Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Childcare) Share this | Link to this | Hansard source

There are many provisions in the Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006 that Labor is happy to support, such as the increase in the lower income free area for the family tax benefit part A from the current level of $33,361 to $37,500 from 1 July this year. We know that the new threshold will be significantly higher than the projected amount of $34,310 after adjustments are made for inflation. If these amendments were not put up, families would have suffered a loss in the value of the family tax benefit. We welcome the fact that this change will result in 530,000 families currently on family tax benefit part A getting up to $828 a year extra, depending on the number and ages of the children and their family income. We are also pleased that the government has finally recognised the logic of increasing the lower income free area for FTB part A—something that Labor has advocated now for many years.

There are some concerns, however, with this bill. I want to address some of those concerns now. The first is on the family tax benefit. While the government is acting to make sure that families on lower income levels are eligible to receive benefits and that benefits keep up with inflation, there is no attempt to stop people who are earning $1 million a year or more from receiving welfare benefits. I believe it is shocking that, in a country where some children are growing up without textbooks, money for school excursions or even an adequate diet, there are families on annual incomes exceeding $1 million who are receiving welfare benefits.

Let us make no mistake about this: family tax benefits are designed to be income distribution payments. They are welfare benefits. In the case of families on annual incomes over half a million dollars or $1 million, family tax benefit part B is a welfare payment paid out of the taxes of lower middle income families and singles who are struggling to afford the costs of raising children, a mortgage, the weekly petrol bill and groceries. This money is being transferred from struggling families to families who do not need the extra cash. Millionaires should not be the beneficiaries of income distribution, and under the Howard government they are.

Labor is taking the opportunity presented by this bill to end the family tax benefit part B rort which allows super rich families to claim up to $3,000 a year in obligation-free welfare from the government. We will be proposing amendments to end this outrageous welfare entitlement by introducing a family income cap for receipt of family tax benefit part B. Labor’s amendments prevent families with incomes of more than $250,000 a year from getting any family tax benefit part B from the government. It is a very generous income cap. Families with an income of over $250,000 surely do not need welfare payments.

Under the current rules, the total income of a family is not taken into account for the purposes of determining family tax benefit part B eligibility. As long as the income of the secondary earner in a family with a child or children under five years old is less than $20,951, or less than $16,316 if the child or children are over five, the family will get some family tax benefit part B. These rules enable very wealthy families to claim the benefit. Over 200 families with annual incomes of over $1 million a year have now claimed this benefit since it was introduced in 2000. These are not people who own a $1 million house. That is not our definition of millionaire. We are talking about families who earn $1 million a year. Last year alone, 70 millionaire families took advantage of this benefit for the wealthy and 2,000 families with annual incomes of over a quarter of a million dollars are receiving welfare from the government.

Labor does not believe that families earning over a quarter of a million dollars a year should be getting welfare payments from taxpayers, but we have seen consistently that the Howard government does. When challenged on this in the past, the former Minister for Family and Community Services, Senator Patterson, strangely enough claimed it would be too costly to implement a means test on this payment. I think this is an extraordinary claim when it is considered how many obligations are put on people receiving welfare more generally from the government. I would like to know from the new minister whether it is still the position of the government that it is too much trouble to check how much people are earning and whether they should be entitled to such payments.

Labor’s amendments will end this absurd loophole. In doing so, the system will be brought into line with community expectations. They are reasonable expectations that the system should be fair and consistent and that payments should be targeted at families most in need and not go to those who can afford to care for their kids without this extra taxpayer assistance.

Labor will move amendments to the carers allowance. The second amendment I will be putting is to provide a discretionary power to extend backdated carers allowance claims in cases where there are genuine reasons for delayed applications. This bill has the effect of severely cutting back the period for which carers can have payments for the care of a disabled child backdated from the current 12 months to just 12 weeks. It does not take too much imagination to understand how a parent who has just given birth to a disabled child or whose child has just become disabled through an accident or misadventure would not have in their first 12 weeks of coping with this new situation the time, energy or knowledge to get down to their local Centrelink office to start filling in paperwork.

The measure being proposed is estimated to significantly reduce payments made to carers when they first apply for the allowance. The government estimates it will save between $35 million and $37 million each year. It really seems incredible to me that the government should seek to save this money directly out of the pockets of people who are caring for disabled children and relatives. It is phenomenal, considering how much money it saves every year through the efforts of carers, that the government should seek to restrict people’s access to backdated payments which they are legitimately entitled to because of their caring responsibilities. That $37 million is coming directly out of the pockets of people who are already incredibly vulnerable and hard-pressed in many cases to make ends meet. They are taking care of severely disabled Australians and it is not infrequent for carers to have an injury or a disability themselves. They are frequently not able to get to the Centrelink office because respite care is so difficult to come by. Without the help they need to get to Centrelink in the first 12 weeks, it is completely unreasonable to expect them to be running around filling in paperwork when they have a duty of care to the people they are looking after.

It is particularly shocking that the National Party have agreed to these measures, because some of the people who will be worst affected are people in the bush. It is much harder getting to Centrelink or to a Family Assistance Office if you are in an isolated or rural area. In some cases, people are travelling hundreds of kilometres to a town which has a suitable service. On top of that, getting respite care to get out of the house in order to seek the advice you need in the first place, to find out that these payments are available, is much more difficult. This of course comes on top of the emotional challenges that come with the day-to-day reality of caring for a newborn child, say, with a disability or a partner who has an acquired brain injury because of an accident.

We know, because the department admitted to Labor at estimates last year, that under current arrangements claims for ‘a high proportion of children’—that is a quote from their evidence—are backdated for 52 weeks. The department admitted last year that the proportion of claims backdated was ‘of the order of 90 per cent’. That means that, because of the stress, difficulty and complexity of caring for a newborn child with a disability, and because they have not made getting to the Centrelink office a priority with all the other things they have on their plate, 90 per cent of people who would otherwise be entitled to the 52 weeks backdated payment are going to miss out financially. It is unbelievable that a government which has $12 billion sitting in the bank should look to the pockets of carers for money in this incredibly cruel and thoughtless way. It really is beyond belief that the government should look for savings out of the pockets of some Australians who have the hardest lives—people who are caring for a child with a disability.

Labor’s amendment gives the Secretary to the Department of Families, Community Services and Indigenous Affairs the discretionary power to extend backdated carer allowance claims in cases where there are genuine reasons for the delayed application. Those reasons might include that the person is unable to readily access relevant services or advice just 12 weeks after their family member suffers the disability or, secondly, that the person was unaware of the carer allowance. I have heard of that situation on many occasions. When people are coping with the day-to-day reality of learning how to care for someone with special needs, the last thing they are doing is scanning the family and community services website for how they might help themselves financially.

A third reason that would be considered genuine under the amendments I am foreshadowing is that the parent underestimated the ongoing needs of their child and, perhaps months after the disabling condition arose, realised how much care would be needed. It is also worth remembering that, with a newborn baby, many disabilities are not picked up for many months. It is a gradual process of noticing that their developmental milestones are not being reached. It might be many months before a parent even considers their future—whether they will need to leave their employment and so on.

This legislation gives the secretary of the department the power to take allocated but unfilled places from out of school hours care and family day care providers. We will be moving amendments in relation to that. The justification for this new power is to allow the redistribution of places from areas of low demand to areas of high demand. If that is what this was actually going to do, people would not be so worried about it. The problem is that, at the moment, places take so very long to allocate that they will not be taken back from services that are not using them and reallocated; they will be taken back and never reallocated. There are still unallocated out of school hours care places in the system from the last budget. In December last year we were told that they numbered around 60,000. So the notion that there is a desperate need to take them back from existing services seems to be an effort to be seen to be doing something that, in fact, will have no positive effect for parents, children or child-care providers.

The child-care allocation system is extremely slow and unresponsive. Out of school hours care centres and family day carers often face a wait of up to two years to regain places that they lose under this system. We have been told many times by family day carers that it can take up to two years from when they apply for a place to when they receive that place. Nobody can run a business or a service that way. Family day care providers have to be able to prove that they have employees available to perform that care—they have to be able to show that they have someone to do the work. They cannot engage someone to do the work until they can show that person that there is a real prospect of them having a job, and they cannot prove that until they have the places allocated. We have this ridiculous catch-22 situation that sees family day care in particular chasing its tail to receive places.

With out of school hours care, from what they tell me, I think that services would be perfectly happy to give unallocated places back into a pool of places if they knew that they could dip back into that pool if the numbers changed. It is phenomenal when, for instance, you can have a service that has been approved for 50 kids and at the end of January one year they find that school numbers have grown a little more than expected and they could easily provide for 53 kids at the service. They have the staff, they have the room and they have the kids who need the space, but they need to wait till November for the next funding round to actually get those places. It is a nonsensical system.

Who will have the power to decide when to take back places and when to reallocate them? The department will have that power, and it is the same department that admits time after time, because of this government’s shocking negligence when it comes to child care, that they do not know where the shortages are. For long day care in particular, they do not have a clue where the shortages are. They tell us that time and time again and they say that it is not their responsibility to know where the shortages are. I cannot have any confidence in a system that puts the same department that takes two years to allocate the places in charge of taking them back and reallocating them. I cannot have any confidence that this will improve the efficiency of the system.

