Christian Porter (Pearce, Liberal Party, Minister for Social Services) Share this | Hansard source

I thank all the members for their contributions on the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015. Perhaps the most useful way to commence in this particular summation of the contributions is to note some points of procedure and the path in which the government is going to approach the present bill, in regard to the position of the opposition. That is, essentially—and there are amendments before the House that will be dealt with shortly—that there is a single portion of the bill that is agreed to by members opposite. The bill does several things and what is agreed to by members opposite is merely one thing and one part of an overall suite of measures. What will occur is that we will amend the existing bill down to simply that portion with which the opposition agrees.

I must note for the record and for the House that the remainder of the issues that are dealt with in the bill as it presently stands, prior to any amendment, will in their substance be brought back before the House. They maintain their status as general policy of the government, and the position will be put that they represent appropriate savings that the family tax benefit system can garner in the context of a necessity to pay for very substantial reforms to the childcare sector.

By way of summary of what is presently in the bill—so that exactly what members opposite are agreeing to and, therefore, what this bill will be amended down to can be delineated—I note that there are, I think, three issues that need to be raised by matter of description.

The first is that there is a major saving in the bill which revolves around the reform of family tax benefit part B rates. In essence, the bill proposes that FTB part B payments, which are per family, should cease when the youngest child of a family in the FTB B system turns 13, but with some mitigatory and compensatory spends attached to that policy, which are twofold—first, that there should be an additional $1,000 paid for the youngest child aged under 12 months in an FTB B family; and, second, that there should be a compensatory payment to two groups of FTB B families, those being single-parent families and families where there are grandparent carers of a child at and then over the age of 13, and that amount is also $1,000. Overall, in fiscal terms, those proposed changes to family tax benefit part B rates would be about $1.4 billion over four years.

The second group of measures and the largest proportion of the expenditure restraint in this bill is the phasing-out of FTB end-of-year supplements, both in FTB A and FTB B, such that the supplement in part A would be reduced from its present amount to $600, then down to $300 and then, in the third year, extinguished and no longer payable; and the part B supplement would be reduced to $300, then to $150 and then down to zero and no longer payable.

The third area is actually an area of spend—and again it is meant to be a compensatory and mitigatory measure in the overall savings package—whereby we would increase the rate of FTB part A and youth payment fortnightly rates by the amount of $10.08 a fortnight. That would involve, over the relevant period of spend, about $585 million. So the major saving in the bill comes from the ending of end-of-year supplements, and that is a matter I will return to shortly. That would achieve a saving of about $4.1 billion.

What members opposite have indicated publicly that they are agreeable to is ceasing family tax benefit part B for families when the youngest child turns 13, but not for all families. Members opposite would not agree to ending that payment for grandparent-carer families or single-parent families, but they did agree to ending the FTB B payment to couple families when the youngest child turns 13.

As is appropriately and properly the case, these debates revolve around notions of fairness. We on the government benches would argue that fairness is always a matter to be considered in context. There are two important contexts in which to consider fairness in this instance. The first is that the approach we are taking is to link, in a practical sense, the savings reforms contained in this bill to a very significant expenditure which would very significantly reform child care in Australia. Indeed, the expenditure on the reforms to child care would amount to $3.5 billion. So this would adequately pay for that and allow for some budget repair along the way. But, as has been noted, only one portion of the bill and one aspect of the savings elements of the bill has been agreed to by members opposite. The second context in which we say fairness needs to be taken into account is that the savings that we propose would not merely pay for sweeping reforms in child care; they would also allow a modest contribution to budget repair and assist the nation to return to surplus.

Again on the context of fairness, I raise this point: when a nation is in both debt and deficit, which is the situation that our government undeniably inherited, any expenditure that cannot be restrained today or avoided today is effectively paid for by borrowings. So we are talking here about savings which, if denied by members opposite, will be paid for with borrowed money. That is a very important context in which to consider fairness. That is because, in any family that might by virtue of this legislation be subject to a reduction in FTB B when their oldest child turns 13, that child will in a very fulsome sense very quickly enter the tax system and, because we are presently borrowing money to pay for a welfare system in terms of incremental spending that we cannot avoid today, that child's taxes will be required to not only contribute to and pay for the welfare system of their own day but retrospectively pay for the welfare system that we maintain today. As a matter of intergenerational equity, there can be no characterisation of that as a fair situation.

