The Government will direct around $1.3 billion in net
savings from social welfare payment expenditure towards the National Disability
Insurance Scheme (NDIS) Savings Fund. The welfare savings
measures which will fund the contribution to the NDIS Savings Fund are:
- $1.4 billion from closing the Energy Supplement to new recipients
of social security and family assistance payments from 20 September 2016
and closing the Single Income Family Supplement (SIFS) to new recipients from
1 July 2017
- $108.6 million from removing backdating provisions for new claims
for Carer Allowance from 1 January 2017 and
- $62.1 million from reviewing 30,000 Disability Support Pension
(DSP) recipients each year for three years and assessing their capacity to
Around $270.7 million arising from these savings will not be
credited to the NDIS Savings Fund (the Fund)—they will be directed towards
other unspecified priorities in the Social Services Portfolio.
Further to the welfare measures, the budget papers indicate
that $711.2 million in savings from within the NDIS (from reduced net costs in
transition agreements signed with the states and territories) will be credited
to the Fund. This will result in an estimated $2.1 billion being credited to
the Fund over five years, on top of the Fund’s opening balance of $164.2 million,
which was set aside in the Mid-year Economic and Fiscal Outlook.
The NDIS Savings Fund is a special account which will
collect underspends and identified savings to help meet the Australian
Government’s contribution to the NDIS from 2019–20. The budget papers state that there will be a funding shortfall of $4.4 billion
in 2019–20 when the NDIS is fully operational. Savings from across the
Government will be directed to the NDIS Savings Fund to help meet this
shortfall. The Opposition has argued that there is no funding shortfall and
savings measures announced in the 2013–14 Budget, on top of an increase in the
Medicare levy, would help fund the full scheme.
Closing carbon price compensation
to new recipients
To offset the impact of the introduction of the carbon price
in July 2012 on income support recipients and those on low incomes, the Gillard
Government introduced the Clean Energy Household Assistance package. A key
component of the package was the Clean Energy Supplement (now called the Energy
Supplement), an additional amount paid to recipients of allowances, pensions
and Family Tax Benefit (FTB) recipients set at around 1.7 per cent of the basic
rate of these payments (the expected price impact of the carbon price—a 0.7 per
cent increase—plus an additional one per cent buffer). The SIFS, worth $300 per annum, was introduced at the same time and is for
single income families where the single parent or main earner has income
between $68,000 and $150,000. It was intended as compensation for those
families who would receive little or no assistance from the tax changes
introduced as part of the Household Assistance package.
During the 2013 election, the Coalition committed to
abolishing the carbon price while keeping the compensation measures that formed
part of the Household Assistance package. However, after winning
the election and repealing the carbon price in 2014, the Government made a
number of changes to the package, including renaming the Clean Energy
Supplement the ‘Energy Supplement’, ceasing indexation of the payment and
abolishing some minor supplementary payments.
The budget measure will mean that any new recipients of
pensions, allowances and FTB will no longer receive the Energy Supplement
(worth $14.10 per fortnight for a single pensioner and $8.80 for a single
Newstart recipient with no children). Current recipients of the Energy
Supplement will be grandfathered and still receive the payment as long as they
remain continuously eligible for a qualifying payment. The same applies to SIFS
recipients—new claimants will be ineligible but current recipients continue to
receive the payment as long as they continue to meet the eligibility criteria.
Minister for Social Services, Christian Porter, stated that
compensation for higher electricity prices under the carbon price arrangements
‘is no longer necessary for new entrants to the welfare system’. Arguably, the Energy Supplement and SIFS are also no longer necessary for
current recipients following the removal of the carbon price. However,
Treasurer Scott Morrison stated that the compensation should not be removed for
those who were promised it at the time and who have come to rely on it.
The abolition of these payments comes on top of the
Coalition Government’s cuts to other supplementary amounts paid to certain
benefit recipients. These include the Income Support Bonus and the Schoolkids
Bonus (to be abolished from December 2016); the proposed phasing out of the FTB
end-of-year supplement amounts; and the proposed abolition of the Pensioner
Education Supplement and Education Entry Payment.
