Monday, 8 February 2016
Social Services Legislation Amendment (Family Measures) Bill 2015; Second Reading
I speak tonight on the Social Services Legislation Amendment (Family Measures) Bill 2015. Labor will not oppose the measures in this bill. We do accept the task of budget repair and of course we always have. But what we on this side of the House believe is that budget repair needs to be done in a fair and equitable way. We think this task can be pursued without punishing those Australians who are already struggling to make ends meet. This has been our fundamental guiding principle since the Liberals handed down their disastrous 2014 budget.
Since then, we have agreed to sensible savings where they do not offend the fundamental principles of fairness. We agreed to reduce the cut-off for family tax benefit B from $150,000 to $100,000 a year. More recently, we agreed to changes to family tax benefits when we thought they were fair, and we opposed the government's reckless attempt to reintroduce the baby bonus as part of the Prime Minister's deal with the National Party. Today, we will agree to some further savings. In fact, in total, since the 2013 election, there are more than $9 billion in savings that Labor have supported—$9 billion in the area of social services and child care. These savings have not been easy, but we do understand that they are necessary and we will take them, as I said, when we think they are fair.
The task of spending restraint is one that we do take seriously. It is the case, of course, that we differ from the government in a fundamental way: we do not agree that the cuts should hurt vulnerable people, and we make no apology for that. So we will continue to fight the government's unfair cuts to families, their harsh and unfair cuts to pensioners and their cruel cuts to young job seekers. I am sorry to say these cuts are still in the parliament and they are still in the budget.
Just today, two other bills in the social services portfolio are before the House, and Labor will not be supporting those bills. We are strenuously opposed to the very harsh cuts to family payments that will leave some Australian families around $5,000 a year worse off—cuts that will leave around 1.6 million families and three million children worse off. We are also opposed to the government's cuts to pensioners, its scrapping of the pensioner education supplement and the education entry payment. These cuts are harsh, they are unfair, and we will fight them all the way to the next election. But, as I said, we are prepared to accept the more than $200 million in savings outlined in this bill today.
This bill does two things. Firstly, it will reduce from 56 to six weeks the period during which family tax benefits can be paid to an individual who is outside of Australia or in respect of a child who is outside of Australia, starting from 1 January. This will deliver a saving to the budget bottom line of around $42.1 million. It is important to note—and I know some people have been concerned about this—that portability extension and exemption provisions that allow longer portability under special circumstances will continue to apply. This includes, for example, situations of illness or accident that prevent people from returning to Australia.
Secondly, this bill will abolish the large-family supplement from 1 July
The supplement is part of family tax benefit part A and is currently paid at the rate of $324.85 a year, or $12.46 a fortnight, for the fourth and each subsequent FTB child in the family. This represents a saving of $177.3 million over the forward estimates. Cessation of the supplement is consistent with reports from NATSEM and recommendations from the Henry tax review in 2010.
Those opposite like to say with some regularity that Labor never cooperates with them when they propose changes that are in the national interest.
Mr Whiteley interjecting—
We hear, right on cue, from the member for Braddon, who says that repeatedly. I will remind him, yet again—I know he does not like to listen to facts, but these are the facts—Labor has actually supported around $9 billion in savings in the social services and childcare portfolios, so any argument that we are not up for sensible conversations about fair savings is wrong.
We should not forget the Abbott-Turnbull Government's record on budget repair. The deficit has doubled on their watch over the last 2½ years, despite all the rhetoric about a budget emergency, which most of them do not mention any more, but which we heard so much about in the early period of their government. Despite all the harsh cuts, this government under Mr Abbott and Mr Turnbull have actually doubled the deficit. That is an extraordinary outcome. For the purposes of this bill, we will support these changes and, as I said, we will support other changes where we see them to be fair.
Our economics team has been leading the debate on tax reform, laying out fair, responsible plans to tax multinationals fairly, reduce unfair superannuation tax concessions and increase the tobacco excise. These are responsible measure, and we have been debating them for some time.
Opposite, in their so-called tax debate, we see only complete disarray when it comes to tax reform. They do not seem to know what they stand for or what to do. They, especially the current Treasurer, spent all last year arguing against changes to superannuation. Now it looks like they might even embrace what we are doing. We know they desperately want to increase the GST, although they do seem to have got the wobbles on that change as well. The government is in complete and total chaos when it comes to tax reform. So much for the new economic leadership that the Prime Minister promised the Australian people when he knifed the member for Warringah.
In summary, Labor will support this bill today but we will not compromise on fairness, particularly when it comes to Australian families. We want to put people first. It is because of Labor that the Turnbull government has backed down on two harsh cuts that would have hurt families. We protected families from their plan to freeze family tax benefit rates and certain eligibility thresholds, and because of Labor's pressure the Turnbull government finally scrapped its appalling cuts to grandparent carers. We have managed to protect those people so far, and we will keep up the pressure to protect families from further unfair cuts.
Today I stand to support the Social Services Legislation Amendment (Family Measures) Bill 2015. In doing so I am supporting the government's strategy to bring expenditure on social services under control and to ensure the system's sustainability and longevity.
I am sure there are very few who would disagree with me when I say that Australia's social services system is one that we as a nation can be very proud of. I believe we Australians care about each other. We help those in need and we look after each other. To be frank, we are the envy of the world. I suspect that this is one of the driving reasons behind the decision of so many people to bypass many other countries to get on unsafe boats and seek refuge in our country.