Labor senators recently asked how well prepared the department is to deal with these new powers and whether the department was convinced that it would know more about where the shortages and areas of excess were than individual child-care operators know about demand for their services. Frankly, the answers were quite alarming. The department admitted that it does not have any measures of demand at regional levels. It does not know how many places are not currently being utilised; it only has ‘some sense’ of the numbers and it has not even decided on a definition of ‘excess places’. In other words, the government has decided to propose a new power to take away child-care places from providers that have been ‘consistently unused’, but it does not know what ‘consistently unused’ means. We are being asked to allow child-care places to be forcibly removed from providers despite the fact that the government does not know where the areas of high and low demand are or how long a vacant spot needs to be vacant before the government can swoop down and take it away.

Our objections could be expressed in this way: we are worried that places removed from one service do not have to be reallocated to another service and certainly do not need to be immediately reallocated to another service. We are worried that the system for allocating and reallocating places is rigid and slow, that generally places are only allocated within advertised windows when services are invited to apply, that there have been fewer than five such windows since 2000 and that services, as I have said, often have to wait up to two years from the point of request for new places to have those places finally allocated. No-one can plan for the operation of their service in those circumstances.

Parents around the country might be without a child-care place simply because the allocation system lags behind new demand. We can have a situation where the government has actually allocated the money in the budget for out of school hours care places or family day care places, the service provider says, ‘We’re happy to take more kids, we’ve got the staff and we’ve got the space,’ parents are desperate for the service and their kids want to go but, because the cogs turn so slowly in the absurd allocation system that we have, those kids, those parents and those service providers might not be able to use those places. It is ridiculous, and to give the opportunity in those circumstances of taking these places back is actually extraordinary.

The government’s ability to accurately assess unmet need for child care is poor. It has admitted this on many occasions. In fact, it uses it as a defence. When I ask questions about unmet demand in various areas, the government is very happy to say, ‘We don’t know; we don’t keep those figures; we’re not interested in keeping those figures; we don’t see it as our job to keep those figures.’ So the notion that we should then entrust to that system a new power that can take back places when we have not worked out how we will define that they are being underutilised or unutilised and we have not defined how and when they will be reallocated fills me with dread rather than giving me any cause for confidence. Labor have said in the past that we should have a pool of places where existing service providers that have passed the relevant state licensing requirements, where they exist, and have the space and the staff should be able to operate above their quota. They should be able to dip in very quickly and get extra places so that when they find out that they need extra places in January they are not waiting till November before they can apply for those places.

I will be moving amendments in the consideration in detail stage that will have the effect of, firstly, limiting the secretary’s power to reduce the allocation of places to a service until it has been continually vacant for 12 months; secondly, reallocating the place to another service within seven days of removal; thirdly, obliging the secretary to assess applications for additional places to meet demand throughout the year; and, fourthly, requiring the government to include reporting measures on the number of places that have been taken back and reallocated.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

I am pleased to speak in the parliament today on the Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006. I am very happy to support it very strongly in my capacity as the elected representative of the people of Ryan. As I say in this parliament whenever I have the opportunity to speak here, I have the great privilege of representing the people of Ryan. Having just heard the member for Sydney, the shadow minister for child care, speak on this bill, one would think that there are all kinds of things wrong with the national economy and the Howard government’s management and stewardship of it, with the Howard government not having the full confidence of the Australian people. I very strongly repudiate the shadow minister’s presentation just a few moments ago in which she certainly presented a picture of doom and gloom across the Australian economy and in the areas that she touched upon.

This economy is growing very strongly. We have tremendous figures that testify to the great policies that the Howard government has initiated. I think it is important that from time to time members of the government remind the Australian people of why in fact they have confidence in us and have voted for us on successive occasions and given us four election victories. The best thing that any government can do for its people is to provide a very strong economy, to provide strong job growth and real wages growth, because that is when families benefit. None of the stakeholders in the Australian economy—families and those sectors of the Australian economy including low socioeconomic Australians, veterans and those in need of the help of the government—benefits if the Australian economy is in reverse or struggling to compete internationally. We live within an international economy. We live in a globalised world. We have to have a strong economy that supports measures which go to help the Australian people. I want to make it very clear that the underlying principle of the government’s policies is to have a strong economy, one where jobs continue to be provided. Indeed, we have a situation where the economy is so strong and vibrant that employers are struggling to find people with skills and talent to fill vacancies.

The assistance given to middle- and low-income families by this government is certainly one of its strongest achievements. In 1996, when the Prime Minister as the then Leader of the Opposition was campaigning against the Keating government, he talked about the importance of families and about how important it would be for a coalition government in office to look after the families of Australia. I want to quote the Prime Minister when he talked about the weakness of the then Keating government and about how ‘the Keating government was forgetting Australian families because not only was the economy in tatters but the employment rate was very low and the taxation system did not recognise the cost to parents of raising their children’. I think it is very important that this is not forgotten.

Certainly, under the Keating government, there was scant relief for Australian families. I think the support they received was tied in with Mr Keating’s phrase ‘the recession we had to have’. How can that be family friendly? How can having an economy in recession, in a mess, with high unemployment and mortgage rates, be family friendly? When this government took office, its policies were focused very much on correcting the economy and that meant that the families of Australia, young people of Australia and business people of Australia could all benefit. That in turn allowed government revenue to expand, which in turn provided the social services that Australians were in need of and entitled to.

It is important enough for me to stress this very strongly. We all know—and members of the government continue to speak about it—of the country’s massive government debt. When we came to office, there was a $96 billion debt. Had government policy not been targeted at correcting that, the families of Australia would now be crippled to the back teeth by paying off the enormous debt principal, as well as the interest on that debt. The unemployment rate was almost 11 per cent—almost one million fellow Australians could not get a job. That is certainly not family-friendly policy or Australia-friendly policy.

With this bill, the Howard government not only have ensured that Australian parents have a greater opportunity for employment and lower mortgage repayments and real wage increases of 16-plus per cent but also are taking a very strong initiative to ensure that Australian families are compensated for the extra costs associated with raising a family—an initiative only made possible by prudent economic management, which delivers the budget surpluses that we have.

Ryan families will be interested in this bill because they are very much affected and concerned about how their government manages the economy in their interests and in the interests of their fellow Australians. The introduction of the family tax benefit on 1 July 2000 provided real assistance for families. Over 2.1 million families with four million children are now receiving on average $7,500 a year in family tax benefit to assist with the cost of raising their children. I want to make a comparison with the situation in 1996 when just 1.8 million families were receiving family assistance under the Keating government. The base rate of family assistance is now almost three times higher than it was under Labor: over $1,700 per child compared with less than $600 in the Keating years.

Schedule 1 of the amendment bill raises the family tax benefit A income test-free area threshold. This initiative is part of the Howard government’s 2005-06 budget commitment. It is also a key support brace for the 2005-06 budget Welfare to Work reforms. Currently, the family tax benefit A, which is a supplement payment for families with dependent children, has an income tax free area of up to $33,361 per annum. Once this amount of annual income per family is reached, the maximum family tax benefit A payment level is reduced. The income test-free area is currently linked to the consumer price index and is annually indexed. The amending legislation before the House will therefore raise the family tax benefit income test-free area from $33,361 to $37,500 per annum, to take effect from 1 July 2006. Low- and middle-income families will see a significant financial benefit from this amending legislation. Around 400,000 families will get an average $24 a fortnight boost to their family tax benefit part A payments.

The bill will also complement the government’s Welfare to Work reforms by addressing the barriers faced by families in attempting to increase their earnings from employment, while at the same time seeing decreases in government assistance. The Howard government recognises that, if it is asking family tax benefit recipients to work more, to become more self-supportive, the financial disincentives to earning more from employment should be removed as far as is possible. We want to have in place incentives that encourage as many recipients of government support as possible to go into the workforce.

The rise in the threshold also reflects the fact that, while the rate and income test limits for family tax benefit A are indexed once a year to the CPI, the average weekly earnings have been increasing at a greater rate over the period due to the strengths of the economy. So fewer people are entitled to the maximum rate because it follows that their incomes have increased.

The threshold increase represents an investment in Australian families by the government to the tune of $788-plus million over four years—in anyone’s language, no small amount of money. This increase in the threshold builds on nearly $17 billion paid in family assistance in 2003-04 and on the $22 billion in extra assistance allocated by the government in the 2004-05 budget, including an ongoing $600 per child increase in the rate of family tax benefit part A and an additional one-off $600 per child payment, as a result of the economy being very robust and very strong.

If I recollect, the shadow Treasurer said this $600 was not real money. Australians who would be receiving this were told by the current shadow Treasurer that it was just fake money, paper money, artificial money—not real money. We should certainly remind our constituents that $600 support from the government is indeed real money.

Currently recipients of family tax benefits and child-care benefits are given the option to receive their payments either in fortnightly instalments or in a lump sum at the end of the year. The amount of benefits a recipient receives is calculated according to the amount of taxable income they receive in a year. The majority of family tax benefit recipients—some 95 per cent—take their payments fortnightly during the year. That adds up to over 1.8 million Australian families receiving their benefits fortnightly.

