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Thursday, 16 May 1985
Page: 2076

Senator GRIMES (Minister for Community Services)(3.12) —The Social Security and Repatriation (Abolition of Assets Test) Bill 1985 [No. 2] is another gesture by the Liberal-National Party Opposition to abolish the assets test. It is apparently to be a repeat performance over and over again for the forthcoming parliamentary sessions. The Opposition states that its Bill to abolish the assets test is based on two grounds, if I can summarise them. First, the Opposition suggests that the assets test was designed to encourage people to become more dependent on the Government. The second ground seems to be based on the assertion that the legislation is shot through with anomalies. Quite clearly, the Opposition has had some difficulty in coping with its attitude to the assets test, and perhaps it would be a good idea if I dealt with some of the Opposition's comments.

On 5 May this year Mr Peacock, the Leader of the Opposition, said for the first time, having equivocated for a long time before that, that the assets test should be repealed. He has now joined Senator Messner by introducing in the other place legislation to try to repeal the assets test. Senator Messner previously had said:

We rejected the notion of seeking amendments designed to correct anomalies in the assets test legislation.

Prior to that he had talked of amendments to ensure that the legislation would be fairer. On the same day as Mr Peacock was saying that the assets test should be repealed, Mr Sinclair, the Leader of the National Party, was asking for the assets test to be amended to make up for the difficulties he saw in the legislation. On 27 April Mr Peacock made the first large announcement that the Opposition wanted to repeal the test. But on 27 November last year Mr Howard, the Deputy Leader of the Opposition, said that he personally was 'in favour of a needs approach to the payment of welfare'. Although he did not agree with the methods of the assets test proposed, quite clearly he favoured the reintroduction of the assets test. Since then his deafening silence in this matter indicates where he really stands.

I think the best summing up of the Liberal Party's approach was made by Professor Gruen after his Panel of Review of Proposed Income and Assets Test had commented on the Government proposals. He said:

The position of Liberals is even less defensible. Those who argue for smaller government and needs based welfare, whilst rejecting concrete administrative moves in that direction, deserve to be regarded as supremely opportunistic cynics.

In fact that is what Opposition members are and have been ever since the Government legislation was introduced. Despite the fact that the Confederation of Australian Industry, the Business Council of Australia and all the Opposition's usual supporters reaffirmed their support for welfare payments being made to those in need and supported the assets test, the Opposition, thinking it would gain political mileage out of this, continued to say that it opposed the assets test. Yet only two days ago the Opposition's new star on the horizon, Mr Paul Everingham, said on the Australian Broadcasting Corporation:

The only way you're going to cut back the deficit and be the only way we're going to have lower taxes which everyone wants is by cutting back expenditure. And one area of expenditure of course is social security where spending is now enormous and last year exceeded the total tax, personal tax income take. I think that we have to make sure that the money that's spent in the social security area is getting to the people who are disadvantaged. I think we have now to take the hard step of saying that people, you know, in the middle income brackets and upper income brackets, simply can't benefit from social security in any way if they are to have any hope of getting income tax cuts.

We have had repeated statements of that type from almost every member of the Opposition present in the Parliament today. On past occasions I have quoted Senator Chaney, Mr Peacock, Mr Sinclair, Mr Howard and any number of back bench Opposition members who have talked about needs based welfare.

Why do we have an assets test? Why did this Government reintroduce an assets test, which had been abolished in 1976? We reintroduced it because there was an anomaly in the Australian social security system whereby people who were able to arrange their financial affairs to minimise income as a result were able to pick up pensions. It was inequitable, we believed, that those with quite substantial private means were able to pick up benefits in a supposedly needs based system. It is unreasonable that the taxpayer should have to support those who are quite able to support themselves, and the assets test, by reducing expenditure in the way in which it does, enables any government, including this Government, to concentrate assistance on those in need and therefore provide additional revenue for redistribution of low income groups. As a result of the assets test, we now know that in both social security and veterans' affairs between $130m and $150m will be saved to the revenue.

Those members of the Opposition who each day, since and before Tuesday's statement, have claimed that we must reduce government expenditure-particularly Mr Howard and Mr Peacock, who say that we must reduce government expenditure even more-may be contradicted by people such as the honourable member for Richmond (Mr Blunt), the shadow Minister for Tourism, who put out no fewer than six statements in respect of proposals that would add $260m to existing Commonwealth expenditure. Ignoring those statements, we know that at all times we are asked to keep cutting government expenditure. Yet on this issue considerable parliamentary time and media time has been spent in urging the Government to forgo $150m and abolish the assets test.

