Piloting lateral responses to decrease financial disadvantage and increase inclusion

Transcription

1 Piloting lateral responses to decrease financial disadvantage and increase inclusion The role of financial counselling in the Community Inclusion and Household Debt Pilot Project Care Inc Financial Counselling Service and the Consumer Law Centre of the ACT August 2006

2 Index: Page: 1) The purpose of this report: 3 2) About Care Inc: 3 3) The Pilot Project in context: 4 A national focus on Financial Literacy 4 Safe, fair market access for low income consumers 5 The Community Inclusion Board s strategic priorities 6 4) Care s involvement in the Pilot: 7 5) About the participants: 9 6) Successes and challenges: 17 7) The future: 18 2

3 The Purpose of this report: It is intended that this document will be included in the set of final reports on the Household Debt and Community Inclusion Pilot, commissioned by the ACT Community Inclusion Board. It is also designed to be separable for presentation and discussion purposes. Care s rationale for becoming involved in the Pilot and the design of that involvement is explained in detail on pages 7 and 8. About Care Inc: Care Inc has been the main provider of financial counselling and related services in the ACT and region since Care s client group are low to moderate income consumers experiencing problems with credit and debt. A range of coordinated and integrated services have been designed to meet the needs of those clients and include: - A daily telephone information service, - Face to face financial counselling options including information appointments, an afterhours drop-in service, case work and advocacy, a service specifically designed for public housing tenants and an outreach service in Queanbeyan, - Community development and education activities, - The collocation of the Consumer Law Centre of the ACT, - Policy and law reform comment on issues of importance to the client group and - A No Interest Loans Scheme. In delivering these services, Care receives resources from: - ACT Government (through the Community Services Program in the Department of Disability, Housing and Community Services, Housing ACT in the same Department and from the Department of Justice and Community Safety); - The Commonwealth Government (through the Commonwealth Financial Counselling Program, located in the Department of Families, Community Services and Indigenous Affairs); - NSW Government (through the Credit Counselling Program administered by the NSW Office of Fair Trading); - Queanbeyan City Council and the Queanbeyan Multilingual Centre and the - Ian Potter Foundation (as an initial sponsor and ongoing supporter of the No Interest Loans Scheme). In the financial year Care responded to 2353 requests for assistance across its direct service provision programs. In addition, in the last year Care s community development and education activities directly involved approximately 660 participants. 3

4 The Household Debt and Community Inclusion Pilot in context: Australians recent love affair with consumer credit is well documented. Nowhere is the growth in the amount of personal credit being carried by Australian consumers more stark than in the credit card market. Most recent figures provided by the Reserve Bank indicate that at the end of June 2006, $36.5 billion was outstanding on credit and charge cards. By way of comparison, 5 years ago the balance was $16.5 billion and 10 years ago $6.9 billion. 1 Indeed, the outstanding balance on cards has increased by over $5 billion in the last year alone. That is of course just one example within one market. There have also been significant changes in the amount of credit and debt being carried in other consumer markets, from home lending to telecommunications. Care acknowledges that at an aggregated level, most consumers have been coping adequately with repaying the money they have borrowed or owe. That is not the case however for all consumers. Our agency s service delivery experience suggests that particular groups, for example those on low incomes, or struggling with some vulnerability or disadvantage, experience the incidence and effects of financial stress to a greater degree. Sometimes that stress represents a chronic cycle from which those consumers cannot escape. It impacts their health, their relationships and their ability to have any meaningful involvement in the communities in which they live. A National Focus on Financial Literacy: In July 2000 the Australian Securities and Investments Commission (ASIC) released a Discussion Paper entitled Educating Financial Services Consumers. In the introduction to the paper, ASIC described its role as follows: ASIC is well placed to be a catalyst for financial services consumer education. Since mid- 1998, we have been the primary Australian consumer protection regulator in the financial services sector. Our regulatory aims now include the requirement to promote the confident and informed participation of investors and consumers in the financial services sector.2 ASIC followed the July 2000 Discussion Paper with a consultation period and devoted its Stakeholder Forum late the same year to the subject of educating financial services consumers. The key note speaker at the Stakeholder Forum was Paul Clitheroe, host of the highly successful television program Money. Since that time, the subject of financial literacy has become a clear policy priority for a number of governments, but particularly at the Commonwealth level. The Commonwealth convened a Financial Literacy Taskforce in February 2004 and has since established a Foundation located within the Treasury. Paul Clitheroe was appointed Chairman of both the Taskforce and the Foundation s Advisory Board. In addition to the attention the subject has drawn from governments, a number of very large corporations particularly in the banking sector have become involved in financial literacy research, commentary, design or delivery or in some 1 The Reserve Bank web-site includes data on the financial services market. This information was drawn from the Credit and Charge Card table available at 2 Australian Securities and Investments Commission, Educating Financial Services Consumers Discussion Paper, Sydney July 2000, page 4. 4