For the purposes of determining the amount of family tax benefit a recipient receives each fortnight, the claimant is required to make an estimate of their income for the coming year. At present, estimates of income are only provided by the claimants, are often not updated from year to year and are inherently conservative because a lower estimate can of course realise a higher rate of family tax benefit or child-care benefit. Schedule 2 of the amendment bill will empower the secretary to apply an estimate based on the previous year’s actual income indexed to average weekly earnings. At an investment of $18.6 million over four years, this will see the Australian taxpayer save $115.2 million in overpayments over four years. This also means that less money will be expended in following up and compelling the payment of debt. It is important for us to make it clear that the government is very keen to ensure that those who are entitled to payments receive payments and that those who are not entitled to payments also account for that. This is taxpayers’ money, after all, and I think overpayments are most regrettable when they occur.

This amendment bill also makes a commitment to the government’s very successful child-care policy. I know that there has been a lot of talk in recent months about the government’s position on child care. Colleagues in the parliament have been vociferous on this issue and I think it is an important one. The Howard government has made its child-care policy a central element of its economic strategy, recognising that by providing flexible, high-quality and affordable child care parents are better able to balance their work and family responsibilities. In fact, the Howard government has more than doubled funding for child care since it came to office in 1996, investing over $12 billion in the last 10 years, compared to the $5 billion Labor invested during the 13 years it was in government. The Howard government has delivered a record number of child-care places—some 600,000 places in 2005-06. In 1996 there were just over 300,000 places available to Australians.

The Howard government has also recognised the increasing costs of child care in Australia. Through the introduction of the child-care benefit scheme, families are now receiving $2,000 a year on average in assistance. Since its introduction in 2000, the child-care benefit has improved the affordability of child care for low- and medium-income families to the point where it is now assisting over 690,000 families a year. Thanks to the child-care benefit, an extra 130,000 children are now accessing child care. In total, some 778,300 children today are accessing child care, which represents an increase of 21 per cent since 2000.

Of course, in government expenditure there is no limit to how much you can spend in this area, and the critical point for the government is that it must, as much as possible, get the balance right between fulfilling an important obligation to the Australian people and being responsible in its allocation and distribution of taxpayers’ money. I think at the moment it is getting the balance about right. I am certainly one member of the government party who would encourage the government to be generous in this area. It affects families very directly, and whatever the budget in May can produce that will support increased child care for our fellow Australians, where it is appropriate, I would certainly welcome it very warmly. We all know that the new 30 per cent child-care tax rebate provides eligible families extra assistance of up to $4,000 a year for out-of-pocket child-care expenses. That is a very important policy, and maybe that can be tinkered with a little bit to make it more parent friendly, but as a general position I certainly support that 30 per cent child-care tax rebate.

Schedules 4 and 5 of the amendment bill will alter the child-care benefit. Schedule 4 will make it easier to recover debts relating to the overpayment of the child-care benefit by allowing the government to tap into reconciliation top-up payments and tax refunds to clear family assistance debts. This gives the government the same power in relation to debt recovery for overpayment of the child-care benefit that it already holds for the recovery of debt in relation to the overpayment of the family tax benefit. For an investment of only $4.7 million in administration costs over four years, it is estimated that this amendment will reduce debt to the tune of $47.1 million over four years.

Once again, the Howard government is ensuring that, despite massive expenditure on programs such as the child-care benefit scheme, every cent of taxpayers’ money is maximised. We all know at the end of the day that this is the money of the people of Australia, and the government of the day—of whichever political party—has an abiding interest in and responsibility for being conscientious and diligent in its allocation of resources. I think it is one of the primary reasons why the Keating government was thrown out decisively by the Australian people. The people came to realise that, quite frankly, the Keating government had lost the plot in its capacity to responsibly manage the national economy. Again I make the point, which I think is really a no-brainer: unless your budget is strong, unless you have a strong, growing economy and unless the government is able to be in receipt of revenues, there is no money to provide for child-care places, there is no money to provide for hospital services and there is no money to provide for all the important services which Australians, who are entitled to these benefits, are able to use.

This bill will also make important changes to the rules for the backdating of the carers allowance. The carers allowance is provided to a person who is caring for a child or an adult at home. The supplementary payment is tax free and income and asset test free. There are two types of carers payment: CA (caring for a child) and CA (caring for an adult). Currently the commencement date for payment of the carers allowance for a child can be backdated up to 52 weeks prior to a claim. The commencement date for payment of the carers allowance for caring for an adult can likewise be backdated, but only for up to 26 weeks.

The Howard government have a very strong commitment to the carers of Australia. I know of many residents of the Ryan electorate who are caring for adults and for children. I praise them very generously for their fortitude and generosity and for the character that they show in performing this difficult task. I commend the bill very strongly. It is another example of where the Howard government are in the business of providing legislation to the parliament that is in the national interest, and we will continue to do so. If we were to cease doing that, we would lose the confidence of the Australian people. I know that both parties in the coalition govern with the criterion of the national interest at heart. (Time expired)

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

The Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006 contains a number of provisions that Labor strongly supports. One that I want to speak to at the outset is the increase, from the middle of this year, of the lower income threshold for family tax benefit part A from the current level of $33,361 to $37,500. The benefit of that measure is that it will provide more incentive for mothers in particular to return to work after having a baby. That is an incredibly important incentive for our nation. I do not of course believe in forcing or cajoling mothers to return to work after having a baby. It is absolutely up to a mother and a father to make a decision as to the appropriate time for a mother to return to work if that is what she wants to do. If she does not, that too is absolutely her right. But we should not be putting obstacles in the way of such a decision. Currently, there are quite a few obstacles in the way of women wishing to return to work after having a baby, to the point where, in many cases, it just does not make much financial sense at all.

One of those obstacles is obviously the withdrawal of family tax benefit part A as a mother starts earning income in the marketplace. Another obstacle is income tax payable. A third obstacle, in many instances, is the high cost of child care. Travel costs and work costs are a fourth obstacle. There is an array of obstacles along the path to that decision and, as a consequence, many mothers decide that it is just not worth returning to work, even though they would quite like to do so. By increasing the income-free threshold for family tax benefit part A, this legislation helps reduce the size of one of those obstacles. On that basis, Labor is happy to support it.

However, there is another dimension to the family payment system with which Labor is unhappy—that is, the operation of family tax benefit part B insofar as high-income earning families are concerned. As a consequence of that concern, which I will outline in a moment, Labor is moving an amendment to prevent families with incomes of more than $250,000 a year from getting family tax benefit part B from the government, because we just do not see the argument for millionaire couples to receive that benefit. I have raised this matter on a number of occasions, including on the Today Tonight program, in this parliament and in opinion pieces. Each time, the Prime Minister seeks to fit Labor up with an argument that, by not supporting family tax benefit payments to millionaire couples, Labor therefore must not be supportive of the family payments system. That is a ludicrous proposition—one that you would expect from the Prime Minister, because making family tax benefit part B available to high-income earners, including millionaire couples, is the Prime Minister’s very own pet piece of social engineering. He wants to pay wealthy mothers to stay at home from work but he wants to punish poor single mothers.

Years after consideration of the McClure report, late last year the government came up with the most appalling piece of public policy in relation to single mothers. The story is that, from the middle of this year, single mothers whose youngest child turns eight will be forced from the sole parent pension onto Newstart, the unemployment benefit. That means a drop of $29 a week. In addition to that, the very income-free area about which we are speaking in relation to family tax benefits is lower for Newstart allowance than it is for the sole parent pension. Therefore, there is a disincentive effect. Moreover, the taper—that is, the rate at which Newstart is phased out per dollar of income earned—is more severe than it is in relation to the sole parent pension. Disgracefully, the incentive for sole parents to undertake further education and training is weaker under Newstart than it is under the sole parent pension.

Put all those together and you get this amazing consequence: a parent, a single mother, who is forced onto the Newstart allowance will be activity tested. If she does not meet the activity tests she can be breached. The proposition that is put to single mothers in those circumstances is that, after taking account of the loss of Newstart allowance, tax paid, the cost of child care and travel and work costs, they are expected to work for as little as $2 an hour.

I know that, with the government’s industrial relations system, that is where it would like to take much of the Australian workforce but that is exactly where it is taking single mothers from 1 July this year. So, while John Howard is saying to mothers in millionaire families that he will pay them welfare to stay at home, he is requiring poor, single mothers to work for as little as $2 an hour. Such is John Howard’s view of Australia, such is his experiment with social engineering. He thinks it is fair for millionaire couples to receive family payments while poor, single mothers are forced to work for as little as $2 an hour.

Any single mother confronting that reality surely would strongly entertain this possibility: that in being moved, when her youngest child turns eight, from a higher benefit—the sole parent pension—to a lower benefit—the Newstart allowance—she would get a miserable return from working but she could easily get back onto the sole parent pension by having a baby. So John Howard’s social engineering is creating very strong incentives for poor, single mothers to have more children. This is because if a single mother had another baby she would get eight more years on the higher sole parent pension and a more attractive set of arrangements in relation to education. And, on top of that, she would get a baby bonus, which is now $4,000. Here is John Howard’s great social experiment: to have wealthy, single mothers stay home and receive welfare and to put poor, single mothers in a situation where they have little choice but to have another baby in order to avoid his trap—of forcing them onto the Newstart allowance and then have them suffer the consequences of working for as little as $2 an hour.

