What responsibility should we have over how welfare is delivered to those in need? Since the introduction of federal unemployment benefits in 1944, the government has provided welfare in cash. The reason is expedience: dropping cash into an account is simpler and cheaper than the traditional church welfare of providing clothes, food or vouchers.
But what happens if the cash is wasted on drugs, alcohol and gambling, leading to catastrophic social consequences?
This is the question the Abbott government has been grappling with following the recommendation in Andrew Forrest’s Creating Parity report to introduce a cashless debit card for welfare recipients in vulnerable areas.
The logic is inescapable. We have places where welfare is a major part of the local economy and the welfare dollar is fuelling gambling, alcohol and drug abuse.
It’s not just that individuals are wasting welfare payments but welfare abuse is destroying the lives of women and children.
In a place such as Kununurra, the hospitalisation rate from assaults is 68 times the national average. Across the Northern Territory, indigenous women are being bashed every year at a rate of 11 assaults per 100 women. These are just the reported cases. Two-thirds are related to alcohol, nearly all of which is paid for by welfare cash. It is not uncommon for kids to go hungry because there is no food on the table. Not because of poverty — an unemployed couple with three young children could have $800 in welfare cash a week after housing costs — but because the money is wasted in the first few days after “payday”. The National Crime Commission says towns of high welfare dependence are being targeted by criminals selling ice.
Most of the measures taken in the face of such evidence have been on the supply side, tough rules about what can be sold at pubs and what can be imported into a community. Such restrictions typically have halved the rate of violence in those places. But even in remote communities it’s hard to sustain initial gains and stop the grog runners and drug dealers. In urban areas, restricting supply (other than through hours of sale) is nearly impossible.
Forrest’s proposal is to work on the demand side. He argues that in certain areas, all welfare payments — except old age and veterans’ pensions — be placed on an ordinary bank debit card that could be used anywhere to purchase anything, but simply cannot be used at liquor stores or gambling venues. Because cash would be limited, illicit drugs could not be bought.
The government believes this concept is worth trialling and today I will be introducing legislation to implement the idea in two or three regions. These regions will be chosen on the basis of (a) high welfare dependence and social harm caused by welfare-fuelled alcohol and drug abuse, and (b) willingness of community leaders to participate in the trial. The Ceduna region will be the first trial site and we are in discussions with East Kimberley leaders about that region being the second. Our view is the debit card could reduce the social harm welfare-fuelled abuse can cause, while still providing as much individual freedom as possible to welfare recipients.
We have been negotiating with banks and community leaders over how the card could be designed and implemented. How a card would be issued, how online transactions would occur, how people could get account balances and how fees would be structured to minimise or eliminate costs to the user are issues being worked through. The intent is for the card to look as much as possible like the ordinary debit card most people carry in their pocket daily. Eighty per cent of payments will be placed on the card, with the other 20 per cent continuing to go into the recipient’s bank account.
Where there is a desire to do so, we will implement a local board that will have control over the settings of the card. This board would have power to lift the amount of welfare placed into an individual’s cash account. Key additional services such as alcohol counselling and financial management assistance may need to be introduced.
This proposal is not income management. There will be no compulsion for anyone to spend their payments in a particular way, although of course people will be encouraged to establish a budget. There will be complete freedom, with the exception of two restricted products.
I acknowledge that for some people, using a card rather than cash to pay for everyday items will be an initial inconvenience. The potential upside, however, is a transformed community where women are safer and more money is available for children’s needs.
If successful, this will represent a radical new positive approach to the distribution of welfare.
Alan Tudge is the Parliamentary Secretary to the Prime Minister.