Annual Report 2016-17 cover

Reducing the welfare liability

In 2015 the Government set two challenging Better Public Services targets to be achieved by June 2018: to reduce the number of beneficiaries by 25 percent to 220,000 and to achieve an accumulated actuarial release of $13 billion.

Over the past year we have continued to use a social investment approach to ensure we improve employment and social outcomes by moving people closer to independence. We have managed this through a greater use of active case management, and trialling new approaches.

Using a social investment approach to prioritise our work with people with health conditions and disabilities and Māori clients

Our focus in 2016/2017 was on two groups who make up a significant part of the liability and were addressed as a priority area in the Investment Strategy: clients with health conditions and disabilities (HCDs), and Māori clients.

People with health conditions and disabilities

Recent valuations of the benefit system have shown us that while we are doing well in moving jobseekers who have been on benefit for less than a year and sole parents out of the benefit system, we are not having the same impact for clients with more complex barriers to employment. This may be due to underlying HCDs or limited educational levels or skills. This means that many of our clients face particular difficulties in getting into the labour market, and our current portfolio of services does not completely prepare these clients for work.

A proportion of those who receive welfare benefits have an HCD, with poor mental health being particularly prevalent.

Ensuring that individuals with HCD needs have sufficient income not just to support themselves but also to meet the additional cost of their health care, is an important function of the benefit system.

Helping HCD clients, including those with mental health conditions, to find and stay in work is also one of our key goals. HCD clients have the right to work on an equal basis with others, and the social, economic and health benefits of employment are significant. Most of our HCD clients can and want to work.

Through trials and innovation, identification of best practice in regions and international evidence, we are learning more about what works to help disabled people and people with health conditions to find and stay in employment.

In the past year we entered a cross-agency partnership with the University of Auckland and the Waikato, Northland, Waitemata and Canterbury District Health Boards (DHBs) to change the way we engage with the health sector and the wider social sector to deliver outcomes. Under this partnership, known as Oranga Mahi, we are trialling new types of service provision to get better outcomes for people currently at risk of long-term benefit, health and justice system dependency.

In 2016/2017 Oranga Mahi implemented three trials:

  • REACH (Realising Employment through Active Coordinated Healthcare) – a trial with Waikato DHB using cognitive behavioural therapy techniques to remove or reduce barriers preventing sustainable employment
  • Step-Up – an intervention to access the right service and focus on getting clients back to work
  • Rakau Rangatira (the leader within) – a kaupapa Māori and Whānau Ora-based trial that aims to support clients to return to wellness, manage their wellness, and move towards and into employment.

Mental health

Clients with mental health conditions make up over 40 percent of all clients receiving health and disability benefits.

In 2016/2017 particular services for people with mental health conditions included:

services aimed at improving employment outcomes for people with mental health conditions on benefit in South Auckland

a specialised Wellness service in Auckland, Waikato, Canterbury and the Southern and Central Work and Income regions to help people prepare for and find suitable work, and to support them and their employer when they do start work.


Implemented in late 2016, EmployAbility is an approach to assist disabled clients and clients with a health condition to achieve sustainable employment. The approach aims to increase employment and economic opportunities for disabled people and people with health conditions. We work with clients to help identify their strengths and the types of jobs that could be right for them. We also work with employers to understand their needs so we can match the right clients to jobs that suit their particular skills. When the person obtains a job we offer them and their employer support to ensure it is successful for all involved.

Disability Confident campaign

We designed and developed the Disability Confident campaign, which the Minister for Disability Issues launched in November 2016. The campaign aims to highlight the many benefits of employing disabled people and to make it easy for employers to get the information they need to become ‘disability confident’. This includes showcasing the wide range of practical information and free government-funded support and services available to support employers to recruit and retain disabled employees.

Māori clients

Māori make up a significant proportion of both the benefit system (31 percent) and the social housing register (36 percent), but only 15 percent of the working-age population.

The 2016 valuation shows that the average future lifetime cost for Māori clients is about 50 percent higher than for non-Māori clients, and that they are significantly over-represented in all the risk factors associated with higher benefit cost. Consequently Māori clients are more likely to be on benefit for a long time and to go on and off benefit more regularly than other ethnic groups.

Unemployment, low pay, insecure housing, and other adverse social outcomes disproportionately affect many Māori communities. The effectiveness of our services for Māori is a critical factor in achieving our goal of improving the social and economic outcomes of all New Zealanders.

A very young Māori population, projected population growth and other demographic factors compound issues, and their future impact, for Māori and for wider New Zealand society.

In 2016/2017 we developed a Māori Investment Plan with a focus on improving sustainable employment outcomes, as a means to address long-term benefit dependence for Māori. The Plan sets out our strategy for addressing welfare dependency amongst Māori clients over the short, medium and long terms, and for ensuring that employment opportunities for Māori are meaningful, fit for the future, and sustainable.

We also established a Māori Innovation Reference Group, Te Aka Whānau, which contributed to the development of the Māori Investment Plan. The group continues to meet regularly to provide a consultative lens across Ministry initiatives that better address the needs of Māori.

This work contributes to the following Ministry outcomes:

  • More people into sustainable work and out of welfare dependency
  • Fewer children and people are vulnerable
  • More communities are strong and thriving

At 30 June 2017:

Expanding Family Start

276,041 people were receiving working age benefits (the lowest number since December 2007)

60,631 people were receiving Sole Parent Support 7.3% less than the previous year – its lowest level since the category was introduced in 2013

Expanding the Youth Service

Supporting disengaged young people into education, training or work

In October 2016 the Youth Service, a contracted service in which community-based providers work with unemployed or disengaged 16- to 18-year-old youths, was expanded to include 19-year-old teen parents, young partners and young parent partners of main beneficiaries.

