Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Hansard source

I rise to speak on the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) (Consequential Amendments) Bill 2006, which sets out a range of measures consequent upon the so-called Welfare to Work legislation which was pushed through the Senate by the government late last year. The amendments that are today before the Senate really ought not be necessary. If last December the Howard government had finally, after 10 long years, delivered the real welfare reform that this country does need, this bill would not be before the Senate. However, as history will regretfully record, the Howard government did not deliver real welfare reform, it did not tackle the reasons why people are not working and it did not deliver practical solutions. Instead it used its complete control of the parliament and of this chamber to ram through, in a guillotined debate, extreme and incompetent changes. Some of that incompetence has already come home to roost with the need for additional amendments that the government, in its unseemly haste, failed to make in previous bills.

In the context of the new welfare changes, Labor does not oppose this bill, which largely adds some consistency to the botched changes of last year. In particular, it extends some benefits that are open to single parenting payment recipients, such as the 14-week bereavement period, to principal carers who are on the dole. Of course, it would not be necessary to do this if the government were not dumping people onto the dole in the first place. The bill also applies some more consistency across similar groups receiving different payments, such as providing for a seasonal workers preclusion period for students and new apprentices claiming youth allowance. But the bill does not amend that which needs to be amended most. It does not scrap the incompetent welfare changes imposed by this government which leave people with less incentive to work than they had before. It does not scrap the incompetent changes that make it harder for jobless Australians to prepare for work with training and study.

The government’s changes cut income support for some of our most vulnerable Australians and, perhaps even more importantly, reduce the rewards from work. What this government has consistently ignored, and continues to ignore with this bill, is the impact of putting people on lower welfare payments. It is not just the immediate loss of money but the potentially disastrous effect that this will have on people’s ability to work their way out of poverty, which is what we all want. The basic cut to the money in people’s pockets is bad enough—around $20 a week for sole parent families and about $40 a week for people with a disability. Of course, we know that of family groupings in this country the family type most overrepresented in the poverty statistics is that of sole parents.

From 1 July many people who would have received the disability support pension or the single parenting payment will instead be dumped by this government onto Newstart—what is colloquially known as the dole. By 2008-09, according to the government’s own figures, 60,000 people with a disability who would have received the DSP will instead receive the dole, as will 77,000 single parents who would have received the parenting payment. Think of not only these people but also their dependants, the children who will now have to survive on less money and fewer opportunities, making life far more difficult for them. Not only does the dole provide less money for these vulnerable Australians who have many additional expenses associated with their circumstances; Newstart also has a lower free area, higher withdrawal rates and harsher tax treatment than both the disability support pension and the single parenting payment. This will mean that when these Australians are dumped onto the dole by this government they in fact will get to keep less of every dollar earned—an extraordinary proposition if you were serious about moving people from welfare to work.

Last year the National Centre for Social and Economic Modelling undertook modelling research on the changes. According to this research, which the government has never tried to refute, if a sole parent with one child does the right thing and works 15 hours a week they will keep only $81 of their earnings while the Howard government claws back the other $114 in tax and loss of social security payments. The effect of this is that this parent will be $91 a week worse off by moving into work under these changes than if they moved into work under the previous arrangements. The government dresses up this policy as welfare to work but in fact takes more out of every dollar earned for this group of people than it would under previous arrangements. It has increased the disincentive and reduced the rewards for working. It is hardly a way to try to improve people’s passage from welfare to work.

The Howard government has effectively told sole parents to work for a return of $3.88 an hour, because for their 15 hours work a week they would only be $58 ahead of someone not working. That would be before they pay for the costs of work—things like travel, clothing and so forth. For people with a disability, the situation is even worse because the DSP is not taxable whereas the dole is. According to NATSEM—in the research I referred to earlier—if a person with a disability worked 15 hours a week at the minimum wage they would keep only 25c in every dollar earned while the Howard government would claw back 75c. Such a person would be $122 per week worse off by moving into work under these changes than if they had moved into work under the previous arrangements. Again, this reduces the reward for work and creates greater financial disincentives to move into work. That is this government’s so-called plan. According to the NATSEM research, the Howard government is effectively telling people with a disability to work for a return of $2.27 an hour. Again, that is before the costs of work were taken into account.