Our social services system reflects this attitude of caring and looking after one another. Our social services system is comprehensive. On average, approximately one-third of Australians are accessing some form of government payment of subsidy. However, with such a broad system comes a degree of overlap, complexity and, dare I say it, more often than we would like, noncompliance. For the average Australian this makes it challenging to understand which payments are eligible for, how much they can receive and what details of each payment might be. I am sure that members on both sides of the House are familiar with the scenario where constituents come into our offices with an armful of Centrelink paperwork. They are at the end of their tether because they cannot navigate the complex labyrinth of social security payments in Australia.
The scale of our social security system makes it one of the strongest and most comprehensive systems in the world, and it is a financial safety net that exists for Australians that is one of the greatest strengths of our society. If we are to have a social security system that is fair, it must also be fair on future generations of Australians. It is not always just about us. More often than not, it is about those who come after us. A system that is not sustainable, costs hundreds of billions of dollars a year and is the fastest growing area of government expenditure is of concern. It is not fair on our children or our grandchildren, who will be saddled with debt after years of what we all now know as Labor budget blow-outs. In the years that Labor was in government, from 2008, Labor delivered deficits totalling $191 billion. If the budget were to have been left on the trajectory that Labor set it on, an additional projected deficit of $123 billion over the forward estimates would have increased that deficit further.
I will digress for a moment and refer to the previous speaker, the shadow minister, who got to her feet so proudly and said that she has had enough of the members of the government saying that the opposition, the Labor Party, will not support our savings measures. I have never said that they will not support them; I have mostly said they will not support most of them. She got to her feet very proudly and said, 'We've helped to save $9 billion.' That is over the forward estimates; it is not today, tomorrow or this year. It is over the next three or four years.
Let me reiterate: in the six or seven years that they were in charge, there were $191 billion of deficits. On top of their projected deficits, if we had not fixed it up or tried to fix it up without any help from them, it would have been another $123 billion. So it was $123 billion worth of deficits and she stands so proudly at the podium to declare, 'We've helped save $9 billion.' Thank you, but whoop-de-do! There is a lot more hard work to be done. When the hard work needs to be done, you look over your shoulder to have a look to see who is behind you and you will not find the Labor Party of Australia, that is for sure. We simply cannot continue to spend taxpayers' hard-earned money in the way that we have been, led obviously by the Rudd-Gillard-Rudd government. We cannot continue it. It is unsustainable.
The bill before the House today, combined with other bills that have come before the House, seeks to simplify our social security system and bring the social security bill to a level that is sustainable into the future. This bill implements two key measures: firstly, the portability of the family tax benefit will be reduced to six weeks and, secondly, the large family supplement will be removed. Both of these measures are carefully planned and implemented, with targeted exemptions that I will detail.
In reducing the portability of family tax benefit part A and payments that rely on family tax benefit B, eligibility will be paid for six weeks to recipients who are outside of Australia. This measure will save $42.1 million across the forward estimates and, importantly, there are safeguards in this change to protect families who are overseas advancing Australia's interests. For example, members of the Australian Defence Force or Australian Federal Police who are deployed overseas will not be impacted by this change. Exemptions extend to those who are unable to return to Australia for a valid reason. The Secretary of the Department of Social Services will retain discretionary ability to extend the six-week portability period to up to three years.
It is made clear by this legislation that, for the payments to continue, the receiver of the payment will need to demonstrate a strong connection to Australia. I would say that I would doubt there would be too many Australians who would disagree with that eligibility criteria. The social security system is a residence-based system and is designed to help Australians living in Australia with the costs associated with that living in Australia. However, to maintain fairness and equity in the system, safeguards are in place to ensure that those who are serving our country overseas or those who cannot return through no fault of their own are not unfairly disadvantaged. This is a good part of this change.
I support the changes to the portability of social security payments and, as I said in the House in speaking on the Social Services Legislation Amendment (Budget Repair) Bill just last week, the standard we apply in our social services legislation should also extend to past politicians' pensions, as far as I am concerned. If we are to reduce the portability of this to six weeks, we should also reduce the portability of past politicians' pensions. I have written to Mr Porter and Mr Cormann asking that they consider this. I support fairness—I am speaking on it here today—and I support equity for Australians. I strongly believe that the standards applied should be applied to all Australians.
I do not see how it is fair to allow former prime ministers in particular to pretty well pack their bags, leave the country and still be able to collect their pensions at the expense of the Australian taxpayer. I think if we are going to talk about fairness and equity, that is something that we should be looking at. No-one is suggesting that they should not travel overseas and fulfil the role that we would seek them to fulfil as past prime ministers from whatever side of the parliament. But when someone packs their bags and basically moves to New York or takes up a professorship in a university somewhere around the world and kisses us goodbye for a year, half a year or two years, I do not see the fairness in that. I have written—as I have said—to Ministers Porter and Cormann, seeking them to at the very least have a look at that.
The second measure in this bill is the cessation of the large family supplement, which will save the taxpayers $177.3 million over the forward estimates. Whilst it is a small component of the family tax benefit A, the total savings are significant. This government is committed to ensuring that the social services system is as efficient and cost-effective as possible. There has been consistent evidence from the National Centre for Social and Economic Modelling that each additional child in a family costs less than the previous children. As families grow, some of the costs incurred in preparing for the first child do not recur.
This may be a particular matter of interest to you, Deputy Speaker Vasta, as your own family grows. I am sure that you will be pleased to hear that it gets cheaper. They are cheaper by the dozen! You will only have nine to go! It has been reported in the most recent research findings that a family's second child costs 83 per cent of the first, while the third child costs 69 per cent of the first. Mr Deputy Speaker and anyone else who might be interested, you go on long enough and you get the last one for free! They would cost you nothing, if that is true!