So, Mr Deputy Speaker, you can see why Labor is pretty upset about this and you can see why all fair-minded Australians would be pretty upset about it. Labor will be developing and proposing alternative arrangements for single mothers, alternative arrangements to the brutal regime that is being put in place for them from 1 July this year. In parliament today we are proposing an alternative arrangement for couples on millionaire incomes who still receive those welfare payments. That alternative arrangement, proposed here tonight, is that those couples with family incomes of more than $250,000 would not get family tax benefit part B.

When I raised this matter some months ago, the Department of the Prime Minister and Cabinet prepared a briefing note for the Prime Minister. How do I know that? I applied, under freedom of information legislation, for any documents related to reform proposals that I had made. The briefing note was a note from the Department of the Prime Minister and Cabinet to the Prime Minister for question time, to say to the Prime Minister, ‘Here’s how you can take this Emerson to task for daring to suggest that wealthy mothers should not receive welfare.’ What is the motivation of a department to provide such advice, other than to please the Prime Minister because they know that this is a policy that is dear to the Prime Minister’s heart? In pleasing the Prime Minister, they presented a briefing note to say, ‘These are some of the consequences of Emerson’s proposal,’ and, in the course of preparing that briefing note, they wrote down the savings from family income testing family tax benefit part B from $125,000, and the department said, ‘It only comes to $100 million.’ Only $100 million! That is a sum hardly worth worrying about from the point of view of the Prime Minister and the Prime Minister’s department. A trifling $100 million is going to wealthy couples, when kids in poor schools in Australia—government and non-government—are striving for a decent education but cannot get the resources to allow them the same opportunity in life that their better-off peers take as a birthright. This department and the Prime Minister are saying, ‘Why bother with $100 million that could be spent towards the great task of ensuring that every young person has a flying start in life.’ Where are this Prime Minister’s priorities?

The truth of the matter is that this Prime Minister, in 10 years, has created a welfare state that is out of control—much of it because he has directed more and more cash payments to very wealthy Australians. How else do we explain that more than 20 per cent of working age Australians now receive some form of income support, at a time when welfare dependency is at a 30-year low? The government points out that unemployment is at a 30-year low level and therefore welfare dependency should be at a 30-year low level. But 20 per cent of working age Australians receive some form of income support. Compare that 20 per cent with only 15 per cent at the end of the 1980s and just four per cent in 1969. The fact is that almost 90 per cent of families with dependent children receive taxpayer funded family payments.

I will go on. Social security payments now contribute more than 14 per cent of household disposable income under the Howard government compared with just six per cent in the last year of the Whitlam government. We hear the Liberals and Nationals say what a socialist government the Whitlam government was—what a big spending, free spending government the Whitlam government was and how it was into welfare up to its ears. Yet under the Whitlam government social security payments contributed just six per cent of household disposable income, and the figure is now 14 per cent.

While poor single mothers are required to go out and work for as little as $2 an hour, how do we justify giving family payments to millionaire couples so long as the mother agrees to stay at home? And why does the government provide family payments for working couples who earn up to $145,000 a year? I know what the Prime Minister will say when I utter these words. He will say, ‘Oh, that is just further evidence that Labor is against the family payment system.’ Wrong, Mr Deputy Speaker—wrong. The family payment system was originally designed to redistribute income to those families most in need and also to recognise the extra costs of raising children. Labor introduced a needs based family payment system. A family payment system has a vital role to play in redistributing income. In fact, it has been successful in its stated objectives—redistributing income from the better off to the less well off—because three-quarters of payments are received by the bottom 40 per cent of households.

We support that. But as the coalition government has extended the family payment system right through middle Australia and on to the very wealthy, the system has become less fair. Lower income earners are receiving a diminishing share of family payments. They certainly did in the period between the mid-1990s and the early 2000s. We know from statistics provided through the Senate estimates process and the good work of Senator Chris Evans that more than 38,000 families earning above $100,000 a year receive family payments for stay-at-home mothers. The government has deliberately moved the family payment system away from the redistributive role that was instigated by Labor and is converting it into a machine that redistributes income from poorer taxpayers without children to well-off taxpayers with children, including millionaire couples.

Let me look at the broader picture of welfare spending. In just 10 years the Howard government has increased real welfare spending by half. It took the best part of 100 years for welfare spending to get to a particular level and it took the Howard government just 10 years to increase that welfare spending by half—and, as I have said, this at a time when welfare dependency should have been declining, and has been declining, with very substantial reductions in the unemployment rate.

Welfare spending now exceeds nine per cent of gross domestic product. If federal welfare spending were the same share of gross domestic product as in the last year of the Hawke government, it would be $16 billion lower in real terms. But the government continues to expand its incentive-crushing income tax system to fund these relentless increases in welfare payments. I have had a look at what will happen if the government’s addiction to welfare spending is allowed to go unchecked. Based on recent growth rates in welfare spending and those contained in the forward estimates, within a decade taxpayers will be called to pay—just wait for it—an extra $27 billion for the welfare state, for this monster that John Frankenstein Howard has created. And that is an extra $27 billion in today’s dollars, not in the dollars of the day in 10 years time.

Here we are at the end of a big productivity surge, a record breaking decade of productivity growth built on the reform program initiated by the previous Labor government and extended in some places by the coalition. But from the middle of 2004 productivity growth did not just slip back to its historical growth rate from that record level: it slipped into reverse gear and it has been stuck there ever since. Today’s productivity growth is tomorrow’s prosperity. That reality should dawn on us. If today’s productivity growth is negative, what does that say about tomorrow’s prosperity?

Australia might have been able to afford this explosion in the welfare state when productivity growth was so strong and when our favourable mineral prices and the low cost of manufactured imports meant that we were getting an injection of $46 billion a year in national income but, when that is all over, the welfare state will come crashing down. And it will not be the wealthy who suffer—it will be the poor—if a coalition government happens to be in power, because they would ensure that they protect the wealthy at the expense of the poor. (Time expired)

Phillip Barresi (Deakin, Liberal Party) Share this | Link to this | Hansard source

I remind the member for Rankin that in future he should refer to members by their correct title or the name of their seat.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I support Labor’s amendments to the Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006, amendments to be moved later this evening, because it is high time the government stopped welfare to millionaires. There will always be a debate about the appropriate tax mix—the mix between tax and welfare. The government will always be required to manage the competing tensions between tax reform and its social obligations to support those in the community who need it most. Sadly, this debate is a debate that the government is committed to not having. Sure, tax reform is very topical in the government ranks, but there seems to be very little interest from members opposite in examining the interaction between tax and social security systems and addressing some of the crippling effective marginal tax rates currently enforced on so many within our community.

The opposition has shown it is willing to consider the interaction between the tax and welfare systems, because this is the only fair way to put incentives back into our system. I welcome a number of the changes we have before us today, because they will directly benefit constituents in my area. Werriwa is not one of the wealthiest electorates in this country, not by any measure. Based on the income statistics of the 2001-02 financial year, 97 per cent of income earners in my electorate earned less than $78,000, while nearly half of them earned less than $31,200. They are simply the facts. It is for this reason I am compelled to support changes to the arrangements of family tax benefit A, changes which act to raise the current income threshold and which will result in payment increases of up to $828 a year for more than half a million families currently on family tax benefit A payments.

There is absolutely no doubt there will be some winners in my electorate as a result of this legislation. But, disappointingly, I note that these families—families that are below the income threshold, including those families on income support payments—will not see any increase in their family tax benefits. In fact, many of them are likely to see a decrease in their payments in the not too distant future, as this government implements its Welfare to Work reforms.

I have no doubt that families who are experiencing financial pressures will welcome any assistance they can get. Many families are surviving on income earned from overtime, for instance. Quite clearly, for these families income from overtime is the difference between being able to meet the mortgage repayments, feed their kids and generally go about their day-to-day lives and not being able to. The families who are surviving on overtime payments are also those families living in fear that this is likely to be the first thing taken off them when they are forced to negotiate their new individual contracts that this government, courtesy of its Work Choices legislation, will have indirectly forced on them.

At the outset, I stated that I was happy to support Labor’s amendments to this bill because it is about time millionaire families stopped receiving government handouts. In the same way that the tax take of this government continues to grow, sadly so does its position with respect to being a welfare state. It is not a welfare state that supports those in most need; it is a welfare state that continues to hand out money. As the previous speaker, the member for Rankin, pointed out, how did we get to the point where the government’s spending on social security has increased by 50 per cent in real terms over the past decade? How is it that we find the situation where more than 20 per cent of working age Australians are receiving some form of welfare support when unemployment is at the lowest it has been in decades?

