A second phase of reform is being prepared by Tony Abbott and Joe Hockey in talks with Families Minister Kevin Andrews. Picture: Gary Ramage Source: News Corp Australia

31 May 2014

The Australian

Inflaming the dispute over tough budget cuts, Tony Abbott and senior ministers are canvassing further ways to cancel or reduce payments as they express frustration at the number of benefits. The government is aiming to sharpen the political row over welfare by releasing confidential advice within weeks to highlight the complexity of the system and the looming burden on taxpayers.

On the agenda is a far-reaching program to weed out supplements and allowances that are not essential, cutting down on the cost of running the system.

Another goal is to discourage welfare recipients from building their lives around the benefits they receive and treating government supplements as a permanent source of income.

Joe Hockey told The Weekend Australian that the system had grown so complex that key agencies did not know all aspects of the multiple benefits being paid to some recipients.

“We don’t understand the circumstances of our own customers, and that’s a historical thing because different departments provide different payments at different levels of government,” the Treasurer said.

Documents prepared for the federal budget show dozens of direct payments and scores of other assistance measures that go to millions of people, but the cuts unveiled on May 13 tackled only some of the programs.

A second phase of reform is being prepared by Mr Abbott and Mr Hockey in talks with Families Minister Kevin Andrews involving ideas such as rolling several payments into one to streamline the system.

The government is wrestling with the political risk of cancelling supplements as well as the potential cost of introducing one single benefit for people of working age.

Spending on social security and welfare is due to reach $145bn next year but this includes $60bn in age pensions and other help for the elderly, which is not part of the “second phase” of reform.

Mr Abbott’s advisers are examining a preliminary report from a review led by former Mission Australia chief executive Patrick McClure, but it could take until the end of the year for the reforms to be unveiled.

The Weekend Australian has been told that Mr McClure’s recommendations are to be released for public comment within weeks, setting off a new round of debate over the welfare system.

The McClure report is said to revisit a key finding he made in 2000 to replace all working-age benefits with a single payment, an idea the Howard government rejected. The simplification plan now has strong support among cabinet ministers.

Mr Hockey has sought to highlight the complexity in recent days by listing a dozen payments and supplements that can go to some recipients, including a single mother with two children who was getting $54,417.

Experts attacked the Treasurer’s claim, however, as an “incredibly rare” example, when most single mothers with two children were getting $35,000 to $40,000 a year.

National Centre for Social and Economic Modelling principal researcher Ben Phillips said that out of 44,000 families in his sample, there were only eight single parents on the pensioner education supplement who were not working and had two children under 14 with at least one of them in childcare.

Mr Phillips said complex payments were a way of targeting specific groups and “the targeting saves a lot of money”, despite proposals for collapsing all payments into one.

Australian National University professor Peter Whiteford warned that trying to simplify payments would either cut benefits or add to spending.

“If you want to simplify the system so there are no disparities, do you level the payments up or level them down?” he said. “With one option there are losers and with the other it costs money.”

Professor Whiteford also said that decisions to scale back family tax benefits risked reneging on an electoral “deal” on the GST in 2000, when the benefits were designed to compensate families for the new tax. “We are definitely generous to families at the bottom end but not to those in the middle or at the top,” he said.

Mr Hockey warned of the “crippling” welfare culture as ­people forgot the difference between income support — such as the age pension — and supplements such as family tax benefits that were only meant to top-up household budgets.

The Treasurer said pensions would rise to keep up with the cost of living but some of the supplements would be frozen. This would mean they were gradually eroded by inflation.

“We as a community should be helping people and we should be very supportive of those most vulnerable — there’s no argument about that,” he said in an interview. “But it should not become a cargo net into which people fall and then expect an endless supply of money.

“And I think we all need to appreciate that the payments ultimately come out of another person’s pocket. It doesn’t come out of the government’s pocket, it comes out of a working Aus­tralian’s pocket.”

Centre for Independent Studies policy analyst Trisha Jha has outlined welfare reforms including the cancellation of Family Tax Benefit Part B and changes to Family Tax Benefit Part A so that the money could be targeted at those on low incomes.

Ms Jha said it would require “bravery” from politicians to attempt major reform such as halting supplements with a promise that the savings would be returned to people as tax cuts later.

“The cost of the reforms could end up cancelling out the benefits,” she said.

Mr Hockey did not use his interview with The Weekend Aus­tralian to nominate any benefits he wanted to cancel but he sought to emphasise the generosity of the system.

Bill Shorten has savaged the government for its budget savings including a $7.4bn cut to family tax benefits, a $1.3bn cut to seniors’ concessions, a $1.1bn cut to the Seniors Supplement and a $1.2bn measure to force young people who do not have jobs to wait six months before getting Newstart or Youth Allowance.

“Everyone knows that this budget is sinking and is in disarray,” the Opposition Leader said.

With difficult reforms likely to stall in parliament, the Prime Minister reached out to crossbench senators yesterday to seek their support.

The talks have made it clear that priority items in the July session of the upper house will be the repeal of the carbon tax, repeal of the mining tax, restitution of the Australian Building and Construction Commission and the creation of an appellate tribunal at the Fair Work Commission.

Liberal Democratic Party senator-elect David Leyonhjelm said he had an “affable” meeting with Mr Abbott yesterday and indicated his support for those four reforms, but raised objections to any bills that would increase taxes.

Family First senator-elect Bob Day also indicated support on the four key bills in a meeting with Mr Abbott on Wednesday, but he is also advocating welfare reform. Mr Day said family tax benefits — which cost about $20bn a year — should be replaced with tax cuts: “The family tax benefits make it look like the government is giving you money but it shouldn’t be taking it off you in the first place.”