This clear trend in costs to families makes it quite clear that this change is both sensible and an improvement to the social services system. Removal of the large family supplement has had significant support from a number of review bodies, not least to mention the Henry tax review; the National Commission of Audit; and the McClure reviews, of which there have been a couple. They all support the removal of this payment. As the McClure review stated:
The removal of one supplement helps to simplify what is such a complicated system for families.
The removal of this payment is one small step towards making our social security system simpler, fairer and better targeted so that the people who it is designed to support can better understand and access it.
Those opposite could sit there and oppose the bill, but thankfully they are not doing so on this occasion by the sounds of it. But when they have their constituents ask them why the social security system is complex and not understandable, I hope that they will reflect on those other bills that they have refused to support and try to offer an explanation to their constituents as to how this government or any government may in fact fix the problems. But I do not understand why they would choose not to assist us in that.
In 2015-16 the government will spend approximately one-third of its total expenditure on social services, of which approximately $20 billion—that is, $20,000 million—will be spent on family tax benefit payments. The total saving of around $200 million that this legislation provides represents just one per cent of the $20 billion that we are talking about with family tax benefit payments. I believe this is a very reasonable and fair measure when compared with the generous payments that will continue to be available to families.
If the Labor P arty had not spent so much money and built up such high levels of debt, these and the many other measures we are attempting to address would not have been be necessary. The reality is that the Labor debt mess means we are spending $100 million per day more than we are receiving.
Mr Feeney interjecting—
The member opposite has no shame. He shakes his head as if it were not true. Well, it is true. Every day, we as a country are spending in excess of $100 million more than we are receiving. Every day, we need to pay well over $30 million in interest payments alone just to cover the debt that was wholly and solely accrued in the time of the Rudd-Gillard-Rudd government. They started with a clean sheet, with money in the bank, and we ended up in a debt and deficit disaster. These savings measures that I stand to speak on today are appropriate, fair and reasonable. They allow us to take steps toward reining in the debt disaster that Labor left us. We cannot continue to spend the way the Rudd-Gillard-Rudd government did. Despite every effort by those opposite to stand in our way, we will continue to do what is right and prudent for the people of Australia and those that will come after us.
I commend the bill to the House.
I rise with pleasure to speak in support of the Social Services Legislation (Family Measures) Bill 2015. This bill seeks to amend the New Tax System (Family Assistance) Act 1999. There are a number of measures in this bill, but I think it is first worthwhile to reflect on the quality, the breadth, of our social security system, which is regarded as one of the best social support systems in the world. This bill seeks to make a number of changes to the act. It seeks to reduce to six weeks the period during which family tax benefit part A and additional payments that rely on family tax benefit eligibility will be paid to recipients who are outside Australia from 1 January, 2016. This bill will also cease the Large Family Supplement from 1 January, 2016.
The government acknowledges the important role of parents in the primary care of their children and maintains a wide range of programs and payments to support them. Currently, the government spends a substantial amount of money in three main areas of family support each year, including around $20 billion in family tax benefits, around $6 billion in childcare benefit and around $2 billion in paid parental leave. As I said earlier, the depth and breadth of our social security system provides enormous support to people in our community who require it. I think all of us in this House recognise the importance of maintaining the integrity and longevity of that system.
This government is committed to supporting parents in caring for their children. However, it must be balanced to ensure family assistance and social security payments are well targeted and sustainable into the future. In my electorate of Forde, there are thousands of hard-working families who rely on government programs and payments to support them as they raise their children. I want to assure families that I will work with the government to ensure we provide a sustainable family tax benefit system that will continue to support them well into the future.
The Social Services Legislation Amendment (Family Measures) Bill 2015 contains two measures that are designed to assist with the necessary task of budget repair to get us back on a steady path to surplus as well as ensure government support for families can be maintained for the long term. As part of these measures, the government will reduce from 56 to six the number of weeks FTB part A can generally be paid when a family is overseas. This measure is expected to save Australian taxpayers more than $40 million over the forward estimates. More importantly, it ensures that our family tax benefit payment system meets its objective of helping families to raise their children in Australia.
Currently, family tax benefit part A recipients who are overseas can receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks. Strengthening the family tax benefit residence requirements will better ensure family assistance payments are targeted to those families who have a strong residence connection to Australia. Importantly, this change will not affect members of the Australian Defence Force or the Australian Federal Police who are deployed overseas; individuals assisted by the Medical Treatment Overseas Program; and those unable to return to Australia for a specified reason such as a serious accident or natural disaster.
Family tax benefit recipients who stay overseas for more than six weeks will have their payment stopped. If an individual stops being eligible for family tax benefit under the amended portability rules and returns to Australia within 13 weeks of the end of their portability period, FTB will be restarted where appropriate without a new claim. This measure will align the portability rules for family tax benefit part A with those of family tax benefit part B and most other income support payments.
The second measure in this bill will cease payment of the large family supplement from 1 July 2016. The supplement is a component of the family tax benefit part A and is currently paid at the rate of $342.85 per year for the fourth and each subsequent child in the family. Modelling by NATSEM in 2002, 2007 and 2013 consistently found that each additional child in a family costs less than the first child. In 2010 the Henry tax review recommended that the large family supplement be abolished, as the policy rationale behind the payment was not strong. The National Commission of Audit reiterated this position in 2014 by stating that the basic rates of family tax benefit part A were sufficient for the cost of raising children. More recent research has found that on average a second child costs families 83 per cent of the cost of the first child, while a third child costs families 69 per cent of the cost of the first child. The reason for this being that families experience economies of scale in which fixed costs are spread among more children. This research highlights the appropriateness of the modest change to the family tax benefit part A payment structure, which was recommended by the Henry tax review and the National Commission of Audit.
