A recently released review by Australian mining magnate Andrew “Twiggy” Forrest (news article available here, full report available here) investigating training and employment for Indigenous Australians has made a controversial recommendation for the introduction of a “Healthy Welfare Card” for all recipients of welfare assistance in Australia, except for those on aged or veteran’s pensions.
The Healthy Welfare Card
The Healthy Welfare Card is the centerpiece of a new cashless system proposed by Forrest, to encourage responsible spending, reduce welfare fraud, administration costs, and increase financial inclusion. Future welfare payments, he envisions, will be directed to an account at a nominated responsible financial institution, presumably one of the Four Pillars of Australian banking. The Healthy Welfare Card is the direct debit card linked to this banking account, but with a twist – spending on “alcohol, gambling products, illicit services and instruments that can be converted to cash (such as gift cards) and…activities discouraged by government, or illegal in some places, such as pornography” will be restricted, presumably by prohibition of certain retail outlets or at the point-of-sale. The card will be usable at all Australian retail stores that accept VISA or MASTERCARD via EFTPOS facilities (except for the aforementioned), but will not permit the withdrawal of cash.
The justifications and benefits for the Healthy Welfare Card highlighted variously throughout the report and article include:
- Achieving financial stability and empowering individuals by enhancing responsible spending.
- Financial inclusion through the use of mainstream banking.
- Streamlining the welfare payments system by reducing fraud and administration costs.
- Reducing welfare costs by removing distractions to employment, and thus decreasing long-term reliance on welfare.
Welfare in Australia
In considering the Healthy Welfare Card proposal, it should be noted that there are actually two suggestions that should be separated out – firstly, the introduction of a cashless welfare payments system, and secondly, the implementation of universal restrictions on the spending of welfare payments (including the inability to withdraw cash). For this blog piece, I will focus mainly on the second, more controversial, suggestion. The first is largely an empirical issue – whether a cashless welfare system will reduce costs and improve financial inclusion can only be answered by research and evidence (which, currently, seems to be still an open question).
Firstly, a quick primer on the Australian welfare system, and who the scheme is likely to affect. In his report, Forrest claims that:
“Some form of cash welfare (excluding the age and veterans’ pensions) is received by approximately 2.5 million Australians, including around 195,000 first Australian people of working age. The total value of these payments is $37 billion” (no reference cited)
The most recent Australian Government report on the welfare system in 2010-2011 (available here) puts the total value of cash welfare payments at AUD$90.0 billion – of this, AUD$36.3 billion (40.3%) was received by older people, AUD$25.5 billion (28.3%) by families and children, AUD$20.1 billion (22.3%) by people with disabilities, and AUD$5 billion (6.7%) by the unemployed. All of these categories recorded a year-on-year increase as a proportion of welfare expenditure, except for benefits for the unemployed, which stayed steady.
Given his stated figure above, Forrest’s proposal, “that this scheme be implemented so that an individual’s welfare payments, other than age or veterans’ pensions, would be paid into a savings account drawn on with a Healthy Welfare Card”, presumably covers more than just cash payments for the unemployed, and will possibly also include benefits for families and children, or people with disabilities.
What does the Healthy Welfare Card scheme imply?
Let us then consider the ethical implications inherent in the Healthy Welfare Card. Forrest’s proposal for restrictions of welfare spending rests primarily on the empirical assumption that welfare benefit payments are widely, or at least significantly, misspent on alcohol, cigarettes, and other undesirable or unproductive purchases. The author, however, was unable to find any non-anecdotal evidence or statistics to support this point, both in Forrest’s report and in a wider search. This is somewhat unsurprising, as currently there is no wide-spread monitoring in Australia of how welfare benefits are spent. Of course, a complete lack of any significant evidence is not entirely evidence of lack, so this author will allow this assumption to hold for the sake of the following argument.
The reason for this, presumably, is that welfare recipients are unable to properly control their spending – whether because, as Forrest suggests, they have inadequate understanding of financial management and budgeting, because they are subject to predatory exploitation by sellers of illicit drugs, alcohol and tobacco, or perhaps because they simply cannot look after their own wellbeing.
Finally, Forrest suggests that this unwise spending is bad both because is it not in their best interest, and because “the hard-earned dollars of taxpayers [should not] be used to also buy alcohol and illicit drugs”.
What’s wrong with this?
Is it, firstly, problematic for the State implementing controls to promote its citizens’ best interests? Arguably, it could be said that there are precedents for actions such as this – making certain addictive substances illegal, and thus unavailable; road safety legislation, including compulsory seatbelts and a legal limit for blood alcohol; or even our strict gun control laws. In certain circumstances, then, it seems permissible for the State to restrict the freedom of its citizens to prevent harm.
The issue with the Healthy Welfare Card, however, is that there seems to be a significant imbalance between the severity and risk of the harm in question, improper spending and consequently poor lifestyle, and the degree of restriction of freedom. Firstly, freedom is restricted absolutely – holders of the Healthy Welfare Card are completely unable to use it to purchase alcohol, cigarettes, or whichever other goods the State deems to be ‘inappropriate’ (and how this in itself is decided is anyone’s best guess). Secondly, the restriction of freedom unfairly discriminates against those who are more dependent on welfare and thus likely already worse off. That is, those who have other income streams will be restricted to a lesser extent (since they can presumably buy the restricted goods with their other funds), while those dependent solely on welfare, and who are arguably most needful of it, will find these restrictions on their freedom absolute.
