Reviews are important as they let you know if things are working and where improvements may be needed. When done properly they gather data, examine policy, and provide recommendations for action based on the result. Governments, quite rightly, commission plenty of reviews to help guide policy development and delivery. However, Governments also often exclude things from reviews, and when they do so perhaps one should question the effectiveness of the review, or its purpose.

For example the Rudd Labor government commissioned the Henry Review of the taxation system. It was to be a ‘root and branch’ review of the taxation system yet excluded the GST. Given the importance of the GST to State revenue why was it excluded from the review?

The latest is a review into the nation’s welfare system which is ‘unsustainable’ according to Minister Kevin Andrews. News of this review broke via The Australian in its article titled “Welfare must be reined in, Kevin Andrews”, with this as the first paragraph:

“A 10-year report by the Department of Human Services shows that more than five million Australians received an income support payment in June 2012 – more than one in five Australians – with Disability Support Pension recipients hitting 827,000, while 550,000 people were on Newstart Allowance.”

I’ve learned newspapers often emphasis the key message in the first paragraph. This is so the reader, if they stopped reading there, that is what they’ve learned. I’ve used the same technique in this article. Note the emphasis on 827,000 Disability Support Pension (DSP) and 550,000 on Newstart Allowance, I’ll come back to those later.

Other news outlets subsequently reported the review. The first paragraph from the Guardian in its article titled “Australia’s ‘unsustainable’ welfare system to be overhauled, says minister“:

“Australia’s welfare system is to be overhauled, with only the age pension exempted from potential reforms announced by the social services minister, Kevin Andrews.”

Note the Guardian emphasis on an exception, the age pension. The Sydney Morning Herald (SMH) in “Kevin Andrews to target dole and disability payments” has as the first paragraph:

“The Abbott government will exclude the age pension and family tax benefits from its review of Australia’s welfare system, with Social Services Minister Kevin Andrews indicating he will target unemployment benefits and disability pensions.”

The SMH first paragraph notes the exclusions (age pension and family tax benefits) and the targets (unemployment benefits and disability pensions). The announcement of a review does lead to some questions of course. If the welfare system is unsustainable where is the money going? Why are some elements excluded from the review?

To answer the first question the old adage “follow the money” holds true. To start with how many people make use of income support [1]?

Australian use of income support graph 1

The top line is the Age Pension the second the Disability Support Pension. At June 2012 there were 2.2 million people accessing the Age Pension, an increase of 26% since 2002. Another way to visualize this information so you can see how many people in total for all categories is to stack them.

Australian use of income support graph 2The graph above shows the total of people receiving income support was dropping up until 2008 when it then started increasing. What was behind this reversal in the trend? The following graph takes 2002 as the baseline and looks at how the numbers have changed year on year.

Australian use of income support graph 3The data tells us in 2008 there was large increase in the number of people on the Age Pension, followed with a large increase in people on Newstart in 2009. Three income support categories have grown consistently since 2002: Age Pension, Disability Support Pension, and Carer Payment, something brought to light in the following graph.

Australian use of income support graph 4This graph tells use over the last decade covered by this data growth in people receiving support via Age Pension, Disability Support Pension, and Carer Payment, whereas all other categories shrank. The three that grew can probably easily be explained as a function of Australia’s aging population.

Understanding how many people have income support is one thing, but to answer the question where’s the money going it’s necessary to look at the Federal Budget. InfoAus is a website run by Rosie Williams which provides a way to explore the Australian Federal Budget, as well as a range of other services. One of the pages, “Top 100 Programs”, provides a summary of the top 100 programs claiming funds from the Federal budget. The following graph is uses data from that page for the top 5 programs.

Australian use of income support graph 5We can see 4.1 Income support for seniors (which encompasses the Age Pension) will grow from $36.5 billion in 2012/13 to $48.5 billion in 2016/17, an increase of 32.5% over 5 years. What of the money for the programs outlined in previous graphs?[2]

Australian use of income support graph 6

This graph clearly shows most of the money (close to half) is forecast to go towards the Age Pension, something excluded from the review. The following graph looks at this data in terms of total growth over five years.

Australian use of income support graph 7

The growth in the Age Pension is significantly larger than the other income support categories.

Having answered the question where does the money go, the second question, why are some categories excluded from the review, remains. As alluded to earlier, the growth in the Age Pension can be explained through Australia’s changing demographic. However, excluding it from the review given it will have the largest impact in terms of growth in number of recipients as well as on budget expenditure seems strange.

It is widely acknowledge Australia, like many western economies, is dealing with an aging population, which in turn presents a number of complex policy challenges. Complex problems rely on the provision of quality information, possibly obtained from reviews, to help decide on the correct course of action. Deciding to exclude things from a review, as the Minister has done, can therefore call into question the effectiveness or the purpose of the review.

Update #1: 2014/01/22

During a discussion on Twitter with Robyn Oyeniyi (@TeamOyeniyi) about this post, Robyn noted while I had Family Tax A in one graph (the Top 5 Programs) I had not mentioned it elsewhere. I had used Table 1 from Department of Social Services Statistical paper as my index of income support which did not include the Family Tax Benefit; it was further down in the document (Page 63, Table 54).  Family Tax Benefit A is a $14.3 billion dollar claim on the 2012/13 budget climbing to $14.7 billion by 2016/17 (Source: InfoAus). A Family Tax Benefit was claimed by 1.7 million people in 2012 (Source: DSS Paper, Table 52). Robyn has written a great article “Small government philosophy? Then cut the waste” which looks more closely at the Family Tax issue. Thank you Robyn for the pickup.

[1] Source: Australian Government Department of Social Services, Statistical Paper no.11: Income support customers: a statistical overview 2012, accessed 2014-01-21 from http://www.dss.gov.au/about-the-department/publications-articles/research-publications/statistical-paper-series/statistical-paper-no-11-income-support-customers-a-statistical-overview-2012

[2] To create this graph I have used the Budget Boolean search capability on InfoAus to find the appropriate budget line for each of the income support items, transferred to excel to graph.

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