In very simple terms, the approach requires you to assemble masses of data. In the Australian case, the Government used PricewaterhouseCoopers (PwC) to mine fifteen years of data. You then use this to estimate future costs of particular programs or types of spend. This generates a baseline report. This might suggest that people in a particular cohort were going to cost so much over a particular time frame. However, if you can spend (invest) now so that those people do not need the later support, you may generate significant future savings. The gain reflects your return on investment. Its the same type of calculation you might do if you were investing in a new machine to lower future production costs.
One of the difficulties with the approach in the social policy area is that calculating returns from particular initiatives is highly problematic. You just don't know what will work because of the number of variables involved. This means that you experiment, trying small things knowing that many will fail in the hope of getting some that do work and can be rolled-out on a larger scale.
In Minister Porter's case, he identified certain key groups from the PwC analysis:
- 11,000 young carers - it is forecast, on average, they will access income support in 43 years over their future lifetime;
- 4,370 young parents - it is forecast, on average, they will access income support in 45 years over their future lifetime; and
- 6,600 young students - it is forecast, on average, they will access income support in 37 years over their future lifetime.
I heard the initial interview with Mr Porter just before I left for a training course. I like the investment approach, although I am not blind to its weaknesses. Then I bought The Australian at lunchtime and found the equivalent of a three page spread involving multiple writers and commentators all about Mr Porter and the approach.
It was actually quite funny. The paper wanted to differentiate the approach from that of the Abbott Government, it wanted to put it in a New Zealand context quoting Bill English admiringly, yet it wanted to stick to its traditional lines. For his part, Mr Porter clearly wanted to emphasis the revolution of it all, to place it in a broader policy context, but in so doing used rhetoric that exactly fitted within the ideological frame of the previous Government.
I will call this one now. I think that Mr Porter's approach is likely to fail. I say so for a number of reasons.
The investment approach can be applied in multiple contexts and political frames. It is a tool. In linking it to ideology, in suggesting that it is the start of a revolution, Minister Porter is attempting to use a tool to justify, support, a broader position.
That broader position has been tarnished by the previous over-reach of the Abbott Government. The New Zealand approach of explain, incremental change, test, explain, more change, test, explain etc doesn't work when people don't trust you. Here Mr Porter's position on the New Start Allowance (the Australian equivalent of the dole) is indefensible.
It may be true, as Mr Porter argues, that dole recipients receive (on average) several benefits, but when you total them up, the value of the dole remains penurious. That was accepted several years ago by both business and social welfare groups It remains true. But the image of a man who receives more in daily travel allowance than anybody on the dole receives in total is not good atmospherics.
Finally, there appears to be a growing disconnect between the data itself and Mr Porter's arguments. The main cost drivers are not those Mr Porter focuses on, but reflect changes (among other things) in the demographic structure of society, including the growing importance of the old age pension.
There are instabilities as well as conflicts in the Australian welfare system. Consider this. The housing that underpins much of our welfare system is based on a single payment, Commonwealth Rent Assistance. This has been going down in value, but it's still critical.
In Mr Porter's case, rent assistance was one of the benefits that people on Newstart might receive, In the case of the NDIS, the National Disability Insurance Scheme, rent assistance is included in the reasonable rent contribution that people pay. In the community housing sector, rent assistance is absolutely critical to viability because it is included in the rent collected.
So what would happen to all this if the Commonwealth decide to abolish or significantly alter rent assistance? There is a case to say that they should. Its really not fair that a person on welfare should get rent assistance (it's only paid to people on Commonwealth benefits) while a working person on the same income does not. But the impact would be dramatic.
Writing in The Conversation, Michelle Grattan commented:
But some of the negative reaction this week – for example from young carers and welfare sector representatives – reinforces the point that it’s not easy to prosecute reform. Suspicion about the government’s motives affects the debate, and whenever payments are involved there is resistance to anything that could threaten them.I think that's a fair summary. The suspicion about government motives is deeply embedded. In retrospect, a key feature of the reaction to the 2014 Australian Government budget is that it was seen as ideological, inequitable, thus creating a climate of distrust, of suspicion. The Government overreached, in so doing damaging the very things it was trying to achieve. I think that Minister Porter has made the same error.
The Australian Productivity Commission has released a preliminary report on Human Services delivery that includes some comments on social housing relevant to the discussion here in comments. You will find the report here.