The welfare revolution that has passed disability pensioners by

Since the mid-1990s, Australia has been at the forefront of a global revolution in the way welfare payments are designed. In the past, being on welfare didn't mean much more than collecting a dole cheque. Now recipients have to meet strict conditions - 'mutual obligations'- to receive income support.

This revolution has largely passed disability pensioners by. Unemployment has fallen. Single parents are returning to the workforce in droves. Yet the number of people on Disability Support Pension (DSP) - currently more than 800,000 - continues to climb. It is becoming increasingly difficult to get on the pension, but once on it we treat all recipients as if they will never work again.

There is a growing agreement - and rare bipartisan consensus - that we should aim to provide more than a life on welfare for Australians with disabilities.

In the future, there will be an even greater emphasis on getting people with disabilities off welfare and into work. Attitudes about the role that people with disabilities can play in the labour market and society are changing. Population ageing and slower workforce growth have led to a growing focus on increasing labour force participation.

Around two-thirds of disability pensioners have mild or moderate disabilities, yet let less than 10% earn any income through work.

DSP now costs taxpayers more than $13 billion a year, making it the second largest piece of social welfare spending after the Age Pension. This figure is projected to grow to more than $15 billion in the next four years.

To reduce the number of people on DSP, we must apply the lessons of other successful welfare reforms.

First, we must identify which disability pensioners are capable of working and which are not. While people with profound disabilities should not needlessly be made to jump through hoops, those whose work capacity can improve over time shouldn't be absolved of the responsibility for eventually looking for a job.

Second, we must create rules and ensure recipients stick to them. Those disability pensioners with some capacity to work should be required to undertake activities (such as job search, rehabilitation or training) that will help them move off the payment. These can be tailored to suit a person's level of impairment and might involve working with a specialist disability employment service. Those recipients most likely to find work, such as younger people who have been on the pension for less time, should be targeted for reassessment first. People with severe disabilities should be offered help – but not compelled – to look for a job.

Finally, we must dismantle the welfare traps that keep people on DSP. The growing difference between DSP and unemployment benefits (currently $130 a week) will have to be addressed sooner or later. If unemployment begins to rise, we will again see DSP claims soar. Eligibility for the Pensioner Concession Card should be disassociated from eligibility for DSP – at least for people with severe disabilities.

We already have two good models for how sweeping reforms of this type could be achieved: the Henry Review recommendations and the Britain's Employment and Support Allowance.

The Henry Review, handed to government in 2009, recommends a 'participation payment' to replace unemployment benefits, single parent payments, and the DSP. Everyone of working age with some capacity to work would face participation requirements, but these would be tailored to suit their individual circumstances. People with severe and profound disabilities would retain eligibility for a pension, but those with milder disabilities would no longer qualify.