Cessation of the large family supplement in 2015-16 will affect approximately 383,000 families. Nearly all families who lose eligibility to the large family supplement will continue to receive family tax benefit part A, which provides assistance to families in meeting the day-to-day costs of raising their children. Cessation of the large family supplement is expected to save Australian taxpayers more than $175 million over the forward estimates. The measures in this bill will provide ongoing savings to the budget. It is imperative that these measures are undertaken as we continue to focus on the process of repairing the budget after six years of profligate spending by those opposite.
Importantly, this is about ensuring that we have a social security system that is sustainable in the long-term to supports our families and those in need—those who need that assistance, not just the current generation or those currently receiving those payments but those who in the future require this support and assistance. It is so we on this side of the House—or those opposite, if they are ever in government again in the next little while—have the financial capacity to support those in our community who need that support and to achieve the outcomes that our social security system was ultimately set up for—to support those most in need. I commend this bill to the House.
I am pleased to rise tonight to speak on the Social Services Legislation Amendment (Family Measures) Bill 2015, which introduces two measures. It makes changes to the portability of the family tax benefit and it makes changes to the large family supplement. Why are these changes necessary? The simple reason is that this country had six years of reckless and wasteful spending by the former Labor government, which ran up debt and deficits year after year. Even after all the hard work this coalition government has done and even after all the savings we have made and the heartache we have gone through to make those savings, with expenditure that has been locked in we are still, as the member for Braddon noted, borrowing $100 million every day. In fact, here in Canberra it is now a little after 6.30 in the evening. In the six-hour period between 6 o'clock and midnight tonight we will need to borrow another $25 million just to keep government functioning. It is completely unsustainable for us to continue in this fashion.
In this debate the member for Jagajaga talked about the fundamental principles of fairness. It is completely unfair to future generations of Australians if we continue to borrow money and leave them with higher interest repayments and debt. It will mean they will have a higher rate of taxation and a lower rate of government services because this generation could not balance the budget. That is why the steps in this bill are necessary.
I get annoyed when I hear members of the opposition yell out from the dispatch box. During this debate we heard the member for Batman, who is currently sitting there, and the member for Jagajaga say that the coalition has doubled the deficit. We know the principle behind that. It has been said that, if you repeat a lie often enough, people will come to believe you and you may even believe it yourself. The coalition has done no such thing as double the deficit. This is a complete distortion; it is a fabrication. It is misleading the Australian public for any member of the opposition to make such a claim.
This year, as I said, we are still looking at a deficit of $37 billion. Yet we still have members of the opposition whingeing and complaining when we try to do the hard yards, making the cuts we need to bring this budget back to deficit.
During this debate the member for Jagajaga said that Labor's proposed tobacco excise increases are responsible. I would like to see smoking rates in this country reduced to zero. But Labor's proposal to raise $47 billion by increasing the tobacco excise means that Labor plans to slug smokers with a tax of another $20,000 per smoker—that is, $20,000 extra tax paid by the smokers of this country. That is Labor's grand proposal. They borrow tax, borrow some more and spend. Do they not have any understanding of—if you try to put an extra $20,000 tax onto smokers of this country—what that will do to the black market for cigarettes? Have they given any thought to that? Obviously not, from what we have heard from members of the opposition.
Onto the measures of this bill. Firstly, it addresses the portability. This shows how generous we are with our social security and welfare payments in this country. Even after this, you can take your family on holiday overseas and you will still receive the family tax benefit for up to six weeks. This is even the cut after this bill. The primary purpose of our family assistance payments should be to assist Australian families raising their kids in Australia. Yet we have portability that allows parents to take their children overseas and obtain this for six weeks.
If we do not make these cuts now, the cuts we will need to make in years to come will be much harsher. Already, we are paying—every single year—$13 billion in interest on Labor's reckless and wasteful spending and the debt it incurred. I look around my electorate and see the things we need to do as a government. And to think that $13 billion, this year, has to come out of government revenue and simply go to paying the interest. It should make us all sick. But that is what we have to do.
The important thing to note in this bill about portability is that it does not affect our Australian Defence Force or our Australian Federal Police deployed overseas. They are exempt from this. Also, the Secretary of the Department of Social Services retains discretion to increase the six-week time frame for up to three years. Where there are circumstances of family illness or tragedy, the secretary has discretion to extend it.
The second change made to this legislation is to cease the large family supplement. Let me make it very clear so there is no misunderstanding what this is. Everyone will still receive a per child family tax benefit payment. But there was an additional payment for a family that had a fourth and subsequent child. That is being removed. If you look at the cost base, for a family, for each child a family has the cost reduces. In fact, the National Centre for Social and Economic Modelling found that this is exactly the case: for each additional child, the costs become less. They found that on average the second child costs 83 per cent of the first child. The third child costs 69 per cent of the first and so on. There are almost economies of scale, if you would like to say so, for the number of kids you have. I am sure that when you get to a certain number diseconomies of scale may well cut in.
These are, simply, small targeted measures that we need to take. We would rather not take them. I am sure that everyone here who sits in this parliament would not like to make any particular cut whatsoever, because we know there are people who would be affected by them. But if we are to do our jobs as members of parliament—when it comes time for us to step aside from this House and look back at the work we have done, we want to be able to say that we fought to try to balance the budget, that we did not leave future generations with that debt from our spending. We still have a long way to go.
These are just two small measures: changes to the portability of the family tax benefit, a saving of $42 billion over the forward estimates; and the cessation of the large family supplement, a saving of $177 billion. They are very significant amounts of money but only a small drop in the bucket of what we need to do to get this budget back to balance. It is something we all need to work on and take responsibility for without the harping, whingeing, whining and misleading statements from the opposition. With that, I commend this bill to the House.
