Government backs income management, despite evidence

October 10, 2014
A protest against income management in Bankstown in 2011.

Last week the federal government released its first evaluation of how its controversial income management policy has fared in five locations where the scheme was introduced in July 2012.

This discriminatory government policy, which allows for Centrelink clients to have their payments quarantined and restricts how they can spend their money, has also been been explored in two recent government reports that have proposed extending the scheme.

Patrick McLure's interim report on welfare, A New System For Better Employment And Social Outcomes, and Andrew Forrest's Indigenous Employment And Training Review both call for the policy to be expanded to more areas and categories of income support recipients.

The government study, Place Based Income Management – Process And Short Term Outcomes Evaluation, like previous government studies, failed to demonstrate that compulsory income management has positive impacts on financial and personal wellbeing.

The evaluation found that while volunteers for the scheme reported improvements in their ability to manage their money, those forced on the scheme — the vast majority of clients — reported no such improvement.

There was no decrease in alcohol or tobacco sales for income management clients, and no improvement in reported levels of health. Indicators of child wellbeing, including school attendance, were unaffected by income management, despite supporters of the policy often justifying the scheme on child-welfare grounds.

The proportion of income management clients who engaged with financial counselling or money management services, the only direct support service for clients, was low. This was particularly the case for compulsory clients, with only 16.7% of those forced on the scheme using these services.

As of May 16, there were 2519 income management clients across the five sites, a marked increase in numbers but significantly smaller than the 20,003 clients in the Northern Territory where income management has operated since 2007.

Of the 2519, 78% were forced on the scheme, with 560, or 22% being volunteers.

Centrelink social workers have the power to classify income support recipients as “financially vulnerable” and put them on the program, and child welfare workers can also put individuals on the scheme.

The vast majority of compulsory income management clients, however, were automatically put on income management simply because they are young and receiving a particular type of Centrelink payment. These include people aged under 25 exiting prison, and especially, people aged 16 to 21 who were unable to live with their parents.

Defenders of the scheme point to the Matched Savings Payment as an example of how income management encourages financial responsibility. Income management clients who complete a money management course, and save up to $500 from their non-restricted funds (usually 50% of their payment), are rewarded by having their savings matched dollar-for-dollar by the government.

The problem is very few people have qualified for the payment, with only one income management client out of roughly 2,500 having been eligible for the payment. This is hardly surprising: saving $500 from a yearly income of roughly $6,000 (half the yearly income of someone on Newstart Allowance) is extraordinarily difficult. Saving $500 from $12,000 would be difficult. The Matched Savings Payment reflects how out-of-the-touch the government is with the experiences and hardship of those on income support payments.

Roughly half of those forced onto income management reported feeling judged or shamed. This is similar to previous reports that have found significant feelings of embarrassment and humiliation.

Interestingly, the evaluation found that those who had volunteered for income management tended to be more likely to experience financial stress than those forced on income management, and tended to report lower levels of health, and higher levels of alcohol and tobacco consumption.

This probably reflects the fact that compulsory income management in the five sites operates largely as a blanket measure, affecting large numbers of young people regardless of their financial and personal history, or their employment and educational status.

Many part-time workers and students have been forced on income management, solely because of their payment type, even when they have no history of mismanaging their funds.

It is ironic that while income management has been advocated as a tool to help struggling people deal with financial hardship, build money-management skills and prevent homelessness and other forms of crisis, so many of the government's budget cuts to welfare services and programs currently being debated in the parliament will have the effect of increasing vulnerability, especially for young people.

The government's proposed welfare measures, where job-seekers aged under 30 will only be able to receive income support for six months a year, and will have to wait six months before receiving income support after finishing study or losing work, have recently been condemned by a bipartisan parliamentary committee as breaching Australia's human rights obligations.

Fortunately, it appears these changes, which the government has spent so much of the year defending, look increasingly likely to be defeated.

Other budget changes that are more likely to pass, such as reducing access to Family Tax Benefits; changing how Age and Disability Pensions are indexed, so that they increase much more slowly; reviewing the Disability Pensions of those under 35; and raising the age at which young people can receive Newstart to 24, forcing them to survive longer on the much lower Youth Allowance, will only increase financial challenges faced by those on Centrelink payments.

For the vast majority of those on income support payments, it is the inadequacy of payments, not financial mismanagement, that is the source of poverty and stress.

After eight years and $1 billion spent, income management remains an expensive, heavy-handed, stigmatising scheme that has failed to achieve positive results. Rather than expanding income management, as the reports argue, it is time to move on.

The policy should be scrapped, except for a voluntary version, with savings directed towards properly investing in job creation, community programs like like financial counselling and money management services, anti-addiction programs, and raising income support payments to adequate levels.

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