Social Services Legislation Amendment (Ending Carbon Tax Compensation) Bill
2017
Purpose of the bill
1.1
The Social Services
Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017 (bill) seeks
to cease the payment of the energy supplement to new income support recipients
from 20 September 2017.[1]
1.2
The energy supplement was introduced in 2013 as a distinct component of income
support payments to compensate for the rising cost of living resulting from the
introduction of the carbon tax.[2]
The payment rate of the energy supplement varies between $0.50 and $14.10 per
fortnight depending on the type of income support payment.[3]
1.3
The bill amends the Social Security Act 1991, Farm Household
Support Act 2014, Veterans’ Entitlements Act 1986, Military
Rehabilitation and Compensation Act 2004 and Budget Savings (Omnibus)
Act 2016 to extend this measure to a range of income support payments such
as Newstart Allowance, Disability Support Pension, Carer Payment, Farm Household
Allowance and Widow Allowance.[4]
1.4
The effect of the bill is that eligible welfare recipients who were
receiving an income support payment on 19 September 2016 will continue to
receive the energy supplement. Income support recipients who became eligible for
the energy supplement after 19 September 2016 will cease to receive the energy
supplement from 20 September 2017.[5]
Background
1.5
This measure was previously contained in the Social Services Legislation
Amendment (Omnibus Savings and Child Care Reform) Bill 2017 (Omnibus Bill). The
committee tabled its report on the Omnibus Bill on 21 March 2017.[6]
The Omnibus Bill was discharged from the notice paper on 23 March 2017.
1.6
Following the commencement of the Budgets Savings (Omnibus) Act 2016,
the energy supplement has been closed to new recipients of Family Tax Benefit
(FTB) A, FTB B and the Commonwealth senior's health card since 20 March
2017.[7]
Financial implications
1.7
The measure is expected to produce savings of $933.4 million from 2016‑17
to 2019‑20.[8]
Conduct of the inquiry
1.8
On 15 June 2017, the Senate referred the provisions of the bill to the
Community Affairs Legislation Committee for inquiry and report by 9 August
2017.[9]
1.9
Details of the inquiry, including a link to the bill and associated
documents, were placed on the committee's website.[10]
The committee wrote to relevant individuals and organisations inviting
submissions to the inquiry by 14 July 2017. Submissions continued to be
accepted after that date.
1.10
The committee received 19 submissions to the inquiry and held a public
hearing in Melbourne on 26 July 2017. Submitters and witnesses are listed at
Appendices 1 and 2.
1.11
The committee thanks those individuals and organisations who contributed
to the inquiry.
Note on references
1.12
References to Committee Hansard are to the proof transcript. Page
numbers may vary between the proof and official transcripts.
Legislative scrutiny
Senate Standing Committee for the
Scrutiny of Bills
1.13
The Senate Standing Committee for the Scrutiny of Bills considered the
bill in Scrutiny Digest 6 of 2017 and did not make any comment on the
bill.[11]
Parliamentary Joint Committee on
Human Rights
1.14
The Parliamentary Joint Committee on Human Rights considered the bill in
Report 5 of 2017 and noted the bill did not raise any human rights
concerns.[12]
Issues identified during the inquiry
1.15
Submitters to the inquiry raised a range of concerns. In particular,
submitters identified the creation of a 'two-tiered' income support system, the
inadequacy of current payments and increasing electricity prices as issues of
concern.
Creating a two-tiered system
1.16
Submitters to the inquiry argued that the bill's proposal to cease the
payment of the energy supplement to new income support recipients from 20
September 2017, while people who were in receipt of the energy supplement on 19
September 2016 would continue to receive the payment would create a
'two-tiered' system.[13]
1.17
The Australian Council of Social Service (ACOSS) stated that the bill
would 'deepen inequity in our income support system as two people in the same circumstances
will receive different rates of payment.'[14]
Similarly, COTA Australia expressed the view that it would be unfair for a
person to receive a lower or higher payment rate based on when they began receiving
income support payments.[15]
1.18
However, the committee notes that the point at which a person began
receiving income support payments is fundamental to consideration of the energy
supplement and its purpose. The energy supplement was introduced in 2013 in
order to 'assist with the cost impacts resulting from a carbon price.'[16]
The carbon tax was repealed on 1 July 2014 and consequently, people who entered
the income support system since the repeal, have not been subject to the
increased costs associated with the carbon tax.
