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Thursday, 12 December 2002
Page: 7965


Senator MARK BISHOP (6:53 PM) —by leave—I move opposition amendments (1), (3) to (18), (22) and (24) to (30) on sheet 2688:

(1) Schedule 1, item 11, page 5 (line 20), omit “2 years”, substitute “12 months”.

(3) Schedule 1, item 14, page 18 (line 31), omit “2 year”, substitute “12 month”.

(4) Schedule 1, item 14, page 19 (line 1), method statement, omit “0.18”, substitute “0.20”.

(5) Schedule 1, item 14, page 19 (line 3), omit “2 year”, substitute “12 month”.

(6) Schedule 1, item 14, page 19 (line 4), method statement, omit “0.24”, substitute “0.25”.

(7) Schedule 1, item 14, page 19 (line 10), omit “2 year”, substitute “12 month”.

(8) Schedule 1, item 14, page 19 (line 12), omit “2 year”, substitute “12 month”.

(9) Schedule 1, item 14, page 19 (line 12), omit “2 years”, substitute “12 months”.

(10) Schedule 1, page 20 (after line 25), after item 24, insert:

24B Paragraph 550(2)(b)

Omit “2 years”, substitute “12 months”.

(11) Schedule 1, page 20 (after line 25), after item 24, insert:

24D After paragraph 553B(3)(d)

Insert:

(da) satisfies the Secretary that the cost of housing accommodation has been a significant factor in causing the person to move; or

(12) Schedule 1, page 20 (after line 30), after item 26, insert:

26C At the end of section 557

Add:

(2) If:

(a) a youth allowance becomes not payable to a person because of:

(i) a failure to enter into a Youth Allowance Activity Agreement; or

(ii) an unreasonable delay in entering into a Youth Allowance Activity Agreement; or

(iii) a failure to take reasonable steps to comply with the terms of a Youth Allowance Activity Agreement; and

(b) the Secretary is satisfied that, not more than 8 weeks after the start of the activity test rate reduction period applicable to the person by reason of the breach referred to in paragraph (a), the person:

(i) has entered into such a Youth Allowance Activity Agreement; or

(ii) is no longer unreasonably delaying entry into such a Youth Allowance Activity Agreement; or

(iii) is taking reasonable steps to comply, or to resume compliance, with the terms of a Youth Allowance Activity Agreement that is in force in respect of the person or, if there is no Youth Allowance Activity Agreement in force in respect of the person, with the terms of the Youth Allowance Activity Agreement that was in force in respect of the person immediately before the commencement of the rate reduction period; as the case requires; this Act has effect, for the purpose only of determining the rate of youth allowance during the balance of the rate reduction period, as if the rate reduction period had never applied.

(3) A determination that a person has commenced to take reasonable steps as referred to in paragraph (2)(c) may be expressed to have effect from the day on which those reasonable steps are taken, whether or not the determination is made on that day or a later day.

(13) Schedule 1, page 20 (after line 30), after item 26, insert:

26D Subsection 557E(1) (Method statement and step 2, paragraphs (a) and (b))

Omit “2 year” (wherever occurring), substitute “12 month”.

(14) Schedule 1, page 20 (after line 30), after item 26, insert:

26E Subsection 557E(1) (paragraph (a) of step 2 of the method statement)

Omit “0.18”, substitute “0.24”.

(15) Schedule 1, page 20 (after line 30), after item 26, insert:

26F Subsection 557E(1) (paragraph (b) of step 2 of the method statement)

Omit “0.24”, substitute “0.25”.

(16) Schedule 1, page 20 (after line 30), after item 26, insert:

26G Subsection 557E(2)

Repeal the subsection, substitute:

Meaning of 12 month period

(2) In this section:

12 month period means the 12 months immediately before the day after the activity test breach.

(17) Schedule 1, page 20 (after line 30), after item 26, insert:

26H At the end of section 558

Add:

(2) If:

(a) a youth allowance becomes not payable to a person because of a failure to comply with a requirement to attend at a particular place for a particular purpose in accordance with a notice issued under paragraph 63(3)(c); and

(b) not more than 8 weeks after the start of the administrative breach rate reduction period applicable to the person by reason of the breach referred to in paragraph (a):

(i) the person attends that place for that purpose; or

(ii) the person complies with an alternative requirement that the Secretary notifies to the person (whether orally or in writing);

this Act has effect, for the purpose only of determining the rate of youth allowance during the balance of the rate reduction period, as if the rate reduction period had never applied.

