Bills Digest no. 120 2009–10
Social Security and Family Assistance
Legislation Amendment (Weekly Payments) Bill 2010
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Social Security and Family Assistance
Legislation Amendment (Weekly Payments) Bill 2010
Date introduced: 10 February 2010
House: House of Representatives
Portfolio: Families, Housing, Community Services and Indigenous Affairs
Commencement: On Royal Assent
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
This Bill seeks to amend the Social
Security Act 1991, the Social Security Administration (Administration)
Act 1999, the A New Tax System (Family Assistance) Act 1999 and the A
New Tax System (Family Assistance)(Administration) Act 1999 to enable welfare
payments, as well as Family Tax Benefit (FTB) and baby bonus payments, to be
made on a weekly rather than fortnightly basis to vulnerable income support
recipients.
Typically, welfare payments
(including income support and income supplement) are paid on a fortnightly
basis. While most welfare recipients are able to manage their finances over
this period, some disadvantaged people experience great difficulty in doing so.
Vulnerable people—such as people who are homeless or at risk of homelessness
and people with mental health and substance abuse problems—can struggle to organise
a budget such that they are able to pay their bills and purchase groceries over
a fortnightly period. In many instances, these disadvantaged Australians live
on a day-to-day, hand-to-mouth basis and find themselves spending their
payments too quickly. Where this is the case, this is not only bad for these people’s
immediate health and well-being—increasing the risk of their going without food
and necessary health services and becoming homeless—but it can also serve to
prolong and exacerbate their experience of disadvantage.
It has long been recognised that certain welfare recipients
struggle for various reasons to maintain a budget over a fortnightly period.
There has also been a longstanding interest in determining whether a shorter
pay period might assist these people.[1]
During the past decade two trials of the weekly payment of
income support have been conducted in Australia. The first of these was carried
out from September 2001 to March 2003 as a part of a broader trial of
culturally sensitive banking and financial services in Town Camp communities in
Alice Springs. The trial of services offered to Town Camp residents by the
Tangentyere Council[2] through a Westpac agency located on its premises included: the delivery of
face-to-face, over the counter banking services to Aboriginal clientele; a
financial literacy program designed to assist Aboriginal clients in the shift
from cheque-based to electronic banking; and, a weekly payments trial.[3]
The Tangentyere weekly payments trial, which was funded through
the then Department of Family and Community Services (FaCS), was intended to
help in countering the ‘feast-and-famine’ cycle experienced by many Indigenous
welfare recipients, and to ameliorate the worst effects of this fortnightly cycle.
According to Siobhan McDonnell,
a former visiting fellow at the Centre for Aboriginal Economic Policy Research
(CAEPR), many Indigenous people face a feast-and-famine cycle as a result of
their ‘low personal incomes, distinct cultural patterns of immediate
expenditure often for a wide social network, combined with a lack of access to
savings’.[4] The consequences of a feast-and-famine cycle can be severe. Families that have
spent their income support payment early can end up going without food and, in
the worst case scenario, this can create problems of child malnutrition.[5]
Based on a limited study of the trial conducted by FaCS,
weekly payments would appear to have helped Tangentyere weekly payments trial participants
to better manage their money and, as a result, had some impact on the
feast-and-famine cycle and its effects. The weekly payments trial was reported
to have resulted in less people going without food, and people either buying
more food or buying food more often.[6] Another positive outcome of weekly payments, according to FaCS, was that they
‘reduce the amount of money available to buy alcohol in one sitting, thus
reducing potential intake amongst Indigenous customers who binge drink.’[7] In this respect, FaCS contended that weekly payments could be viewed as a harm
minimisation strategy.
On the strength of her own assessment of the weekly payments
trial, and FaCS’ evaluation of the trial, McDonnell was generally supportive of
the use of weekly payments as a strategy to overcome the fortnightly feast-and-famine
cycle in the Tangentyere town camps. However, while noting that the initial
results of the trial had seemed positive, McDonnell identified some problems that
would, she argued, need to be addressed if the trial were to be expanded to
other Indigenous central Australian communities. Some of these problems were of
a technical nature, with Centrelink experiencing difficulties in putting weekly
payments in place. Others related to people choosing to exit the trial and
return to fortnightly payments because weekly payment amounts were insufficient
to allow them to make larger purchases.[8]
McDonnell also highlighted the fact that a limited number of
people had participated in the trial, and that this could have influenced the
trial’s results. It is worth noting that while the evaluation results may certainly
have been biased towards the small number of people who chose to remain on
weekly payments this does not detract from the benefits reported by these
participants. Nevertheless, the point is that we do not know, on the basis of
the trial’s limited results, whether or not those people who dropped out of the
trial suffered ill effects as a result of returning to fortnightly payments. All
that we can safely say, then, based on available trial results, is that there
is evidence that weekly payments are helpful to some people—and especially when
combined with additional services—and worth making more widely available, as a
result.
