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Benefit claims rising

Posted in News

The latest data from the Ministry of Social Development shows that for the first time since December 1999, the total number of adults on a means-tested benefit has risen year-on-year.

As at September 30, 2008 there were 269,608 people on a 'main' benefit, up +2.4% from a year earlier. This is now 8.2% of the working age population.

There was growth in claimants for all the main classes of benefits. But there are now only 23,273 claiming the unemployment benefit, a huge decline from the 148,755 who claimed it in September 1999.

The picture is not so positive for other classes of claimants, however. There are 98,473 on the DPB, compared with 110,477 nine years ago. Growing numbers of us are apparently sicker than we were nine years ago - there are now 48,208 on the Sickness Benefit, up from 32,414 in 1999, and 83,618 on the Invalids Benefit, up from 51,239 nine years ago.

The MSD data does not include the Working-For-Families data. In fact, the department does not publish the level of claimants for this program, unless the information is released in a speech by a Minister. The last time this data was revealed was for March 2008 when a Minister said there were 327,000 families on the program - which may be equivalent to about 589,000 adults at that time.

Estimates by interest.co.nz show that more than 1.4 million adults are now on various means-tested benefits. As at September 30, 2008, this is made up of:

- unemployment benefit  ..................   23,273
- domestic purposes benefit  ............   98,473
- sickness benefit  ............................   48,208
- invalids benefit  ..............................  83,618
- other adult benefits  .......................  16,036
- working-for-families benefits ........  635,000 E
- national superannuation +65 .........  539,100

A small number of adults may be on multiple benefits. Overall, this now means there are less than 1.5 workers for each adult beneficiary. This has fallen from 2.1 workers per adult beneficiary nine years ago.

A wider view ...

It appears that the State Services Commission will not issue its annual Human Resources Capabilities Survey until after the election on November 8, 2008. However, based on the 2007 report, an estimate of current employee numbers in the wider public service can be made, and this shows staffing at about these levels:

- the Core Public Service ............   44,000
- public health-services  ............    59,000
- public education sector ........... 119,000
- other non-trading  ..................    40,000 (police, defence, etc)
- local government  ...................    45,000
===========================
  Total public sector staffing .....  307,000 funded by tax collected

With these 'paid-by-taxes positions' included in the total adult employed population of 2.16 million, it is clear that 1.75 million adults rely on income taxes paid by 1.85 million adults. (This assumes adults benefiting from the Working-For-Families program are on both sides of this equation.)

That is close to a 1:1 relationship - one person dependent on tax collected for their income, for every worker-paying-tax not in the 'public' system.

 

   

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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18 Comments

The increase of particular interest

The increase of particular interest should be superannuation - given it is not a means-tested benefit here in NZ as it is in Aussie, for example.

David - a most interesting

David - a most interesting and at the same time frightening report. How can NZ survive as a nation with such figures. I would predict two ways to resolve this problem. Either the immigration floodgates are opened and we all know what happened the last time this trick was used in 2002 to 2004. Or taxes will be raised substantially. The nightmare scenario is that both solutons are required to solve the problem. However don't despair we can all "trust" Helen to solve the problem that she created.

Shuttle - means-test super and

Shuttle - means-test super and change the rules regarding LAQCs - and I suspect the savings would be substantial. But so far, no commentators or politicians seem willing to take up the challenge in attempting to quantify either of those two possibilities.

These are truly sobering stats,good

These are truly sobering stats,good comment Kate you are correct about LAQCs
but I supect that the next Goverment of of this banana republic will be forced
to address this massive Scam there are also many Gov workers that also recevie
working for familys and may operate a LAQC under the Guise of being a PROPERTY
INVESTOR when I meet these people and I do I am quick to remind them that
tax payers are proping them and their investments up.
But this wont go on forever Michael Cullen and Bollard have known of this and in
fact have probably in Cullens case used it to prop up this Building Boom we have
been having for the last six years ie low employment etc, and just for the record
I work in the plumbing trade
BAZ

Don't worry as part of

Don't worry as part of the IMF loan package that NZ is going to need soon one of the requirements will be that the government will have to cut spending including benefits.

Those numbers are staggering !

Those numbers are staggering !
While the expectation is to try to trade our way out of this financial mess, there's no way that business can increase exports with such a millstone around their necks.

Kate & Baz, it is obvious you need to get a better understanding of the LAQC process. Ringfencing losses will make absolutely no difference to the tax take.
Personal tax collected will increase at the same time as company tax will decrease- ie zero change.
At best you may find someone on 39% temporarily paying more while the company stores up bigger losses & will ultimately pay even less (because LAQC are inherent loss makers. As soon as they become profitable & liable to pay tax (even at 30 or 33%) it no longer makes sense to be an LAQC, so will be restructured - assets either put iinto a trust or personal name)
You can guarantee that anyone paying 39% and having to subsidise a loss making company will very quickly find another way to make things balance out again.
A cash loss is a cash loss & no amount of fiddling with tax rules will change that.
Bring down interest rates (which are the main contributor to the loss) & you may find tax take rising.