(18) Schedule 1, page 20 (after line 30), after item 26, insert:

26J Subsection 558A(1)

Omit “13 weeks”, substitute “8 weeks”.

(22) Schedule 1, page 21 (after line 25), after item 33, insert:

33A After paragraph 634(3)(c)

Insert:

(ca) satisfies the Secretary that the cost of housing accommodation has been a significant factor in causing the person to move;

(24) Schedule 1, page 21 (after line 28), after item 34, insert:

34D Paragraph 644AE(2)(a)

Omit “0.18”, substitute “0.20”.

(25) Schedule 1, page 21 (after line 28), after item 34, insert:

34E Paragraph 644AE(2)(b)

Omit “0.24”, substitute “0.25”.

(26) Schedule 1, page 21 (after line 28), after item 34, insert:

34F Section 644B

Omit “13 weeks”, substitute “8 weeks”.

(27) Schedule 5, item 13, page 47 (lines 8 and 9), omit paragraph (b).

(28) Schedule 5, item 13, page 47 (line 10), omit “26 weeks”, substitute “8 weeks”.

(29) Schedule 5, item 14, page 48 (lines 5 and 6), omit paragraph (b).

(30) Schedule 5, item 14, page 48 (line 7), omit “13 weeks”, substitute “8 weeks”.

I wish to make a few remarks, which may take some time, about the need for breach reform and about the Pearce report. It is now beyond argument that our system of breaching is flawed and unfair. St Vincent de Paul, the Salvation Army and other welfare services, not to mention the Ombudsman and the Pearce review of penalties, have all drawn attention to the large increase in the number of people being breached, often unfairly, and the negative impact this has had on their wellbeing and their continuing efforts to find work. It has been noted that the current regime is a contributing factor in homelessness and crime. It has acted disproportionately on young people. Perhaps the most telling statistic is the fact that over a quarter of a million breach penalties were meted out last financial year alone. Of those that do appeal, around 43 per cent have the breach overturned. This is clear evidence of arbitrary penalties that have been misapplied in many cases. The impact of those penalties varies, but for most it meant a loss of income of at least $800 over six months, regardless of their actions to remedy the situation that caused the breach. As St Vincent de Paul has noted, the penalty for failing to lodge a tax return is just $110. The opposition says there is clearly a need for change.

To an extent, the government has recognised this and initiated some administrative changes that came into effect from 1 July this year. The government has argued that it would like to see these changes through before it contemplates any substantial reform of the penalty regime. As part of Labor's desire to engage the government in a debate about a change to the penalty regime, we have held discussions on the operation of the current regime and potential changes to it. The discussions have been lively with different points of view, but positive progress has occurred. At least now we have the government engaging in a debate and examining the pros and cons of various proposals. As part of the discussions, the government was willing to obtain the very latest data on breach penalties at Labor's request. In a positive move, the government has provided this information to allow informed debate.

If we are to believe the government's figures, the impact of the 1 July changes has been positive. According to the government's figures, overall breaching levels for the September quarter are down fairly substantially on the same quarter last year. The government figures indicate a reduction of a little more than 50 per cent on the same quarter last year and 35 per cent on the March quarter this year. There has also been a shift from activity test breaches to administrative breaches, which is also positive. However, Labor cautions that Centrelink has had problems of late in obtaining accurate breach data. These problems led to it providing wrong information to the Senate Community Affairs Legislation Committee at Senate estimates. The minister also utilised this incorrect information, so there could still be issues with the accuracy of the latest data that the government has obtained from Centrelink. Notwithstanding these accuracy issues, the direction is positive; however, Labor is still firmly of the view that more fundamental change is required. The government's progress to date has been as a result of administrative changes, and they could be reversed at the stroke of the minister's pen.