Youth Service providers deliver intensive wraparound support to vulnerable youth to improve their educational and social outcomes and to reduce their welfare dependency. All clients referred to the Service have a youth coach and budgeting obligations and are money-managed. Teen parents in the Service have an obligation to attend a parenting course, enrol their children with a Primary Health Organisation, complete Well Child checks, and ensure children attend early childhood education.

Providers seek to coach youth to pursue or plan for education or training (by achieving at least NCEA Level 2 or equivalent), and to remain off benefit for at least three months after exiting the Youth Service. In 2016/2017 approximately 27 percent of people who left the Youth Service (over 3,400) stayed off benefit for at least three months.

We have a formal agreement with the Ministry of Education to share information about school leavers and potential school leavers.

Supporting the Business Growth Agenda

In 2016/2017 we continued to actively support the Government’s Business Growth Agenda and regional development priorities through collaborative approaches to training and employment pathways for New Zealanders.

Under the Sector Workforce Engagement Programme [50], we are supporting Ara (the Auckland Airport Skills and Jobs Hub) as it transitions into industry-led ownership. As at 30 June 2017 Ara had placed 251 people into employment since November 2015, of whom 110 had previously been receiving a benefit. A school work experience programme with five South Auckland high schools aims to support 64 students to undertake work experience through Ara in 2017 – as at 30 June 2017, 50 students had undertaken work experience through Ara.

We are working on a number of initiatives within the Regional Growth Programme to support beneficiaries into work, including Project 1000 in Hawke’s Bay, which aims to support 1,000 local people into jobs by July 2019. As at 30 June 2017, 257 people had been placed into employment. Of these, 34 percent were female, 50 percent were youth (18- to 24-year-olds) and 56 percent were Māori.

Trialling new ways of working with clients

In 2016/2017 we continued to seek opportunities to develop and implement trials to better understand the needs of clients who have high barriers to employment, in order to help them achieve improved outcomes.

One such trial, which began in 2016, is the Supporting Offenders into Employment trial, a joint initiative between MSD and the Department of Corrections, which was funded for $15.3 million over three years in Budget 2016.

The trial aims to improve employment outcomes and to reduce reoffending by engaging with prisoners before their release and continuing to provide intensive support for up to a year after their release as they integrate back into the community. It comprises two services, each for up to 200 clients.

Improving financial literacy and avoiding debt

In 2016/2017 we undertook a comprehensive redesign of budgeting services to build the financial capability and resilience of people experiencing hardship.

Working with providers, we used leading-edge social investment analytics and insights to co-design a new service, Building Financial Capability (BFC), which came into effect on 1 November 2016.

The BFC and Community Finance [51] services help clients to avoid debt by:

  • providing small loans to enable clients to avoid high-interest debt from third-tier lenders
  • providing services such as MoneyMates and Financial Mentors who help clients by talking through their options to avoid debt
  • providing further financially inclusive products, including trialling a savings scheme with the aim of enabling clients to build a savings habit and thus provide a buffer against crises that can lead to debt.

Up to 30 June 2017 we had contracted 113 providers to supply financial mentoring and to facilitate MoneyMates group programmes.

The first part of the impact evaluation of the Community Finance Initiative showed evidence of positive changes for participants, in terms of their financial capability (attitudes and behaviours), employability and wellbeing. If maintained, the changes participants described can be expected to improve their financial situations over time [52].

Integrating the welfare and housing valuations

One of the pillars of the social investment is the use of actuarial modelling in the welfare and social housing systems to establish the lifetime costs both of the overall system and of specific client groups. We achieve this through annual valuations of the two systems.

The annual valuations identify likely future trends in benefit receipt and social housing need. We analyse and use this information to shape our services and case management and our work to identify new ways of doing things. The forward liability valuation is now a key part of our monitoring and accountability arrangements.

We have now integrated the welfare and housing valuations and since 30 June 2016 these annual valuations have been calculated using an integrated model. Using this integrated model, we can take a person-centric approach to people’s welfare and housing needs.

Addressing alignment issues

In 2016 we identified 36 confirmed or potential situations where legislation and practice were not aligned. All of these issues have now been investigated and resolved or a way forward determined.

The two most significant issues were the benefit payment commencement date issue and the Accommodation Supplement rate of payment:

  • An error in a legislative amendment in 1998 inadvertently changed the wording in the Social Security Act 1964 about the day on which benefit payments commence following a stand down. The error was corrected by new legislation in 2015. The vast majority of people affected by the 1998 error have now been paid for an extra day of entitlement. The small number of people who have not yet received payment will be paid when they provide their bank details.
  • Between 1993 and 2014, more than 113,000 people had discrepancies that affected the rate of their Accommodation Supplement. We have paid all amounts owing to current and non-current clients. Clients who were overpaid will not be required to repay any money.

Rewriting the Social Security Act

In 2016/2017 we continued progressing a rewrite of the Social Security Act 1964 to make it easier to navigate and understand, and to help us improve the delivery of frontline services. The focus is on improving the structure of the Act so those who use it can find information more easily and understand it better.

The Social Security Legislation Rewrite Bill has been considered by the Social Services Committee and is currently awaiting its second reading.


[50] Working with the Ministry of Business, Innovation and Employment and other key stakeholders, the Sector Workforce Engagement Programme aims to improve employers’ access to reliable and appropriately skilled staff and create more opportunities for New Zealanders, including beneficiaries, to enter the workforce and develop their skills.

[51] Community Finance provides small loans to people who would not otherwise have access to safe, affordable credit. The service has now been expanded nationwide.

[52] Good Shepherd Microfinance-NAB, Life Changing Chats: Impact of the financial conversation on StepUP applicants’ financial literacy and capability, April 2015.