 |
Bills Digest No. 177 2001-02
Veterans' Affairs Legislation Amendment (2002 Budget Measures)
Bill 2002
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
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Veterans'
Affairs Legislation Amendment (2002 Budget Measures) Bill 2002
Date Introduced:
20 June 2002
House:
Representatives
Portfolio:
Veterans' Affairs
Commencement: Items
3 to 5 in Schedule 1 are proposed to commence from 20 September
2002. All other Items and Schedules in this Bill are proposed
to commence from the date the Bill receives Royal Assent.
Purpose
To provide legislative support for
the ‘unfreezing’ of the rate of Income Support Supplement (ISS), which
is paid to recipients of War Widows/ers’ Pension (WWP). Income Support
Supplement is paid as income support and can be paid in addition to WWP,
albeit at a lower rate than other income support pensions, recognising
that WWP is also paid.
It is proposed to increase the rate of ISS twice yearly
(20 March and 20 September) being the same times the twice yearly indexation
of the other main income support pensions occur. These pensions are the
civilian age pension, veterans’ service pension, parenting payment - sole
parent, carer payment etc. The indexation factor proposed to be applied
to the rate of ISS, is the same proportional increase as is applied in
the corresponding six monthly indexation to the rate of service pension.
These pensions are indexed twice yearly (20 March and 20 September) to
both the Consumer Price Index (CPI) and to 25% of Male Total Average Weekly
Earnings (MTAWE), the factor realising the greater increase being used.
Schedule 1 – amendments relating to the indexation of ISS
WWP is paid to compensate widowed partners and dependants
of veterans who have died as a result of war service or eligible defence
service. As at June 2002, the fortnightly rate of WWP is $446.80. WWP,
being compensation, is neither income nor asset tested. Recognising that
some WWP recipients may also require income support, ISS may be paid in
addition to WWP, with a maximum fortnightly rate as at June 2002 of $124.90.
Many WWP recipients may not otherwise need income support,
having their own other means of support, eg. income from employment or
income from a partner. However, some WWP recipients may not have any other
source of significant income and ISS is paid to assist them with income
support. ISS, like the other income support payments, is income and asset
tested but paid at a lower rate, recognising that WWP is also paid.
From 1 November 1986, the rate of any income support
payment, paid in addition to a WWP, was frozen at $120.10 per fortnight.(1)
Prior to this, WWP recipients could also access a full-rate income support
payment, subject to the income and assets tests. Pre-existing WWP recipients
receiving a higher rate of income support payment, in addition to their
WWP, were saved and continued to receive that rate. However, any new grants
of income support payment paid in addition to a WWP on or after 1 November
1986, were restricted to the ceiling ‘frozen’ rate.
This decision was announced in the 1986-87 Budget.(2)
The decision was made at a time of reviewing and rationalising welfare
payments provided through the social security system, arising from the
Social Security Review of the mid-1980s. In talking to the Bill(3)
that provided the legislation for a ‘frozen’ rate of income support payment,
the then Minister for Social Security the Hon. Mr Brian Howe, MP said:
This Bill will also make a number
of amendments to the Veterans' Entitlements Act 1986 to give effect
to the Government's decisions announced in the Budget. The opportunity
is also taken in this Bill to make a number of machinery amendments,
the need for which has become apparent from the experience of the
last four months since the Veterans' Entitlements Act came into operation.
The Bill will also provide that the rate of service pension payable
to a widow who is also in receipt of a war widow's pension, currently
payable at $228.20 per fortnight, will be frozen at the rate payable
on 1 November 1986. Where service pension is granted to such a war
widow at a later date the maximum rate of pension payable will be
$120.10 per fortnight.(4)
The measure was also made in the context of the then
Government looking to limit ‘unnecessary’ expenditure and to rationalise
welfare assistance. In speaking to the Bill, the then Minister for Veterans’
Affairs, Senator the Hon Arthur Gietzelt said:
This Bill contains amendments to Social
Security and Veterans' Affairs legislation to implement decisions
affecting those portfolios in the 1986-87 Budget. Honourable senators
will be aware that, as a result of international economic conditions,
there have been significant reductions in Australia's national income.
The Government believes that through the Budget and other policy changes,
the problems which this creates can be faced squarely and remedial
changes put in place quickly and decisively. These changes must be
made so that our domestic economy and standard of living can be adjusted
to our current circumstances. The Budget therefore incorporates very
large reductions in spending, amongst other measures.(5)
In short, a lower and frozen rate of income support payment
was considered appropriate, given the means test free WWP already paid,
and given that income support payments, being means tested, are targeted
at those in most need of support.