Although we have examined the latest developments closely, we have decided that full debate should occur in relation to the new breaching model. Accordingly, Labor will be moving amendments today that give effect to the Pearce report recommendations on substantive adjustments to the duration and level of breach penalties. Whilst I intend to discuss the merits of each component in detail shortly, it is important to say that this is a package of amendments and it represents a moderate and considered change to the current outdated and punitive breaching regime. They are not about going soft on compliance; on the contrary, the changes will yield an increase in compliance. The carefully targeted changes as put forward by Labor will actually increase fortnightly penalties as a counterweight to the proposed reduction in the period that the breach penalties apply.

The fact is that the current breach regime is not compliance focused. For example, the penalties are no different for a job seeker who remedies their error than for those job seekers who do nothing to correct their actions. The current structure of breaches sees penalties applied over a long duration—up to six months in most instances—rather than shorter periods. The long duration of penalties seriously diminishes the financial resources available to a job seeker over a protracted period. This in turn diminishes their ability to participate—for instance, to pay for bus fares to look for jobs and attend job interviews. This negative impact undoubtedly leads to job seekers being stuck on benefits for longer than they otherwise would be. It is not good for them and it is not good for taxpayers.

The government has said the centre of welfare reform efforts should be participation. Participation costs money—money that this government is taking from job seekers for unnecessarily long periods. Now it has an opportunity to back up its participation rhetoric by making its breach regime participation focused. Labor hopes that minor parties and government will see sense in these proposals, and they should receive support from the Senate. They are a necessary part of advancing welfare reform and essential in the context of the measures in this bill that propose to subject new groups to activity testing and breach penalties. I will address each individual measure shortly.

Turning to the breach period, these amendments seek to reduce the accumulation period for activity test breaches from two years to one year. The accumulation period is the period over which subsequent activity test breaches may escalate in severity from a first breach to a second breach to a third breach—a non-payment period. The amendments follow a recommendation of the Pearce report into breach penalties. This change is intended to reduce the risk that relatively diligent job seekers may be subject to a second or third breach for minor transgressions. It is not inconceivable that a person may be late for or miss an interview twice over the course of a two-year period on benefits. Under the existing rules, on the second occasion they would lose 24 per cent of their income for six months. While there should be higher penalties for persistent failures, the current two-year accumulation period sees even fairly diligent job seekers treated in the same way as the worst.

Turning to the issue of the breach rate reduction period, that group of amendments reduces the period over which an administrative first or second activity test breach may apply for parenting payment recipients, Newstart recipients and youth allowance recipients. The amendments propose that administrative breach penalty periods be reduced from 13 weeks to eight weeks and activity test breach penalty periods from 26 weeks to eight weeks. These amendments are in accordance with recommendation 25 of the Pearce report. Breach rate reduction periods apply for far too long. It has become apparent, over time, that the continued reduction in income for up to six months has caused significant financial hardship for job seekers and impaired their subsequent ability to participate and fulfil their ongoing obligations. For a second activity test breach, 24 per cent of income is withdrawn for a period of six months. This lasting penalty remains, despite their effort to rectify the action that triggered the breach. Putting aside the fact that such long-lasting penalties are unfair, it is likely that they will also lead to job seekers being stuck on benefits for a longer period.

The problems with this effect are self-evident. An increase in the average duration of payment receipt leads to an increase in outlays. How do we know that this is likely to be the case? The government has argued the converse effect. The McClure report model is built around the notion of participation support because it helps precipitate re-entry to the labour market. The bottom line is that participation costs money. This is one of the key principles of the government-commissioned McClure report and why it argued for a participation supplement. Using the same rationale, it stands to reason that withdrawing financial resources from a job seeker for a protracted period will reduce their ability to participate, thus reducing the likelihood that they will make the transition into employment. These amendments are not about going soft; they are about increasing compliance and participation. The unemployed move off benefits sooner. This is good for job seekers and good for taxpayers. Along with Labor's other amendments, these amendments represent moderate and considered change for the better.

Before I conclude, it would be appropriate to examine the costs of this change. The government has costed the reduced breach reduction period of eight weeks at $69 million per year, the cheapest of the Pearce options. However, since Labor's amendments propose a simultaneous increase in the percentage rate reduction for an administrative and first activity test breach, the cost would fall to $63 million per year. However, the cost would be less than this due to the positive effect that a reduced breach rate reduction period would have on job seeker participation. This saving is difficult to quantify.