5 instances a combination of each of those activities. If ASIC was looking to be a catalyst in this space then it has been spectacularly successful and in a very short period of time. In comparison to efforts overseas, particularly in the United Kingdom and the European Union, Australia s financial literacy activities are only now beginning to recognise the significance of understanding why some consumers miss out on participating at all or at least on terms that are fair and appropriate. Whilst the commitment to financial literacy in Australia in recent years has been welcome, energetic and relatively well resourced, it was starting from a low-base in investigating the causes and possible responses to market exclusion. Safe, fair market access for low income consumers: Care has been supportive of the development of financial literacy initiatives in Australia and has engaged actively in discussion and debate of related issues. Central to our engagement has been the commitment to more than information exchange. Low income consumers who cannot access markets or services at all or on safe, fair terms need more than information and education. They need detailed, thoughtful and sensitive interventions that recognise how debilitating exclusion from normal social and economic interactions can be. Low income consumers have relatively less bargaining power than higher income consumers and therefore often pay more for what they are able to access. Care and the Consumer Law Centre of the ACT made the following observations in a submission to the Productivity Commission review of National Competition Policy in 2004: It is often the case that our clients do not share the benefits delivered by competitive markets. Products and services may not be available to them at all, or where they are, they are more expensive because they cannot take advantage of relationship discounts, or bundling, or do not belong to professional associations and so the list goes on. There are however more perverse sides of competition, without appropriate policy and regulatory counterbalance. One such example occurs where the vulnerability or disadvantage of consumers becomes the competitive driver. Markets grow and flourish with the express purpose of taking advantage of disadvantage, such as in the burgeoning fringe credit market. 3 The ability to access appropriate, affordable financial services is an important element in ensuring connection to and involvement in community: The more an individual or community is marginalised from financial services, the more likely it is that they will also be socially excluded, which exacerbates their overall civic marginalisation.4 The Community Inclusion Board s strategic priorities: 3 Care Inc and the Consumer Law Centre of the ACT, submission to the Productivity Commission Review of National Competition Policy Arrangements, 9 December 2004, page 2. 4 Connolly, Chris, Do the poor pay more for financial services?, appearing in the Consumer Law Centre of Victoria publication Do the poor pay more? A research report, Melbourne, January 2005, page 5. 5

