Prime Minister John Key has announced a major overhaul of the welfare system introducing three new benefits to replace the current range.

Jobseeker Support will be given to 135,000 beneficiaries currently receiving the unemployment benefit, the sickness benefit, sole parents and widows with children over 14.

Sole Parent Support will be given to 93,000 other sole parents and widows and a Supported Living Payment will go 92,500 on an invalid's benefit and those caring for the sick and infirm.

Key said there would be no reduction in benefit levels.

The creation of a sole jobseeker benefit was recommended by the Welfare Working Group which reported back in February.

It also suggested work-testing for sole parents, although at a much younger age than that announced today by National.

Under the changes there would be a part-time work expectation for sole parents whose youngest was over 5-years-old and those whose youngest child was over 14 would be expected to work full-time.

The changes also include a move to an investment based approach which would tailor support to beneficiaries based on their likelihood of becoming a long-term welfare dependent.

Expectations would be set on what people could do and people would be individually listed as being able to work part-time, full-time or be temporarily exempt.

Social Development Minister Paula Bennett said the supported living payment would replace the invalid's benefit for those who were permanently and severely disabled, severely mentally ill or terminally ill.

"This benefit is for those who're unable to work at all and the name change reflects the fact the term 'invalid' for many, is offensive and outdated."

The current sickness benefit was intended to be temporary but 40 per cent had been on it more than four years, she said.

Those currently on a sickness benefit would be transferred to the new jobseeker benefit but will be able to apply for a temporary exemption from work testing.

Sole parents whose youngest child is five would be expected to work part-time and when their youngest turns 14 they will transferred onto the job seeker benefit.

Bennett said that was "absolutely reasonable".

"We have greater aspirations for New Zealanders and their children, which are achieved through work, not welfare," she said.

Labour leader Phil Goff said renaming benefits and "penalising parents" would not create jobs.

National had done nothing to get people off benefits for the past three years and had not created the new jobs promised either, he said.

"All it is proposing is to rename benefits and tell parents with children to get back to work. What you have to do is give them jobs to go to and affordable childcare."

He said Labour was committed to providing jobs and skills to get people into work and training.

Green Party co-leader Metiria Turei said harassing beneficiaries into low paid jobs was not the way to a better future.

A strong economy and good jobs were what was needed, she said.

"National seem to spend far more of their time looking for ways to bully beneficiaries than actually worrying about creating jobs."

The changes were expected to get 46,000 people off welfare and another 11,000 into part-time work within four years.

It would cost $130 million a year for four years and was expected to save $1 billion over four years.

Key said it was clear the current benefit system was not working and National would introduce a more active benefit system.

"Some argue that people on a benefit can't work. But that's not correct."

He said the new approach recognised people would return to work and it was a matter of timing.

Under the new plan

Jobseeker 135,000

Sole Parent Support 93,000

Supported Living Payment 92,500

Total 320,500



Current beneficiaries (at at June 2011)

Unemployment 56,264

DPB 113,429

Sickness 58,009

Invalids 84,836

Other 15,279

Total 327,817



When National took over (as at June 2008)

Unemployment 17,710

DPB 96,440

Sickness 46,271

Invalids 82,879

Other 15,017

Total 258,317