It is good to have this opportunity to speak on the Social Services Legislation Amendment (Family Measures) Bill 2015. When we look back upon what has happened in the history of our country since 2007, it really does set the scene for what has come to pass. As the member for Hughes put so well, it has come to this. It has come to someone actually stepping up to the plate and having to make decisions to take these sorts of measures off the table and to modify the measures that are contained here: the portability of family tax benefit and the ceasing of the large family supplement.
Of course, in a perfect world, where everything is in black ink and not red ink, there would be no problem and it would be nice to be able to do it. It would be nice to be able to have supplements all over the place. But this sort of recurrent spending is just not sustainable anymore. We have been put in this situation. We have to look at these sorts of measures and we have to make these sorts of decisions because it is the right thing to do. It is the thing you have to do when you look to the future as a government and when you look at what the future could entail if we did not wind back the spending.
Yes, it is true that, thanks to what has happened in China, iron ore is no longer worth as much as it used to be. It is now maybe back to even less than historical levels, and that is a challenge that faces us. The commodity sector has been very good for this country, and we no longer have those sorts of things to back us up. I remember during the six years of the Labor government they talked about us squandering the benefits of the mining boom. This was when we actually had surpluses before 2007. If we talk about the allegations of squandering the proceeds of the mining boom, Australian people do not need to look that far back—only to the six years between the end of 2007 and 2013, when there was a change of government again.
This is the reality that really does present itself to us now. So when we look at measures like this—savings of $42.1 million for a change to the portability of family tax benefit and around $177 million for the ceasing of the large family supplement over the forward estimates—they are not big figures, but they are important steps. It is a signal to the nation that we are no longer in the situation where we can afford to do these sorts of things, where we can afford to say, 'You can go overseas and you can continue to be paid this sort of money for the more than six weeks that you are away,' with the exception, of course, of those Defence and Australian Federal Police personnel that are posted overseas and people like that. With the exception of those sorts of people, no longer can we be in the situation where we can afford to keep paying, and I do not think that it is unreasonable either. I do not think the Australian people can look out there and say, 'People should be allowed to go overseas and continue to be paid the family tax benefit under the current arrangements before this bill comes into effect.' I do not think Australians would say that what we are doing here is an unreasonable thing. I think the country knows that we have to take steps to rein in expenditure in the face of much-reduced revenue. So I do not think that it comes as a shock; I do not think it comes as a surprise. It is not as though people are being left destitute by either one of these measures. That certainly is not the case.
It is similar with the ceasing of the large family supplement. It is not as though each child does not attract a per-child payment. It is not as though that is not the case. But this large family supplement was something on top of that The point has been well made regarding the cost, and I do not for a moment suggest that the cost of raising four, five or six children is small by any means. But it is not as though the cost becomes exponential. The National Centre for Social and Economic Modelling in 2002, 2007 and 2013—and even the Henry tax review—came to the conclusion that the additional cost of raising those additional children is not 100 per cent as you have more and more children. There is no doubt that it is not easy—it is clear that it is not easy and the costs are still there—but, in fact, there is no real justification for including $177 million extra of this recurrent expenditure that we can no longer afford in the budget bottom line. As I have said before, in a perfect world, where there is a surplus every year, you might start looking at these sorts of things. I suspect that, in the future, when we get things back into the black, if there were expenditure to be made, as a first priority, it would be more along the lines of things that are going to have some tangible, economic benefit that is going to produce jobs and increase the economic output of the country. But, as it currently stands, we are not in a situation where these sorts of matters can be carried on.
I certainly endorse the substance of this bill. These savings are the savings that need to be made. These savings are important to be consistent with the circumstances that the country is now in, and I think the Australian people absolutely will support this. They do think that something needs to be done, and these measures are the measures that are required to bring things back to a more sustainable level of spending. We still have a long way to go—there is no doubt about that—with regard to balancing the budget. Much has been proposed on the savings side by the government. It is sad and unfortunate that the approach is not agreed with by all within the parliament. There are obviously many people who think that things can carry on and that increasing taxes on smokers is the way to bring things back into balance, but what we actually need to do is concentrate on reining in expenditure, not increase taxes.
To conclude, these two measures are important. We must achieve the savings. It is hard to believe sometimes, when I talk about $42 million and $177 million, that they are in some way modest or small numbers, but they are most definitely important numbers. It is vital for us to work to achieve these sorts of savings. Again, I believe that the Australian people, when they look at the substance of these measures, will see that these are good things to support and that, ultimately, they just must be done.
Without further ado, I certainly endorse this bill and commend the bill to the House.
I rise to speak on the Social Services Legislation Amendment (Family Measures) Bill 2015. I advise the House that I must be getting old—I must be getting old because I am about to launch into an 'In my day' tirade. When I was young, family life was reasonably simple. When I was young, it was a reasonably simple thing to raise a family. It was reasonably simple to do anything. Most pushbikes did not have brakes. You did not have to wear boots or helmets or pads to play cricket. You went to school barefoot, and away you went. It was so simple.
Families have become so complicated in our lives, and there is no greater measure of the complication in which we see our lives than this bill. Can I go through these points. We acknowledge the role of parents in the primary care of their children and maintain a range of programs and payments to support them. Is that necessary to say? Do we really have to be in that space? Currently, the government spends a substantial amount of money in three main areas of family support each year: around $20 billion on family tax benefit, around $6 billion in childcare benefit and childcare rebate and around $2 billion in paid parental leave. If I had a pin board behind me, we could, with red woollen thread, connect the dots and show how complicated this map actually gets—and we wonder why we are afraid of reform in this country.