6 Launched in May 2004, the Community Inclusion Board represents a core part of the ACT Government s commitments under The Canberra Social Plan. Care and other community groups in the ACT welcomed the Board s decision to adopt household debt as one of its key strategic priorities in its first term of operation. The Board was no doubt assisted in arriving at that decision by the critically important work undertaken in the Chief Minister s Department to scope the incidence of financial hardship in the ACT, particularly in low income households. By analysing data already available from the Australian Bureau of Statistics and in particular the 2002 General Social Survey, analysts in the Chief Minister s Department concluded that around 13,000 low income consumers in the ACT are experiencing financial stress, with a further almost 20,000 at risk of financial stress. 5 They also concluded that, similar to evidence elsewhere, lower income consumers experience financial stress in proportionately greater numbers than higher income consumers, even though higher income consumers carry much more debt. 6 It is sometimes the case that disadvantage in the ACT is dismissed as an issue of significance, because of the higher average incomes and lower rates of unemployment that the Territory enjoys in comparison to the rest of the country. As was seen in the work of the ACT Poverty Task Force however, undertaking more detailed analysis of data specific to the ACT is important in exploding the myth that there is no disadvantage in the nation s capital. The important background work undertaken by the Chief Minister s Department led to the preparation and presentation of a plan: The Community Inclusion Board proposed a new solution for low-income people in Canberra who are currently experiencing financial stress. The proposed model is unique in Australia and is targeted at promoting community inclusion through debt counselling, educational and training opportunities and personal development. Operating from the premise that the greater the burden of financial stress, the greater the risk of community exclusion, the ACT Community Inclusion and Household Debt Pilot Project aims to provide low-income people with opportunities to fully participate in the community and share in the best quality of life in Australia. 7 Care s involvement in the project: Care was invited to become part of the Pilot, providing specialist and intensive financial counselling assistance to participants. The design of Care s financial counselling service already anticipates intensive assistance it can and does include the opportunity for ongoing casework and advocacy on behalf of clients. Counselling is at the heart of the service model. 5 Stakelum, Patrick and Galang, Leila (Cabinet and Policy Group ACT Chief Minister s Department) The ACT Community Inclusion Board Household Debt Pilot Project, Refereed paper presented to the Transition and Risk: New Developments in Social Policy Conference, Centre for Public Policy, University of Melbourne, February 2005, pages 7 and 9. 6 Ibid, page 6. 7 Ibid, Stakelum and Galang, page 3. 6

7 There were several elements in the project design however that offered additional support, specifically: - An extra dedicated support worker with a community development background, provided by the YWCA, - Brokerage resources, to pay towards existing debts and to facilitate other activities and purchases; and - An opportunity to broaden discussions from a focus on financial disadvantage to tackling barriers to inclusion. Deciding whether to be involved was not difficult. For a service like Care, responding as it does to requests for assistance usually driven by crisis, being able to offer a different engagement to clients and having access to additional resources with which to assist those clients presented a rare opportunity. The agency considered that opportunity so important, that after seeking permission from its main source of funding the ACT Department of Disability, Housing and Community Services, Care committed a considerable amount of accumulated reserves to being involved in the project primarily so that a full-time financial counsellor could be employed for the duration of the undertaking. Care was fortunate to attract to the ACT an experienced financial counsellor, Joy McKay, to act as the Project Officer delivering financial counselling support. Joy had been working in a variety of financial counselling roles in NSW for almost 10 years. Joy explains in her own words how her role in the project differs from and adds value to the role that a financial counsellor normally plays: Financial counselling is often considered as a role that deals with the numbers element of people s lives working with budgets and assisting with debt issues. That is what financial counsellors do, but is only part of the role. Giving clients an opportunity to discuss their issues with someone, thrash out options and reframe problems, does assist clients to find a way through. This requires counselling skills and imagination. The amount of time a financial counsellor can spend with a client is limited in the normal running of an agency, thus limiting the depth of work that can be done. The demand levels that are constant (apart from when they increase) see to that. The Project allowed time for ongoing counselling and an opportunity to build a relationship able to deal more comprehensively with the client s lifestyle issues, fears and barriers to implementing change. For example, in being able to take more time with one participant, we were able to identify the fear of implementing a management plan for averaged annual Income and Expenditure. This participant had come from a poor family who had lived through crisis management each pay period; therefore this is how the participant had always managed finances. This person described lying awake at night trying to plan how to meet commitments, pay for the school excursion or the shoes one of the children needed that week. This was a description of living from crisis to crisis on a weekly basis. Once the problem was identified we were able to work with the participant to overcome a fear of losing control. It took some months. Having access to some resources that the participants could decide how to apply was great but perhaps surprisingly it was not the sole focus of the interaction. What for me was most important and the greatest difference from my previous experience of financial counselling was the extra time to consider ways in which participants felt excluded from 7

