Budget Review 2014–15 Index

Dr Luke Buckmaster and Michael Klapdor

Paid Parental Leave

The Budget did not include an announcement relating to funding for the Government’s proposed new Paid Parental Leave (PPL) scheme.

The Government has committed to introduce a new system of PPL from 1 July 2015.[1] The current system is paid for up to 18 weeks at $622.10 per week before tax (based on the rate of the National Minimum Wage).[2] The Government’s proposed scheme would extend support to 26 weeks at replacement wage or National Minimum Wage (whichever is greater) up to a cap. The cap was originally to be set at a salary of $150,000 per annum, but this was recently revised to $100,000.[3]

Under the $150,000 cap, the proposed scheme was to have cost $4.1 billion in 2015–16 and $5.7 billion per year when up and running in 2016–17, while the current scheme is expected to cost $2.1 billion in that year.[4] It is not clear how much the cost of the scheme will reduce under the new $100,000 cap, though the Prime Minister has indicated that ‘the savings won’t be vast’.[5] In 2011–12, of those women aged 18 to 49 who lodged tax returns, approximately 3 per cent had a taxable income from $100,001 to $150,000.[6] Media reports have suggested that the cost of the scheme may only reduce by $40–60 million per year.[7]

The amounts listed in the Department of Social Services’ Portfolio Budget Statements refer only to the cost of the current scheme (around $2 billion per year).[8] Additional funding for the Government’s PPL system and provision for the PPL Levy (which will be used to partially fund the scheme) is in the Budget’s Contingency Reserve.[9]

The Contingency Reserve:

… is an allowance, included in aggregate expenses, that principally reflects anticipated events that cannot be assigned to individual programmes in the preparation of the Australian Government budget estimates. The Contingency Reserve is used to ensure that the estimates are based on the best information available at the time of the Budget. It is not a general policy reserve.[10]

The PPL funding has reportedly been put in the Contingency Reserve because the Government is still negotiating with the states and territories in relation to their participation in the scheme and how costs might be shared.[11]

Income management

The Budget includes $101.1 million to fund the operation of income management in particular locations in 2014–15.[12]

Income management refers to a policy under which a percentage of the welfare payments of certain people are set aside to be spent only on ‘priority items’ such as food, housing, clothing, education and health care.[13] There is also an explicit ban on certain goods and services which must not be bought with income managed funds, including alcoholic beverages, tobacco products, pornographic materials and gambling services.

Welfare recipients who may be subject to compulsory income management include those in:

• the Northern Territory (NT), deemed by the Government to be ‘Disengaged Youth’, ‘Long-term Welfare Recipients’ or ‘Vulnerable Welfare Payment Recipients’
• the NT and metropolitan Perth and the Peel and Kimberley regions of Western Australia (WA), whom a child protection officer has referred to Centrelink to have their income managed (‘Child Protection Income Management’)
• Cape York, whom a statutory body, the Family Responsibilities Commission (FRC), has ordered should be subject to income management for engaging in dysfunctional behaviour
• one of five targeted communities (Bankstown, Greater Shepparton, Playford, Logan and Rockhampton), who have been referred for Child Protection Income Management or the Vulnerable Welfare Payment Recipients measure (known as ‘Place Based Income Management’) and
• the Anangu Pitjantjatjara Yankunytjatjara Lands (APY Lands) (South Australia (SA)) or Ngaanyatjarra Lands (NG Lands) and Laverton Shire (WA), who have been referred for Child Protection Income Management or the Vulnerable Welfare Payment Recipients measure.

People in any of the above locations may also participate in income management voluntarily.

The Budget measure continues income management in the NT, WA and the APY Lands. It also expands income management into the Ceduna region of SA from 1 July 2014. Income management is already funded in Cape York (until 31 December 2015) and the five targeted communities (until 30 June 2015).

As the Parliamentary Library has previously highlighted, evidence for the success of income management is mixed: while some people report that it has improved their lives, there is little evidence that it is leading to widespread changes in behaviour.[14]

Clean Energy Supplement

The Budget proposes to cease indexation of the Clean Energy Supplement (CES), an amount that was added to pensions, allowance, veterans’ payments and family tax benefit payments as compensation for expected cost increases arising from the carbon price.[15] The payment will also be renamed as the ‘Energy Supplement’.[16] At the time it was introduced, the CES was equivalent to 1.7 per cent of the basic rate of the payment it was attached to. The CES rate is currently indexed in line with movements in the Consumer Price Index on the same day as the underlying payment is indexed (20 March and 20 September for most pensions and allowances), to preserve its real value over time.

Stopping indexation of the CES from 1 July 2014 will achieve estimated savings of $479.1 million over five years. The Government has committed to removing carbon pricing and, arguably, the CES and other forms of carbon price compensation will not be required. However, the Coalition committed to removing the carbon price while keeping the compensation measures:

The Coalition will keep the current income tax thresholds and the current pension and benefit fortnightly rates while scrapping the carbon tax.

This means that Australian workers, families and pensioners will keep the tax cuts and fortnightly pension and benefit increases provided in Labor's carbon tax package, but without the carbon tax.

As a result these tax cuts and fortnightly benefit increases will become genuine cost of living relief …[17]

The Budget measure will not reduce the nominal value of the CES but it will mean its real value will decline over time and benefit recipients will not receive the increases they had expected. The measure continues a theme for this Budget: not achieving significant savings through direct benefit cuts but through changed indexation methods or by halting the normal indexation of some rates and means test limits.[18]

Discretionary grant program reform

The Budget announced changes to grants programs administered by the Department of Social Services (DSS). The changes will bring together 18 programs from five former departments into seven ‘streamlined’ social policy programs.[19] This is expected to create savings of $240.0 million over four years.

According to the Government, ‘[T]his will consolidate existing grants to create more efficient and effective programmes which will reduce red tape for service providers and remove the duplication of funding and services’.[20]

The new streamlined program is intended to ‘provide greater freedom for service providers who will no longer be restricted by overly prescriptive Programme Guidelines that can hinder solutions to community needs’.[21]

The seven programs under the new arrangements are:

• Home Support Programme
• Residential and Flexible Care Programme
• Workforce and Quality Programme
• Ageing and Service Improvement Programme
• Families and Communities Programme
• Housing and Homelessness Programme and
• Disability, Mental Health and Carers Programme.

The first four of these are existing programs carried across from the Ageing portfolio, while the latter three are new ‘broadbanded’ programs.

The Government says DSS will be ‘offering funding extensions to the majority of existing service providers with grant funding due to expire on or before 30 June 2014’.[22] Most will be offered extensions of six months, though some providers in areas such as aged care, disability and mental health services will be offered a 12 month extension.

 

 

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