1.19
The Department of Social Services (the department) emphasised that the
changes proposed by the bill will only affect recipients who are new to the
income support system since 20 September 2016. The committee notes that
the government considers it to be a fair and reasonable adjustment to cease
providing compensation for the carbon tax in the form of the energy supplement
to new income support recipients, approximately three years after the carbon
tax has been repealed.[17]
1.20
Furthermore, it is important to note that the provision to exclude
existing income support payments from this measure ensures that an income
support recipient's payment will not decrease as long as they continue to
receive and remain eligible for a qualifying income support payment.[18]
Adequacy and indexation of income
support payments
1.21
A number of submitters expressed concern that income support payments
are not sufficient to meet the rising costs of living in Australia.[19]
In addition, some submitters noted that the energy supplement was not fully
indexed when it was introduced under the previous government, resulting in
income support recipients being worse off now than they would have been had the
energy supplement not been introduced.[20]
1.22
ACOSS outlined that regular Consumer Price Index (CPI) indexation of the
Newstart Allowance was adjusted to account for the energy supplement when it
was introduced, in order to compensate for increased costs associated with the
carbon tax. ACOSS submitted this has resulted in the payment being less than it
would have been had regular indexation occurred.[21]
1.23
The department informed the committee that in order to assist income
support recipients with rising energy costs, the Government has provided a
one-off Energy Assistance Payment to a range of income support recipients with
fixed incomes at a rate of $75.00 for singles and $62.50 for each eligible
member of a couple.[22]
1.24
The department's submission emphasised that as the carbon tax no longer
exists, it is not necessary to continue to compensate households for the
impacts of the tax.[23]
The committee notes that seeking to cease the payment of the energy supplement
to new recipients forms part of the Government's commitment to ensuring
Australia's welfare system provides appropriate support to those who need it,
whilst ensuring the system remains sustainable.
Increasing electricity prices and
impact on recipients
1.25
Most submitters drew the committee's attention to recent announcements
that retail electricity prices would increase from 1 July 2017.[24]
National Seniors advised the committee that energy retailers across the country
have announced increases in electricity prices from July:
Energy retailers increased retail prices for residential
customers on average by 20 per cent in New South Wales, the ACT and South
Australia and by seven per cent in Queensland.[25]
1.26
The Salvation Army Australia highlighted that increases in electricity
prices have a greater impact on income support recipients because low-income
households spend a greater proportion of their income on utilities.[26]
1.27
Catholic Social Services Australia supported this view, citing
Australian Bureau of Statistics data which found that:
...low-income households spend $22.07 per week or 6.9 per cent
of their income on electricity while the top 20 per cent of households by
income spend more than $43.89 per week on electricity but that amounts to just
2.4 per cent of their income.[27]
1.28
People with Disabilities Western Australia (PDWA) advised the committee
that income support recipients may also be disproportionately impacted by rising
electricity costs due to greater use of electricity. PDWA explained that in
particular, the specific needs of people with a disability may increase
electricity usage:
Many people with disability are reliant for their health and
ability to be independent on items that use electricity. For example people
with communication aids that require charging, reliable fridges for medication,
reverse cycle air-conditioning for temperature regulation, electric beds and
hoists, and ventilation and breathing machines.[28]
1.29
Similarly, Carers Australia noted that high rates of electricity usage
affect not just people with a disability but also their carers:
There are also things, as stated, around where there is
incontinence or other issues that require the washing machine and dryer to be
running constantly, and then there are the special equipment needs. It affects
everybody in the household—both the person with the disability and the person
providing the care.[29]
1.30
Carers Australia also acknowledged that wholesale electricity prices
dropped after the repeal of the carbon tax, however, electricity companies failed
to pass this price drop on to consumers and have instead announced increases to
retail electricity prices.[30]
1.31
The department noted that while carers were not subject to the one-off
Energy Assistance Payment, carers may receive a range of other supplements on
an ongoing basis which may compensate for increased electricity usage.[31]
1.32
The committee is aware that increasing electricity prices have been a
continual concern to consumers and stakeholders in recent years. The department
noted in its submission that under the previous government, electricity prices
more than doubled between December 2007 and September 2013.[32]
1.33
The department also submitted that had the carbon tax not been repealed,
it was predicted to have resulted in long-term increases in electricity prices.
Furthermore, when the carbon tax was repealed on 1 July 2014, the Australian
Competition and Consumer Commission (ACCC) estimated it would lead to savings
of up to $263 per year in electricity costs for residential households.[33]
1.34
As the Minister for Social Services, The Hon Christian Porter MP,
outlined in his second reading speech, the government is continuing to
prioritise energy security and affordability. The 2017-18 budget included a
$265 million energy package to ensure that Australia maintains a secure,
reliable and competitive energy system.[34]
In addition, the government has asked the ACCC to conduct a review of
electricity retail prices which will include examining the competitiveness,
cost components and profitability of electricity providers.[35]
Committee view
1.35
The committee acknowledges the concerns identified by submitters and
witnesses regarding the fairness and adequacy of income support payments,
coupled with recent announcements by energy providers to increase retail electricity
prices and the impact this may have on income support recipients.
1.36
Notwithstanding increasing electricity prices, the committee notes that the
energy supplement was introduced in 2013 for the sole purpose of compensating
for the carbon tax which has since been repealed. Therefore, the committee
believes it is no longer appropriate to provide the energy supplement to new
income support recipients in order to compensate for a tax which no longer
exists.
1.37
The committee supports the actions the government is taking to put
downward pressure on electricity prices which will ensure that new income
support recipients are provided appropriate support without the need to be
compensated for a tax which does not exist, and maintain the sustainability of
Australia's welfare system for the future.
Recommendation 1
1.38
The committee recommends that the bill be passed.
Senator Jonathon Duniam
Chair
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