The government's commitment to supporting parents in caring for their children, however, must be balanced with the responsibility to ensure that family assistance and social security payments are well targeted and sustainable into the future. The Social Services Legislation Amendment (Family Measures) Bill 2015—this bill—contains two measures that are designed to assist with the necessary task of budget repair required to get us back on a steady path to surplus and ensure that government support for families can be maintained into the future. This is the whole thing. Basically, from the Whitlam government all the way forward, we have been driving down the road as parliaments, as governments and as oppositions throwing money out of the window at everyone and wondering why we are not getting the results we should.
The government will reduce the number of weeks that FTB part A can generally be paid when a family is overseas from 56 weeks to six weeks—known as portability. Currently, FTB part A recipients who are overseas can receive their usual rate of payment for six weeks and then a base rate for a further 50 weeks. Strengthening family tax benefit residence requirements will better ensure family assistance payments are targeted to those families who have a stronger residence connection to Australia. Isn't it amazing that we should have such a concern that our tax dollar will be spent in Australia? I think that is a wonderful thing and it is a great goal that we should have as a government to ensure that the tax dollar is being spent inside Australia. Importantly, this change will not affect individuals who are members of the Australian Defence Force or Australian Federal Police deployed overseas—thank goodness we have that common sense. The Secretary of the Department of Social Services will retain discretion to increase the six-week time frame up to three years. Family tax benefit recipients who stay overseas for more than six weeks will have their payment stopped. If an individual stops being eligible for FTB under the amended portability rules and returns to Australia within 13 weeks of the end of their portability period, then FTB will be restarted where appropriate without a new claim.
This is where, as members of parliament, we sit in our electorate offices and people come to us, trying to work their way through the social security system. It is so convoluted. The poor staff sitting over at Centrelink have to try and work these things out. Surely, we can just get down to something that is basically simple.
This measure will align the portability rules for FTB part A with those of FTB part B and most income support payments. It is expected to save Australian taxpayers over $40 million over the forward estimates. That is $10 million a year—all this work to save $10 million a year. When we are trying to bring down the budget deficit from $40 billion, we are bringing in this thing for $40 million over a four-year period. All this work; all this convolution; all this, 'The party of the first part shall now be called the party of the first part'—it should drive everyone in this place crazy.
It ensures our family assistance payment system meets its objective of helping families to raise their children in Australia, whilst noting that overseas business may arise from time to time. The government will also cease the payment of the large family supplement—this is a new one—from 1 July 2016. The supplement is a component of family tax benefit part A, another thing we have to try to fix up, and is currently paid at a rate of $324.85 per year, or $12.46 per fortnight, for the fourth and each subsequent FTB child in the family.
The estimated number of families that will be affected by cessation of the large family supplement in 2015-16 is 383,000. Evidence from the National Centre for Social and Economic Modelling in 2002, 2007 and 2013 consistently found that each additional child in a family costs less than a first child. In 2010, the Henry tax review—and I could go on with this, but can I tell you that I believe the minister is trying to do his utmost here. I believe the minister has really got a big job in front of him. When you consider what our social security bill is—how much we spend on social security—it just beggars belief that we are trying to save $40 million and it beggars belief that we have to work so hard to get $40 million worth of savings across four years in a budget of over $160 billion.
The problem we have is that we have come to this thing where we have complicated the lives of Australians. We have put in all these things just to give money away. For the life of me, I just do not understand why we don't just line up everyone and give them cash. Surely we are better than this. Have we become a society of people just on the make? Is it always what we can get out of something that drives us? Surely, at some stage in our lives, it should be about what we deserve?
This is the whole thing about families and what the government can do. In my city of Townsville we are seeing society break down completely in parts of our community. Where we used to see youth crime as that thing that 15-18 year olds would do—a bit of break and enter or a bit of car theft and that sort of thing; not that I am trying to diminish the responsibility or the tragedy around that—we are now seeing nine- to 11-year-olds stealing cars and participating in youth crime and becoming part of the system. We see police turn up to pick up the 14-year-olds and 15-year-olds and take them off. They see the other three or four children there and their cousins there, and we are not allowed to say anything. We can come up with a system that is so convoluted in handing money out all over the place but we cannot get to the families where there are real problems. This is the problem we have as a society, I think. We have to ask: what is important? What is important is trying to keep the family together and make it the responsibility of the family to keep themselves together.
What on earth is a nine-year-old doing out and about town stealing cars at one o'clock in the morning? I do not care what colour the skin is; the fact that they are out of the place at one o'clock in the morning completely beggars belief. What we have to do is try and instil this thing where people are responsible for themselves. I think this whole social security stuff—the minister is at the table there and I know he has a massive job to do but we have to try and unscramble the egg here. At some stage personal responsibility must play a part in this. At some stage we must be accepting responsibility that our children are out; whether they can afford the best pair of Nike boots or not to go to football should be a matter of what is in our wallet not what is in Centrelink.
My son plays soccer and he wanted to get that brand new pair of Neymar boots with the soft tops all the way to the top—290 bucks! Two hundred and ninety dollars for a pair of football boots for a boy whose feet are growing exponentially every month! But there are kids out there who have these shoes, and it should be their right, but we are complicating our lives here. If we do not get to the stage where we can have the conversation around this—that we are spending $160-billion-plus every year on handing money out the window back to taxpayers, back to people who do not pay tax, back to people who have never participated in raising taxes, back to people who have hidden their money, back to people who have got so convoluted in this that we want to make sure that we can do these things.
