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Fact check – did the 2021 Budget reverse 1991’s ‘Mother of All Budgets’ benefit cuts?

Stephen Hickson is the Director of the Business Taught Masters programme and teaches Economics at the University of Canterbury.

It is not easy to establish this. We need to compare benefit rates from 30 years ago to today. However this is not straightforward.  There is the effect of inflation, which can be easily corrected for, but more difficult is the complexity of the welfare system. There are several types of benefits plus layers of add-ons that depend on income, number of dependents, location or expenses faced by the beneficiary, such as housing costs. Not only do the amounts of these vary over time, so do the conditions under which beneficiaries qualify. Useful information can also be lost in the mists of time and historical rates are only available online back to 1998.

We can compare main benefit standard rates over time and it is these rates that are most often referred to in the media. They are the benchmark. In 1990, the standard adult + 1 child (nett) rate for the Sickness, Domestic Purposes (DPB), and Widows benefits was $213.14. In 1991 this was cut to $185.93 (a 12.7 percent reduction). At the time the unemployment benefit was lower than other benefit rates, and these rates did not include add-ons such as accommodation supplements. 

At April 2021 the standard rate for Jobseeker Support (previously unemployment) and for Sole Parent Support (previously DPB) was $386.78 (1 adult and 1 child). The Sickness Benefit no longer appears as it has been subsumed into Jobseeker Support.

If the rate from 1 April 1990 (before the 1991 cut) had simply kept pace with inflation then by 1 April 2021 the rate would be $396.60 or about $10 more than what the rate actually is. In other words, by April 2021 welfare benefits were not greatly different from what they were prior to the 1991 cuts in terms of purchasing power.

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