25 May 2016

Nervous wait for budget services in funding shakeup

11:01 am on 25 May 2016

Budgeting services are facing an uncertain future, as the government prepares a major shake up of the sector.

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Photo: 123rf

Next month all country's budgeting services will have to reapply for funding, and if successful they will be part of a new system which launches from November.

The Ministry of Social Development has already cancelled 14 other contracts, saving $374,000, and it's feared others will follow.

Ministry of Social Development figures show a quarter of households had only just enough money to meet their needs and 12 percent did not have enough to meet their everyday needs.

The ministry said those who were struggling needed a more comprehensive response and has launched a "major shift" in how it funded and supported budget services.

It wants to move away from teaching people how to budget to what it termed financial capability. 'Budget advisors' will become 'financial mentors'.

The Labour Party's social development spokesperson Carmel Sepuloni said the new approach was about looking at a person's future decisions, rather than just their budget.

Carmel Sepuloni

Carmel Sepuloni Photo: RNZ / Kim Baker Wilson

Last week she attended a financial capability programme in Auckland.

"You listen to families talking about how they've managed to buy $80 a week of groceries one week, and then only $35 the next for two people, and you just think how are they possibly surviving on such limited amount of food. And that's all because they have such limited amount of money."

Ms Sepuloni said the problem was that people didn't have enough money to buy food and pay bills, let alone save money and reduce debt - one of the new strategy's long term outcomes.

But Associate Social Development Minister Jo Goodhew said people struggling to make ends meet were not getting the comprehensive budgeting advice they needed, and users, services and government departments had come up with a new way of providing advice.

Ms Goodhew said an evaluation in 2012 found the same people were going back to the budgeting services regularly.

"There might be some short term advice given to them but in essence even when we talked to the people who'd been through the services they weren't gaining what we call financial capability."

'Not enough funding to keep up with demand' - budget service

Budget services RNZ News contacted said they were are already seeing twice, or even more than three times, the number of people they were funded for.

The groups declined to be interviewed for this story, fearing it could jeopardise their chances of winning a contract.

They told RNZ News the Ministry of Social Development had given no indication of any new funding - and some have been told they will be losing it.

This response summed up the views of many:

"There is not enough funding to pay sufficient staff to keep up with demand from clients needing financial help.

"The process to qualify for funding changes regularly and takes up a lot of time that services are really lacking due to being so busy with client work.

"It appears that the funder has difficulty measuring success amongst a very stressed and diverse group of people who use services.

"Evidence has been provided that our service can be proud of. Many of the factors affecting this group of people can be separate from budgeting such as mental health, addictions, lack of housing and cultural issues," one said.

Some budgeting agencies were also critical of the tender process, and said it had put extra stress and unnecessary pressure on them. It had also made it difficult to keep and retain staff, and plan for the future.

Others were more positive, saying there were aspects of the policy they liked the sound of, but until the detail is released next week, they wouldn't comment.

Social policy researcher Charles Waldegrave said the government needed to lift income levels because the minimum wage wasn't enough for a family of four to live on.

"It's just very difficult to make ends meet at the bottom. And really there needs to be a whole new policy shift along the lines of Working For Families that was very successful and lifting low income families out of poverty. That was basically devolving money down to lower income groups, rather than some of the planned tax cuts which are more likely to benefit higher income groups."

And he sounded a warning to the government about the damage it could inflict on budgeting services.

"They have to be very careful that they don't damage the goodwill in the New Zealand community that is giving services to all sorts of people. Because many of these people are not paid. They are part of NGOs and are volunteering."

Tenders for the new service open on 1 June and the new system will start from November.