A Treasury report to the Government's welfare working group recommends reclassifying all 144,000 people on sickness and invalid benefits into three categories based on their ability to work, shifting those with some capacity to work in the near future on to the unemployment benefit.
It also recommends requiring sole parents to look for paid work before their youngest children turn 6, and contracting out most welfare services to private companies or charities.
But its hard line is softened by other proposals to extend sick leave and parental leave entitlements, and to let sickness beneficiaries earn more from part-time work before having their benefits cut.
The welfare working group, chaired by economist Paula Rebstock, has been given until next February to come up with proposals to reduce long-term benefit dependency.
Ms Rebstock said yesterday that the Treasury paper, presented at the group's latest meeting on September 3, was "just one of many inputs that the working group is getting".
"It was useful input but it would be premature as to what the welfare working group might be recommending," she said.
However, the 38-page paper provides the first concrete set of public proposals from any official source in the working group's review.
It draws heavily on recent reforms in Australia and Britain, which have both moved work-ready people off disability benefits on to the unemployment benefit. In Britain, the paper says, 69 per cent of previous disability beneficiaries were classified as "fit for work" and moved on to the dole.
"On the basis of the recent UK reforms, the reclassification of all sickness and invalid beneficiaries could result in more than 80,000 New Zealand beneficiaries moving on to the unemployment benefit," it says.
The move would make no difference to benefit rates for sickness beneficiaries because they already get the same as the dole. But the adult invalid's benefit of $243 a week is $49 higher than the $194 adult dole.
Shipley rides again!