ISS was announced in the 1994-95 Budget(6)
and introduced in March 1995, replacing the various different ‘frozen’
rate income support payments previously payable to WWP recipients. Prior
to the introduction of ISS, other income support payments that may otherwise
be payable (at a ‘frozen’ ceiling rate) commonly would have been age pension,
service pension, wife pension, disability support pension and carer payment.
ISS was basically a rationalisation and simplification
of income support arrangements paid in addition to a WWP. Instead of a
WWP recipient having to approach Social Security and seek and qualify
for one of three or four different payments under the Social Security
Act 1991, the person could claim ISS with Veterans’ Affairs.
On 13 October 2001, the Government released a policy
paper on veterans’ assistance called ‘Supporting Those Who Served’.
The paper announced that, if elected, the Government would abolish the
‘frozen’ ceiling rate of ISS.(7) The policy platform stated:
The Coalition Government will reverse Labor’s unfair
decision and introduce twice yearly indexation of the ISS to increases
in MTAWE or the CPI, whichever is the greater.(8)
It should be noted that the current Bill does not restore
ISS to the maximum or full rate otherwise applying to other income support
payments. Rather, it is proposed to unfreeze the current ‘frozen’ ceiling
rate of ISS rate and apply increases proportional to the MTAWE or CPI
indexation increases applied to other payments. Providing access to a
full rate of income support would have significant cost implications.
As at June 2001, there were a total of 110 656 WWP recipients of which
79 491 were also receiving some rate of ISS and of these 69 685 were receiving
the maximum frozen rate of ISS.(9)
The Government formally announced the unfreezing of the
ceiling rate of ISS and its twice-yearly indexation in the 2002-03 Budget.(10)
It is proposed the first six monthly indexation increase is to apply from
20 September 2002 and to use the indexation increase factor applied to
the single rate of service pension. Service pension, like age pension
is indexed twice yearly to both the CPI and to 25% of MTAWE, using the
factor that realises the greater increase.
This proposal is estimated to cost $5.8m in 2002-03,
$15.7m in 2003-04, $26.9m in 2004-05 and $38.2m in 2005-06.(11)
As at June 2001, there were a total of 110 656 WWP recipients
of which 79 491 were also receiving some rate of ISS and of these 69 685
were receiving the maximum frozen rate of ISS.(12) The Government
claims this initiative will benefit some 81 000 WWP recipients.(13)
The initial ex-servicemen repatriation scheme was introduced
shortly after the commencement of World War One (WWI). The Government
commissioned Major-General W. T. Bridges to raise 20 000 volunteers to
be sent to Europe to serve with other Commonwealth forces. In the process
of raising the force, Bridges advised the government on 8 August 1914:
"that pensions should be guaranteed to enlisted
men, and to their dependants in case of death, and compensation in
case of disablement through wounds."(14)
First Commonwealth war widows’ pension
- the War Pensions Act 1914
A proposal for a war caused injury and loss scheme received
Cabinet approval and was made public in September 1914 and subsequently
the War Pensions Act 1914 was introduced to the Parliament on 5
September 1914. There being no Australian precedent repatriation legislation
or scheme, the War Pensions Act 1914 largely mirrored the pre-existing
United Kingdom legislation, which had previously covered Australians serving
as members of Imperial Forces overseas. Prior to the War Pensions Act
1914, compensation for the small contingents sent by Colonial Governments,
ie. the Sudan, the Boxer Rebellion, the Boer War, were provided for by
the British Government.
The Defence Act 1903 provided compensation in
case of death or wounds or injuries or disease contracted while on active
service or on duty. The maximum rate of payment was for those cases where
total disability prevented any capacity to earn a livelihood. The Commonwealth
Compensation Act 1912 provided for members of Defence Forces not on
active service with the rate of payment for total or partial incapacity
for work based on worker’s average weekly earnings.
The War Pensions Act 1914 provided for payment
of war pensions to a wide range of dependants of incapacitated and deceased
members of the defence force, including wives, children, widows and in
certain circumstances, other dependants. The WWP was paid as compensation
for war loss, not as income support or income maintenance, as is the case
with the civilian Old Age and Invalids Pensions of 1908. This element
of war compensation is manifest by the fact that the WWP (and war disability
pension) have never been subject to an income or assets test.
The use of worker’s average weekly earnings as benchmarking
for payment rates was not used in the War Pensions Act 1914, largely
due to the concerns about cost. Consequently, from the outset there was
a tension created between a payment for compensation paid at a lower rate,
and a rate of assistance sufficient to support persons, unable to support
themselves from employment. In the debate on the Bill for the War Pensions
Act 1914, there was little dispute or disagreement between the parties
as to the need for the Commonwealth to provide for the needs of injured
or disabled soldiers, or the dependants of deceased soldiers. However,
there was considerable debate about the appropriate level and rate of
assistance for soldiers with injuries and widows of those who were killed.
