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Thursday, 9 May 1985
Page: 1705

Senator PETER RAE(9.45) — We have moved from one of the extremely important matters concerning the future conduct of this country to a matter which could be regarded as being beyond any party differences other than a feeling of a degree of shame. I believe there is a degree of shame on both sides of the Parliament that it has taken us as long as it has to recognise that something that was costing the taxpayer money was inefficient, ineffective, inappropriate and unnecessary. We have before us the National Welfare Fund Repeal Bill. The National Welfare Fund was introduced in 1943 as the vehicle for making various welfare or social service payments as are directed by any law of the Commonwealth to be made from the Fund. Initially amounts paid into the National Welfare Fund were provided from the general revenue. However, in 1945 the Parliament passed the Social Services Contribution Act and the Pay-roll Tax Act to provide revenue specifically earmarked by virtue of a complementary amendment to the National Welfare Fund Act which appropriated the Consolidated Revenue Fund for the purpose, that is, for the National Welfare Fund.

I believe it is important to go through the history of this matter because there is a lesson for all of us to learn in relation to this Bill-a Bill which will be supported warmly by the Opposition and which was initiated by the Opposition. My only political comment is that it is a pity it has taken the present Government nearly 2 1/2 years to get around to introducing the legislation.

Senator Grimes —Come off it, you had twenty years.

Senator PETER RAE —No, from the time the former Minister for Finance, Senator Dame Margaret Guilfoyle, started the action to repeal the Act. I am not saying that we did not have time before that to do something about it. To continue with the history, in 1950 the social services contribution was merged with income taxation and the National Welfare Fund Act was amended to ensure that the income of that Fund would be approximately the same as if the social services contribution had remained as a separate levy. What happened was that for a relatively short period there was, as happens in some countries, a specific levy in relation to aspects of social services.

The change of government in 1949 brought about a change of attitude in relation to that specific social services contribution. What happened was that the social services contribution became part of the general Consolidated Revenue coming from the various forms of taxation. From that time on we found that there was no real nexus between the earmarked revenues of the National Welfare Fund and payments from it. This resulted in a substantial buildup in the Fund's credit balance. In 1952 Parliament amended the National Welfare Fund Act to provide that future payments from the Consolidated Revenue Fund to the National Welfare Fund in any financial year would be equal to the amount paid out for welfare and social purposes. A standing appropriation of the Consolidated Revenue Fund was provided to enable payments into the National Welfare Fund.

For the life of me I have found it difficult, from my reading of the speeches that were made at the time and from anything else, to understand what it was that motivated people to make a decision such as that at that time. The Parliament did it, and I just do not understand why. It was perfectly obvious that there was no longer any real purpose in continuing the existence of the National Welfare Fund. One can only assume that some somewhat hidden political considerations of the day motivated people to take the decisions that were taken. There continued thereafter a situation whereby the balance which was then standing to the credit of the National Welfare Fund, some $370m, was recycled within the Commonwealth public account by investing it in the internal Treasury bill-that is, by transferring moneys of the trust fund of which the National Welfare Fund is part to the Loan Fund, and to the extent necessary to cover any temporary revenue deficit in the Consolidated Revenue Fund.

The procedure whereby a temporary shortfall in revenue of the Consolidated Revenue Fund may be met by payments from the Loan Fund is authorised by the Loan (Temporary Revenue Deficits) Act 1953. Interest received on such investments increased in the National Welfare Fund balance to $470m by 1976, at which time the then Treasurer, the late Sir Phillip Lynch, announced that the Government had decided that the balance should be repaid to the Consolidated Revenue Fund pursuant to section 62A of the Audit Act. Since that time there has been no continuing balance of the National Welfare Fund, all expenditure from it being precisely matched by payments into it from the Consolidated Revenue Fund pursuant to the standing appropriation inserted into the National Welfare Fund Act by the 1952 amendment.

It is important to go through this story because I believe that there is a very good lesson to be learned in relation to the necessity for reducing waste in government. What we find is that the raison d'etre for the National Welfare Fund, namely, as a vehicle for the receipt of specifically earmarked revenues-that is, the levies which were to be made for welfare, pending their disbursement for welfare and social service payments-was effectively removed in 1952. But they have continued to be paid by way of transactions until now-1985. Some 5,000 transactions per annum have been paid into the National Welfare Fund and have been paid out by the National Welfare Fund to the disbursing department. We have had a series of transactions which have cost a small fortune by way of the cost of requisition, the cost of payment, the cost of re-requisition for the payment out and the cost to the disbursing department of that payment out and then the auditing of the whole transaction.

