Welfare Review: right questions, flawed model

25 February 2015

Though welcoming key aspects of the McClure report released today, the Australian Council of Social Service said the final report of the Federal Government’s commissioned review of Australia’s welfare system was a missed opportunity to move to a more rational system based on people’s financial need rather than decisions about ‘deservedness’.

“We congratulate Social Services Minister Scott Morrison on the release of this Report today and his commitment to further engagement with the community to inform the Government’s response,” said ACOSS CEO Dr Cassandra Goldie.

“This report should be used as a starting point for further discussion with the community with an objective of achieving structural reform that is bold in vision and scope. It usefully identifies the key problems in the payment system which need to be addressed: complexity, unfairness, inadequacy and disincentives to work.

“However, some of the Report’s suggested answers are flawed. While some current income support recipients would go on to a higher payment than they receive currently, many newer applicants would be worse off under the proposed rules. Additionally, the recommended 4-yearly reviews on adequacy are welcome, but indexing to CPI or another price index in the interim would be likely to erode the value of payments over time. In the case of the Aged Pension, the Commission of Audit estimated this erosion at $80/week in a decade if pensions are indexed to prices only.

“Moreover, for people of working age, four income support payment levels instead of three is neither simpler or fairer; and four definitions of disability is likely to be unworkable. To this end, we urge the Government to design a simpler model than that proposed in the Report, which is founded on the principles of adequacy, consistency and fairness.

“We know that many stakeholders raised concerns about the adequacy of allowances and the increasing gap between pensions and allowances. We would have liked to have seen a stronger recommendation that payments to people who are unemployed need to be increased as an urgent priority.

“We welcome the recommendation to establish a panel to regularly review payment adequacy and make recommendations about payment levels. We support this proposal and call on the Government to conduct an initial review of adequacy as a next priority in the reform process.

“Under the current system, people in similar circumstances with similar basic living costs receive different levels of financial support and face different expectations of work.

“Unfortunately, the Report recommendations preserve many of these inconsistencies and create new anomalies in the system through its complex tiered payment proposal.

“While the Report recommends setting higher rates for people with limited capacity to work who are less able or unable to supplement their payments through earned income, this assumes people can get paid work. Yet as we know from the current job market, this is very difficult at the moment.

“While there are savings to be achieved through better targeting parts of the payment system, specifically to address the growth in the Aged Pension, there is very little waste in the working age payments system which is the focus of this Review. In responding to this Report, the Government has an opportunity to reset policy after the Budget and abandon harsh measures that will do nothing to support people in paid work.

“We strongly support the recommendation for a jobs plan for people living with a disability or mental health conditions in the first instance. But it it hard to understand why the review does not include other disadvantaged groups in the plan, including people who are unemployed long term. We look forward to discussing with the Federal Government options to better assist this group, now a majority of people on the Newstart Allowance.

“Any reform must be complemented by increased support to assist people to find paid work, particularly people who are long-term unemployed, older people, single parents, carers and people with a disability.

“In addition to the Minister’s commitment to an open dialogue on the Government’s reform process from here, we also need a conversation between community organisations, employment services, and employers, so that we can progress policy changes that will work to improve the job prospects of people disadvantaged in the labour market, and to provide adequate income support for those who need it.

“Ultimately the changes we make must simplify the system, improve payment adequacy, and support people into work, as well as to improve the fairness and equity of the system,” Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155

The review report available at here.