Give a man a fish: the short-sighted scheme of compulsory income management

In 2007 the then-Government under John Howard introduced compulsory income management to 70-odd Indigenous communities in the Northern Territory, ostensibly to address concerns about child abuse raised in the June 2007 Little Children are Sacred report which stated that the main causes of child abuse were alcohol abuse and lack of education.

Income management withholds between 50 and 70% of welfare payments (and 100% of lump sum payments) in an attempt to ensure that parents spend their money on food and other necessities rather than alcohol, tobacco, gambling and pornography.

In late 2009 the Minister for the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Jenny Macklin, announced changes to the operation of income management. Starting 1 July 2010, those changes would, in theory, remove the Indigenous focus of the program, apply it to a wider category of Northern Territory welfare recipients regardless of race, and act as a trial to the potential roll-out of income management to other ‘disadvantaged’ areas of Australia.

Over a period of 5½ years (2009-10 to 2014-15) the government will spend $410.5 million on income management, a cost of over $4,000 per person. This is only the cost for the Northern Territory. An Australia-wide roll-out would cost a hell of a lot more.

Minister Macklin’s reasoning was that income management has been proven to work.

This is not the case; it’s not even close to being the case.

Problems with income management
Indigenous people, academics and community organisations have soundly criticised compulsory income management, both in its original form and the new model.

FaHCSIA’s ‘consultations’ obtained feedback from less than 0.5 per cent of the total number of income managed people in the NT, hardly a basis for claiming widespread support.

Lack of evidence
The efficacy of imposing compulsory income management on particular categories of welfare recipients is not supported by evidence demonstrating that the benefits warrant the substantial costs. Several reviews and evaluations have shown that domestic data are limited and what little ‘evidence’ has been inferred is weak, conflicting and largely anecdotal (see, for example, the 2009 report of the Australian Institute of Health and Welfare, Report on the evaluation of income management in the Northern Territory).

The Australian Indigenous Doctors’ Association found no evidence that compulsory income management had been effective in improving child health or reducing child sexual abuse.

Store licensing may have improved community access to a better range of food and other goods, but this is only coincidentally linked to income management. Evidence about increased food sales is based on reports of store owners and customers, not hard data.

A much less expensive way to improve nutrition in remote Indigenous communities would be to subsidise the transport of fresh fruit and vegetables to the communities.

The effects of income management are also difficult to separate from the related programs of alcohol restrictions, financial management and the licensing of community stores.

The Government has not listened.

It doesn’t build capacity
Compulsory income management is very unlikely to assist people to find work or achieve financial independence but may instead trap people in a cycle of long-term dependence on others to make financial decisions for them.

Financial management support services would be more cost-effective and are more likely to improve the financial management skills of welfare recipients over the long term, thereby assisting them to meet the basic needs of themselves and their families. Building the money management and budgeting skills of welfare recipients would minimise their dependence on external support to manage their money in the future.

It doesn’t deliver what Indigenous people want
The expansion of compulsory income management does not deliver what the majority of Indigenous people want and risks continuing government failure to ‘close the gap’.

Paternalistic approaches such as this disempower Indigenous people. The solving of Indigenous problems requires the building of Indigenous capacity and self-determination; it requires that Indigenous people be given the freedom to make their own genuinely informed decisions about their lives and communities.

The majority of community consultations have shown that Indigenous people support a trigger model – rather than people ‘being found guilty until proven innocent’, an income management sanction would apply only where people have behaved in socially harmful ways. They also supported voluntary income management.

Once again the government has failed to listen.

It is stigmatising and racist
Social security recipients generally have a legal right to decide how to spend their payments. However, income management stigmatises the long-term unemployed, young people and sole parents and has, and will continue to have, a disproportionate impact on Indigenous Australians.

The changes to income management were brought about by Minister Macklin’s desire to make the scheme compliant with the Racial Discrimination Act 1975.

Despite the new scheme applying to a range of welfare recipients across the whole of the Northern Territory (and, from 2012, other “disadvantaged locations” across Australia) rather than just selected Indigenous communities, there is still a significant risk that the new scheme would be racially discriminatory because those locations have significant Indigenous populations that rely on unemployment, youth or sole parent payments.

While income management would be applicable to the non-Indigenous residents, there will be little practical difference between the new and old schemes as many Indigenous people across Australia rely on income support payments.

It won’t improve social issues
Income management is not the most effective method of addressing community and/or individual disadvantage, dysfunction and disengagement, and dictating how 50 to 70% of a person’s income can be spent will do nothing to address entrenched disadvantage.