8 the community they live in. The time to engage, to listen, to work with people and to help them effect change. It was also important for Care s role to be designed and delivered in a way that did not compromise the financial counsellor s obligation to act exclusively in the interests of the client. Far more detail on design and structure is provided in the main body of the YWCA s report to the Community Inclusion Board, however from Care s perspective, the following elements were critical in facilitating financial counselling involvement: - Care played no role in selecting participants for the Pilot and - In discussion with participants, Care presented suggestions for spending the brokerage resources but was not part of the process of approving such payments. About the participants: One of the central questions on Care s service evaluation forms is whether clients felt pressured to make contact with the agency. The establishment of an effective counselling relationship is almost impossible if clients are unwilling or unable to engage. A key feature of Care s involvement in this Pilot was the opportunity to work with a highly motivated client group. Participants self-nominated to be involved and, those who chose to take part did so with enthusiasm and commitment. That enthusiasm provided a sound basis for constructive and productive relationships. The YWCA will be reporting detailed data on the demographic make-up of the participant group. It is therefore unnecessary for Care to duplicate that information. We would however like to draw particular attention to the following: - As with Care s general experience, most of the participants were women, - Most participants reported a Centrelink benefit as their main source of income, - People living alone or as sole parents with children made up the majority and - The project participants were all low-income consumers (85% in receipt incomes of less than $25,000 per annum). With the permission of participants, Care also took the opportunity to gather some more information than might normally be possible, or practical in the agency s interactions with its clients. That information provided some useful insights into the participants experiences of a number of consumer markets. The following is a summary of the key additional information gathered: Information about savings accounts: Do you have a savings account? 23 2 No Yes 8

9 Do you know what the fees are on your savings account? No Yes Do you have information on low or no fee savings accounts? No Yes Not stated Comment: The information above is interesting from a number of perspectives. It supports observations made in other research that relatively few Australians are unbanked. 8 Not having a basic saving/transaction account is considered to be a very clear indicator of market exclusion. Less positive however was the number of participants who did not know whether fees applied to their savings account or had no information about low or no fee accounts. It is likely that all of the participants would be eligible for some form of basic, low or fee free transaction account, a variety of which are now offered across most major retail banks in Australia. If the participant group are indicative of the consumers these products are designed to assist, there may be real problems in how the information is disseminated to those who need it. The Australian Code of Banking Practice requires signatory banks with basic bank accounts to 8 For example research that both ASIC and the ANZ Bank have undertaken in relation to Adult Financial Literacy levels in Australia. 9

10 provide information to low income consumers. 9 This is a less direct approach than the equivalent Code in the United Kingdom which requires banks to assess a consumer s eligibility for a basic account at the time any new account is opened. 10 Insurance related questions: 6 participants were buying or owned their own homes. Of those participants, 5 had building insurance cover. The whole group were asked do you have contents insurance? No Yes Not stated Of the 13 participants who answered we have no contents insurance, a number gave other reasons for not having cover: - Cannot afford it 6 - Too expensive 1 - Nothing of value to insure 1 - More important things to worry about 1 - The insurance company would not allow them to have a separate policy on their personal effects at a parent s house 1 9 Australian Bankers Association, Code of Banking Practice, August 2003, Clause The Banking Code (Uinited Kingdom), March 2005, Clause