Recently released statistics show that there were 76 families earning more than $1 million a year receiving family tax benefit B payments. In addition, there are more than 38,000 families with incomes of more than $100,000 receiving the payment. There has to be something wrong with the system when people earn over $1 million a year and yet are receiving welfare payments. It is for this reason that I consider the amendments proposed by the opposition to be reasonable when it comes to addressing the issue of family tax benefit B. The proposition to place an income cap on family tax benefit B would not be considered unreasonable by the vast majority of people, and, quite frankly, it would save money. The introduction of Labor’s proposal to income-cap family tax benefit B would save in the order of $7.5 million annually. Labor’s proposal regarding family tax benefit B not only commences with the process of restoring some equity to the social security system but also is fiscally sound. I am sure the amendments will not be supported by government members, and I will be interested to hear their views on this.

Amongst other concerns I have about the distorted shape of the government’s welfare state is the chasm that is now being opened between families and childless couples. This chasm goes to the heart of the government’s methodology when it comes to using tax and welfare systems to support particular groups in our society at the expense of others. I do not stand here today to argue that all social security should be removed from families, in the same way I do not suggest that social security should be removed from single people and childless couples. I would just like to point out that there is a disparity in the system as it currently stands.

Recently released research about the comparative position of families and childless couples quite frankly indicated a number of things. For instance, it is worth while noting it reported that a single-income family that were earning $50,000 a year with two children under the age of 13 received $2,374 more in benefits than they contributed through the taxation system. That is right; the Australian government actually paid them. They did not have to pay tax; they were paid by the Australian government an additional $2,374 over and above any tax that was paid.

I do not deny that families need help—families are in financial distress. As we all know, an income of around the $100,000 mark these days in any capital city or outer-metropolitan area is not regarded as an excessive income. There are a great many families, particularly in electorates like mine, who are suffering from financial stress. In many of the suburbs in my electorate, families have both parents working in order to keep their heads above water, but still they are suffering from financial distress. Part of the reason is obviously the increase in housing prices, but most of the reason stems from the rapid decrease in housing affordability, something that this government has shown repeatedly that it is unwilling to do anything to address.

At the last election the government sold the idea that they were the only ones who could manage the economy and keep interest rates low. As part of their re-election strategy, that was the position that they put out to the electorate at large in 2004. As part of their re-election strategy, you will recall, they contrasted the 17 per cent interest rates experienced under the Keating government, when the interest rates climbed during that period, with current interest rates. Naturally, the government did not seek to present the reasons as to why interest rates were so low nor did they present any information on relative housing affordability.

Recently, I read that the repayment burden on households is higher under this government than at any time under the Hawke and Keating governments. Even at the peak of interest rates, households experienced a lower debt repayment burden than they are currently experiencing under this government. At its peak, that debt burden, that share of household income devoted to interest repayments, was 8.9 per cent under the Keating government. You will be interested to know, Mr Deputy Speaker, that it currently stands at 9.8 per cent. This is the reason that families are struggling so much: now more of their income is dedicated to debt repayment, even though nominal interest rates are significantly lower.

The situation exists where so many are suffering financial stress, but among those receiving financial benefit and relief in the form of social security payments are those who need it least. This government has presided over a stunning increase in middle-income welfare by extending welfare to high-income earners, at the expense of single parents and the disabled, through its system of child-care benefits.

Raising the issue of child-care benefits brings me to the amendments proposed to the administration of child care. Child care is of critical importance to parents in my electorate of Werriwa because, as I mentioned earlier, in order to have some form of financial security ordinarily you will find that both parents need to work. That is the same in most areas of outer-metropolitan Sydney, and I presume the same would be the case in any other capital city. But, if both parents need to work, someone needs to look after the kids.

One of the changes before us gives the departmental secretary the power to allocate unfilled places of a child-care provider on the basis that this will allow the redistribution of places from areas of low demand to areas of high demand. Ordinarily, I would say that that sounds like a great thing, something that I would probably rush to lend my support to. I would imagine that any member concerned about child care could not do anything but support that notion. But, as always with the approach of this government, you do have to have some caution because you tend to find that the devil is in the detail.

One possible problem with this change is that, once places are removed from one service, they do not have to be reallocated to another. There is a real and distinct possibility that the change could actually exacerbate the child-care shortage. With the stroke of a pen, a child-care place could simply disappear. As I understand it, the process of reallocating places is a slow and rigid one and places are generally only reallocated in advertised windows, which I also understand have only occurred five times since 2000. I also understand that services wait up to two years from the point of their initial request for new places to be allocated to them. This will be cold comfort for anyone in a high-demand area waiting for the provision of child-care services.

One of the amendments proposed by the opposition would limit the secretary’s power to reduce the allocation of places to a service—in this case, only if the place has been continually vacant for a period of 12 months—and we propose that the places would be required to be reallocated within seven days of their removal. That in itself would require the department to actually plan and not simply remove a position and wait some time before its reallocation. In other words, if a place were taken away from an area of low demand, it would be known in advance and would be reallocated to an area of high demand to satisfy that need within seven days. This is yet another reasonable amendment that the opposition has put forward, in my opinion, but I do suspect again that it will not be supported by the government.

I would also like to offer my strong support for Labor’s amendment to require annual reporting to the parliament on the number and location of services suffering an involuntary removal of places; of services that have been reallocated those places; and of services seeking more places, which would provide some indication of unmet demand. Those are figures that I would have thought anyone in this place would be very interested in. Again, it is not an unreasonable amendment and it is one which I think ought to be supported in this place.

Helping families is one thing but helping families who earn multiple hundreds of thousands of dollars—or, worse, millions of dollars—each year is another thing altogether. Labor has proposed some fair and reasonable amendments to this bill. It has proposed amendments that would bring some sense back into the system of social security, amendments that would act to curb the growth of the welfare state that this government has presided over. Members who feel that placing an income cap on family tax benefit B is unreasonable, while continuing to support the cutting of payments to the most vulnerable in society, quite frankly are symptomatic of a government who have their priorities misplaced. In my opinion, what is occurring in welfare to work is completely wrong.

I would welcome any member who does not support the sensible amendments being proposed here to come and visit my electorate—to visit suburbs like Minto, Macquarie Fields and Miller, suburbs with high degrees of welfare dependency—and explain to them how it is better for everyone to have people earning millions of dollars and receiving welfare while their payments are being cut. I would then welcome the opportunity to take them to visit suburbs like Prestons, Austral and West Hoxton and have them explain to the people there why they would support people with incomes of more than $250,000 per year receiving social security payments while people in those areas are forced to work two jobs to struggle to keep bread on the table for their families, relying on overtime to meet their mortgage repayments and day-to-day living costs.

I have always found it quite amazing that this government—the government who makes the claim that it is the greatest budgetary manager of all time—is the same government who collects record levels of tax and who spends record levels on social security. As the Prime Minister has previously been advised, this government could save $100 million a year by simply scrapping payments to stay-at-home mothers if their family income is more than $125,000. In 2003-04 there were nearly 13,000 families living in our 10 wealthiest postcodes and receiving family support payments.

This is really a crossroads for this government. Either this government is happy to go along the path of maintaining these welfare state provisions, or, alternatively, it starts looking at the real and very much needed tax reform provisions that are required in a developing society. This is not about simply slashing and burning when it comes to welfare; this is about a proper redistribution of the tax burden with a view to ensuring that people who need assistance most receive it and that those who do not need assistance contribute properly to our society. (Time expired)

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

The Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006 does a number of things, all of which Labor is supporting. The legislation extends the upper threshold for accessibility to family tax benefits to $37,500 from the current upper limit, for the maximum, of $33,361. It changes the arrangements with respect to the backdating of carer allowance for particular recipients. It provides the Secretary of the Department of Families, Community Services and Indigenous Affairs with the power to change the allocation of child-care places to move places from areas of relatively low or unexpectedly low demand to areas of high demand. Finally, it allows for the offsetting of debts with respect to child-care benefit against tax returns or refunds paid to individual taxpayers.

Labor broadly supports the legislation but is going to move a number of amendments relating to some of the issues that are traversed by this piece of legislation. In particular, Labor will be moving an amendment to provide for the withdrawal of the entitlement to family tax benefit B that currently applies to families in receipt of incomes of $250,000 per annum or greater, which is an issue that has been dealt with in some detail by some of the previous speakers from the opposition.

I want to address a broader question that the legislation indirectly raises, and that is the ever-growing proliferation of transfer payments, both broad income support payments and more specific and targeted payments from the Commonwealth budget. It is something that has been contributed to by governments from both sides of politics over the years, but it is a particularly strong trend under the Howard government. That raises a number of very important issues which are ripe for wider public debate and really have not been addressed. When we consider the various issues that are raised by these things, there are a number of matters that we need to properly consider in forming a view about the future of income assistance for people in Australia and about the future of specific payments that are provided with particular tags to families and to individuals to enable them to better access particular kinds of services.

We need to consider effective marginal tax rates that result as a collision between the family payments system and the tax system. Labor has sought to address this for some years, with proposals for tax credits as far back as the 1998 election. This is still a major problem, and the tinkering with the structures that we have seen on occasions has not alleviated it. Very large numbers of Australians face very strong disincentives to re-enter the workforce or to increase their contribution to the production process, as it means they would face a very high effective marginal tax rate for the additional dollars they earn, because of the intersection between family payments and the ordinary marginal tax rates.