I think it would be not unreasonable to estimate that each of those transactions would have cost not less than $50, just to take a ball park figure of the absolute minimum for the most efficient operation which one could imagine would take place. Taking the cost of all that is necessary in the various steps from the initial requisition to the final disbursement and audit, I would be amazed if they were done for $50 each. But that is what happened. For a period of more than 30 years some 5,000 transactions in and out per annum were being carried out for no real purpose. As the Auditor-General said in his report for the year ended 30 June 1981, all that happened was that it served no useful function either as a control mechanism or as a holding account for future expenditure. He stated:

Its continuation as the hub of the accounting process entails significant and unnecessary accounting work.

He went on to say that he believed that there was a very good reason for abolishing the National Welfare Fund, for repealing the legislation. The processing by the spending departments and the Department of Finance of more than 5,000 journal entries per year and the effecting of the corresponding reconciliation process, together with the audit burden, amounted to a good reason for abolishing it when it served no useful function either as a control mechanism or as a holding account for future expenditure. The journal entries involved a number of departments-Social Security, Health and Housing and Construction, as well as the Department of Finance and the Auditor-General's Office.

A number of pieces of legislation were involved in relation to the National Welfare Fund. Those pieces of legislation included the Social Services Act 1947 in respect of pensions, benefits, allowances and the Commonwealth Rehabilitation Service. Also included were the Aged or Disabled Persons Homes Act 1954 for the personal care subsidy, the Delivered Meals Subsidy Act 1970, the Homeless Persons Assistance Act 1974, which involves grants in respect of food, accommodation and meals, the National Health Act 1953 involving medical, hospital and pharmaceutical benefits, the Health Insurance Act 1973, the Nursing Homes Assistance Act 1974, the Home Nursing Subsidy Act 1956, the Tuberculosis Act 1948, the Homes Savings Grants Act 1964 and the Commonwealth and State Housing Agreement Act 1945, with its provision for contribution to rental losses by the States under the 1945 Commonwealth-State Housing Agreement.

As I said, the Auditor-General in his report stated that the Department of Finance had advised that it intended taking the matter up with other proposals having potential for administrative savings, but indicated that any proposal to abolish the National Welfare Fund would require consultation with relevant departments and possibly with the Joint Committee of Public Accounts. I can only say that I would criticise the Department of Finance for failing to mention in that regard that it should also consult the Senate Standing Committee on Finance and Government Operations.

Fortunately, the then Minister for Finance, Senator Dame Margaret Guilfoyle, remedied the omission of the Department of Finance. She did consult the Senate Standing Committee on Finance and Government Operations as well as the Joint Committee of Public Accounts. She inquired whether either of those committees saw any reason why the National Welfare Fund trust account should not be abolished and the Act repealed. Both committees looked at it and they also discussed it with other potentially relevant committees of the Parliament. The Senate Standing Committee on Finance and Government Operations, responding to the letter of invitation of the then Minister for Finance to consider this matter, considered it and found that it could find no reason why the Fund and the Act should be continued. It had discussions with the Joint Committee of Public Accounts and with the Auditor-General, who also agreed that there were no reasons for not supporting the proposal. It was also discussed with the Senate Standing Committee on Social Welfare to ensure that from that Committee's point of view there were no reasons why the Act should not be repealed.

The Committee recommended to the Minister that it would certainly support the repeal of the Act. However, it did raise one question as to whether and how aggregations will in future be published and whether there will be any statutory or other obligation to publish them in relation to that. The Minister replied in a detailed letter on 10 June 1982 in which she gave full details of how the aggregations would be published in what I will summarise as the totality of the Budget and national accounts. I do not propose to take time to detail the answer she gave. I simply assure anybody who may have the same questions the Finance and Government Operations Committee had about the situation that a very detailed answer was given by the then Minister. I have not asked the Minister for Community Services (Senator Grimes) whether I may have incorporated the answer given by the then Minister for Finance, dated 10 June 1982, to the questions asked by the Senate Standing Committee on Finance and Government Operations but, to save time, I seek leave to have it incorporated in Hansard.

Leave granted.

The document read as follows-


Parliament House Canberra, A.C.T. 2600 10 June 1982

Senator Peter Rae


Senate Standing Committee on Finance and Government Operations

Parliament House

Canberra, A.C.T. 2600

My dear Senator Thank you for your letter of 25 May 1982 attaching your Committee's response to my letter of 5 January which proposed the abolition of the National Welfare Fund and the introduction, in its place, of standing appropriations of the Consolidated Revenue Fund (CRF) to effect the relevant social security and welfare payments.