We argue strongly that any issue of fairness has to be considered in the context of the deficit that we inherited and the debt that we inherited that require any responsible government to engage in expenditure restraint, because expenditure that cannot be restrained today is paid for in borrowings, which effectively means it is being paid for by taxes that have not yet been paid by young people that have not yet reached their fulsome contribution to the personal income tax system and other taxes.

It is worth analysing at least briefly, I think, what members opposite argue is fair and have agreed to as a proportion of the savings measures in this bill, whilst they argue that other portions are unfair. What members opposite are essentially agreeing is that it is fair to end family tax benefit B for couple families when their youngest child turns 13. We would say that that is fair in the context of deficit, issues of intergenerational equity and what we wish to apply the savings to, which is sweeping reform of the childcare sector.

It is interesting to analyse an argument that it is fair to remove family tax benefit B from couple families but unfair—as is proposed by members opposite—to remove it from grandparent carers or from single-parent families. If you compare the pair, so to speak, the reality is that grandparent carers are much younger than their name would suggest. You can well have a situation where there is a grandparent carer couple in their mid-50s on a particular income whom the opposition say it is unfair to have family tax benefit B removed from, but in the case of a comparable couple who are simply a couple family with children in their mid-50s, on exactly the same income, members opposite now agree that it is fair for their FTB B to end when their youngest child turns 13. There may be no material difference between the two families in income or any other economic measure, but members opposite are tacitly agreeing that it is fair for the FTB B payment to end in one circumstance—for the couple family—but not fair in the other circumstance, for the grandparent carer family.

Similarly with a single-parent family: a single parent may be in exactly the same economic circumstances as a couple family. Members opposite are agreeing to the removal of the FTB B from the couple family but not from the single-parent family. While, in context, the savings in this package in their entirety could be argued to be fair, with what members opposite have agreed to, couple families now face a situation where their family tax benefit B will end when their youngest child turns 13—but where other families, who may well be in similar or precisely the same circumstances economically, will not have to make a similar contribution. I think this simply goes to the point that judging fairness, at certain points in time in certain arguments, particularly from members opposite, becomes a situation where the goalposts move very rapidly indeed. Those couple families might ask themselves why it is fair for them to lose a payment but not fair for other families to lose it.

When we look at the other measures in this bill, some further things are worth noting. The childcare reforms, which the savings in this bill are intended to pay for, will replace three separate payments with a single payment. There will be hourly caps on the provider, which will ease some of the inflationary drivers that exist in the present system. There will be a very generous activity test. As a whole, those childcare reforms will provide very significant economic benefits to families engaged in child care or desiring child care, and they will drive participation. It is also interesting to note that the overwhelming majority of the savings in this bill which are not agreed to by members opposite arise from ending FTB end-of-year supplements. That is the major saving in this bill which is not agreed to by members opposite. It will be brought back to this place in a separate bill.

The McClure report noted that the Australian welfare system has 20 different categories of welfare, with up to 55 different types of supplements, subpayments, bonuses and add-ons, creating an excruciatingly complicated system. These end-of-year supplements which we suggest should be removed—and which would be removed if this bill were supported in its entirety—came into being in 2004 during the time of the Howard-Costello government. The official reason for introducing these supplements in 2004 was to mitigate the risk of debt at end-of-year reconciliation. In the years prior to 2004, in some instances families who were receiving fortnightly payments, particularly under FTB A, were incurring debts at the end of the year because of understating or underestimating their income. In the years preceding the introduction of these supplements in 2004 there were higher numbers of people who had incurred those debts. Those levels of indebted recipients stabilised and they are now much lower than they were during the period up to 2004.

The supplements were introduced at a time when there was an estimated $13½ billion dollar surplus. They were specifically designed to mitigate the risk of debt, which was higher then than it is now—and we believe that, with the advent of the single-touch payroll system that will be rolled out in three years time, the risk of debt can be very substantially reduced. If, in a situation of debt and deficit, we are unable to avoid the expense of FTB end-of-year supplements, we are in effect borrowing money to pay for supplements to mitigate debts that the overwhelming number of recipients do not in fact have and which will be substantially eliminated in the very near future by a technological solution being developed by government. That has to be considered in light of fairness and issues of intergenerational equity—whether it is wise to borrow that money and expect a future generation of taxpayers to pay it back while also paying for the welfare system of their time. If we as a House cannot agree to phasing out supplements that are no longer fit for purpose, that were brought into being during a period of massive budget surplus and that were designed to mitigate debts that no longer exist, then we clearly have a very difficult problem. Nevertheless, there will be amendments and we would hope to progress them.

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