The then leader of the Opposition in the Senate, Senator
E. D. Millen, moved an unsuccessful amendment to raise the rate of the
proposed war pension to the rate of pay of lower ranked soldiers. Millen
expressed several concerns about the adequacy and comparative relativities
for the payment rates for soldiers, for widows and for children, as proposed
in the Bill. In brief these concerns were:
- The rates of payment proposed to be paid to a widow, to a totally
incapacitated soldier and to the wife of a totally incapacitated soldier.
Millen not only considered the rates too low but also the rate differentials
between the proposed widow pension and that for the incapacitated soldier
were not appropriate, ie. £78 pounds a year for a widow and £50 pounds
a year for the soldier. Millen commented that a widow would be able
to access other forms of support (eg. employment), whereas this would
not be the case for the totally incapacitated soldier. Millen referred
to the Imperial Pension Scheme, in which the rate paid to a totally
incapacitated soldier was almost double that paid to a war widow.
- Millen did not challenge the scheme in terms of having payment rates
linked to rank but he did consider the rate proposed for the lower ranking
incapacitated soldiers too low and not a rate a soldier could live on.
He was not concerned with the rates proposed for higher-ranking soldiers.
The rate then proposed for a private, the lowest ranking soldier, was
£1 pound a week (ie. £52 pounds a year), which was more generous than
the then age pension rate, which was then 10 shillings a week. The annual
salary for a private was then £104 pounds a year in addition to which
the army provided food, accommodation and clothing.
In the end the amendments proposed by Millen were not
accepted, largely due to concerns about the potential cost to Government,
rather than there being disagreement about the logic and merit for the
rates proposed by Millen, or that they were too generous or were not appropriate.
The rates of payment were prescribed in a Schedule attached
to the War Pensions Act 1914, were proportionally linked to soldier
pay rates. For example, pension for total incapacity of a private (paid
6 shillings a day) was set at £52 per year, and for an officer paid 50
shillings a day the rate was £156 a year. This First Schedule set the
General Pension rate payable to a totally incapacitated veteran. Those
with a lesser incapacity were paid a proportion of this total amount,
eg. 50% or 10%, depending on each individual’s assessed degree of total
incapacity. This linking of the rate of WWP to the rank of the deceased
soldier continued until 1952 when a very significant amendment to Schedule
One of the Repatriation Act instigated changes to the long-standing practice
of tying the rate of war pensions to the rank of the veteran. This practice
was finally ended in 1972 with the introduction of standard rates for
all regardless of rank and in 1973 this was extended to the rates of dependent’s
pension.
It is commonly thought today that the WWP pension provides
income support, like the age pension, sole parent pension etc. However,
its origins are as compensation and this is still reflected by the fact
that the WWP pension is income and assets test free and has higher payment
rates than income support pensions. As at June 2001, the single fortnightly
rate of age pension is $402.00, whereas the WWP is $446.80 per fortnight
(pf). This $446.80pf is made up of an indexed rate of $421.80pf, plus
a non-indexed amount of $25.00pf, the latter being the vestiges of the
old Domestic Allowance (DA).
However, this confusion between the WWP and other income
support payments, also more accurately called pensions, raises the issue
of access to income support payment for war pension recipients (both WWP
and the war disability pension). For example, currently war disability
pension is disregarded as income under the income test for service pension
but is regarded as income for the age pension.
|
PAYMENT
|
Service pension
|
Age pension
|
War disability pension
|
War widows/ers’ pension
|
|
Service pension
|
X
|
Cannot be paid concurrently – can only be paid one OR the other
|
Can be paid at the same time – the war disability pension is not
income for service pension
|
Can be paid additional to service pension. Service pension is paid
in the form of Income Support Supplement at a frozen rate
|
|
Age pension
|
Cannot be paid concurrently – can only be paid one OR the other
|
X
|
War disability pension can be paid in addition to the age pension
but is treated as income under the income test
|
Can be paid additional to age pension. Age pension is paid in the
form of Income Support Supplement at a frozen rate
|
|
War disability pension
|
Can be paid at the same time – the war disability pension is not
income for service pension
|
War disability pension can be paid in addition to the age pension
but is treated as income under the income test
|
X
|
Can be paid at the same time with no impact on either payment
|
|
War widows/ers’ pension
|
Can be paid additional to service pension. Service pension is paid
in the form of Income Support Supplement at a frozen rate
|
Can be paid additional to age pension. Age pension is paid in the
form of Income Support Supplement at a frozen rate
|
Can be paid at the same time with no impact on either payment
|
X
|
Item 2 of Schedule 1 provides for the commencement
of payment of ISS to be made from the same start date as the commencement
of payment of WWP, even where WWP is backdated. This amendment is being
proposed to amend some anomalies and unintended results of non-complimentary
legislation between the Veterans’ Entitlements Act 1986 (VEA) and
the Social Security Act 1991 (SSA). This ensures that there is
no gap in ISS payment where WWP is backdated, which can be up to three
months and the person is transferring to ISS from an income support payment
paid under the SSA. This is a beneficial amendment.