I turn now to the issue of the breach rate reduction. These amendments propose changes to the percentage fortnightly payment reduction that occurs in relation to administrative and first and second activity test breaches. They propose that the fortnightly percentage increase marginally to balance the reduction in the period that the breach would apply. These amendments propose that the administrative breach percentage increase from 16 per cent to 20 per cent, the first activity test from 18 per cent to 20 per cent and the second activity test from 24 per cent to 25 per cent. The changes would apply to the parenting payment affected by the bill as well as Newstart recipients and youth allowees. These increases are meant to be complementary to the other changes Labor has advanced. Accordingly, we are opposed to pursuing them in isolation. These increases are not a huge increase in burden for job seekers who suffer a breach but they are intended to send a strong message up-front to job seekers to encourage them to comply and to remedy any failures. They simplify the range of breach reduction rates that may apply and are in the spirit of the flexibility that the Pearce report allows. Pearce proposed a maximum fortnightly percentage reduction of up to 25 per cent. These amendments mitigate the costs of the other amendments but not significantly so. They are about achieving a balanced set of changes.

Turning to the issue of housing affordability, covered by amendments (11) and (22), these amendments seek to restore some balance to the rules that allow youth allowance and Newstart job seekers to be breached if they move to an area of lower employment prospects. Labor does not disagree with the principle of penalties where a person moves deliberately to an area of lower employment prospects to minimise the chances of their finding work. These penalties originated from concerns about large numbers of job seekers moving to areas for lifestyle reasons—Byron Bay and numerous beach havens come to mind. Labor makes no bones about penalties in these cases, but there have been some unintended consequences from these provisions. Unfortunately, many job seekers trying to survive on allowance payments find it very difficult to maintain their housing arrangements. Often the high cost of rentals forces job seekers to find more affordable housing. The difficulty is that the areas of higher housing costs where they may be moving from have better employment prospects than the areas of lower housing costs that they are moving to. As a consequence, these people have substantial non-payment periods applied where all they were seeking to do was find affordable accommodation. These amendments provide an exemption for job seekers from the non-payment period when the secretary is satisfied that the cost of housing was a significant factor in forcing the person to move. No-one should be penalised for simply trying to keep a roof over their head.

I turn now to the last set of amendments, which are to do with the waiver of the amount of breach reduction period. These amendments would allow the remaining portion of a breach rate reduction period to be waived, effectively restoring payments to a job seeker when they rectify the incident that triggered a breach penalty. This is another Pearce recommendation that aims to enhance the level of compliance by job seekers. The government has adopted this approach in the bill, enabling the restoration of benefits for both parenting payment and mature age Newstart groups.

These amendments seek to broaden this arrangement to other job seekers, namely all Newstart recipients and youth allowance recipients. The government has obviously seen the merit in this approach, since it has opted for this arrangement for the parenting payment and mature age Newstart groups in the bill. We say: why not extend it? There is merit in extending this approach. Currently, job seekers who remedy their errors are exposed to the same penalties as those who do not. This is not fair and does not send the right message to job seekers. We should not have a system in place that says to job seekers, `Don't get your act together, because we will treat you the same as if you do nothing.' Once again, the government has costed these amendments, although it has used some dubious assumptions—for instance, the government has assumed that all job seekers would remedy their failures within two weeks. Whilst we are confident that the vast majority of job seekers will do the right thing and remedy, there will be a proportion who will not be so diligent. In addition, the government has assumed that all breaches would have a clear remedy that would allow the remaining period to be waived. This again is not the case. For instance, a breach triggered by not properly declaring earnings could not have a clear remedy, as opposed to, for instance, a breach by a job seeker undertaking to reschedule a missed interview. So not all breaches would have a clear remedy that would constitute compliance by the job seeker.

Finally, the government has assumed that a third breach non-payment period may be remedied. Labor's amendments, in line with Pearce's position about persistent breaches, do not propose to allow the waiver of a remaining non-payment period. With more sensible assumptions, together with Labor's other Pearce related amendments, the total cost of a system that allows waiving a breach penalty period is approximately $85 million per year. This again is on the high side, since this amendment will have the same positive impact on participation as the previous amendments, which reduce the breach rate reduction period. This benefit cannot be quantified easily.