Senator Messner made an interesting second reading speech in which he took a different tack. It involved the suggestion that the assets test is designed to encourage people to become more dependent on the Government. The first point to make is that to the great majority of pensioners, and the great majority of persons approaching pension age, the assets test is not an issue at all. A total of 2.5 per cent of pensioners are affected; the vast majority are unaffected. This is because there are very generous exemption limits. Those limits are indexed annually. For a single person $70,000 plus a home, or $120,000 if no home is owned, is the starting point of the cut-off. For a married couple the corresponding figures are $100,000 and $150,000. The vast majority of pensioners do not even dream of having that amount of assets, let alone have them. For those who are affected by the assets test, the facts are quite the reverse of the Opposition's assertion. The existing income test had become increasingly exploited by those persons with very considerable assets who, together with their financial advisers, were able to arrange their assets so that they appeared to have little or no income and could therefore qualify for a full pension and full fringe benefits. They were the people who were so arranging their assets that they could get the full pension and the full fringe benefits and who were exploiting the system. Obviously the application of the income test encouraged people to become dependent on the Government for income support.

The assets test has brought to light a significant number of cases in which people who have had assets amounting in some cases to hundreds and thousands of dollars, and in some cases even to over $1m, have not been using the assets to produce a reasonable income. Those people have been claiming pensions and benefits. In some instances capital appreciation was sought. In some cases massive amounts were kept in cheque accounts. The largest amount I can remember was $565,000. In all instances additional assistance through the social security system was sought. As Mr Howe has pointed out, we found that, in fact, no fewer than 12 millionaires in this country were drawing the full pension with full fringe benefits.

Senator Messner —Twelve millionaires.

Senator GRIMES —I know it is not many to people such as Senator Messner. But the simple fact of the matter is that 30,000 people admitted, by simply crossing the appropriate box, that they should not be getting a pension. They did not even bother to come to the Government and put up a claim.

Senator Messner —Because they didn't want to disclose their private information to you.

Senator GRIMES —They had to disclose their private information? Every pensioner in this country has to disclose his or her income. How can Senator Messner possibly suggest that it is unreasonable to ask people to declare, in confidence to the Department of Social Security, their assets, whereas it is perfectly reasonable to ask people to declare their income? How can Senator Messner possibly argue that as a consistent, logical argument?

Senator Messner —You don't understand that.

Senator GRIMES —I do understand that. I understand that people such as Senator Messner believe that if people can accumulate wealth as assets and can manipulate that wealth to get into the public purse, it is offensive for them to have to declare those assets. But for everyone, including the poor person on a weekly fixed income from superannuation, Senator Messner considers that it is reasonable that they declare their income. There is no consistency at all in that argument. Senator Messner talked about compassion. How compassionate is it, in fact, to allow people to avoid the income test while others are honestly complying with that test? I believe it is a fair comment that the average worker in Australia in fact readily accepts the obligation to support those in need. But the fact is that that average worker objects to supporting a person with very considerable assets, assets which are very considerably more than the value of his or her home. I think that is an understandable objection. Far from encouraging dependency on the Government, the assets test means that we say to people with assets of, for example, $300,000-there are plenty of them-that they should invest those funds reasonably and safely and produce at, say, 10 per cent interest $30,000 income rather than receive unnecessarily a pension of $4,778.80 a year.

The second objection by Senator Messner is based on the assertion that the legislation is shot through, as he said, with anomalies. I think that suggestion needs to be examined both generally and, in particular, in relation to the specific examples Senator Messner cited. Speaking on a general level, I believe that to the impartial observer this test, even with its generous exemption limits and its total disregard of income, has addressed a major anomaly in the existing system. The effect of its immediate application in the Department of Social Security alone has been to reduce the annual pension bill by just in excess of $100m, and in the case of the Department of Veterans' Affairs, another $40m plus. In other words, a large number of people with substantial assets were able to provide for themselves and were escaping the income test arrangements and picking up a full or part pension.