11 17 of the participants had a car. Those participants were asked whether they had insurance: T hird party o nly C o mprehe nsive N o insurance Comment: The proportion of participants with a mortgage who had building insurance was quite high, although the requirement to have and maintain such insurance is a condition of most home loans. In comparison, the prevalence of contents insurance and motor vehicle insurance was much lower, in keeping with findings in research into underinsurance amongst low income consumers. 11 It was beyond the scope of this study to delve too deeply into whether participants had tried to access insurance and at what cost. It is however interesting to note that almost half of those without contents insurance indicated they could not afford it, rather than thinking it was unnecessary. Unlike the emergence of a range of low cost savings account alternatives, there has been limited development of affordable general insurance products for low income consumers. When one considers these consumers are perhaps less able to accommodate, respond to or replace loss of assets or cover damage caused in an accident, their relative need for general insurance may in fact be greater than higher income consumers who may be able to fund loss or damage in other ways. It is Care s understanding that the policy arm of Housing ACT has recently conducted some separate research into the needs of public housing tenants for affordable, appropriate insurance. We are unaware of the results of this research. Credit and debt profiles: The YWCA data set includes details of total debt levels on entering the project and on departure, both at an aggregated level and per participant. The relative levels of debt reduction were encouraging and well in excess of the amount of brokerage available for payment toward debts. The second intake was less successful in this regard than the first. It would appear this had more to do with how and when brokerage had to be 11 See for example Sheehan G and Renouf G, Risk and Reality; Access to general insurance for people on low incomes, Brotherhood of St Laurence, Fitzroy, June

12 spent to ensure compliance with the terms of relief provided by the Commonwealth from income tests, ensuring participants benefit incomes were not adversely impacted by the additional assistance. The YWCA makes further reference to this issue in its reports. It is also dealt with in the Successes and Challenges section to follow. Care obtained some further details about specific product usage: Credit and Charge cards - Numbers of participants with credit/charge cards: Num ber with Credit Cards N um ber with no cards N umber with 1 card N um be r wit h 2 cards N um ber wit h 3 cards Comment: Card facilities are amongst the most expensive forms of consumer credit available in the market. For consumers who can afford to pay them off within interest free periods, they can work well. For those who cannot they can represent an increasing debt cycle from which it is difficult to escape. Lower income consumers, in Care s experience, do not use cards to fund extravagant lifestyles but to fill gaps where income is insufficient. Care s intake data confirms credit card debt is consistently high in the list of reasons clients provide for making contact with the agency. 12 In November 2003 the ACT became the first jurisdiction in the country to require credit providers to conduct an assessment of capacity to repay before new credit is advanced on a new or existing card. In Care s view this approach should not only be adopted nationally, it should apply to all consumer lending, regardless of product type. This view is reflected in a recommendation made in the YWCA s report to the Community Inclusion Board. 13 There will no 12 Care reports to the ACT Department of Disability, Housing and Community Services six monthly. Intake data includes a list of the top 10 reasons clients report for making contact with the agency. At number 2 in the most recent report January to June 2006 was credit card debt at 23%. This is consistent with previous reports over a number of years. 13 This issue is taken up in Recommendation 2 of the YWCA s report to the Community Inclusion Board. Whether and when the report will be released is a matter for the Inclusion Board. 12

13 doubt be design challenges to effect policy and regulatory change of this type, especially given the growth of equity share products, reverse mortgages and the like. The principal however that credit providers should adequately check the affordability of the products being sold to consumers based on their actual needs and capacity is a universal one. Home loans - As noted earlier, 6 participants were purchasing their homes and had current home loans. Of those, 2 entered the project with arrears on those home loans. Rent arrears - 7 participants entered the project with some form of outstanding rental arrears. (4 had public housing rental arrears, 1 current private rental arrears and 2 had old private rental debts). Miscellaneous debt - Other obligations noted in information collected on entry: o 20 participants entered the project with one or more utility debts outstanding o 14 participants had borrowed money from friends or family members and were yet to repay those loans o 6 had current personal loans o 4 had current car loans o 2 had borrowed money to study o 7 entered the project with outstanding Centrelink advances o 3 were paying off Centrelink arrears/overpayments o 2 had outstanding fines Comment: In the earlier section providing a context for the Pilot, reference was made to the extraordinary amount of debt that Australian consumers are collectively carrying. At an aggregated level most consumers manage that debt well. That is not however the experience of all people. Lower income households regularly struggle to make ends meet and in Care s experience the debt profile of the participant group is broadly representative. It does not reflect extravagance or poor management, rather an ongoing struggle to make ends meet. The debt profile information suggests a significant reliance on informal networks for assistance, with 14 participants having current and outstanding loans to friends and family members. At one level, the existence of these informal networks and arrangements may suggest greater access to support and potential for inclusion. There are however other indicators that are far less positive, suggesting households that just have too little income to meet essential expenses, for example: - There was a high proportion of participants entering the project with outstanding utility debts. These were motivated consumers, trying hard to balance difficult household budgets and wanting to improve their circumstances. 80% of them were however struggling to keep up payments for basic electricity and gas services. In Care s view this disturbing trend will only get worse if the best the market can produce is outcomes like pre-payment meters where low income households will actually pay more per unit of energy to remain connected. The ACT Independent Competition and Regulatory Commission recently approved a code of practice for 13