The issue is not the tax take, it is the overspending of Govt on far too many beneficiaries and not enough workers to sustain that spending.
We need more jobs, more income & more people or less beneficiaries.
At present we have the exact opposite.

Keith - you forgot about

Keith - you forgot about the fact that loss making property assets can be sold. Of course, capital gains tax should be paid, but ....

Keith what I was trying

Keith what I was trying to say is that in the recent property bubble is that houses have been purchased rented out and in many cases are two hundred dollars plus a week short of the cost of servicing the debt repayments required to hold the property so a LAQC is used to transfer losses against other taxable income. But the capital gains on these properties have at times been greater than any losses they may have had.so this has added to the size of the property bubble and over priced properties,which reminds me of a joke I heard the other day--why dont Auckland real estate agents look out of the window in the morning--because they need something to do in the afternoon.

No arguement with that Baz,

No arguement with that Baz, but it has nothing to do with LAQC. You can do that whether the property is owned personally or in an LAQC. Plus any other business can offset losses in one against income in another.
So the issue is about capital gains tax not about deductability of losses

I drive a tour bus

I drive a tour bus so I see a sector of the economy many don't. We work long hours during the warm months and part-time during the cold. Many of our drivers are older collecting national super. One or two have rental properties and only work for the next overseas trip. Younger drivers can't afford to take it on.
Tour guides have residency issues and often work for less than the minimum wage (start at point A and finish point B and use own car etc). Tours are being cancelled (I should add).
The rental car guy near our yard tells me that many people get redundancy and buy a small business and then there are too many of them.
Native speakers are driving Chinese.
There are a lot of vans with "family members" in.

Looking at those figures the

Looking at those figures the first step for a new government to take is to scrap Bludging for Families. That will significant reduce the welfare bill and the number of claimants.

But that's Labours flagship -

But that's Labours flagship - you can't trash all the wonderful work labour has done in the last 9 years to get over half the population to be dependent on the state !
I mean, you can't minimise in one foul swoop, Labours acheivement of spending more on social welfare than ever before in our history.
Just think of the outcry.

Government spending has doubled in

Government spending has doubled in my lifetime

1964 - 19% of GDP
2008 - 37% of GDP

Either we're twice as useless as our parents or twice as gullible...

"you can't live without Guvmint help - vote for us and we'll save you"

Diminishing returns suggests that the last dollar spent returns less than the first.

So money blown on the next ridiculous scheme, peripheral department, committee, fact-finding trip etc. returns less than the early dollars spent on primary education, say.

Take a look at the increase in Government employment since 2001 here

http://www.interest.co.nz/gallery5.asp

and the drop in labour productivity over the same period here

http://www.interest.co.nz/gallery8.asp

Labour productivity equals the value of outputs less the value of inputs.

Putting to one side the issues that many government outputs don't have a market to value them, if you agree that government inputs are valuable (wages, land, technology, other capital) and the outputs are sometimes of questionable value, then one interpretation is

At some point a government that spends more makes us all poorer.

I'm not saying that all government spending is low quality, but a lot of it arguably is, and wasting this resource makes us poorer overall. In particular, as the government involves itself more and more in our lives in more and more schemes the spending quality is highly likely to decline.

R

And wasn't Aunty Helens debate

And wasn't Aunty Helens debate comment telling "You're going to fire people John!" she howled, as if the Public Service where she has spent her whole life is immune from the rigors of reality.

You could also add Kiwisaver subsidy as a benefit, I mean after all Cullen called it a "Tax Cut" when it suited, I see it as more as a benefit delayed.

Neven

HI Kate good idea remove

HI Kate good idea remove the laqs and means test all benefits ,,Then we can all get some sleep and peace will reign ,until the day that people realise that benefits are a handup as against a 5 star way of life .Once on the system checks and balances are rare.,with no accountability.The LACQ system is accountable sooner or later all claims against property as a tax benefit are clawed back by IRD .that dosnt happen in the world of free taxpayer payer handout to non producers .REMEMBER THE WORD IS FREE.

David - these statistics will

David - these statistics will look even more alarming if you include the 25,000 "employees" (substitute "civil servants") from NZ's soon to be nationalised banking sector"¦"¦

...and even worse when you

...and even worse when you take into account all of the private sector consulting supported by central/local govt activites.

I had got a desire

I had got a desire to begin my business, however I did not earn enough amount of money to do that. Thank God my colleague advised to utilize the personal loans. So I took the collateral loan and made real my dream.