Last month, the Minister for Employment and Workplace Relations, Minister Kevin Andrews, announced that the government had—and can I say that this was obviously under some pressure—set a threshold for the return from work that a parent would need to gain in order to be required to accept a job. If you missed this announcement, it is not surprising. The announcement was made on the afternoon when the nation’s attention was squarely focused on the East Timor deployment. But when you see the detail of Minister Andrews’s announcement, his motivation for burying it is patent. He decreed that parents would have to accept jobs that left them just $50 a fortnight better off from work, after the costs of working, such as income tax, loss of income support, clothes, travel costs et cetera, had been taken into account. Minister Andrews can complain about Labor’s response to this all he likes, but the maths of his position are quite simple: $50 a fortnight is $25 a week. If parents are being asked to work for 15 hours for a net gain of $25, they are working for an effective return of $1.66 an hour—$1.66 an hour! That is what this government is telling parents they will have to work for under these extreme welfare changes.

It gets even worse for people with a disability, who have no such threshold. The government has not yet indicated why it is that parents are given a threshold of $25 a week—even if it is manifestly inadequate—but no such safeguard, inadequate as it might be, exists for a person with a disability. Under this government’ policy, a person with a disability will have to accept a job with an even lower return than $25 a week. In fact, a person with a disability could very easily end up paying to work under the government’s changes once you take out the costs of working. What greater symbol of incompetence could there be from this government than promising welfare reform but delivering a policy that makes work less desirable than welfare?

In the recent budget, the Treasurer announced around $37 billion worth of tax cuts and a $10 billion surplus, but he could not find a way to fix this mess. He could not find a way to reverse the damage done to incentive by the government’s welfare changes. It is fair to say that the budget did finally provide some limited financial work incentives, largely as a consequence of the government adopting tax proposals that Labor had outlined over the last year. The new effective tax-free threshold of $10,000 for low-income earners does go some way to improving incentives for those moving from welfare to work and parents returning to work. Despite these changes, however, sole parents and people with a disability will still go backwards when the welfare to work measures are implemented in a few weeks, with their effective marginal tax rates increasing by up to 20c in the dollar.

Since this legislation was rammed through in December, the government has also broken its promise to provide an extra 4,000 places in disability open employment services to help people who are already on the disability support pension to move into work. These places will instead go to people with a disability who are on the dole and are further evidence that the Howard government is not serious about helping people who are currently on the DSP move into work. It does seem extraordinary that the government, after complaining about the burgeoning numbers on the disability support pension, has removed one of the significant measures it pointed to when criticised about the lack of support for existing disability support pensioners. Let us not forget that in last year’s budget this was the group that the Treasurer identified as being problematic—the 700,000-odd people on the disability support pension. For political reasons, those people have been grandfathered. They are not subject to mutual obligations, and now the government is removing one of the aspects in last year’s budget that would have assisted some of those people move from welfare to work.

Of course, consistent with their approach to training and their failure to train Australians is the refusal of this government to encourage people who are on welfare to get training so they can get the skills employers need. Once you are on the dole, you cannot satisfy your mutual obligation requirements by studying or training and you cannot access the pensioner education supplement, which is a payment made to try and assist with some of the costs of studying and training.

This is a point that the Minister for Workforce Participation appears to be somewhat embarrassed about, and when this point is raised she protests and suggests that Labor is incorrect in its views. The fact remains that, under her policies, unless you are going to do the most basic entry-level short course via your Job Network provider, you cannot acquit your Newstart obligations by studying or training. The government response is, ‘There’s nothing stopping you from studying or training on top of working 15 hours a week.’ Perhaps this is all you can expect from an out-of-touch government—out of touch after 10 long years in office. But the reality is that if you are a single parent and you are already working 15 hours a week, that will be challenging enough. It will be very difficult for people to find the time and money to study on top of that. Never mind if you want a better job, never mind that this country has a skills crisis—you still cannot study or train. It is an extraordinarily incompetent set of policy measures.