So, as a member of the government, I back this thing; anything that saves us anything along the way is fantastic. But we have to participate in reform in this place at some stage. At some stage we have to stand up here and be part of a government or part of a parliament that is going to sit there and be responsible for what we are doing. We have become the society that no longer sees the big picture; all we see is what is coming into our accounts. We must make sure and we have to be better than this.
So I stand here and I back these bills. But, if we are not up for reform here, we should all have a really good look at ourselves and what we are doing in this place. If we are not prepared to make the hard decisions here and if we are prepared to trumpet ourselves and pat ourselves on the back for $40 million worth of savings over four years when we are spending $160 billion, we have a long way to go—a long way to go as a parliament, a long way to go as a government and an even further way to go if we think this matters to families. I thank the House.
It is my duty now to provide some summing up to the contributions in the second reading debate that have been offered by members opposite and by members on this side of the House. As was noted by the last speaker, these are very modest savings measures in the context of the difficult problems that we face. I understand that they are modest savings measures that will be supported by the opposition and I do thank them for that support, although I note that this is one of the very few times in which support for the government's savings measures has been offered. Of course we will accept that support and thank members opposite for it.
As was noted by the previous speaker, the combined savings that are represented by the two measures in the Social Services Legislation Amendment (Family Measures) Bill 2015 are, in context, modest. They achieve combined savings of around $219.4 million over the forward estimates. Of course that is not an insubstantial amount of money, but it is in the context in which it sits that we might describe those savings as modest. To place those savings in context and to place the agreement from members opposite to these two measures in context, we have a situation, as has been noted by many speakers on this side of the House, where in excess of one-third of the Commonwealth budget is represented in the social services portfolio. It represents line items of expenditure that are growing faster than any other line items of expenditure in the entire Commonwealth budget, in a situation where we inherited $190-odd billion worth of cumulative deficits and projected deficits. As Mr Keating has recently said, there is a necessity to restrain growth in expenditure; otherwise, the nation will simply not be able to return to surplus. A failure to restrain expenditure growth in the largest single part of the Commonwealth budget—and, in an unhappy coincidence, the part of the Commonwealth budget which is growing the fastest—means that there is no ability to return to surplus.
Those $219.4 million sit in the context of other savings that have been either proposed by the government and which members opposite are now blocking, or that have been passed but which members opposite say we must restore from banked savings which have not yet been introduced but which members opposite say they will not support, and indeed savings that have been introduced since the 2015-16 budget that members opposite have said they would not support.
And those totals are very large. The savings and revenue measures that have been proposed by the government that are presently being blocked by members opposite total $5.24 billion. Spending decisions that we have made—decisions to restrain expenditure growth that we have made and that have achieved parliamentary passage, which members opposite say they would restore from banked savings, total $30.26 billion. The 2015-16 budget savings measures that the government has announced that members opposite say they will not support total $1.1 billion. Savings since the 2015-16 budget that Labor has said it will not support total $5.57 billion. Added to that list is a $1.22 billion amount representing, astonishingly, savings and revenue measures that were proposed by members opposite when they were in government which they themselves are now blocking.
So, whilst I am thankful to members opposite for their agreement to these two measures, it is not a scenario of enormous glee for the government because, really, should there be much if any debate about these two measures? In the circumstances where it is simply not conceivable that you can return to surplus unless you restrain expenditure growth in the social services portfolio, should there really be any argument about those two measures at all?
Perhaps that question is answered by describing the two measures. The first is with respect to family tax benefit and a range of other additional payments that rely on FTB eligibility for a period of up to six weeks when outside Australia. So the present situation is that family tax benefit part A recipients who are overseas are able to receive their usual rate of payments for six weeks, and then the base rate for a further 50 weeks. So, in effect, a family can leave Australia and receive payments at the usual rate—and then down to a base rate, but payments nonetheless—for a period of 56 weeks whilst outside Australia. The base rate is a not insubstantial amount of money and, obviously, cumulatively, this is where the savings of $42.1 million occur over the forward estimates.
The measure itself can be seen not merely as fair in the context but, I think, as fair in absolute terms—particularly, not just in the context of the budget scenario that we face and the difficult path back to surplus, but also in terms of looking at the portability rules that apply to other payments inside the welfare system. Indeed, this move will align the portability rules for family tax benefit part A with those for family tax benefit part B and, indeed, most other income support payments. So it is consistent with an essential principle: that the primary purpose for family assistance payments is to assist Australian families with the cost of raising children in Australia. Strengthening the family tax benefit residence requirements will better ensure family assistance payments can be targeted to those families who have the strongest residence connection to Australia.
At the same time, the government acknowledges that of course families have business to attend to from time to time overseas. That may involve going on holidays; it may involve visiting family members. But the question here is: what is the appropriate amount of time for which that visiting of a family member can be done or that holiday can be taken overseas, and benefits can still be collected through the family tax benefits system? What we say in this bill is that recipients who stay overseas for more than six weeks will have their payment stopped. Family tax benefit recipients who return to Australia within 13 weeks of their payment being stopped may have their payment restored without the need for a new claim. However, of course, family tax benefit recipients will not be back-paid for any period of overseas travel in excess of the six-week portability period.
Importantly, this change does not affect individuals who are members of the Australian Defence Force or Australian Federal Police deployed overseas. It will not affect individuals who are assisted by the Medical Treatment Overseas Program or those unable to return to Australia for a specified reason, such as a serious accident or a natural disaster. Indeed, the secretary of the Department of Social Services will retain discretion to increase the six-week time frame for up to three years.
