Wednesday, 10 February 2016
Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill (No. 2) 2015; Second Reading
Before the House is the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill (No. 2) 2015. I thank members on this side of the House and members opposite for their contributions to the second reading debate. In summing up the terms of that second reading debate it is appropriate to note first of all that this bill operates in conjunction with the original Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015 and, in combination, introduces a package of new reforms which the government believes are designed to support families whilst also finding the appropriate balance between the outcome of supporting families and the outcome of encouraging parents' maximum participation in the workforce.
The two bills anticipate the withdrawal of the measures relating to family tax benefits from the 2014-15 budget and, in their place, propose changes which focus squarely on principles of structural reform of the social welfare system by simplifying the payment structure of family tax benefits. At the same time the bills focus additional assistance to families at the points in time in the arc of a child ageing when they need it the most. In that sense they are reforms we consider are fiscally responsible.
Critical to the contextual consideration of the present measures is to note that the new package has been introduced squarely in order to pay for the Jobs for Families package. That is to say that these reforms, which involve savings inside the family tax benefit system, are designed to garner enough savings to both pay for sweeping reforms to the childcare system and also make a modest contribution to budget repair. So the package contains the required savings from family payments to offset the additional investment in the childcare package, and it is that investment in the childcare package which will help families and encourage workforce participation.
The government believes that workforce participation is fundamental for creating prosperity, which in turn allows families to create a better life for themselves and for their children. That is why this government places an emphasis on the importance of child care—which, has been noted, 165,000 Australians say is of critical importance in order for them to return to work or indeed to increase their work hours and thereby grow their household wealth. While the family payments structural reform set out in this bill will pay for the Jobs for Families package and those reforms to child care, it will also have the effect of simplifying the family tax benefit system and provide more money on a fortnightly basis to those families who need it most as well as ending payments which in all rational assessment are no longer fit for purpose. So the government is increasing the fortnightly payment rates of family tax benefit part A by $10.08 for each FTB child aged up to 19 years in a family. That measure is worth an extra $6,000 over the lifetime of the child and it means that around 1.2 million lower income families, including income support families who receive family tax benefit part A for around 2.2 million children, would receive higher fortnightly payments commencing 1 July 2018. The increase in that fortnightly payment component FTB would help families better manage their day-to-day budgets by providing them with timely, regularised assistance when they need it the most.
The government would also provide an additional $10.44 per fortnight for under-18-year-old youth allowance recipients who are living at home, bringing the payments to the same standard rate as a family tax benefit part A child aged between 13 and 19. It must be noted that aligning those two rates of payment is in itself part of needed reform to the system and particularly it is reform to processes which are required to simplify payments where possible. These reforms will, amongst other things, avoid confusion for families and make sure there are no perverse incentives for any family to change payment structures.
Just as workforce participation is a key to growing wealth, obviously educational attainment is very important to attaining employment, and the government understands this and is increasing the fortnightly rates of these payments to encourage children to stay in school. This is fundamental to giving children the best possible start in life so that they are assisted to become productive, contributing members of our society.
Importantly, this alignment reform will also flow on to people who are on the disability support pension under the age of 18, special benefit and ABSTUDY, so that these changes will, cumulatively, cost around $584.2 million over the forward estimates. So these are increased payments, in excess of half a billion dollars over the forward estimates.
The changes, it must also be noted, are based squarely on the very reasonable and fair recommendations that were contained in the McClure reform report. They simplify the social security system by making it easier for parents and their older children to navigate the system in order to get the assistance appropriate to their circumstances.
Having noted what part of this bill occasions extra spending on the part of the government, it is of course appropriate to acknowledge, as we do openly, that the bill is also designed to engender savings over the out years, which savings will pay for reforms in child care and also make a modest contribution to budget repair. So the bill will also provide for the phase-out of both the family tax benefit part A supplement and the family tax benefit part B supplement. The part A supplement will reduce from $602.25 a year from 1 July 2016 to $302.95 a year from 1 July 2017. The part B supplement will reduce to $302.95 a year from 1 July 2016, then to $153.30 a year from 1 July 2017, and then both supplements would, under the terms of this legislation, be withdrawn from 1 July 2018. That measure will save $4.1 billion over the forward estimates.
There is obviously disagreement as to whether or not that is a fair and reasonable measure. The government certainly considers that it is—and, indeed, it is a sensible reform which not only saves the government money inside the family tax benefit system, in order to allow for reasonable expenditure on the jobs for families package, but also has the effect, in combination with the changes to child care, of encouraging workforce participation. And of course it contributes to budget repair. It certainly allows for the better targeting of spending and indeed it allows for expenditure to be reconfigured and applied through the childcare system, so that we can measure the positive outcomes of that expenditure in terms of increased workforce participation as well as it contributing to budget repair.