The main point made by McDonnell in her assessment of the
Tangentyere trial was that if weekly payments were to prove successful, then
this demanded that they be voluntary. Participants in any program of weekly
payments, she argued, should be able to return to fortnightly payments at any
time, to ensure that their consumer choices are not unduly limited.[9] So long as this condition could be met, McDonnell supported an expansion of the
weekly payments trial beyond Town Camp communities in Alice Springs to other
Indigenous communities throughout central Australia.
Following the success of the Tangentyere trial of weekly
payments, a weekly payment trial was conducted in the broader Australian
community by FaCS, the then Department of Employment and Workplace Relations
(DEWR) and Centrelink. [10] From 24 October 2005 to 30 April 2006, the option of weekly payments was made
available to disadvantaged welfare recipients across 69 Centrelink Customer
Service Centres located throughout Australia. A majority of these sites were
located in Western Australia and South Australia. Around 1700 disadvantaged
welfare recipients are reported to have been involved in the trial, with most
of these people in receipt of the disability support pension and suffering from
some form of mental illness.[11]
The trial sought to determine the costs and benefits of
weekly payment arrangements, both for participants themselves, and for other
stakeholders. These stakeholders included Centrelink social workers and support
services that cater to the needs of disadvantaged welfare recipients, and Centrelink
staff who may have had to deal with these recipients’ requests for advance or
urgent payments when their fortnightly payments had been exhausted. It is
important to note that weekly payments were not offered in isolation; trial
participants were also provided with access to other support services that were
calculated to assist in stabilising their circumstances.
While the evaluation report on the trial has not been made
publicly available, it is generally recognised that the trial, with its combination
of weekly payments and services to assist participants, was reasonably
successful.[12] The Minister for Workplace Participation during the time in which the trial was
conducted, Dr Sharman Stone, is reported as having stated, ‘preliminary results
suggest the trial is a positive initiative for disadvantaged income support
recipients when weekly payments are accompanied by other contact arrangements’.[13]
A similar assessment was made by the then president of the
National Welfare Rights Network, Michael Raper. Based on feedback provided to
him by community groups, Raper is reported as having stated that, as a result
of the weekly payments trial, ‘very vulnerable clients have been able to turn
their lives around with improved health and personal outcomes, more stable
accommodation and reduced costs in terms of demands on the health and legal
systems.’[14] Indeed, given the reported success of the trial for participants and
Centrelink, Raper was ‘at a loss as to why it [was] being wound up’.[15]
It would appear that the reason for the trial’s being
finalised was that, under existing arrangements, income support payments must
be paid in arrears, and in respect of a 14 day instalment period. Hence, to
have continued to pay income support recipients on a weekly basis would have
been to pay them in advance of when they were entitled to receive their payment—that
is, at day 15 in respect of a 14 day instalment period. Weekly payments were
able to be made to Weekly Payment Trial participants on a limited, trial basis
only.
The current Bill would provide for weekly payments to be
made to vulnerable income support recipients through two part payments in
respect of a 14 day instalment period. This would enable weekly payments to be
made by treating the two part payments as though they were a single payment
being paid at the end of a 14 day instalment period, while preserving the 14
day instalment period that applies to most income support recipients.
In the context of the 2007 Federal election campaign, then
opposition leader, Kevin Rudd, made a commitment to tackle the issue of
homelessness in Australia as a matter of national priority. The problem of
homelessness was to be addressed within Labor’s broader housing affordability
and social inclusion agendas through a focus on the prevention of homelessness,
improved crisis services, and the creation of exit points to secure longer term
housing and stop the cycle of homelessness.