If we are considering these measures on the basis of fairness and equity—which should be, reasonably, at the heart of our social security system—we are indeed providing for that six-week time frame to be increased at the discretion of the secretary-general, in extremely unusual cases. But the measure itself is completely justifiable. The notion that we are paying the base rate of family tax benefit part A for 50 weeks for a family who is overseas is not merely a very strange policy situation; it is in the context of the fact that we are in deficit—that, in effect, that extra expenditure is being paid for out of borrowings. It is an extraordinary situation in any context, let alone the context of the fact that we are trying to find reasonable and rational savings to return ourselves to surplus.
I should also note, before closing on the issue of family tax benefit A, that there will be flow-on effects to other payments that rely on the family tax benefit eligibility criteria. They include the childcare benefit, the childcare rebate, the double orphan pension, the schoolkids bonus, and the single income family supplement if the family is outside the portability period.
The other measure that is contained in this bill, with respect to savings, is to remove the large family supplement from 1 July 2016. This is a larger amount of savings and will help the government achieve savings of $177.3 million over the forward estimates. The large family supplement is a very small component of the overall family tax benefit part A structure. It is currently around $12.46 per fortnight, or, cumulatively, $324.85 per year. It is applied to the fourth and each subsequent family tax benefit child in a family. So that is $12.46 per fortnight for the fourth child, the fifth child, the sixth child and so forth.
The notional reason why that amount of money has been paid in the past is that larger families cost more and, because of the fact that the family tax benefit is meant to relate and respond to the cost of raising each child, there was a rationale for a weighting. All of the best evidence now suggests that is not correct. The evidence from the National Centre for Social and Economic Modelling in 2002, 2007 and 2013 consistently found that each additional child in a family costs less than the first child. Indeed, the most recent research found that, on average, a second child costs 83 per cent of the cost of the first child and the third child costs 69 per cent of the cost of the first child.
It may seem emotionally more difficult, but the fact is that it is economically cheaper, and of course that is simply because of the ability to spread fixed costs among more children—just a classic economic example of economies of scale. That highlights the appropriateness the government believes of the change to the family tax benefit part A payment structure. It is interesting to note that we have acted on the economic evidence and that evidence has been available through modelling in 2002, 2007 and 2013. It is not a simple decision, of course, because it means a reduction in absolute payments to families who have a fourth, fifth and sixth child, but, nevertheless, it is in a context where, again, in deficit with debt, we are trying very hard in difficult circumstances to gain savings to deliver us back to surplus. Is it worth borrowing that money to spend in this fashion? I think the answer to that question would have to be that it is not. There is support for this move even the Henry tax review commissioned by members opposite in 2010, which recommend that the large family supplement be abolished because the policy rationale behind the payment was not strong. The National Commission of Audit reiterated this position in 2004 by stating that the basic rates of family tax benefit part A payment were sufficient for the costs of raising children.
I will pause there for a moment. It raises this question: with 50 different supplements, add-ons and extra payments that were inherited in the welfare system by this government, and with 20 broader categories of welfare, each of those payments have to be examined to see whether they are fit for purpose, and, indeed, there has to be some interrogation of the purpose for which they were originally devised and whether that purpose, if it were ever economically true, still exists. It would have to be said that the arguments with respect to the large family supplement are that the reasons for which it was devised, if they were ever true, are no longer true and therefore it is reasonable to end that supplement. Of course, that is part of the necessary task of budget repair. This is part of an evidence based approach that the government makes best efforts to take in achieving policy outcomes in this area.
I must also note that, importantly, this change is in line with the recommendations of the McClure review and, without labouring that point, as I have just noted, the McClure review was very persuasive in arguing that there are simply too many different individualised payments inside the social welfare system in Australia. The government has made its best efforts to start consolidating the list of 55 different payments, supplements, add-ons and associated benefits that exist in the welfare system.
The government of course acknowledges the costs incurred in raising children, and, whilst we recognise the best economic evidence to suggest that those costs decrease with additional children, the fact is that most families affected by this change continue to receive the per-child family tax benefit part A payments, and that continues to help cover the costs associated with raising children. Family tax benefit part A is currently paid at the maximum rate of $179.76 per fortnight for each family tax benefit child up to 12 years of age and $233.94 for each child aged 13 and over until the end of the calendar year in which the child turns 19 and is in secondary school. The base rate of family tax benefit part A is $57.68 per fortnight, and of course that base rate is the rate that we are ending payment of after six weeks whilst a family is overseas. Families who would no longer receive family tax benefit part A as result of these changes would only have been entitled to a very small amount of payment—indeed, less than the value of the large family supplement.
These two budget measures, along with the reform package introduced recently by the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill, will improve the sustainability of family payments while providing continued support to those most in need of assistance. It should be noted, of course—and it was a point of note by many speakers on this side of the House—that in the 2015-16 budget, notwithstanding the best efforts in as fair a way as possible to rationalise and slow down the growth in expenditure in the family tax benefits system, the government will still be providing around $19 billion in family tax benefit payments. That is in the 2015-16 budget. That is the second biggest item of expenditure within the social services portfolio and the fourth biggest in the Commonwealth budget. This very modest saving of around $177.3 million is a reasonable and prudent measure to ensure that the family tax benefit system remains affordable and the government can continue to assist families in raising their children on a sustainable basis and in the context of sustainable budgets and a return back to surplus.
In summary, we would argue the measures are sensible and practical, they are aimed at ensuring the sustainability of the family tax benefit system and they are designed to guarantee that payments are targeted to those most in need and on the basis of comparative need. Of course, sustainability and fairness are at the heart of these reforms. I commend these measures to allow us to support those most in need in the future. I do thank the assistance, albeit modest assistance, that has been offered by members opposite. (Time expired)
The question is that this bill be now read a second time. There being more than one voice calling for a division, in accordance with standing order 133 the division is deferred until after 8 pm.