The operation of the family tax benefits system has resulted in a chronic problem of overpayments. People have been forced to estimate their future incomes, often in circumstances where it is not necessarily easy for them to do so. They have then been lumbered with an unexpected debt, the repayment of which, in many circumstances, has been very difficult for them. The family tax benefit system has become a very cumbersome administrative burden for the Commonwealth and, inevitably, an additional cost to the taxpayer.

We have an extraordinary proliferation of income tests and assets tests, with sometimes conflicting and inconsistent approaches taken to different entitlements. Family tax benefit B is an entitlement that has been focused on by the Labor Party in this debate. There are some families who earn $1 million a year but are still entitled to receive this payment, even though the government is busily engaged in trying to reduce the entitlements of or remove entitlements from many people on very low incomes.

The role of government to smooth fluctuations for citizens and families over the life cycle was relatively limited 50 years ago, but it has now become central. Once there was not much more than child endowment, the age pension and some very specific social security payments, such as unemployment benefits, that inevitably applied to only a relatively small number of people. In Australia we now have an extraordinary array of schemes and arrangements that are designed to limit the economic effects on families and individuals of child rearing, studying and ageing. Child-care rebates, the baby bonus, family tax benefits, the child support scheme, HECS, Medicare, the private health insurance rebate, occupational superannuation, home and community care, aged care subsidies, the parenting payment and an infinite array of smaller and more targeted programs reduce or inhibit the impact of economic fluctuations derived from changing circumstances over the life cycle.

Clearly, families inevitably have economic challenges when raising children. There is the same challenge for low-income families, middle-income families and, to some degree, even people who are reasonably well off. Inevitably, having children and raising them impact on the family budget.

Similarly, study has a major impact on the costs that families and individuals have to bear. In the world of 50 years ago, the overwhelming majority of people left school at the age of 14, 15, 16 or thereabouts and went into the workforce. For women it was for a relatively short period of time before they married and, typically, they ceased to be in the paid workforce for at least some time afterwards. Now it is common for study to be the dominant activity for people well into their 20s. Therefore, the economic burden of sustaining them—borne by the individual or by their families—is much greater than it was many years ago.

Similarly, older people have a life expectancy that is much greater than it was 50 years ago. The burden on the community, the costs of retirement incomes and maintaining health services, which typically are accessed by older people at a much greater frequency, have grown in relative terms.

Hence, the underlying causes of the massive proliferation of entitlements, government payments, transfer payments and income support payments are absolutely real. Many of the things that have been put in place to deal with these phenomena have been initiated by Labor governments, and we are proud of them. However, we do need to acknowledge that gradually a very messy mixture of entitlements and payments has been created in this country, often driven—in the case of the Howard government—by the need to present electoral goodies at election time. This has created a conflicting, contradictory and ultimately inefficient morass of payments. Although these payments have a legitimate underlying purpose, we need to ask whether we can do this better, more efficiently and more equitably.

Since 1969-70, the proportion of the federal budget devoted to social welfare and health insurance has risen from under 20 per cent to over 50 per cent. The proportion of the overall Commonwealth budget that is committed to payments to families and individuals to counteract the impacts of these changes on family finances over the life cycle has risen dramatically. It is now the majority of the federal budget. These days the government is not just an item in the family budget; it is running it. This ever more complex financial relationship between families and the state raises significant issues in respect of individual responsibility and public sector efficiency. Most of us are living much longer. We require more skills to participate in the production process and women in particular are participating in formal employment much more.

The complex mess that governments have created to respond to these pressures is crying out for serious reform. One example of this is being debated this evening. In 2003-04 family tax benefit B was paid to 38,500 families who earned over $100,000 per annum and 76 families who earned over $1 million per annum. According to research by the Parliamentary Library, by 2006-07 single-income families who earn $60,000 per annum, rent and have two children in child care will pay no net income tax—the combined effect of family tax benefits, child-care assistance and rent allowance for these families will in effect cancel out the income tax that they would have to pay.

In my view, that is an extraordinary level of direct government intervention in the financial circumstances of middle-income families. In effect, governments are taxing families then returning the money with strings attached, creating complex relational and financial effects along the way, most of them undoubtedly benign or positive but some not so. Comprehensive reform of this complicated web of financial relationships is, I think, essential, and it needs to be built not just on dry financial considerations, important though they may be, but also on the relational impacts, the behavioural impacts, of these arrangements.

We in the Labor Party support financial assistance for families. We effectively created it. We support financial assistance for people studying in order to better their skills. Again, the origins of much of this assistance that is entrenched in our system in this country come from Labor governments. We support proper, decent retirement incomes for elderly people. We support the provision of child care and child-care subsidies by the Commonwealth.

But I believe that we need to engage in a big search for a better way to deal with these issues, to reform and rationalise the way that we provide financial assistance, to ensure that individuals and families can exercise greater choice, greater flexibility over how they are able to use the financial assistance that the Commonwealth does provide to them. We need to ensure that we manage to rationalise the multiplicity of income tests and assets tests. We need to ensure that we are not paying welfare payments to millionaires. We need to ensure that there is a clear understanding that the purpose of these payments is to make provision for assistance to individuals and families who otherwise would have great difficulty in providing for themselves because of the circumstances that happen to apply in their particular stage of the life cycle.

We need to keep in mind the imperatives of government efficiency, because every time we add a new payment, a new entitlement, we add a new layer of administration. We add a new layer of processing. We add a new burden not only on the taxpayer in the primary payment, which is likely to be justified, but also in processing—in the time and the energy that is spent by Public Service departments, by the various organs of government which have to administer these schemes, but also by individuals. You only have to look at some of the forms that applicants have to complete for some of the entitlements that are now part of what government offers to individuals and families to see that there is also a burden that is imposed on the citizen and on families as a result of these unduly complex, and in some cases conflicting, entitlements.

Nobody knows how big that burden is. Nobody knows what the efficiency costs to government and the transactional or friction costs that are associated with delivering such a bewildering proliferation of different entitlements are. But it is long overdue that we have a very serious look at all of these entitlements in order to work out better ways of delivering the assistance, better ways of ensuring that the maximum amount of money goes to where it should go, that we are genuinely supporting effort, that we are genuinely supporting people studying, that we are genuinely assisting families to raise children and that we are genuinely assisting people in their older age to live a decent life.

I believe that we are just at the start of a major debate on these issues, and I look forward to contributing further to that debate. There will be many ideas, many possibilities, and I commend the amendments that are to be moved by the member for Sydney in this debate on the bill. I think they establish one very important principle that should be central in the further and wider reform considerations that I am keen to engage in and that I know others are—that is, we should not be in the business of providing transfer payments to very high-income families. We should not be in the business of providing welfare to millionaires. That should be a bottom-line factor in our considerations.

Annette Ellis (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

I rise this evening to speak on the Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006. The bill makes several amendments to the social security law and the Veterans’ Entitlements Act 1986 in a number of family assistance related measures, as follows. From 1 July 2006, the lower income threshold for family tax benefit part A will be increased from the current $33,361 to $37,500, thereafter indexed on 1 July. From 1 July 2006, the backdating provisions for carer allowance will be restricted to allow for a maximum backdating period of 12 weeks prior to the claim lodgment date. The Secretary of the Department of Families, Community Services and Indigenous Affairs will have the power to transfer child-care places from an area with an assessed lower demand to an area of higher demand. Child-care benefit debts will be able to be offset against tax refunds. There are also a number of minor technical amendments to the portability of payments overseas and the treatment of superannuation and income streams for pension purposes.

There are many provisions of this bill that we on the Labor side are happy to support, such as the increase in the lower income free area for family tax benefit part A from the current level of $33,361 to $37,500 from 1 July this year. However, we have some major concerns about some elements of this bill, and we are therefore moving several amendments.

I will discuss in detail one part of this bill which relates to the carers allowance. Labor is moving an amendment which will provide a discretionary power for the Secretary of the Department of Families, Community Services and Indigenous Affairs to extend backdated carer allowance claims in cases where there are genuine reasons for the delayed application. The bill as it currently stands will severely cut back the period for which carers can have payments backdated, from the current 12 months for the care of a disabled child to just 12 weeks. It is estimated that this measure will significantly reduce payments made to carers when they first apply for the allowance. The government estimates it will save between $35 million and $37 million each year. That is $37 million currently being paid to carers of Australians with significant disabilities—$37 million that will not be paid from 1 July this year.

Not only is this unfair; it is plain unjust. It is very poor public policy, especially when you consider the often tragic circumstances under which people apply for the carer allowance. The people who will miss out on the carer allowance are all taking care of a loved one who, in more cases than not, has a very severe disablement. They may be carers who themselves have an injury, disability or chronic illness that makes it difficult to access services or help or that prevents them from applying without the assistance of others.

