14 SOCIAL SECURITY
14.1 Income Security for the Retired
14.2 Income Security for People with Disabilities and the Sick
14.3 Income Security for the Unemployed
14.3.4 Youth Training Allowance
14.4 Income Security for Families with Children
14.5 Housing
The Age Pension was not a focus for change in this budget. Major changes to the income test had already been made, following the recommendations of the Income and Assets Test Review, with the introduction of extended deeming in July 1996. Only relatively modest changes to eligibility and income testing arrangements were announced in the Budget context. The two listed above are the ones most likely to impact on significant numbers of pensioners.
The extension of the 5% deeming rate to the first $2000 ($4000 for couples) in cash and deposits in banks, building societies and credit unions is a minor savings measure which will make it necessary for pensioners to ensure that they make full use of accounts which provide a return at least equal to the deeming rate, such as the deeming accounts offered by most banks.
Abolition of the Earnings Credit Scheme is another minor savings measure which will impact on pensioner earnings from casual employment.
The forward estimates for this program include funding for the maintenance of the pension rate at 25% of Male Total Average Weekly Earnings.
Service Delivery Agency
A major administrative reform outlined in the Budget with effect upon all programs is the creation of an, as yet unnamed, one stop shop service delivery agency. The new agency will deliver from mid-1997:
The agency will be a statutory authority within the Department of Social Security run by a board of directors who will select a Chief Executive Officer. The agency will have a focus on 'quality customer service' and most customers will deal with only one officer who will be able to address all their requirements. After set up costs of $23.7 million in 1996-97 the agency is expected to produce savings of approximately $146 million over the three years 1997-98 to 1999-2000. the agency is expected to have a budget of around $40 billion per annum and employ approximately 20 000 people.
Major reform of payments for people with disabilities and the sick occurred under the previous government in the early 1990s. The decision to conduct medical reviews of approximately 113 000 former Invalid Pensioners who are blind or still receiving Disability Support Pension (DSP) can be seen as further transition measure related to the earlier reforms. Approximately 20 400 of the people who lose eligibility for DSP are expected to become eligible for Job Search/Newstart Allowance with a further 2800 losing eligibility for income support altogether. Some partners will also transfer to Partner Allowance. As a result the savings from this measure over the four years to 1999-2000 are estimated to amount to approximately $120 million.
The targetting of these longer term DSP recipients and blind pensioners for review is likely to draw considerable attention from disability and welfare rights groups because the potential for quite significant impact on the lives of vulnerable blind and disabled people.
The revision of the impairment tables used in the assessment of eligibility for DSP is also a change related to the reforms of the early 1990s. The effect of the revised tables will be a reduction in the average number of DSP recipients of about 5000. Again only small savings of about $15 million will result over the four years to 1999-2000 due to the transfer of most affected pensioners to other payments.
The other measures highlighted above plus many of the less significant changes in this program are intended to improve targeting by tightening income testing. The changes to the compensation preclusion arrangements, essentially require people receiving compensation to live on it for longer before receiving pension payments. The change to means testing arrangements for superannuation assets held by those aged between 55 years and age pension age is intended to ensure that pensioners use their superannuation where it is available to produce income rather than preserving it in order to maximise their pension.