On gaining office, the Rudd Government signalled its
intention to develop a comprehensive, long-term plan to tackle homelessness. To
this end, it commissioned the development of a Green Paper to ‘promote public
discussion of homelessness, highlight the challenges faced by people who are
homeless, and suggest ways forward’. The paper, Which Way Home? A new
approach to homelessness was released in May 2008.[16] This was followed on 21 December 2008 by the homelessness White Paper, The
Road Home: A National Approach to Reducing Homelessness, which seeks
to provide a national plan of action on homelessness for the years leading up
to 2020.[17]
The paper outlines three strategies through which
homelessness is to be tackled. These are: a focus on early intervention in the
provision of homelessness services; increased responsiveness of and connectivity
between homelessness services so as to achieve sustainable housing, improve
economic and social participation and reduce homelessness; and moving homeless
people quickly out of the crisis accommodation system and into stable housing
with the necessary support to ensure that their homelessness does not recur. One
of the initiatives identified under the first of these strategies was the
weekly payment of income support. The Government made a commitment to make
weekly payments available to people who are homeless or at risk of homelessness
as a means to help prevent homelessness.[18]
Weekly payments are to be voluntary, with people who are
homeless or at risk of homelessness to be offered the option of receiving their
welfare payments weekly, where it is determined that this could help them.
Centrelink has introduced a ‘flag’ in its systems to identify claimants who are
either homeless or at risk of homelessness. This ‘flag’ lets Centrelink staff
know that a Centrelink Social Worker is needed to provide assistance to the
person identified, including, if appropriate, access to weekly payments.
While there has been very little
comment on the Bill, all of the commentary in relation to the weekly payments
measure has been supportive.
Both the Australian Council of Social Services (ACOSS) and
the Welfare Rights Centre have welcomed the measure. Each organisation has expressed
the view that weekly payments, along with Centrelink’s Centrepay bill-paying service,
are a more effective and empowering means of assisting vulnerable income
support recipients to manage their finances than a compulsory income management
scheme.[19] The Government has indicated that it does not intend weekly payments to serve
as a substitute for income management, which it proposes to extend beyond
Indigenous communities in the Northern Territory.[20] However, in specific cases it is possible that weekly payments may be offered
to income support recipients who are subject to income management.[21] In the absence of further detail, it is to be assumed that this would be in
instances where the income support recipient concerned was homeless or at risk
of homelessness.
According to the Explanatory Memorandum, the measure has no
administered costs and Departmental costs are to be ‘absorbed within existing
resources by the responsible departments’.[22]
It is worth noting at this point that the Government appears
keen to restrict the availability of weekly payments to only those people who
are the most disadvantaged. This is despite the fact that weekly payments could
potentially be of some benefit to a broader range of income support recipients.
It is to be assumed that the Government wishes to restrict the scope of the
measure as a means to avoid increasing administrative costs. In 2008–09,
Centrelink completed over 6 billion transactions on customer records.[23] Were income support payments to be made on a weekly basis for a substantial
number of claimants, this would undoubtedly increase the number of Centrelink
transactions by a considerable amount.
A substantial body of US research evidence indicates that
many income support recipients, and especially disadvantaged income support recipients,
experience a feast-and-famine cycle. For example, a 2003 study of the response
of household consumption expenditures to the monthly arrival of social security
benefits found
an increase in the amount of and probability of spending
across multiple categories of expenditure in the first few days following
social security check [sic] receipt relative to the day before the check
arrives … when the sample is limited to households for which social security is
a significant portion of their income, the spending increase is more pronounced
and statistically significant across all categories of instantaneous
consumption.[24]
Further research shows that disadvantaged income support recipients (and people on low
incomes in general) do not save very much and do not have access to credit that
would enable them to avoid the ‘famine’ part of the feast-and-famine cycle.
Where disadvantaged income support recipients spend their
payments shortly after receiving them, this can have a range of adverse
consequences for themselves and others, both in relation to the expenditure
itself and the lack of finances that results. A recent US study found evidence
of a causal relationship between income support payment times and a cycle in
drug and alcohol related hospitalisations and mortality.[25] It was found that drug and alcohol related hospitalisations increased abruptly
immediately following the receipt of income support payments. The study also
found evidence of a monthly cycle in crime, with a large increase in arrests
for drug possession and sale and decreases in arrests for some revenue
generating crimes immediately after social security recipients receive their
payments.[26]
Ultimately, the study’s authors conclude that alternative
disbursement policies—such as weekly or biweekly rather than monthly payments—could
help to reduce drug and alcohol bingeing. This, they argue, could in turn significantly
reduce drug-related hospitalisations, arrests for drug possession and mortality
among income support recipients.[27]
Based on available evidence of the benefits of weekly
payments in an Australian context, it would appear that weekly payments are
most helpful to disadvantaged income support recipients where they are combined
with other forms of assistance. The Government has indicated that such
assistance, which could include financial counselling, alcohol, drug or
gambling rehabilitation services, will be offered to weekly payment recipients.[28]
The amendment to subsection 22(1) under Item 1 provides
that while the Secretary must give notice of a determination of a FTB claim to
a claimant, the Secretary is not obliged to let the claimant know whether or
not they fall within a class of persons for whom weekly payments has been
approved by the Minister.
