New ACOSS report confirms Budget fails fairness test

A new report released today by the Australian Council of Social Service shows that, by keeping most of the 2014 savings measures and delivering new cuts, the 2015 Budget would strip an estimated $15 billion over four years from basic services and supports, with total projected cuts of $80 billion from health and schools funding to the States over the next decade.

“Last year’s devastating Federal Budget casts a long shadow that undermines some advances made in this year’s Budget,” said ACOSS CEO Dr Cassandra Goldie. “There is a fair alternative path to budget repair – including through structural tax reform – but unfortunately the best options have been ruled out by the Government in advance of the taxation review.

“While ACOSS welcomed the $3.5 billion new investment in early childhood education and care and a more sensible road to pension reform, the overall Budget fails the fairness test because it delivers an estimated $15 billion in spending cuts, with new cuts to child dental and community health programs in this Budget on top of retained savings from the last Budget.

“It is disappointing that the Government appears to be retreating from its commitment to pursue comprehensive tax reform, which is vital to provide the revenue future Governments will need for essential services. People on modest incomes will pay for inaction on tax reform when they need health care, to send their children to school, lose their jobs or retire.

“This year’s Budget not only failed to reverse the severe cuts to payments and programs from the previous budget, but directly linked unfair changes to family payments to new spending on child care in the current Budget. The cut to Family Tax Benefit Part B to single income families with children over six years would result in income losses of $49 per week for single parent families or more for those with older children. This cut will have dire consequences, particularly when taken together with the freezing of family payments indexation – a condition for the new investment in child care – given that a third of sole parent families are already living in poverty.

The combined impact of the two budgets includes:

  • $126 million cut from child dental programs;
  • $1 billion cut in health funding;
  • $6 billion cuts to family payments;
  • a combined $80 billion over 10 years for hospitals and education;
  • $1 billion in cuts to vital community services for the people in greatest need around the country, such as those experiencing financial crisis or family breakdown, children at risk, vulnerable young people, new mothers and babies, people facing eviction and homelessness, carers in need of respite, those struggling with drug and alcohol addictions, and those with mental health problems, including $500 million from Aboriginal and Torres Strait Islander services and programs;
  • $674 million from affordable housing and homelessness programs.

In stark contrast, the government has made only modest efforts to raise revenue through fair changes to taxation, and the only significant measure is temporary:

  • $3.1 billion Temporary Deficit Levy
  • $295 million capping of meal and entertainment benefits
  • $845 million tightening of car expenses.

“The Government now proposes to reduce the six month wait for unemployment payments for young people to one month, yet neither policy has been justified, especially at a time when unemployment is rising. The modest investment in school to work transition programs is welcome but proposed reductions to youth payments should be withdrawn.”

“ACOSS is also concerned by misleading information contained in the Budget papers about the level of assistance being received by some disadvantaged families. A budget table comparing the disposable incomes of different households inflates those of low income families by including child care fee assistance, without factoring in the costs of care. The result is to overestimate the disposable income of a single parent family with 2 children and private earnings of $30,000 by over $16,000. There can be no doubt that this family of three whose disposable income is actually $49,994 needs income support to keep their children out of poverty.

“While this Budget cemented the damaging cuts that will harm people on the lowest incomes, it took little action to strengthen public revenue. We are mystified as to why the government would rule out changes to unfair tax concessions for superannuation and indicate little appetite for reform of negative gearing and capital gains tax, after announcing a review of taxation with ‘everything on the table’. A lack of action on the revenue side guarantees that future governments will have no option but to cut more deeply into health and community services or ramp up user charges for essential services.

“This Budget also failed to drive the necessary reforms to improve housing affordability and access to universal services or to drive investment in the jobs and industries of the future. We are particularly disturbed that the Government failed to take steps to address the serious gaps in our social safety net including the low rate of allowance payments and the inadequate indexation of allowances and family payments (which are still indexed to the CPI only).

“The retention of most of the 2014 budget cuts and lack of action to strengthen public revenue tips the scale on the negative side of the fairness ledger as it effectively means that the most disadvantaged and struggling individuals and families in our community are being asked to shoulder the responsibility for restoring the Budget,” Dr Goldie said.

Media Contact: Fernando De Freitas 0419 626 155

DOWNLOAD ACOSS Budget Analysis

Summary of harmful cuts

The 2015-16 Budget included new cuts to a number of supports and services which will directly impact on people on low and moderate incomes:

  • Reduced funding to child dental health programs saving $126 million/ 4 years;
  • Cuts to health funding likely to undermine the capacity of community health organisations and services saving $963 million/ 4 years;
  • Reduction in funding of remote housing programs of $95 million/ 4 years.

This Budget also affirmed the Government’s commitment to the following major savings measures from the 2014-15 Budget which disproportionately affect people on low and moderate incomes:

  • Limiting Family Tax Benefit Part B to single income families with children under six years which will result in income losses of at least $49 per week for single parent families;
  • Freeze family payment rates for two years and reduce supplements, which will result in lower payments over time for low income families;
  • Cuts to funding for hospitals and education to state and territory governments;
  • Removal of Federal funding for state concession schemes;
  • Change to the eligibility age for Newstart, which will require young people who are not employed to rely on the lower Youth Allowance for longer (this measure has been delayed by one year);
  • Freezing of the free area for Allowances from 2014-27 which will reduce incomes and work incentives for those working part-time (noting that the Government has abandoned moves to freeze the pension free area, instead increasing it, but is still committed to freezing the Allowances free area);
  • Abolition of the Pensioner Education Supplement will result in losses of $40 per week for eligible recipients, including many sole parents;
  • Extend the pension eligibility age to 70 years by 2035;
  • Cuts of approximately $1 billion (over 4 years) to community services, including approximately $500 million in cuts to Aboriginal and Torres Strait Islander services and programs;
  • Cuts to affordable housing and homelessness programs totaling $674 million over four years, and the resulting loss of 12,000 affordable housing dwellings.

The Government has abandoned or amended the following major savings measures from the 2014-15 Budget:

  • The 6 month waiting period for young people under 30 years to access income support has been amended to a one month waiting period;
  • Indexing pensions to CPI instead of wages; freezing income and asset test free areas for pensions (the freeze remains for allowance payments) and lowering of deeming rates for payment tests (abandoned in favour of changes to the asset test free area and taper rates for pensions);
  • The $7 GP co-payment.