Item 3 proposes to amend the VEA so that the rate
of ISS paid in respect of WWP recipients is indexed, ie. is no longer
frozen.
Item 4 proposes to amend the VEA so that the indexation
factor applied to the rate of ISS is the same percentage increase that
has been applied to the indexation of the single rate of service pension.
Item 5 specifies that the twice-yearly indexation
of the ceiling rate of ISS is to occur at the same intervals as the indexation
of service pension. Service pension, like age pension, is indexed twice
yearly (20 March and 20 September) to the CPI and 25% of MTAWE, whichever
provides the greater increase.
This Bill will see the ‘unfreezing’ of the rate of ISS
(and other income support payments) paid in addition to WWP that has been
in place since 1986. It does not propose a restoration of access to the
maximum rate of income support payments, rather indexation of the existing
lower ceiling rate to the same indexation increases to be applied to the
single rate of service pension. Service pension, like age pension, is
indexed twice yearly to the CPI and 25% of MTAWE.
The issue still remains as to appropriate access to income
support pensions for war pension recipients, both WWP recipients and recipients
of the war disability pension. Given the rates of assistance now provided
under both the WWP ($446.80pf for WWP) and up to $730.70pf (for Totally
and Permanently Incapacitated War Pension (T&PI)), what is the appropriate
level of income support to provide in addition to these war compensation
payments, if any? These rates of war pension compensation compare to the
single age pension rate of $421.80 per fortnight.
- The current ‘frozen’ ceiling rate of ISS being $124.90pf is higher
than the ‘frozen’ ceiling rate set in 1986 ($120.10pf) as a result of
the one-off 4% increase provided as a part of the compensation for the
introduction of the Goods and Services Tax from 1 July 2000.
- 1986-87 Budget Paper No. 1, 1986-87 Budget, p. 138.
- Social Security and Veterans’ Affairs (Miscellaneous Amendments) Bill
1986.
- The Hon Mr Brian Howe, MP, House of Representatives, Hansard,
10 October 1986, Second Reading Speech, Social Security and Veterans’
Affairs (Miscellaneous Amendments) Bill 1986, p. 1865.
- The Hon Mr Arthur Gietzelt, MP, House of Representatives, Hansard,
17 October 1986, Second Reading Speech, Social Security and Veterans’
Affairs (Miscellaneous Amendments) Bill 1986, p. 1522.
- Portfolio Budget Measures Statements, 1994-95 Budget Paper No. 4.3B,
Veterans’ Affairs Portfolio, p. 23–24.
- Supporting Those Who Served, Liberal Party of Australia, 2001
Election, policy platform, 13 October 2001.
- ibid., p. 7.
- DVA Pensioner Summary - June 2001, Department of Veterans’
Affairs’, Tables 14 & 15.
- Portfolio Budget Statements, 2002-03 Budget Paper No. 1.4B, Veterans’
Affairs Portfolio, p. 30.
- ibid.
- DVA Pensioner Summary - June 2001., op. cit.
- Budget Delivers Key Commitments to Veterans, War Widows, Media
Release, 14 May 2002, the Hon Danna Vale, MP, Minister for Veterans’
Affairs.
- Official History of Australia in the War 1914-18, Volume XI,
p. 206.
Peter Yeend
26 June 2002
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to Senators and
Members of the Australian Parliament. While great care is taken to ensure
that the paper is accurate and balanced, the paper is written using information
publicly available at the time of production. The views expressed are
those of the author and should not be attributed to the Information and
Research Services (IRS). Advice on legislation or legal policy issues
contained in this paper is provided for use in parliamentary debate and
for related parliamentary purposes. This paper is not professional legal
opinion. Readers are reminded that the paper is not an official parliamentary
or Australian government document.
IRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of the
public.
ISSN 1328-8091
© Commonwealth of Australia 2002
Except to the extent of the uses permitted under the Copyright Act
1968, no part of this publication may be reproduced or transmitted
in any form or by any means, including information storage and retrieval
systems, without the prior written consent of the Parliamentary Library,
other than by Members of the Australian Parliament in the course of their
official duties.
Published by the Department of the Parliamentary Library, 2002.
|
 |