There are also the disturbing implications of the assumption that a compulsory Healthy Welfare Card is the best solution to the apparently poor spending decisions of welfare recipients. Firstly, it seems to imply that a significant swathe of the population, some 2.5 million Australians, is utterly incapable of controlling their spending in any other way except for it to be dictated to them. Financial education, support services, or even the voluntary implementation of the Healthy Welfare Card are methods which might be effective without the concomitant paternalism that is inherent in the currently proposed scheme. Arguable, income management is already in place, less controversially, on people with chronic, severe drug addictions, or other individuals who are mentally incapable of managing their affairs. Placing the entire group of welfare recipients in this same class seems to support disconcerting generalisations about this population.
Finally, there is also the re-labelling of welfare support as ‘taxpayer money’ – and the unstated suggestion that welfare recipients are beholden to the State and to the taxpayer to spend the money wisely. In modern democracies, we do not generally prohibit people from making bad decisions – fast food, alcohol, tobacco and lottery tickets are treated as unwise, but certainly not illegal. In respect to autonomy, we take it that competent individuals have a right to make decisions concerning their own lives, even if it is arguably not in their own best interests. The re-branding of social security – which is arguably a universal right as listed in the UN Charter, and not a privilege – as a grudging handout to the dregs of society serves little purpose other than to further alienate and discourage sympathy for already vulnerable communities.
In summary, it seems that the proposal for a Healthy Welfare Card is disproportionately paternalistic, rests on controversial and elitist assumptions about welfare recipients and the nature of welfare system, and will only serve to infantilise and alienate an already vulnerable part of the Australian community. It is most certainly not empowering, will not give people complete freedom and will certainly not end paternalism. Perhaps the intent of this amazing doublethink is that “welfare recipients” will become as demonised as the ‘illegal boat people’ of election campaigns past.
Hi Chris,
Thanks for bringing up this policy proposal. I agree that it’s a very bad idea, on so many levels. Interestingly, there is some good data on alcohol purchases among those on gov’t subsidy: http://www.ausstats.abs.gov.au/Ausstats/subscriber.nsf/0/CB07CC895DCE2829CA2579020015D8FD/$File/65300_2009-10.pdf ; see p. 40. Unsurprisingly, lower-income individuals spend less on alcohol in both an absolute and percentage-of-overall-expenditure sense, relative to the general population. The biggest spenders on alcohol? Wealthy folk. Maybe bankers should be paid with a card that cannot be used for booze…. And in any case, alcohol is quite a small percentage of overall expenditures – ~2%. So hardly a massive source of waste. Against this, there’s *is* significant wastage from the near-elimination of cash purchases among recipients: they will be unable to purchase goods from cash-only shops/informal markets, which will often (esp. in impoverished communities) have goods for cheaper/more convenient than card shops. The report cites the South African welfare card success, but that program has a crucial difference: they’re not barred from certain purchases, and are allowed to make cash withdrawals.
Another issue: the hypocritical exclusion of age and veteran pensions. If alcohol consumption really is a problem that demands paternalistic intervention, it should apply to those groups as well. So why the exclusion? I suspect some serious bias here – the perception that most unemployed cannot look after themselves, unlike retirees and vets who are good budget-managers. As you say, the paternalistic attitude is problematic insofar as it denigrates and disrespects the autonomy of the targets. The exclusion of those groups only serves to underscore that sort of disrespect that grounds this programme.
“Finally, there is also the re-labelling of welfare support as ‘taxpayer money’ – and the unstated suggestion that welfare recipients are beholden to the State and to the taxpayer to spend the money wisely. ”
The norms around ‘taxpayer money’ are a bit variable. At (the NZ) Treasury we had very strict “no alcohol” rules – people had to pay for any alcohol out of their own pockets. Likewise I think the state-funded university I’m at is fairly parsimonious with the booze. But then student stipends don’t have anything like these norms around them, and neither do state pensions. But I think the strong norms around spending “taxpayer’s money” on alcohol in parts of the civil service and universities (hospitals? how do they get on?) means that there is some precedent for these rules, though possibly not in the most analogous cases.
You don’t really engage with the side of the argument that says that this is a way of erecting barriers in front of those driving the “predatory exploitation by sellers of illicit drugs, alcohol and tobacco.” That seems to me a stronger argument than the ones you make above. My objection to this argument would be that this solution will create arbitrage opportunities for exactly those bad guys: they could sell apples at some ludicrously inflated price that their friend next door then buys back for some paltry sum of cash, which is then used to purchase alcohol. So I think the card, however well-intentioned, will create opportunities for economic rents among exactly those people whose businesses it is intended to damage. And the basket of goods and services that the card can purchase will reduce as the welfare recipient pays this additional cost, leaving them worse off.
Basically I think it’s hard to do this sort of thing in a targeted way where demand is highly inelastic. People who are really doing it tough are (rationally, in my view) reluctant to give up the few purchases they make which bring them joy. Taxing alcohol more heavily or using regulatory policy (zoning, maximum alcohol contents, etc) strikes me as a far better way of reducing demand. But most of those might actually affect the middle class, and I see little electoral appetite for that level of introspection…
Governments in the Anglophone world are trying to tackle poverty. Turns out it’s hard. [Throwing money at it doesn’t work, and neither do badly thought-through, overly targeted policies like restrictions on the Healthy Welfare Card. [More positively, policymakers seem to agree that early childhood interventions have good value.]
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