Christian Porter looks to big data to help cut welfare spending

The government has measured the hell out of the welfare system.

Marko Milicevic, 21, has volunteered at Meals on Wheels but has not held down a job since he left school in Year 10: ‘I’m trying to motivate myself not to become too comfortable or lazy’. Picture: Aaron Francis

Big data has assumed the role of both hero and villain in the literature of the most disadvantaged, capable of being analysed for trends and patterns among the chaos of human behaviour but charged with being so dense as to exclude humanity itself.

Social Services Minister Christian Porter has staked his reputation on the “maybe revo­lutionary” idea that taking the past 15 years of welfare data and drilling it for the recipients’ total lifetime costs is a means to a better end.

Take the modern rigour of ­actuarial analysis — used to a massive degree in the National Disability Insurance Scheme — and project what the total cost of certain groups will be without ­intervention: $410 billion for those on working age payments, $97bn for students and $109bn for carers. Take everyone together and their total lifetime cost from last year is $4.7 trillion.

You cannot change what you do not measure, so it goes, and the federal government has measured the hell out of the one policy area that has always been a source of grief: the $160bn welfare system, one of the largest and fastest growing segments of government.

Porter told the National Press Club yesterday that 80 per cent of personal income tax raised in Australia goes to paying this bill. That’s the data, but as he admitted during a later question, you can “cut the data in any number of ways”.

Patrick McClure is the architect of the government’s plan after he was enlisted to review the welfare system (you may have heard of him from previous reviews, such as a largely mothballed welfare ­assessment he conducted for John Howard at the turn of the millennium). He stresses the data on its own can only do so much.

“The data is very good at identifying the cohorts, but to me it is all about the ($96 million) Try, Test, Learn fund,” McClure says. “This is where we focus on individuals and try out investments which can achieve good outcomes for them. With big data we can do good, but it is just the first step.”

This fund, Porter says, will be “BYO ideas”, the latest in a series of governments throwing up their hands and daring the private and non-government sector to do better.

In NSW the Baird government pioneered this approach with its social benefit bond, an investment vehicle in which early financial backers are rewarded if their programs achieve typically difficult social outcomes.

In the Newpin bond’s case, $7m of initial capital from investors was used to try to maximise the number of children restored to their own families after a period in foster care. The bond so far has paid a 12.5 per cent return to investors based on its one objective: by ­returning 130 children to their parents, this year’s ­report shows.

Now Queensland, Victoria and South Australia are investigating such social bonds to tackle homelessness, mental health and juvenile justice. The returns to investors are paid from the money government saves in the provision of services for people once trapped in its system, foster homes, jails or on the street.

In its way, the federal government is both backer and victor in its early investment approach, if its long-term approach delivers the savings.

Brotherhood of St Laurence executive director Tony Nicholson says the government is “privileging innovation” but he and others are cautious about the richness of any story told by the data.

“This approach is based on the idea that moving people off benefits is a proxy for improving their lives, which is a good starting point but it would need to be validated over time,” he says. “I can only take this at face value and if the innovation fund is rigorously evaluated, I support that, I do not see any problem with that. But if this just becomes about getting people off benefits, I would not support that.”

Marko Milicevic is 21. He has odd-jobbed for his father and volunteered at Meals on Wheels but has not held down a job since he left school in Year 10. The Frankston man, who lives with his family, is studying a Certificate III in hospitality and wants to find work for his own freedom and peace of mind.

“I’m not bothered by how long it has taken me but earning my own money is definitely something I want to do,” Milicevic says.

“If we’re talking about support for young people, it would help if they focused on the individual, not condescending to them, giving us experience. I’m trying to motivate myself not to become too comfortable or lazy.”

GRAPHIC: High cost of caring

According to government data, the lifetime welfare costs for people who attain a certificate level education are higher than those with only a senior high school qualification and almost as high as those with Year 11.

For his part, Porter says he is not interested in “further restricting programs” but adds there are rules — in the form of mutual obligations that flow both ways ­between government and welfare recipients — that must be met.

“I’m not proposing to spend less money,” he told the press club.

Social Ventures Australia’s impact investing executive director, Ian Learmonth, says it is crucial to latch on to programs that are shown to work, jettisoning the rest.

“The actuarial analysis tells us about long-term welfare costs and the factors that influence those costs, but it doesn’t tell us about other outcomes in people’s lives,” he says. “This is a step toward a more holistic understanding of how disadvantage impacts people across generations.

“As a community we also need to invest in services that improve lives but don’t show a net financial return. The investment approach is an opportunity, but it’s not the answer to everything.”

The government has an opportunity to set a new standard for evaluation of its programs, something many have previously failed.

Research from the Centre for Independent Studies released today reveals the shocking, porous nature of the data and evaluations collected for early childhood intervention programs. In one case, a review of a program in Victoria found no statistically significant evidence it even worked, but funding was increased and the enterprise was expanded.

The federal government has brought in the big data cannon but here’s the deal: it has to be ­prepared to fail, and publicly, if the whole exercise means anything at all.