The grant of claim notification requirements do not extend
to those who have been approved for weekly payments.
Item 2 repeals and substitutes the existing
definition of instalment period of 14 days to enable weekly payments to be made
to classes of persons specified by the Minister to be vulnerable and likely to
benefit from a weekly rather than fortnightly payment cycle.
Item 3 inserts new subsections (3A), (3B), (3C) and
(3D) at the end of section 23. The effect of this insertion is to: enable the
Minister to specify by disallowable instrument a class of persons to whom the
Secretary may determine that weekly payments may be made; enable the Secretary
to determine whether any individual in a class of persons specified by the
Minister should be offered weekly payments; and provide that the Secretary must
return a claimant to fortnightly payments where they are determined to no
longer be vulnerable, but may also return claimants to fortnightly payments for
other reasons, at their discretion. This arrangement leaves the decision as to
when to move claimants between weekly and fortnightly payments to the
Secretary. That said, the initial decision about whether or not claimants wish
to be moved to weekly payments will be made by relevant claimants themselves. In
this sense, weekly payments are to be voluntary.
The intent of subsection (3C) would appear to be that weekly
payments be reserved only for those income support recipients who are deemed to
be in need of a reduced payment cycle. Weekly payments are thus envisaged as a
means to an end, that is, ensuring that vulnerable people’s circumstances are
stabilised sufficient to enable them to return to mainstream (fortnightly)
payment arrangements.
Section 25 of the A New Tax System (Family
Assistance)(Administration) Act 1999 deals with general notification
requirements of people in receipt of FTB. It requires that they notify of
changes of circumstances that relate to their qualification for payment.
Item 4 inserts a new subsection (3) at the end of
section 25 to provide that claimants on weekly payments of FTB must notify the
Secretary if their circumstances change such that they no longer fall within a
class of persons specified by the Minister as being able to receive weekly
payments. Nevertheless, because the rate of payment remains the same whether
claimants are on weekly or fortnightly payments, it is not an offence for
claimants to fail to notify the Secretary of such a change of circumstances.
Item 5 repeals and substitutes section 47, with new
subsection (23) providing that the Secretary must make baby bonus payments in
26 weekly instalments rather than 13 fortnightly instalments to claimants
determined to have weekly payment periods, where the determination is made before
the end of the first fortnightly baby bonus instalment period.
Subsections (8), (9), (10) and (11) mirror those amendments
at Item 3, above.
New subsection (3) extends the Secretary’s current ability
to make advance or urgent payments under fortnightly instalments to weekly
instalments, and to determine that income support recipients can be moved from
one payment period to the other.
New sections 47AA and 47AB provide for the Secretary to pay
maternity immunisation allowance in a way and at a time that he or she
considers appropriate, so long as this is to the credit of a bank account
nominated by the claimant.
Amendments to the A New Tax System (Family Assistance)
Act 1999
Item 8 provides for the Secretary to direct that
people currently in receipt of or entitled to baby bonus can receive this on a
weekly rather than fortnightly basis if the Secretary determines that they may
be paid weekly payments.
Amendments to the Social Security (Administration) Act 1999
Item 9 inserts new subsections that provide for
weekly payments to be made to vulnerable persons as determined by the Minister
and the Secretary as two part payments in respect of a 14 day instalment
period. (Subsection (3B) allows for the Minister to specify by legislative
instrument a class of persons to whom weekly payments may be paid.) Thus, under
subsection 43(3C), the Secretary has the discretion to pay the first part
payment at any time from day 8 of the 14 day instalment period and the second
part payment at any time from day 15 (under Section 43(3D)).
Subsection 43(3E) ensures that a person who is paid two
weekly payments in respect of a 14 day instalment period is taken to have
received one instalment of their payment. This enables weekly payments to be
made to approved claimants while preserving and not undermining existing
fortnightly payment arrangements.
The legislative changes contained in this Bill will enable
the payment of welfare payments to disadvantaged people on a weekly rather than
fortnightly basis. Such a measure, when combined with other forms of social
support, is likely to assist these people to better manage their finances and
to help in stabilising their circumstances. The measure is thus beneficial both
to disadvantaged people themselves and to society more generally.
It is clear that the Government does not intend for weekly
payments to become a mainstream, alternative payment option. Rather, it
envisages that weekly payments will be reserved for those welfare recipients
who are the most highly disadvantaged.
Matthew Thomas
24 February 2010
Bills Digest Service
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