07 Achieving security requires adequate income

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It is clear that the system of income support must be substantially reformed to significantly improve its adequacy and design. However, any changes to income support will require difficult trade-offs (Boston, forthcoming). These trade-offs are often represented in the so-called ‘iron triangle’ – the three main objectives of an income support system that are difficult to achieve at the same time.
These objectives are to:

• reduce poverty
• ensure there are incentives to work
• provide support at a sustainable cost to government.

These trade-offs are clear over the short term, but they become more nuanced over the longer term. For example, while higher benefit payments increase costs to government in the short term, longer-term savings for government come from the impacts of reduced poverty on the broader wellbeing of people, such as lower costs from better health, higher educational attainment, higher employment and productivity, and less crime. In addition, there will be significant benefits to the wellbeing of people and their families, which, aside from any reduced costs to government, are important in their own right.

In other words, the longer-term costs of doing nothing are considerably larger than the admittedly large short-term direct fiscal costs of reducing poverty.

Consequently, to be explicit about the trade-offs we are comfortable with, it is important that the principles underlying the provision of income support by the social security system are similarly explicit.

We have developed 10 principles for the redesign of the income support system.

• Income support is adequate for meaningful participation in the community and maintains this support over time.
• Income support ensures that people are always better off in paid work, and high effective marginal tax rates are avoided as much as possible.
• Main benefits should cover a larger proportion of people’s living costs than they do currently (reducing reliance on other assistance).
• Child-related payments follow the child and can be apportioned with shared care.
• Payments for specific costs provide support that is adequate, appropriately designed and easy to access.
• Changes to income support reduce current disincentives to form relationships.
• The income support system proactively supports people to access their full and correct entitlements and promotes awareness of entitlements to the broader population.
• The income support system is easy to access and provides timely support, including for people transitioning in and out of the system.
• The income support system is as simple as possible, balanced against the need to provide adequate support for people in a variety of circumstances at a reasonable cost to government.
• People are treated with dignity and respect when accessing this support.

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