Those supplements were introduced to be used and for the specific purpose of being used as an offset for potential family tax benefit overpayments that would arise because someone had falsely—though more generally incorrectly or by way of underestimation—put their family tax benefit annual income at a rate which was incorrect. The Australian tax office is introducing a single-touch payroll system—a system which will allow for very accurate reporting of income by 2018-19, and the changes will significantly reduce the problems of debts arising in the family tax benefit system. It should be also noted that those payments were designed at the time in response to the fact that the amount and number of debts that were occasioned in this area were larger, and that they have indeed decreased over time. But we note that, with single-touch payroll, that is a problem which will largely be solved. So crucially, again, these changes are consistent with the critical recommendations of the McClure review to reduce the number of ill-targeted and convoluted supplements that are layered into the system. McClure emphasised that there are far too many payments and supplements. The measure will further reduce the number of supplements in the system. The question clearly arises as to whether or not supplements designed to pay debts—a problem which we think can, in large part, be solved by technology in the near future—remain fit for purpose.
The third measure in this bill will introduce a new rate structure for family tax benefit part B and make other amendments to the rules for part B from 1 July 2016. Firstly, the maximum standard rate will increase by $1,000.10 per year for families with a youngest child under 12 months of age. That measure provides a greater degree of choice and support for families when their children are very young, and it recognises the importance of families having choice in how they wish to spend time, and the extra costs occasioned when a child is very young—under the age of one year. The new family tax benefit part B rate of $1,000.10 per year would be made available for single parents under the age of 60 with a youngest child aged 13 to 16. Eligibility for single parent families under the age of 60 would cease at the end of the calendar year of the youngest child turning 16. That measure would save $781 million over the forward estimates.
What I should note here is that—and we thank the opposition for it; the Labor opposition supported the cessation of family tax benefit part B for two-parent families when the child turns that trigger age—in this bill we would also be seeking for that payment to end for single-parent families. That is of course all families across the income spectrums that are contained in the family tax benefit system.
It does raise, with respect to the salient point of fairness, the question of why it would be the case that the opposition would agree that it is fair for a two-parent family to have FTB B cease at the youngest child turning 16 but that it is somehow unfair for a single-parent family to have the same rule applied even though that single-parent family may be in precisely the same financial circumstances. We understand that these are not the simplest of measures and they are challenging, but to argue that two cases should be treated very differently simply because of the number of parents in the family does not seem to meet with best conditions of fairness or equity.
The combined effect of this bill and bills that would relate to child care is to encourage greater workforce participation as children enter secondary schooling. At the same time, the government of course recognises that it is sometimes challenging for parents and single parents to transition to work when their youngest child turns the secondary schooling age. But it is also the case that such families are provided with additional appropriate assistance to aid in their preparation to re-enter the workforce.
The government has of course listened and it understands and recognises that grandparent carers and single parents who are 60 and over take on a different type of responsibility for caring for children when they are required to do so. They are also less likely to be working, or are, indeed, more likely to be retired—though sometimes the figures show that there is still a very high degree of effort and ability to work at those relevant ages. Nevertheless, that is why we are exempting those two categories from these reforms.
So the reforms, we think, are measured and fair. They represent a modification, albeit a slight modification, from the reforms brought in after the 2014-15 budget but a very substantial change to the 2014-15 budget itself. The reforms are a critical part of efforts to enhance the long-term sustainability of the social security system. The government is taking difficult but proactive steps to ensure that the system is affordable, not merely now but for future generations.
So, in summary, the package of family tax benefits and dependent youth measures enhance the support for families with their day-to-day living expenses. It helps them support children from birth through to education and then transition to independence. The increase in the day-to-day support has been achieved through reforming the supplements and increasing fortnightly payments, including aligning the rates of youth payments. The cessation of the end-of-year supplements over time is also allowing for the payment of and funding for sweeping reforms in child care. Together, the revised package demonstrates the government's commitment to assisting families in a balanced, fair and appropriate way which is sustainable. The reforms provide additional assistance to families when they need it most, they support family choice to spend more time with their children when they are very young, if they wish to do so, and they recognise that grandparents, grandparent carers and single parents aged 60 and over with children in secondary schooling have a somewhat more limited capacity to increase workforce participation.
At the same time, the reforms improve the sustainability of the family payment system such that they ensure that we can achieve three very important goals: first, continue to assist families in raising their children over the long term and to do so in the long term without the necessity to borrow funds to do that; second, fund the childcare reforms designed to enable and encourage greater workforce participation; third, continue the deservedly needed process of simplifying both the family tax benefit system and the overarching social security system, consistent with the recommendations of the McClure review, which highlighted the unworkability of the system that maintains 20 main payment types with in excess of 50 supplement categories—indeed, 55 when we came to office. These measures are sensible and practical. They are aimed at ensuring the sustainability of the social security system, but particularly the family tax benefit system, the guarantee that payments are targeted to those most in need, and they offer sustainability and fairness in terms of the way in which they provide support but also allow for the full funding of very needed reforms to the childcare system in Australia. On that basis, I commend the bill to the House.