Government Services Fraud Tip-off Line, mail and email…

    Of the tip-offs received and/or reviewed or investigated7 in 2007–08, 17 332 or 16.2 per cent resulted in a reduction, increase, cancellation, rejection or suspension to a customer’s payment and/or a debt being raised against the customer…

    Centrelink was unable to provide a robust cost estimate for managing the tip off process in 2006–07, nor the cost of conducting the 52 597 reviews and investigations that were completed as a result of tip offs. The ANAO has previously reported similar findings about Centrelink’s inability to cost particular activities9 and signalled that there are clear benefits to Centrelink if it was to improve its cost identification capacity, including the ability to undertake cost benefit analysis of activities and improve future costing estimates.

  8. derrida derider says:

    We’re all familiar with the term “security theatre” – security measures that combine a minimum of effectiveness with a maximum of intrusion because it is the intrusion – and hence prominence – of the measures rather than their effectiveness that is the actual goal.

    This is just “welfare theatre”. The sad fact is that a good proportion of people want to punish people a little below them in social position, in order to maintain their own relative ranking. They don’t even particularly want to genuinely harm them, BTW – just reinforce their status with semi-symbolic measures. The humiliation and loss of diginity is actually the point.

    • john r walker says:

      It also creates a bit of make work employment and satisfaction for the dominated of the dominant.

      • Alan says:

        The trouble with early morning bed raids is that they are too anonymous to make good theatre. However, if we were to equip the Centrelink inspectors with buckets of iced water and video cameras, we could get terrific images, hopefully with the minister there in hard hat and fluoro vest. It would send a terrific message!

      • Paul Bamford says:

        …dominated of the dominant

        Are you sure that phrase is the right way round?

        The satisfaction in the make work employment is a pretty ugly one – what kind of person would get satisfaction out of getting paid to bully and harass the unemployed?

        More to the point – why is Centrelink’s systematic institutionalised bullying of its “clients” not just accepted but actively endorsed by both the Liberal Party and the ALP?

        • Alan says:

          Both major parties adhere to the cult of tough which is a particular fetish of neoliberalism. You prove your toughness by finding a population you can reasonably bully and then bullying them.

          Welfare beneficiaries are open slather. Age pensioners are not. Disability pensioners are a middle case. Asylum seekers are pure gold.

        • john r walker says:

          Dominated of the dominant is exactly the right way round.
          “what kind of person would get satisfaction out of getting paid to bully and harass the unemployed?”
          Ever seen Pauline of league of gentlemen?
          Its funny because its true.

  9. mary jenkins says:

    jobs for bureacrats, that is what this is about. Keeping the middleclass in work monotoring and bullying the poor, espcially single mothers .

  10. Pedro says:

    It seems to me that one interpretation of the Demos survey is that a majority of people surveyed regard welfare as the provision of charity as compared to just income. People tend to be finicky about how charity is used by the recipients and the extent to which it is deserved and appreciated. So it could be that income management will increase support for the provision of welfare.

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