Closing off the Energy Supplement will create two groups
with notably different payments rates—annual differences for current and new
payment recipients will range between $205 and $367 per annum depending on the
payment received. Paradoxically, new payment recipients who will be ineligible
for the Energy Supplement will actually have been better off had the carbon
price compensation package never been introduced. At the time the Clean Energy
Supplement was introduced, the basic payments the supplement is attached to
were adjusted to ensure recipients would not be compensated twice (via the
supplement and normal indexation to prices). This means that the basic rate for
these payments is now lower than it would have been had the normal indexation
process occurred. For example, a single
Newstart Allowance recipient would be receiving a basic rate more than $100 per
annum higher than the current basic rate had the compensation package never
Removing backdating provisions for
Carer Allowance is an income supplement for people providing
daily care to someone with a disability or medical condition or who is frail
aged. It is a non-means tested payment and can be paid in addition to the means
tested income support payment for carers—Carer Payment. The payment rate is
currently $123.50 per fortnight.
Currently, payments for Carer Allowance may be backdated up
to 12 weeks prior to the day of qualification or, if a claim is made more than
12 weeks after the day of qualification, the payment can be backdated up to 12
weeks prior the day the claim was made. For Carer Allowance
claimed in respect of an adult care-receiver, these backdating provisions only
apply where the adult’s disability is due to an acute event. For Carer
Allowance claimed in respect of a child care-receiver, the backdating
provisions will not apply where the claimant’s qualification is based on them
being qualified for Carer Payment.
The Budget proposes to align the backdating provisions for
new Carer Allowance claims with other social security payments—for most other
social security payments there are no backdating provisions with the start date
of the payment usually being the day a claim is made or the day the person
becomes qualified for a payment. Backdating provisions can apply in specific
circumstances, such as where a person’s partner has made a claim for a payment
at an earlier date or after childbirth.
The measure will impact on carers who delay in contacting
Centrelink to claim Carer Allowance. The $108.6 million in savings arises from
reduced payments to these new Carer Allowance recipients. Carers Australia has
criticised the measure being linked to NDIS funding, with Chief Executive
Officer Ara Cresswell stating: ‘Carers don’t receive direct services under the
NDIS, and savings from changes to the Carer Allowance could be better directed
to the Government’s Integrated Plan for Carer Support Services, which will
provide specific carer support.’
Disability Support Pension reviews
This $62.1 million savings measure will see an additional
90,000 medical reviews of DSP recipients over three years. Of these, 30,000
will include a Disability Medical Assessment conducted by a doctor contracted
by the Department of Human Services (DHS). The measure extends a 2014–15
Budget measure to review the work capacity of DSP recipients aged under-35
years and DHS’s regular program of entitlement reviews. The measure does not require legislation and the savings will derive from some
DSP recipients having their payment cancelled and either moving onto a lower
rate income support payment or off income support.
The reviews assess existing recipients against the current
eligibility criteria for DSP rather than the criteria under which the recipient
first claimed. In 2011, new criteria for assessing DSP claimant’s work capacity
were introduced and new criteria for assessing the impact of medical conditions
and impairments were introduced in 2012. Some of those reviewed may not meet
the new criteria, while some may have seen an improvement in their medical
condition or work capacity so that they no longer qualify for DSP. The new
criteria have restricted the number of new claimants and, together with reviews
of existing recipients, have contributed to a decrease in the total number of
DSP recipients—from around 832,000 people in December 2013 to around 797,000 people
in December 2015.
The reviews will be targeted at DSP recipients who ‘may have
some reasonable but limited capacity to work’. As at January 2016,
20,521 people had been reviewed under the previous measure targeting additional
reviews at under-35s. Of these, 2,986 had had their DSP cancelled with 2,464
not meeting the medical requirements. Of those cancelled, 75 per cent moved to
another income support payment.
Removing carbon tax compensation from new welfare recipients
will deliver significant savings and, while running against the Coalition’s
2013 election commitments, can be argued as reasonable given the abolition of
the carbon price. However, the cut comes on top of a long list of benefit cuts
and reductions over the last three years and will impact on those reliant on
pensions and allowances. Some in this group will be the beneficiaries of the
NDIS—as will those affected by the other two welfare measures. This raises the
question of whether the services offered by the NDIS should be funded by the
withdrawal of direct financial supports for people with disability and carers.
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