That $100m or $150m may not be much in Senator Messner's thoughts. In fact, it is almost enough to increase supplementary assistance which goes to the poorest pensioners in this country by some $5 a week. It is in excess of 50 per cent of the children's services program of the Federal Government. In fact, it is one-tenth of the total budget of my Department for providing care for aged and disabled people. We all know about the queues of people waiting to get into aged and disabled people's accommodation. This anomaly has been minimised. The amounts will increase as people who are getting more and more lump sums will no longer be able to manipulate the system. Now our social security system focuses more closely on the needy. About 30,000 people out of 2.5 million pensioners have lost all their entitlement and 20,000 people have had their pensions reduced. I ask honourable senators to remember the considerable limits this indicates.

If pensioners own their own homes they do not lose the pension until they have $116,000 in assets if they are single and $177,000 if they are married. If they do not own a home they do not lose their pension until they get to $166,000 if they are single and $220,000 if they are married. Of course there have been some difficulties with the introduction of the test. I for one, and Senator Gietzelt for another, have always said that there would be and that, in fact, we would keep this matter under observation. Of course, the anomalies have been almost entirely in the rural areas and we were aware that that was a problem. But the improvement in the Government's capacity to address problems in the welfare system through the savings generated by the assets test I believe has been recognised by most people in the community.

Let us look at some of the anomalies Senator Messner enumerated. He seems to use the same example all the time. I refer to his second reading speech in which he talks about the woman who was recently widowed. The woman and her husband had been allowed $100,000 plus their home before the assets test would have affected them. They had been unaffected by the assets test. If the $100,000 in assets produced $8,000 in income their combined pension would have been about $101 a week. In these circumstances, when the husband dies the effect under the existing income test is that after a period in which the pension formerly paid to the couple is continued the pension payable to the widow would have dropped to some $30 a week. Under the assets test the pension payable to her would be $31.90 a week. It is not apparent to me that the assets test adversely affects the widow in this example. She would be in a position where her private income amounts to $154 a week and her pension almost $32 a week, so she would have a total of $186 a week. I suggest that many people in the community would question whether a single person with an income at that level, plus a home and $100,000 in assets, requires the special consideration which Senator Messner seems to think she does.

Senator Messner referred to the person who realises a considerable sum of money when he sells his home to enter a nursing or aged person's home, or the person who sells a business for $100,000. Such a person has the potential to obtain an attractive income through investing the proceeds. To preclude him from a pension he would need assets of $166,000. I suggest that reasonably attractive interest rates are now available from simple deposits in a building society or an investment account with a bank. Given the investment limits, a person in these circumstances who qualifies for some pension is, as Senator Messner knows, very likely to be income tested rather than assets tested. In other words, that person would be income tested under the existing system. Senator Messner used the example of the aged person's home. At the moment a person who obtains entry to an aged person's home without payment, loan or donation is treated as a non-home owner. If such a payment were made to obtain admission, the person is treated as a home owner, as he had some right or interest in the accommodation. The amount he paid is disregarded as an asset since it represents that home.

I know that there is a wide range of circumstances under which people enter aged persons homes. In practice few will be affected by this provision. Only those with substantial assets would be affected. A single home owner may have other assets of $70,000 without being affected. If a person has $70,000 invested at, say, 9 per cent, the income would allow a pensioner to be paid $46.30 a week. Under the assets test a person would need assets of $92,800 before the pension at that rate was payable. I know that this is a sensitive area. Senator Haines and others have brought it up. It is the only area in respect of which there have been any number of questions from urban-based people about the assets test. We are monitoring the situation to see whether we cannot allow, say, a single sum for people who have paid to go into nursing homes and who, therefore, are considered to be home owners.

It is in rural areas that there have been problems, as we have been the first to admit, although I must admit that sometimes the problems have had more to do with emotion than with reality. I well remember a beautiful example of that on the Willesee television program, of which I took care to get a transcript. In the transcript sentences were run together like this: 'Mrs X has a property worth $150,000 and she has $30,000 in the bank. She does not know where her next meal is coming from'. There are hundreds of thousands of pensioners in this country who have no money in the bank and who do not know where their next meal is coming from. To suggest that someone with $30,000 in the bank does not know where her next meal is coming from is ludicrous, emotive and emotional nonsense.

Senator Haines —Perhaps she has expensive tastes.