Cost Containment
Income support for the unemployed has not been changed in any fundamental way by this budget. Rather, savings worth around $1300 million over the four years 1996-97 to 1999-2000 have been sought through a series of changes aimed at cost containment, fraud and overpayment control and tighter targeting. Briefly they include the following measures:
More Customers
Expenditure reductions in this program produced by the changes set out above are balanced to some degree by increased expenditure on payments for people displaced from payments provided in other programs or departments. These include:
Activity Test Breach Penalties and Waiting Periods
The impact on income support recipients of changes in this area will be monitored carefully by welfare rights advocates and others interested in welfare issues. The simplification of penalties for breaches of the activity test to six weeks for a first breach and 13 weeks for a second or subsequent breach involves a considerable toughening of penalties. Those moving to areas of reduced employment prospects without sufficient reason will wait 26 weeks The maximum liquid assets waiting period will be extended from four to thirteen weeks (affecting around 16 000 people per annum by 1999-99). An income maintenance period will also have to be served equal to the number of weeks of paid leave received when leaving a job (affecting an estimated 87 000 people annually across all programs). Welfare groups have pointed out repeatedly over recent years the influence of existing waiting periods on demand for emergency relief provided by charitable agencies. Between April and December 1995 over 36 000 people lost payment under the existing activity test breach provisions. In the majority of cases a two week suspension of payment was incurred. The proposed penalties would treble these periods. Combine this with the increased activity test reporting requirements introduced in July 1996 and the potential for greatly increased length and number of penalty deferment periods is clear. This situation can only strengthen the concerns of welfare advocates. Similarly the increased emphasis on raising overpayments and increased debt recovery has the potential to cause problems for recipients who must fall back onto charitable assistance, friends and debt when money is tight.
Rent Assistance for Single People
The maximum rate of Rent Assistance available to single people sharing accommodation will reduced by one third. This change is justified in the Budget documentation by the suggestion that singles sharing enjoy economies of scale in terms of reduced living costs. An estimated 80 000 single people in several programs will lose on average $20.60 per fortnight at any one time.
Reform of payments for young people has been announced in this budget with the release of a 'community discussion paper' about a single youth allowance for all young people whether in education or the workforce. From January 1998 the Youth Allowance will be paid to about 630,000 16-20 year old people and full-time students aged up to 25 years. The discussion paper flags all the difficult choices to be made in the process of combining the existing income support arrangements into one payment. Unless the most generous provisions of each payment are extended to all there will be entitlement reductions for many. At best the losses will be more than compensated for by the gains from a more flexible and simplified system of income support. The consultation process over the next twelve months will inevitably be a lively one.
Abolishing minimum rates of payment under the Parental Income Test
The minimum rate that must be paid at present under the Parental Income Test for under 18 year olds will be abolished so that the test will reduce the payment to nothing if parental income is high enough. Of the 5800 people expected to be affected in a full year 3900 are expected to lose entitlement completely.
The big ticket item for this program in the Budget is the Family Tax Payment. This payment is the component of the Family Tax Initiative which provides cash payments to the 900 000 low income families who can best access their entitlement via the Social Security system. It is a fortnightly payment of $7.70 (plus $19.24 for single income families with children under 5 years of age) paid to families whose taxable income entitles them to more than the minimum rate of Family Payment. Families on higher income will receive their entitlement through the tax system as an increase in one parent's tax free threshold.
The direction of additional assistance to families with children as a result of the Family Tax Initiative will no doubt be welcomed by those who benefit. However, the creation of a system which delivers assistance through both tax relief and income support is a partial return to the regime which applied before the introduction of Family Allowance in 1976. At a time when the emphasis is often on simplification of family assistance mechanisms the Family Tax Initiative has to some degree complicated it even further.
Other changes with an impact on this program include:
These are all cost containment measures which do not change the fundamentals of the family payment system.
This Program is made up of two sub-programs - Housing Accessibility and Affordability and Rent Assistance. The first sub-program is essentially concerned with the operation of the Commonwealth-State Housing Agreement (CSHA) which is designed to help people with moderate incomes obtain access to appropriate housing at an affordable price. The Rent Assistance sub-program provides income support to low income families in the private rental market. Budget measures related to rent assistance do not impact on outlays in this program. See Program 3, Income Support for the Unemployed, for comment.
The 1996-97 Budget basically puts Commonwealth support for housing in a 'holding pattern' whilst far reaching reforms are negotiated with the States and Territories. In 1996 an Interim CSHA was agreed to and will apply for up to three years from 1 July 1996 while these reforms are finalised. These reforms have been under negotiation for some time and it is likely that the new public housing arrangements will include:
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