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Rehabilitation Service Reform Bill 1998
Date Introduced: 26 March 1998
House: House of Representatives
Portfolio: Health and Family Services
Commencement: Formal and transitional
provisions come into effect on Royal Assent. The remainder of the
Bill commences on a date fixed by proclamation but no later than 6
months after Royal Assent.
transitional measures that facilitate the corporatisation of the
Commonwealth Rehabilitation Service (CRS).
On 22 December 1997, the Minister for Family
Services, Warwick Smith, announced that the CRS would separate from
the Department of Health and Family Services from 30 June
This statement followed an announcement made on
19 November 1997 that the Government was developing initiatives
intended to improve access to employment assistance services for
people with disabilities. In this earlier announcement, Minister
Smith indicated that by mid-May 1998 Centrelink would be providing
a new eligibility assessment and referral service for people with
disabilities seeking employment.(2)
In late 1997, the Minister also released a guide
to services entitled: Improving Access to Employment Assistance
for Job Seekers with A Disability.(3)
The Commonwealth Rehabilitation Service (CRS)
aims to help people with a disability or injury to get or keep
employment. A key objective of the CRS is to minimise the personal,
social and financial costs of disability by the provision of
To be eligible for assistance from the CRS,
- to be permanent residents of Australia
- to be aged between 14 and 65 years
- to have a disability either from birth or which has resulted
from sickness or injury
- to have a disability that impairs their ability to gain or keep
a job and to live independently
- to show that by being involved with CRS programs they are
likely to make a substantial gain towards being employed and being
able to live independently.
The type of support provided by the CRS is
tailored to each individual and may include services such as: work
experience, on the job training, counselling, suggestions as to how
to handle their disability, help with job applications, help with
contacting community support organisations and other support and
advice. Referrals to the CRS may come from the individuals
themselves but also from medical practitioners, insurance providers
and other government departments and agencies.
The significance and scope of the operation of
the CRS is indicated by the size of its budget and the number of
citizens who benefit from the services it provides.
Each year the CRS assists approximately 30 000
people with injury or disabilities to return to the workforce, and
find and retain jobs.(4)
The Commonwealth currently provides
rehabilitation services free-of-charge to eligible people through a
nation-wide network of 170 service outlets operated by the
In the 1997-98 Federal Budget in excess of $113m
was apportioned to the organisation.
The CRS currently operates as a division of the
Commonwealth Department of Health and Family Services and derives
its legislative authority from Part III of the Disability
Services Act 1986.
Under the current proposal, the CRS will cease
to be a Division of the Department of Health and Family Services
staffed under the Public Service Act 1922 and will become
Commonwealth owned company limited by shares, established under the
Corporations Law, ie a proprietary company.
The changes proposed are intended to create what
is commonly referred to as a 'purchaser-provider' split. The
Department of Health and Family Services will be the purchaser of
services and the newly corporatised CRS initially will be the sole
The Government has indicated that
corporatisation will open the way in the longer term for
competition in the provision of services. In his Second Reading
Speech, Minister Smith indicated that from 1999 it is intended that
CRS will cease to be a monopoly provider. In the interim, however,
the Department of Health and Family Services will continue to
purchase rehabilitation services from the CRS under
The Minister has further indicated that the
company will be designated a Government Business Enterprise (GBE).
This would appear to have implications in relation to the
accountability mechanisms established under the Commonwealth
Authorities and Companies Act 1997 which makes special
provision in relation to Commonwealth companies which are GBEs.
This designation may also have implications for the proposed
company in relation to the Governance Arrangements for Commonwealth
Government Business Enterprises which were issued by the Department
of Finance(7) in response to the Report prepared by Richard Humphry
for the Howard Government in March 1997.(8) Presumably any proposed
measures are to be effected by regulation.
It is noted, however, that neither the
Minister's Second Reading Speech, nor the Explanatory Memorandum,
detail the precise nature of any special governance arrangements
and accountability measures that are to apply to the CRS arising
from its status as a taxpayer funded body.
As noted above, the CRS is presently staffed
under the Public Service Act 1922. The Government proposes
that CRS staff be transferred to the new company by virtue of
section 81C of the Public Service Act which provides for the
compulsory transfer of staff to 'Commonwealth authorities'.