Senator GRIMES —She might be like Senator Messner and live on verve cliquot. But for heaven's sake, that is the sort of emotional nonsense which we have heard from the Opposition and from such programs. We would have to put up the wine tax an awful lot to affect someone in that situation! Of course there were anomalies, largely due to the fact that the system of valuation of rural properties was faulty. We were the first to admit that. The reason that some valuations tended to be faulty was that we were determined that people should not be intruded upon and some of the valuations had to be done at a distance. The best example of an anomaly I can remember concerned a gentleman from Benalla who lived in an area of apparently rich farmland on a considerable block of land, his land being a very scrubby bit of land in the middle of very good farmland and his house being no more than a shack. Within four days of that anomaly being brought to the attention of Mr Howe it was corrected. His valuation had been considerably more than it should have been. Of course there will be such anomalies, but we had to draw a balance between invading people's privacy and being ultra strict in valuations. There is now a good appeals mechanism, as there never was for the assets test administered for 30 years by those opposite.

Senator Messner —That's why we had to get rid of it.

Senator GRIMES —They did not get rid of their assets test for that reason. Senator Withers blew the gaff on that. He said that that assets test was got rid of because the then Country Party did not like it as it made it difficult for people with large rural holdings to maintain them, even when the kids and the parents did not want to work them. When it was got rid of we pointed out the anomalies and difficulties that would arise in the income test when it came forward.

We have been looking at the problems in the rural areas. These problems concern between 1,000 and 2,000 people out of some 50,000 people affected by the assets test or out of 2.5 million pensioners. We are looking at that area. We will make some modifications to the scheme. They need be only modifications in administration. They will be submitted to Cabinet very shortly. I feel confident that many of them will go through, which will ease all this tension. It is a great pity but a practical reality of political life in this country that those anomalies in a scheme which was complicated and difficult to introduce but which is going to be of benefit to the vast majority of people should be concentrated on in the debate. But we accept that.

A similar situation arises with respect to the hardship provisions, which were taken up and continued from those which have been applied in the social security system for a long time. Senator Chaney used to cite them here all the time. It may be that those provisions for $3,000 and $5,000 are too low and that the sums will have to be increased. Certainly that will be the subject of a submission to Cabinet. I feel quite confident that that anomaly will be corrected. But it is very difficult for me to see why the hardship provisions should be extended to someone with $60,000, $70,000, $100,000 or $150,000 in the bank. I certainly do not think they should be extended to someone who has $30,000 in the bank and who does not know where her next meal is coming from!

That sort of emotive problem will always be a difficulty. We have always accepted that it will be a difficulty. It is a difficulty which has been taken up by an Opposition which has so little to say about government policy and so little to offer the people of this country that, for the second time this year in this Parliament, General Business time is being taken up with an assets test abolition Bill brought forward by Senator Messner. Heaven knows how many matters of public importance or urgency matters have been brought up in this place and in the other place dealing with this one issue. We in this community have unemployment, a very real continuing problem of poverty, very real continuing problems, which we accept, in industry and problems with our overseas trade. We do not deny them or resile from them. But we have an Opposition which presents itself as an alternative government and is absolutely obsessed with a measure which gave $150m to the revenue, which affected 2.5 per cent of pensioners in this country, and which provided the Government with the capacity to make alterations to the social security system to ensure that it helps those in need the most. We have an Opposition obsessed with a measure which was introduced in light of the fact that both major parties claim that we should have a needs-based social security system and that, once we get members of the Opposition on their feet and wind them up, the vast majority of them will immediately start talking about a needs-based system, about the need to cut social security expenditure and about closing loopholes to stop people avoiding the social security system. What gets me even more is that members of the Opposition are willing to get up in this place and vote against and block legislation which would recoup to the taxpayers of this country hundreds of millions of dollars which have been stolen from the taxpayers by tax avoidance and tax evasion. They vote against and object very strongly to that sort of legislation, yet come in here and bleat about $150m which has been taken from the revenue, the taxpayers, and pensioners of this country.

Senator Messner —What kind of legislation was that?

Senator GRIMES —Senator Messner is utterly inconsistent in his approach to this matter and is demonstrating that his concern is for those who can manipulate the system through manipulating their assets and the taxation system that we have and who, therefore, disadvantage ordinary taxpayers and pensioners. If that is the line he wants to take, he can continue to do so. But as long as he does so he will remain on that side of the chamber.