Recently, I was driven to comment that the Greens prefer their Aborigines “drunk and stupid”. One of the party’s senators, Rachel Siewert, had frothed in the media that the government was planning to “force” Aboriginal communities “into using an authoritarian cashless welfare card”. She elaborated on this with more fear-mongering: “The Healthy Welfare Card is income management on steroids, authoritarian action has not worked in the past and will not work in the future.”

She introduced a motion for the Senate to note “that the Healthy Welfare Card is a paternalistic approach to social security and that income management hasn’t resulted in significant improvement in community” and to call on the government to abandon the proposal. Even the slow learners on the ALP benches refused to support her motion.

My comment about the Greens was a stage-left aside during an interview with Sarah Martin of the Australian as I attempted to explain Andrew Forrest’s proposal for a “Healthy Welfare Card” (on which I was an adviser). I do not resile from this comment, however, even though it detracted from the seriousness of the problem and the need to persuade a largely ignorant urban population of the need for welfare reform. The federal government is investigating the potential to trial the Healthy Welfare Card in both majority indigenous and non-indigenous communities. Almost half of all working-age first Australians rely on welfare payments as their main source of income, compared to only 17% of all Australians.

Aboriginal leaders face the very difficult problem of trying to shift recalcitrant people from welfare to work. What solutions do the Greens and inner-city progressive “luvvies” have, apart from arrogantly and heartlessly accusing these leaders of being “assimilationist”? The simple answer is none.

They have never encountered scenes like this, a regular occurrence at ATMs in poorly policed towns (that is, most in rural and remote Australia that have large Aboriginal populations):

A woman goes to withdraw cash and is met by a line of male “relations” who threaten and intimidate her for money. This is the only ATM in town, so in order to obtain some cash for shopping, the woman pays an amount to each man. The men promptly head to the pub, and the woman is down one or two hundred dollars. Her children and other dependants will go hungry before the end of the fortnightly payment cycle.

Or this:

In a majority Aboriginal, welfare-dependent town, two young, broke women who wanted a night out (which inevitably involves buying illicit drugs) went to the local social security office to intimidate the counter staff for an exemption to their particular welfare payment rules. They hijacked a cousin’s baby and presented themselves with baby on hip and proceeded to intimidate and abuse the social security officer in front of others waiting. Within a short period of time, the officer had caved in and issued the exemption that allowed the women to receive a payment for which they were not entitled.

Social security entitlements for single parents are a rich playground for male welfare “gamers” across the country, regardless of ethnic or cultural background. In some parts of Australia, pregnancies are not accidents – they are planned so the women can obtain additional social security payments for each child, which are then harvested by the men as a livelihood. These men move from woman to woman, and they call their exploits by a variety of names, including “bareback riding”. The abuse of women and children involved in this elaborate social phenomenon is chilling. There is little time to play “dignified” politics when so many lives, particularly the lives of vulnerable children, are at risk because of poor policy understanding and implementation.

To address these and other similarly distorted features of “welfare dependency”, especially the disincentives for indigenous people of working age to join the workforce, Andrew Forrest has recommended the most audacious reform to Australia’s social security system since it was introduced in 1908. The Healthy Welfare Card is designed to ensure that Australians of working age are encouraged to join the workforce by limiting their access to cash for purchasing alcohol, tobacco and illicit drugs and for gambling. Described simply, it is proposed as a debit card that would be engineered to stop these purchases. The ability to buy alcohol and illicit drugs was never intended to be part of the design of the welfare benefit system.

There are two important aspects of the Forrest proposal that have been wilfully and mischievously misrepresented by the media and some politicians. Firstly, Forrest does not recommend that it be applied only to indigenous social security recipients, but rather that it should be applied to all Australian social security recipients in vulnerable circumstances. He argues forcefully for all people in similar circumstances to be treated equally in relation to his recommendations. Secondly, it is not a system of “income management”, but a debit card with in-built digital restrictions to prevent purchases of alcohol and perhaps tobacco. It is also intended to limit the amount of cash available for the purchase of illicit drugs. But – there’s more – its adoption requires that it be implemented in discrete areas where the majority of the households are “welfare dependent”. Many of those areas have majority non-Aboriginal populations. Areas in Tasmania, for instance, are majority white and “welfare dependent”. Indeed, some calculate that Tasmania has the highest rate of welfare dependency in the nation.

My objection to the proposal relates to its title, the “Healthy Welfare Card”. “Welfare” as it is experienced in low socioeconomic status communities and neighbourhoods is not healthy. (I know this from personal experience.) Why not give it a technically apt title such as “Social Security Debit Card” rather than the grand, wistful one that Andrew has invented? His choice of words encourages the distinctly less compassionate, and distinctly ignorant, to throw mud and invective, with the superficially credible smear of “paternalism”.