As the proposed company is not a 'Commonwealth
authority', the present Bill provides that the proposed company is
to be deemed to be a 'Commonwealth authority' for the purposes of
the Public Service Act even though it is not otherwise to be
treated as such an authority (clause 16).
Clause 5 outlines the new corporate structure of
the CRS and provides that it shall not come into existence until a
declaration is issued by the Minister after the company has been
registered under the Corporations Law of the Australian Capital
Territory and has share capital.
Clause 6 further provides that
the CRS will remain a Commonwealth-owned company if, and only if,
all shares in the company are beneficially owned by the
Commonwealth at any time.
Clauses 10 and
12 respectively provide for the transfer of assets
and liabilities to the new company. The clauses provide for such
transfer to be effected by ministerial declaration but transfers by
other means are not precluded.
Clause 15 exempts the company
from State and Territory taxes. As noted in the Second Reading
The new company will pay all Commonwealth taxes.
However, consistent with current taxation policy it will be exempt
from state and territory taxes. To ensure competitive neutrality it
will instead make payments to the Commonwealth equivalent to the
level of state taxes it would otherwise have paid.(9)
As noted above, clause 16 deems
the company to be a Commonwealth authority for the purposes of the
Public Service Act 1922, but makes it plain that it is not
a Commonwealth authority for other purposes.
The schedules make consequential changes to a
range of Commonwealth laws. Clause 18 excludes the
operation of the yet to be enacted Legislative Instruments Bill
Schedule 2 includes a savings provision which
seeks to protect the rights of current CRS clients by continuing to
apply repealed provisions of the Disability Services Act
1986 to those clients in regard to programs in force
immediately prior to the new provider arrangements coming into
The purchaser/provider model has the potential
to lead to greater efficiency in service delivery. The National
Commission of Audit identified the following potential benefits of
this approach to service provision:
- policy priorities are better specified and hence clearer
- working relationships can be improved because expectations and
responsibilities are clarified
- conflicts of interest can be minimised because providers are
not the sole source of advice on targets, evaluation and standards
- the balance of power is not weighted in favour of the
- contestability can be enhanced because potential providers are
exposed to competition
- accountability can be heightened because a purchaser may
specify what performance information is expected from the
- managerial autonomy can be increased because relevant roles and
structure can be clarified
- responsiveness to clients can be improved because purchase
agreements require the provider to meet client needs.(10)
A purchaser/provider split can be achieved using
a variety of different entities and it is not necessary to achieve
the intended result by incorporating the service provider as a
Corporations law company and designating it a GBE. Of course, the
Government may have reasons for selecting this particular option
rather than (say) establishing a Commonwealth company or
Commonwealth authority under its own enabling Act. A Corporations
law company may be easier to privatise and it will be plain that
the provisions of the Commonwealth administrative law will not
apply to a Corporations law entity.
Richard Humphry in his March 1997 Report to
Minister for Finance, John Fahey, (referred to above) noted
¼ that unlike the analogous
private sector investor, there are other relationships the
Government has with its GBEs. These are:
- the Community Service Obligation purchaser-provider
- the regulatory and industry policy relationship;
- where the Government is a direct and significant consumer of
GBEs goods and services [here in relation to its own employees], it
has a consumer-producer relationship.
The requirement that the portfolio Minister balance the
shareholder interests in GBEs, with the other relationships that
the Government has with its GBEs, places that Minister in an
extremely difficult position because of the potential conflicts of
interest. A more transparent arrangement would be to remove the
responsibility for the shareholder function from the portfolio
Minister altogether. That is, the function could be undertaken by
an economic Minister or the Government could appoint a Minister
specifically to act as a shareholder in the GBE.(11)
It may, of course, be that the full detail of
the Government's proposal addresses any concerns relating to the
meeting of community service obligations and potential conflicts of
interest in the company's governance structure.
Given, however, the decision to bring this Bill
on for debate in the House at relatively short notice, the above
matters cannot be explored in depth in preparing this Digest.
- Media Release, No.42/97.
- Media Release, No.23/97.
- Released November 1997.
- Hon Warwick Smith MP, Media Release, No.42/97.
- House of Representatives, Parliamentary Debates, 26
March 1998, 1167.
- In June 1997.
- Review of GBE Governance Arrangements, 14 March 1997.
- Op cit., 1167.
- Report to the Commonwealth Government, June 1996, 15-16.
- Op cit., 3-4.
Bills Digest Service
Information and Research Services
31 March 1998
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