There is no guarantee that the substantial cost of income management would be offset by improved health, education or employment status.

There is also no guarantee that income management will reduce unemployment or long term reliance on social security payments or that it will improve child safety and welfare.

Attempts to address Indigenous disadvantage would be better focused on areas proven to be effective, such as the provision of public services in housing, health and education. Investment in these areas could also assist in reducing imprisonment rates (countries and states investing more in education, health and social security typically spend less on their prison systems).

While income management has the potential to positively affect individuals with alcohol or drug problems, intensive counselling and support to help people overcome their addictions is likely to be much more effective than a poorly targeted compulsory income management regime. Without this support, people with drug and alcohol problems are likely to find ways around restrictions on their spending.

The recently announced East Arnhem family support service is one example of a program with the potential for greater success than the imposition of compulsory income management: its range of child-focused services will help parents to provide a safe, happy and healthy environment for their children and protect them from abuse and neglect. Services include intensive parenting services, early learning and literacy programs, playgroups, and other services that the local communities indicate they need such as after school recreation programs, home budgeting courses and child nutrition education.

While I am not opposed to income management in principle, I am opposed to compulsorily managing the income of people simply because they fit into particular welfare categories, particularly when the majority of those people are required to carefully manage their meagre income support payments and care for their dependents.

Ideally, income management would be scrapped altogether. Termination from 1 July 2011 would save the country approximately $250 million. The money saved could instead be spent on higher priority needs such as housing, health and education.

Alternatively, income management should be applied only where welfare recipients think that their personal circumstances warrant opting in to the scheme (voluntary income management) or where there is a clearly demonstrated need to protect ‘at-risk’ people or their children or other dependents. Remodelling income management in this manner would, from 1 July 2011, save the country approximately $240 million.

If particular welfare recipients require assistance in managing their income, the Centrepay service is available to Centrelink customers. It is a free and voluntary direct bill-paying service and clients can have a regular amount deducted from their Centrelink payments. Unlike in the income management scheme, deductions can be started, changed or cancelled at any time to suit personal circumstances. Expenses that can be paid using Centrepay include private rent, telephone, utilities, education fees and expenses, ambulance costs, child care, home care services, rental of household goods, and court fines.

A future national roll-out
Minister Macklin states that income management is part of a wider policy agenda to end ‘welfare dependency’ and has referred to an “entrenched cycle of passive welfare”, suggesting that welfare payments, rather than high unemployment and poverty, are the problem. Even if she is right, it is hard to see how income management will provide a solution.

The wider scheme of income management will not be restricted to people who have difficulty managing their finances or are not adequately caring for their children. Instead, long-term recipients of the identified income support payments will automatically be enrolled in the scheme, regardless of how diligently they budget their money, search for work or care for their children.

Imposing income management upon certain classes of welfare recipients will be of limited effectiveness as many recipients of income support already manage their money effectively due to the need to survive on income below the poverty line. Most income support recipients spend their payments carefully to meet the basic needs of their families.

The single rate of Newstart Allowance has not increased in real terms for over 15 years. Even careful budgeting will not make it any easier to live on payments such as the $231 per week received by a single adult on Newstart Allowance – anyone living off this payment will struggle to make ends meet.

To get out of the scheme, individuals will have to apply for an exemption. This is patently unfair, particularly to income support recipients without children who must either get a job or enter full-time study to obtain an exemption.

It is not sufficient to justify the removal of an individual’s control over their social security payments simply because they fall within a particular category and are “economically and socially disadvantaged”. Convincing evidence is needed to show that a substantial proportion of these groups are affected by a “culture of welfare dependency”, incapable of managing their budgets, spend a high proportion of their incomes on such things as gambling and alcohol, or that they are not responsible parents.

Even if this evidence can be provided, the Government would be better advised to instead fund initiatives for which there is a demonstrated need: adequate payments, better employment assistance and training for long-term unemployed people, improved access to mental health and alcohol and drug services, and intensive case-management services.

Income management is a simplistic and flawed answer to a complex problem and it will do nothing to remedy the underlying causes of poverty or social exclusion.

If anyone thinks a change of Government at the upcoming election will change things, the Opposition Leader, Tony Abbott, has argued that compulsory income management should extend to all welfare dependent families with children. Be afraid.

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One thought on “Give a man a fish: the short-sighted scheme of compulsory income management

  1. Great post on a related page and didn’t quite get it. Your entry helped me understand it better.

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