14 utility providers offering pre-payment meters in the ACT. 14 The expectation is these products will soon be available in the ACT and Care has no doubt they will be marketed to low-income households as a tool to assist with budgeting. - Reliance on Centrelink advance payment loans, or problems with entitlement levels is an increasing problem. In a group of only 25 participants, 7 had current Centrelink advances and 3 were paying off arrears or overpayments. These types of problems mirror Care s general service experience 15 and invite more detailed investigation of the sufficiency of current benefit levels, as well as the complexity of navigating the system for benefit recipients. Communications uptake and access: 20 of the participants had a home telephone line. 24 had a mobile. (6 participants entered the project with significant arrears on telecommunications accounts.) 22 of the participants had a computer. 13 had internet access. Comment The relatively high level of computer ownership and internet access was somewhat surprising and encouraging. Although beyond the scope of this project, targeted programs to support internet and access for low income households may support cost effective communications access and allow another inclusion options. Programs of that type would not in Care s view be a substitute for personal connections, rather an extra option for guarding against exclusion. The telecommunications access information is difficult to interpret in any meaningful way given the sample size however it is interesting that more participants had mobiles than landlines. That fits with findings of a modest research project undertaken by the Australian Financial Counselling and Credit Reform Association indicating financial counsellors are observing real problems in their clients accessing and maintaining landline facilities, because of debt and fixed costs issues. 16 For Care, the movement away from access to landline facilities does not match the needs that our clients express for maintaining those services. This may represent an example of markets driving where and how they are prepared to offer certain consumer classes access to certain products, rather than an expression of consumer need or choice. 14 Care s comments in relation to the development of the pre-payment meter code and of the appropriateness of pre-payment meters generally are available on the agency s web-site at 15 A new entry into the top 10 reasons clients reported for making contact with Care in the 6 month period between 1 January and 30 June 2006 was Centrelink problems, arising in 8% of intake. 16 Australian Financial Counselling and Credit Reform Association, Telstra Survey Financial counsellors experiences of clients telecommunications issues, Melbourne (As yet unpublished, but to be accessible via AFCCRA s website later in 2006). 14

15 Successes and challenges: From Care s perspective, the main finding and success of the Pilot was unsurprising if you invest time, support and resources in a coordinated way, genuine improvements can be delivered for marginalised people. After 23 years of operations Care did not need convincing that financial counselling can be both an effective and efficient form of service delivery. It has however been extremely useful and informative for the agency to be involved in a project that added extra options to the model of service delivery and partners to the process. The sample size and design of the project clearly had limitations. Those limitations are acknowledged but do not detract from the delivery of outcomes for a number of participants that were very positive: - Several returned to the workforce, when they had no previous expectation that would be possible. - Most achieved reductions in the amount of personal debt they were carrying and the associated financial stress. - All felt like they had been engaged in a respectful process where their personal involvement and needs were important and valued. Whether these outcomes and experiences are sustainable is a question beyond the scope of the Pilot, but without the intervention of and access to the Pilot they are unlikely to have occurred at all. There were a number of challenges experienced in the process. The most significant was obtaining agreement from the Commonwealth that the brokerage assistance would not adversely impact the participants entitlement to benefit incomes. The YWCA has provided considerable detail on this point in its report to the Community Inclusion Board, in particular noting that the effectiveness of the brokerage was reduced in the minds of participants in the later intakes because it was required to be spent before adequate planning and engagement had been established. That result was in Care s view predictable. It also runs contrary to the central messages delivered by a variety of Commonwealth programs, departments and authorities, which seek to encourage people to consider financial issues in detail and to plan carefully. Care fully supports a recommendation 17 that a template be developed for dealing with requests for exemption of this type in the future. There is clearly a potential benefit at a national level for a coordinated approach to this question. Even the Commonwealth could benefit from a more straightforward mechanism for delivering additional relief packages, such as those designed for the Sugar and Fishing Industries. It is also worth noting that the problems some of the participants were facing when they entered the project had been a lifetime in the making and will persist well into the future. The project could not deliver a magical cure for chronic ill-health, be it physical or mental health problems or both. The Pilot provided a respectful, supportive and intensive intervention that along with the resources the brokerage represented might be categorised for some participants as a respite, rather than a solution. It is not a new message, but complex problems require complex even ongoing responses. 17 The particular issue is taken up in recommendation 10 of the YWCA s report to the Community Inclusion Board. The report is as yet unpublished and it is a matter for the Inclusion Board to determine whether and when it will be released. 15

