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.