But then the government says, ‘You can acquit your obligations by studying on Austudy.’ Apart from starting off at about $6 a fortnight worse off on Austudy, you have to study full time, meaning no time for private earnings, so in fact you will be even worse off. Under the welfare changes, you cannot substitute an equivalent amount of study for work. You either work part time or study full time. It is disingenuous in the extreme for the government to claim that you can acquit your obligations with study when you would in fact have to do almost twice as much study as work to meet the obligations imposed on you. This is simply an unrealistic choice for sole parents. It is even more dishonest to make the claim that full-time study acquits obligations when it is clear that the financial penalties are so great for somebody participating in full-time study. There is the loss of income through the slightly lower Austudy rate and, more importantly, there is the loss of capacity for additional private earnings. It is a purely theoretical choice, and it is consistent with this government’s failure to make training Australians a priority.

Finally, of course, there is the ridiculously extreme set of changes that the breaching regime imposed by this government will bring. The government’s own figures are that 18,000 Australians under this regime will go without any income support assistance for eight weeks at a time. They will have two months when they receive no income support no matter what they do during that period, even if they remedy whatever breach of obligation they have engaged in. Of the 18,000 people who will be without any income support for two months, only 4,000 to 5,000, on the government’s own figures, will be eligible for what they call ‘financial case management’, that is, emergency payments for food and shelter. The remaining 14,000-odd will have no support whatsoever and will simply have to hope that the community is more charitable than the government. Only those who are classified as ‘exceptionally vulnerable’ or who have ‘vulnerable dependants’ will be eligible for this emergency assistance through financial case management. And perhaps one of the most extraordinary examples of how extreme this government’s approach is on this front is that it does not consider people who are homeless to be vulnerable enough to qualify for this financial case management.

Of course, we do not know exactly how this breaching regime or the financial case management will be implemented because the government has not made the guidelines public. In just under 2½ weeks this regime will come into place. We still have not seen the guidelines in relation to the financial case management nor have we seen final versions of the social security guidelines. Indeed, after the questioning of the department and the minister through the budget estimates process it is hard for anybody to be confident that this policy and these guidelines are well-developed at all. The social security guidelines, as I said, have not been finalised and made public. In less than three weeks we will see the biggest welfare changes this country has seen in over a generation but we are not exactly sure how they will take place. We cannot say for sure how people will be affected or what their entitlements will be because of the government’s decision to place so many of these issues in the guidelines. It is an astonishingly rich blend of arrogance and incompetence from this government.

This bill does nothing to fix these major flaws in last year’s changes. You cannot fix faulty foundations with a thin coat of paint. I want to make it clear: Labor support real welfare reform that goes far beyond moving people from one welfare queue to the dole queue. We believe people who can work should work, and for those who cannot work we should provide care and respect. Instead, this government’s changes make it harder for people on welfare who cannot work and harder still for those who can.

I just want to remind the chamber that when the legislation that this is amending passed through the House in December Judi Moylan MP made a very worthwhile contribution in the House of Representatives. It is a pity that more of the government’s back bench did not take on board some of the changes she was outlining and some of the views she put. She made the point that Labor had been making all along: that there is nothing wrong with imposing obligations on people, obligations that are reasonable and directed to trying to move people from welfare to work. These are things that Labor can support. These are things Labor has argued for. But the core of the government’s changes was a reduction in the income support paid to vulnerable families in Australia. The core of the government’s policy is moving people from one welfare payment to the lower welfare payment. The core of the government’s policy is putting people on the dole.

As Mrs Moylan pointed out, this policy could have been implemented without the reduction in income support. The government could have put in place programs to improve people’s passage from welfare to work. Instead, they went for a cheaper solution: dumping people onto the dole. The most incompetent aspect of this is that, through the effect of tax and welfare withdrawal rates, work will become less financially rewarding under these changes. The government is telling this group of Australians: ‘We are going to pay you less. Worse, we are going to make sure that you keep less of every dollar you earn. But we are still going to call it a Welfare to Work policy.’ What an extraordinary arrogance and what extraordinary incompetence.