So, despite the efforts to depict the proposal as racist and paternalistic, this is an urgently required reform to an unwieldy social security system that has had the unintended consequence of intergenerational poverty. It is also a reform that is welcomed by Aboriginal leaders who grapple with how to shift disengaged populations into jobs, and how to overcome endemic poverty, ill health, shockingly poor outcomes in education, and accelerating rates of violence, suicide and detention.

It is proposed that the Commonwealth government partner with financial institutions, major retailers and major card issuers to put the new system in place. Discussions with Coles, Woolworths, IGA, the Commonwealth Bank, National Australia Bank, ANZ, Westpac, eftpos and MasterCard indicate that the technology to support the card is readily available, affordable and could be delivered quickly. These partners have agreed, in principle, to participate.

The technology required to block certain purchases or retail merchants from credit card expenditure has been available for some time, and usage has increased over the past ten years. Corporate credit cards, for example, frequently block gambling outlets.

The Healthy Welfare Card would allow individuals to use the mainstream banking system to manage their welfare payments (rather than the Centrelink income management system). A bank would issue the card on the basis of a current bank account, which is already required for the current cash payment of welfare support. The system would use existing data-mining technology to detect any unusual sales or purchases, with Centrelink issuing on-the-spot penalties to retailers and individuals for fraudulent use of the card.

Forrest advises that the card would need to be introduced sensitively and that individuals with “existing addictions to alcohol, drugs or gambling would require professional support”. (During consultations, we heard frequently about the use of methamphetamine, or “ice”, throughout rural and remote Australia in both indigenous communities and open towns.) Forrest also notes that during our consultations “experts in policing … warned that organised crime networks and unscrupulous individuals will attempt to subvert the new system in order to retain the revenues they get from the current system”. Forrest’s review recommends that professional counsellors and a heightened police presence be made available as the card is rolled out. A recent report by the Australian Crime Commission, released under Freedom of Information laws, also warned that communities in remote areas were vulnerable to criminal exploitation.

In their excellent history of Australia’s social security system, Andrew Herscovitch and David Stanton explain that “maximising economic and social participation is and always has been a cornerstone of Australia’s system”. The social security system, as it is applied to the indigenous and other subpopulations living in intergenerational poverty, hasn’t done this in at least three generations. The cost to the nation of persisting with an approach that further entrenches poverty and economic disengagement is enormous; the cost to the victims is far more tragic.

Herscovitch and Stanton provide the macroeconomic picture: “Expenditure on what is conventionally regarded as social security in Australia (a narrow definition by international standards) represents something like 6% of gross domestic product and accounts for between one fifth and one quarter of the Commonwealth’s budget.”

As they also point out, these figures exclude, for instance, workers’ compensation, health benefits, veterans’ pensions, retirement benefits paid by superannuation funds, and the generous tax concessions for purposes related to social security.

Nor do they include the social insurance embedded in other systems, such as healthcare and disability services.

In any case, as the tax base for funding this system shrinks and the cost of the system grows, the pressure mounts on governments of all stripes to implement reforms that cut costs but preserve its integrity and purpose.

In 1986, the Cass Social Security Review began the reform work with its emphasis on what Herscovitch and Stanton describe as “the need to encourage and facilitate economic and social participation”. The review recommended that the social security system “should treat people more as individuals and that the scope for dependency-based additional payments should be narrowed”. Three decades later, the McClure Reference Group has yet again grappled with these issues.

Forrest addresses this problem for the indigenous unemployed concisely:

Current income support payments are complex. There are about 75 welfare payments and supplementary payments. Some are activity-tested, while others are not. Participation requirements vary according to payment type, work capacity, age and cohort. There is also a wide range of exemptions to participation requirements that are not uniformly applied.

This approach has resulted in cases where members of households that are intergenerationally disengaged from workforce participation are also “gaming” the system. There is room as wide as an ocean for recipients to argue for countless “disadvantages” that will secure “exemptions” to policy. Departmental staff are often fearful in these encounters and comply with the clients’ demands. While exemptions are undoubtedly required, Forrest states that they should be “very rare”. He argues, “Exemptions cause good policy to fail. Well-intentioned providers and government staff use these exemptions to severely reduce the impact of change on an individual job seeker and therefore inadvertently encourage the individual along the path of long-term welfare.”

Forrest’s report notes that financial penalties and the suspension of payments are rarely applied, “despite the fact that for most people a quick, small ‘hit to the wallet’ can be the most effective incentive to change behaviour”. In 2012–13, “less than 25% of penalties raised with Centrelink in relation to unemployed indigenous Australians were upheld and applied; in remote areas this was less than 27%”.

“Those who object and say that special circumstances apply to first Australians,” Forrest concludes, “are in fact applying their own soft bigotry of low expectations.”

The cost of enforcing compliance would be enormous, and moreover largely ineffective. In these circumstances, the smart card approach makes good sense. It gives people the power to help themselves.