The Committee commended the proposal subject to clarification 'as to how aggregations will in future be published, and whether there will be any statutory or other obligation to publish them'.

At present there are two main sources of published information on National Welfare Fund payments:

Budget Paper No. 4, table 7 of which provides, under the relevant departmental headings, disaggregated information on expenditures estimated to be required from the standing appropriation contained in the National Welfare Fund Act; table 6 also provides an aggregation of expenditures by three (now two) departments responsible for National Welfare Fund payments.

The Financial Statements of the Minister for Finance prepared pursuant to section 50 of the Audit Act (and which accompany the Auditor-General's annual report to Parliament) show for each relevant department, details of expenditure from the CRF under the standing appropriation contained in the National Welfare Fund Act into the National Welfare Fund Trust Account, as well as details of final expenditure from the Trust Fund via that Trust Account. Expenditures from CRF are disaggregated as in Budget Paper No. 4; expenditures from the Trust Fund are shown in less detail as those expenditures precisely match the prior transactions of the CRF.

Abolition of the National Welfare Fund will remove the need to publish details of the Trust Account which will be abolished with the Fund. Standing appropriations of the Acts listed at pages 3 and 4 of the paper attached to my letter of 5 January 1982 will, as pointed out in that letter, be required to replace the Fund. Disaggregated information relating to these standing appropriations, showing essentially the same detail as at present, will continue to be provided in table 7 of Budget Paper No. 4 and in the financial statements which the Minister for Finance is required by statute to publish pursuant to section 50 of the Audit Act 1901.

The provision of aggregated information on National Welfare Fund expenditure, as set out in table 6 of Budget Paper No. 4 (which compares estimates for the Budget year with actual results for the previous financial year) has been under consideration for some time.

While the fund is a distinct entity, and it is thus valid to aggregate payments from it, there has been concern that the casual reader might take such aggregations as representing all social security and welfare payments of the Commonwealth. This is far from being the case; indeed, in the case of welfare housing payments, the bulk have for many years been paid other than through the National Welfare Fund and the remainder (estimated to be some $2.5 million in 1981-82) are expected to be phased out by the end of 1982-83.

With the abolition of the Fund, I consider that it would be desirable to dispense with any aggregation of payments corresponding to those presently met from it. The more appropriate source of information is the aggregations (and disaggregations) published in Statement No. 3 of Budget Paper No. 1 (see, for example, pages 85, 86, 100, 101 and 121 of the 1981-82 document). That document covers all social security and welfare expenditures classified in accordance with the functional classification of outlays adopted for Budget and National Accounts purposes and is based on the widely accepted international standard recommended in the United Nations publication ''A System of National Accounts''. Most of the present ''National Welfare Fund'' expenditure is included under the functional headings ''Health'' and ''Social Security and Welfare''. That covering welfare housing expenditure is, together with all other welfare housing payments, included under the ''Housing'' heading.

I also note that aggregated information of outlays under the social security and welfare functional heading is and will continue to be published monthly in the Commonwealth Financial Transactions statement pursuant to section 49 of the Audit Act 1901.

If you or the Committee have additional questions on this matter I should be pleased to elaborate further.

Yours sincerely


Senator PETER RAE —I thank the Minister for his co-operation and I thank the Senate. The position is that, some 33 years after it ceased to be necessary to keep the National Welfare Fund as part of the national accounts of Australia, we are debating and supporting the repeal of the legislation requiring the keeping of that account. It is a great day for reform in Australia. It is a great day for starting the process of eliminating those aspects of government which involve waste and unnecessary action, aspects which I am sure many sectors of the Public Service would be only too anxious to see removed as soon as possible. One hopes that, when the Opposition is back in government after the next election and is applying its new policy for deregulation and reform of the regulatory process, we will have a whole system of review of all of these things which, having learnt some of the lessons of the previous period of government, is far more successful than past systems, to ensure that we do not have any repetition of the continuation of a totally unnecessary fund such as this involving very substantial public expenditure to no public purpose.

It is with great pleasure that the Opposition supports this Bill which, as I said, was initiated by the former Minister for Finance, Senator Dame Margaret Guilfoyle. I pay her credit for having commenced the action as a result of this matter being drawn to her attention by the Auditor-General, whose action in drawing it to her attention and the Parliament's attention I also commend. The Opposition will continue to regard this day as an important day in the development of reform for the elimination of waste in public expenditure. We are delighted to support the legislation.