The department admitted to Labor in Senate estimates last year that, under the current arrangements, ‘a high proportion of children’ are backdated for 52 weeks. The department admitted that the number backdated was ‘of the order of 90 per cent’. There are many good reasons why these families have provided care for such a long time without claiming the carer allowance. They are struggling to survive from day to day, and filling out forms is the last thing on their minds. It can also take time for a complete diagnosis or treatment before a family knows exactly the circumstances in which they find themselves. A family can find themselves dealing with great trauma to the family unit. This bill will do great harm to these very people. I am struggling to understand how the government can begin to justify this kind of policy decision. It is beyond my comprehension why savings have to be made on this basis.

The government is trying to make significant savings at the expense of Australians with the hardest of lives—those who care for a child with a disability. Labor’s amendments will give the secretary of the Department of Families, Community Services and Indigenous Affairs the discretionary power to extend backdated carer allowance claims in cases where there are genuine reasons for the delayed application, such as: the person is unable to readily access relevant services or advice just 12 weeks after the disability their family member has suffered; the person was unaware of the carer allowance, not an unusual occurrence from my experience; or the person underestimated the ongoing needs of their child and realised how much care would be needed months after the disabling condition occurred—again, not an unusual circumstance. I cannot believe there would be one member in this place who would not have come across these circumstances in constituency experiences through their time here in the parliament.

Carers make a great contribution to our society by caring for their loved ones who may otherwise be taken out of the community and placed in permanent care elsewhere. The contribution carers make is not only to the people they care for but also to the community and to the economy more broadly. It is estimated that carers save the Australian economy approximately $20 billion annually. They do this by providing this unpaid work.

But we must be honest about the work carers do. It is difficult and provides very few benefits other than the satisfaction of caring for the loved one. We cannot ignore the fact that informal care comes at a cost to carers in terms of their wellbeing, their quality of life, their financial security and their opportunity to be in the paid workforce. It is not at all unusual for people representing carers in this society to describe those sorts of circumstances as dramatically affecting people who find themselves in that caring role, particularly when we are talking about caring for children with a disability. Therefore, in my view and in the view of the people on this side of the chamber, we should be doing all we can to improve the lives of carers and to assist them. Unfortunately, I am of the view that the federal government has done very little in the grand scheme of things to improve the lives of carers. It seems to be doing everything possible to make their lives more difficult when we look at this sort of public policy. This bill is just one example of a mean-spirited government and its attitude towards families and carers of people with a disability.

Labor is moving several amendments to this bill to make it more equitable and far fairer for all of these Australians. One Labor amendment will introduce an income threshold on family tax benefit part B to stop millionaire families from receiving payment. Labor is proposing a family income cap of $250,000 per annum on and above family tax benefit part B to stop very wealthy families from receiving the payment. This measure in itself would generate savings of approximately $7.5 million a year.

One cannot but compare and consider. On the one hand we have families with very high incomes receiving these welfare payments and, at the same time, this government is guiding a policy to make it more difficult for carers of children with a disability to apply for an allowance. One really has to wonder at the anomaly, at the hypocrisy of that kind of policy. It is beyond me to understand the logic behind it; I do not believe there is any. It is quite shameful that in a country where some children grow up without enough food and clothing there are families on annual incomes in excess of $1 million receiving welfare payments.

Other Labor amendments to the child-care provisions would provide a more flexible system for the allocation of child-care places and prevent the government from removing a place from a child-care service unless that place gets reallocated to another provider. This would help to overcome systemic problems in the current approach that have caused chronic shortages of child-care places in some areas.

In conclusion, I wish to draw that comparison again. Why is it that the government is content in this legislation to continue to allow families on very high incomes to receive welfare payments while it is also moving to make it more difficult for people caring for a child with a disability to apply under the current circumstances and in the future? We really need to consider this comparison very seriously when we listen to the government’s claims of governing for all Australians. In summary, Labor support this bill but we are moving amendments which make the changes much fairer to the people I know in my electorate who need that fairness and the people across the country likewise.

Jennie George (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Environment and Heritage) Share this | Link to this | Hansard source

The Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006, which is before us, seeks to implement a range of measures which were foreshadowed in the 2005 budget. While we support the bill, the opposition—the member for Sydney, in particular—will move a number of amendments which we believe are worthy of government support. I take the opportunity this evening to speak specifically on the changes to the administration of child care outlined in the bill and to touch on some other areas of maladministration of child care, which I think is an important issue that the government must consider.

The bill seeks to provide the Secretary of the Department of Families, Community Services and Indigenous Affairs with the power to take allocated but unfilled places off a child-care provider in order to allow the redistribution of places from areas of low to high demand. This in itself is unobjectionable but, in my opinion, it does not address some fundamental failures in the administration of our nation’s child-care system that I now want to touch on. In my view, the biggest administrative failure—and we can tinker around the edges—is the lack of planning by this federal government. This, as we know, has led to shortages of places, particularly for children under two, across the nation at the same time that pockets of oversupply exist in some other areas.

According to the most recent ABS data that I could find, in June 2002 over 61,000 children could not access services because all the services were booked, 30,000 children could not access services because of the expense of the services, and 22,000 children would could not access services because there were no services available in their area. So, when you look at June 2002 data, which is quite dated now, we see that back then around 113,000 children were not accessing formal child-care services because of problems related to access—that is, there were either no places available or the cost of places was prohibitive. So you would have to say that there is something fundamentally wrong with the administration and planning of child-care services in this country.

The bill has a very limited scope in proposing one minor change to the system, where I think the system really does need a drastic overhaul. At a time when, in outlays through the CCB, the cost of child care since 1990 has risen tenfold to around $1.7 billion a year, we as a nation are still short by over 100,000 places through lack of either affordability or accessibility. The child-care system is growing very rapidly in our country, but it is growing in a very unplanned way. This inevitably causes anxiety and hardship for many families—and many families that I represent are living through this experience. Those lucky enough to have places have seen costs rise by around 60 per cent over the last four years. Many local families in my electorate of Throsby are forced to put their names on a waiting list—and, on many occasions, on more than one—in early pregnancy and then have to wait for years for a suitable placement for their young children. No wonder we learn that around a quarter of a million women are not in the workforce because they cannot find or afford a child-care place.

The tragedy in terms of the administration of the system is that the Howard government has allowed this system to become dominated by private providers, for whom the profit motive becomes a primary motivator. Child-care provision unfortunately has become a licence to print money, as I said earlier, with the government outlaying some $1.7 billion through the child-care benefit scheme. As Mr Groves, the CEO of the largest private conglomerate, said recently, ‘You cannot help but make some money.’ He confirmed that ABC Learning Centres had received 44 per cent of its income from government subsidies—that is $128 million of its $292 million revenue—last year. This company has spent around $700 million on acquisitions and takeovers and it now controls about 930 centres, with the aim of expanding its coverage to 1,300 by mid-2008.

A recent analysis of the ABC Learning Centres projects that the company is to make a net profit in the order of $379 million by the year 2008. If the figure of 44 per cent of revenues coming from the government’s subsidies remains constant, this will translate into $167 million of taxpayer moneys being transferred directly into the pockets of Eddie Groves and his shareholders. No wonder their recent announcement of $88 million in profits was described as appalling by the convener of the National Association of Community Based Children’s Services. She argued—and I agree—that the $88 million in profits announced by ABC Learning Centres could be going to far better use in making child-care services more accessible and more affordable.

The truth is that companies like ABC Learning Centres have tapped into a rich seam of taxpayer funding, which is underpinning its earnings and its profit levels with a government guarantee that is underwritten by the CCB. What really worries me—and I am not against the notion of private provision—is that often these healthy profits are coming at the expense of ensuring decent conditions for staff working in these centres and in the provision of quality of the facilities on offer.

Interestingly, in the recent Herald series on the inadequate quality controls of many of our centres, it was reported that ABC Learning Centres last September was ordered to pay $76,792 in fines and costs after an inspection of one of their centres at Wee Waa. This inspection found ‘mouse droppings on the floor and in bedsheets, redback spiders in an outdoor toy storage area accessible to children, and no smoke detectors’. The company had also failed to keep ‘dangerous cleaning materials, disinfectants, poison, medication and other dangerous substances away from children’. This is a company, as I say, that recorded an $88 million profit, which was underwritten by the outlays of the government through the CCB. Lynne Wannan, the spokesperson for the community based sector services, commenting on the child-care industry recently, had this to say:

Standards have been lowered, poorly paid and inexperienced staff employed and dubious practices crept in as larger providers built bigger centres and strove to get economies of scale. As they became larger, they used predatory pricing to drive smaller, community-based services and even smaller private operators out of business.

We have a new minister, and I am pleased to see he is in the House tonight. Last year, in response to a question on notice I put to the then minister, I was advised that, of the 6,333 children in my electorate of Throsby who were using formal child-care services in the 2003-04 financial year, nearly 60 per cent were in private centres. Interestingly—and I hope the minister picks up on this—when it came to placements for children under two, which is a national problem, of the 930 children under two in child care in Throsby, 70 per cent were in fact in community based child-care services. In his answer, the minister advised me:

There are no requirements for private providers in areas of high demand to provide places for children under 2 years of age.