16 The Future: Care has been actively involved in the development of the recommendations in the YWCA s report to the Community Inclusion Board and looks forward to the release of that report. Reference has been made in this document to several of the Recommendations already. The first of those Recommendations is that the Pilot Model or elements of it be utilised to assist more members of the community experiencing debt stress and social isolation. That recommendation has Care s full endorsement, with a number of current and emerging issues emphasising the need for lateral responses to tackling disadvantage and exclusion. In particular: a) Care would like to underline the significance of testing respectful, incentive and support based programs to improve the circumstances of low income households. Much of the current welfare reform agenda at the Commonwealth level is focussed on encouragement driven by sanctions. Benefit recipients who do not meet their participation requirements under the Welfare to Work reforms risk suspension from benefits. Care rejects this approach as unfair and disempowering; more likely to deliver greater exclusion than sustainable improvement. There is a great deal of research regarding the impacts, positive and negative, of penalty versus positive incentive approaches. Not much of that research, to our knowledge, tests the area of assisting low income people to more fulfilling and sustainable economic and social participation at least not in Australia. This Pilot, albeit a small undertaking, did so and produced very positive results. It invites testing on a larger and more comprehensive scale. The stakes of not getting the balance right are very high, particularly for the low income people potentially impacted by Welfare to Work and the self determination that policy potentially takes from them. As Andrew Reeson from the Sustainable Ecosystems section of the CSIRO puts it: Poorly designed policy interventions may cause collateral damage to existing motivations or norms, resulting in perverse outcomes which can have considerable social and economic costs and be difficult to reverse. 18 There is no reason why the Pilot adopted in the ACT could not be replicated at a Commonwealth level, particularly in the design and delivery of programs aimed at returning people to paid work at an appropriate and sustainable level. Choosing not to trial and compare approaches suggests that policy is driven by philosophy, not based on evidence. b) It would appear that the elongated period of historically low interest rates and good economic news has come to an end. Low income consumers have not in Care s view shared equally, or in some circumstances at all in the good times. They are 18 Reeson, Andrew, Institutions, Motivations and Crowding Out Theory, Evidence and Policy Implications, A Chapter for a proposed forthcoming book (Enhancing Adaptive Governance: Understanding Individual and Collective Human Behaviour in Complex Adaptive Systems); as yet unpublished material - CSIRO Sustainable Ecosystems, Canberra 2006, page 1. 16

17 however much more exposed to the impacts of more difficult economic conditions. Care s data in recent years suggests its clients feel the impacts of adverse economic moves such as rising petrol prices and interest rate increases quickly and dramatically. With the expectation of more difficult times ahead, the need to test lateral solutions to financial disadvantage is even more compelling. Care has appreciated the opportunity to be involved in the Pilot, thanks the other stakeholders for their commitment to the process and congratulates ACT Government and the Community Inclusion Board for initiating the venture. The challenge now is to ensure that the experience and knowledge gained does not go to waste. 17