Cabinet papers 1996-97: minister lost bid to cut dole after year

Jocelyn Newman proposed saving $263 million over four years by cutting the dole for 367,000 people after one year.

Jocelyn Newman in her Canberra office in 1996.

The first social security minister to serve in John Howard’s cabinet brought a proposal to save $263 million over four years by cutting unemployment benefits for 367,000 people after they had been on payments for one year, backed by the Department of ­Finance.

Tasmanian senator Jocelyn Newman introduced the matter to the expenditure review committee for debate but, with the exception of Finance, it was rejected by other ministers and their ­departments because it would create “poverty traps” in the income support ­system.

Senator Newman was told to find alternative savings as the new Coalition government was confronted with a financial position — and a deficit — worse than it had anticipated.

The plan was to boot almost 370,000 people from the dole, job-search allowance and youth training allowance if they remained on the welfare benefits for more than 12 months, forcing them on to the lower rate Special Benefit.

Income tests on the lower payment, however, were incredibly strict and based on gross income, which meant “people would actually be worse off by taking a part-time job when pay-as-you-earn tax deductions and the costs of working were taken into account”.

The Attorney-General’s Department went further, pointing to the well-regarded notion that the proposal “would increase the stresses on unemployed families, thus increasing the risks of family violence and breakdown, abuse of children and youth homelessness.”

In the same term, the Howard government made the decision to expand the Work for the Dole pilot to a compulsory, national program to be announced before the budget in 1997.

The cabinet minute from that decision noted “the initiative is expected to have little, if any, effect on the reported youth unemployment level”.

Introduction of the national scheme required, for the first time, removing provisions from the ­Social Security Act that outlawed the ability to force people to work in return for the Newstart Allowance.

As for cutting the payment ­altogether after one year, however, Finance was reluctant to oppose the measure and wanted to be more strict.

“Finance supports the measures contained in the submission but considers there is scope to go further in tightening arrangements for unemployment payments,” its submission says.

“For example, an extension of the ordinary waiting period from seven days would increase incentives to undertake job search ­activity due to the increased ­period for which the newly unemployed would receive no income support, and would achieve significant savings.”

The proposal, defeated then, pales in comparison to one put in the 2014 budget by then treasurer Joe Hockey when the Abbott government was faced with similar deteriorating financial conditions.

Then, the Coalition proposed making young people wait six months for the dole before revising this to four weeks on top of the current seven days.

Neither measure passed the Senate.

In April 1997, the Howard government was faced with doing something about the youth unemployment crisis — an election promise — but was told almost nothing would work substantially well in the short term.