In other words, companies like ABC Learning Centres can cherry-pick the market, free of any government constraints. The company profits are underpinned by taxpayer funding, yet the taxpayers’ interests—having accessible and affordable services—are left to the mercy of the marketplace, free from government intervention, free from any overall consistent planning and free from any form of regulation.

We can add to this another case of maladministration by this government: their much touted 30 per cent child-care rebate. As we know, the rebate was promised at the last election, though no-one has yet seen a single cent of it paid out. Parents, as we know, have to wait up to two years for tax relief, and you have to hope that they have not lost their receipts in that time. It is a highly complex system which no doubt favours higher income earners. Beyond that—and very worryingly, Minister—this rebate inevitably will promote price inflation, with no guarantees of quality improvements attached to the additional costs of care. It sends the wrong signals, yet again giving scope for profit-making centres to further increase their fees. We already know from the available data that child-care costs rose by 10 per cent last year and by 60 per cent over the past four years, five times the rate of inflation. Child care in many areas is becoming more expensive than private education, with the parents of children in some long day care centres being slugged $100 a day.

It is true, and I acknowledge, that the child-care benefit assists many in our community, but the value of the benefit is not linked to the actual cost of providing care. As child-care costs have risen, the relative value of CCB, which is only indexed to CPI, has declined and the out-of-pocket costs faced by families have had to rise to meet the gap between the entitlement and the fees charged. Child-care costs have risen by 49 per cent, above the rate of inflation between 2000 and 2004, and it is families like the ones I represent who have had to meet these additional gap costs. Not surprisingly, recent data shows a steady decline in the affordability of child-care services. So, beyond the minor amendment that is proposed in the government’s bill, I think the time has come for the government to examine the impact of both the child-care benefit and the rebate on the crisis in child-care provision in this country.

I am concerned, in terms of the administration of the system, that the 30 per rebate places no obligation on child-care operators to provide better access to services or to improve their quality in return for the money that will flow into the industry. Interestingly enough, the government itself has acknowledged that a portion of the rebate might flow directly to the profits of child-care operators rather than to the parents who use the services. So yet again I lament the fact that private providers stand to benefit, in the absence of government requirements. We could well see the value of the tax rebate eaten up entirely by an increase in child-care fees and profits, without any real benefit to children or their families.

There are many areas of serious concern in the administration of child-care provision. With an estimated outlay of $1.7 billion by the federal government through the benefit—on some estimates, rising to $2 billion when you add in the tax rebate to come—its hands-off approach has left the community with a sense of no coherent planning, huge areas of unmet demand, large cost increases which are making services unaffordable, a child-care benefit which today bears no relation to actual costs and a new rebate which will be inflationary, adding further financial pressures onto families who are struggling to cope.

Jackie Kelly, the member for Lindsay and a government member, was right in saying the system is a shambles. The Prime Minister and the Treasurer need to get their heads out of the clouds and understand the huge dimensions of the child-care crisis in our nation. I am pleased that the Treasurer is on the public record as saying recently:

We must look at how to improve opportunities for women, create the most female-friendly environment in the world.

We would be right behind him if his rhetoric actually translated into some real and tangible achievements. A modest start to the Treasurer’s grand vision would be a commitment in the coming budget to fix the shambles that is the child-care system. In that regard, I would draw the minister’s attention to some of the very constructive proposals for change that have been aired by the Leader of the Opposition and the member for Sydney, and to a recent document issued by ACOSS under the title Fair Start: 10-point plan for early childhood education & care.

This government has billions of dollars in its surplus and unprecedented powers to push for changes in the system; it just needs the will to do so. But, after 10 long years, many promises and a lot of rhetoric about the work and family balance being the big barbecue stopper, I must say that the families I represent do not see a material difference in policy outcomes. Despite all its rhetoric, the government has refused to increase the number of long day care places that are affordable and within reasonable travelling distance of home. It controls the supply of family day care and outside school care places with an iron fist, resulting in chronic supply-and-demand problems.

As I said earlier, it has refused to acknowledge that the child-care benefit needs to be increased to actually represent the costs of child care, and it has relied increasingly on families to meet the ever-widening gap between the benefit and fees, such that child care in many areas of the country is becoming a luxury service purchasable by some but not all. As I pointed out in my contribution tonight, I am most concerned that private providers under this government are allowed to cherry-pick the system and to amass huge profits underpinned by government outlays through the CCB. The time for tinkering with the system is over. Australia’s provision of child-care services needs and demands a thorough overhaul so that the system works in the interests of the public by providing affordable and accessible places in a planned and coherent manner.

Mal Brough (Longman, Liberal Party, Minister Assisting the Prime Minister for Indigenous Affairs) Share this | Link to this | Hansard source

in reply—I thank all those members who contributed to the debate tonight. The Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006 will amend the family assistance law, the social security law and the Veterans’ Entitlements Act 1986 to implement several measures announced in last year’s budget and some other current initiatives. These measures will be particularly important to Australian families and those helping to support themselves in retirement. Families will gain a higher rate of family tax benefit through an increase in the lower income threshold from $33,361 to $37,500 from 1 July this year. The new threshold will keep its value by being indexed according to the CPI on every following 1 July. This is substantially more than would have occurred through annual indexation. The bill will also reduce family tax benefit and child-care benefit debts by improving the way customers’ estimates of income are managed in working out their entitlements. These new provisions will also take effect from 1 July 2006. This will allow estimates of income for the current income year.

The bill contains two further measures relating to child care. Under the first, the distribution of the available child-care places will actually be enhanced by allowing the transfer of child-care places from areas with lower demand to areas of higher demand. Second, from 1 July this year the recovery of child-care benefit debts will be improved by more closely aligning the recovery methods currently available with those available for family tax benefits. In particular, a customer’s child-care benefit debts will be recoverable by applying the customer’s or a consenting person’s tax refund.

From 1 July 2006 the bill standardises the backdating provision for carers allowance to allow for a maximum backdating period of 12 weeks before the claim is lodged, whether the carer is caring for an adult or a child. I commend and I thank the Senate committee for its work in reviewing this legislation. They made a very valid point in suggesting that the government ensure that the medical fraternity are aware of this particular provision so that parents of young children in particular who are in need of this carer allowance are aware of it at the time that they are seeing their doctor in relation to the condition of their loved one. In doing so, we want to be able to ensure that those parents are aware of and access that payment at the earliest possible time. I might add that this measure has been introduced to align with other backdating provisions, because in the past there were very awkward and difficult conditions that carers and parents generally had to adhere to in determining whether or not a child was eligible for this payment. Those measures have been removed.

The bill makes various social security and veterans’ entitlement amendments flowing from the government’s response to the review of pension provisions by small superannuation funds. In part these amendments extend the term of market linked income streams and life expectancy income streams so that payments may continue to the member or spouse to age 100. Similarly, if the member or spouse has a life expectancy greater than 100, the greater age will be allowed for. These amendments also allow customers to vary annual market linked income stream payments by amounts between plus and minus 10 per cent. This will actually help them average out their income and allow the income stream to satisfy them throughout their retirement. The bill makes many other minor amendments in this area, including an enhancement to the operation of the income stream rules and allowing certain non-superannuation annuities to be split as part of a divorce property settlement.

Finally, the bill amends the social security law and family assistance law as they relate to payments being made overseas, known as portability. This will be welcomed throughout Australia for those who need it, which unfortunately is often due to illness of children where they have to go and receive assistance overseas.

I have a couple of very quick observations on the contributions of the opposition. Many took the opportunity to speak to the bill with regard to family tax benefit and their belief that it is inappropriate. I simply say to the members of the opposition that it is still current Labor policy not to support the family tax supplement. The last time anyone spoke about it was to say that it was not real money. I would invite them to revisit that and look at changing their policy into the future.

The member for Throsby just spoke at length about ABC Learning Centres, a private provider of child care, basically suggesting that the profits they are making are obscene. It also must be noted that it is the for-profit sector and the capital that they have injected that has provided the additional places. Their growth is largely the reason the number of places in child care have doubled in the term of this government, as has expenditure. She clearly would prefer not-for-profits to be running the sector. While she said that these profits were obscene, she also said she had heard that predatory pricing—dropping the pricing for mothers—was in fact impacting upon some of the not-for-profit centres in her electorate. It would just seem to be a totally contrary argument: on the one hand having lower prices, forcing people out, and on the other hand saying that there are these obscene profits.

She also mentioned standards. I remind her that licensing is in fact a state requirement. The states look at and determine staff ratios. So if the member for Throsby thinks that the staff ratios are inappropriate, she should be taking this up with her state colleagues. I do not believe she will do that. In fact, I am absolutely certain that she will not do that with any conviction. They are also the ones that determine how much space each child should have and the size of the building. It is not the federal government. Therefore, if the member for Throsby has arguments on those issues, the appropriate people for her to take up these issues are her state colleagues.

Finally, in relation to the Labor Party’s comments tonight about freeing places up, I understand that the Labor Party’s policy at the last election was to include about 8,000 additional outside of school hours places. The federal government’s was 84,300—tenfold. The reality is that there is another round to be undertaken shortly. Far from being iron fisted and very restrictive, my aim is to ensure that the places go to where they are needed and that parents as they elect to take up their option to return to work have the options in which to do it. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.