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Wednesday, 16 December 1992
Page: 5236

Senator PATTERSON (7.07 p.m.) —The Senate is today cognately debating five Bills, three social security Bills and a veterans' affairs Bill. I will concentrate on the three social security Bills because Senator Newman has spoken on the veterans' affairs legislation. Both the Social Security Legislation Amendment Bill (No. 2) 1992 and the Social Security Legislation Amendment Bill (No. 3) 1992 are omnibus Bills. The former seeks to implement a large number of minor and technical amendments to the Social Security Act which, due to the time restrictions on this debate, I am not in a position to detail. However, I wish to address one specific part of this Bill; namely, division 13, clauses 126 and 127, relating to the confidentiality of social security information. Clause 126 will extend section 1312 of the principal Act by making it a criminal offence for any person to obtain client information unlawfully or to use that unlawfully accessed information in an unauthorised way.

  Clause 127 will extend section 1317 of the principal Act by making it a criminal offence for a third party to make use of information the disclosure of which is not authorised under the Social Security Act.

  I noticed that Senator Lees had trouble articulating and so have I, but I suppose it is no wonder, given that we have had about seven hours sleep since Monday. A speech therapist should be studying our speech errors.

  The problem of unauthorised disclosure and unlawful use of information provided to Federal Government agencies is not new. In both his first and second annual reports, the Privacy Commissioner expressed concern about the lack of effective statutory mechanisms available to prosecute people who seek financial gain from disclosing or procuring personal data held by Federal Government agencies and the inability of affected individuals to claim damages against the Privacy Act.

  In the first half of 1991 I alerted the Senate to the extent of this information exchange and the lack of effective legislation to prevent its ongoing occurrence. In New South Wales, the Independent Commission Against Corruption has heard evidence of personal information being obtained without authorisation from a large number of Federal agencies, including the Department of Social Security, the Health Insurance Commission, the Department of Immigration, Local Government and Ethnic Affairs, the Australian Customs Service, Australia Post and Telecom. My efforts resulted in an inquiry into the unauthorised disclosure and procurement of government information by the Senate Standing Committee on Legal and Constitutional Affairs. However, the Government merely paid lip service to this inquiry. Only when it came under considerable media attention following the release of the ICAC report this year has the Federal Government finally moved to give this important matter its due consideration.

  Social Security has received considerable flak in relation to this issue. It has been revealed that one officer traded personal information about DSS clients over a 15-year period and, upon retirement, attempted to pass his operation on to another DSS officer—sort of inherit the habit. It has also been asserted that a private investigator reaped in the vicinity of $100,000 from this information trade; $90,000 of it from Social Security.

  As a result of ICAC's inquiries, internal departmental and Australian Federal Police investigations, 36 social security officers were referred to the Director of Public Prosecutions. However, the DPP found there was sufficient evidence to prosecute in only two cases. Despite the criticism directed at Social Security, I believe credit must be given where it is due.

  The Social Security Act was amended in January 1990 to make it an offence for third parties, such as banks, insurance companies and private investigators, to obtain unauthorised personal information. To my knowledge, this was a first in Federal legislation and I do not believe this approach has been effectively followed up in any other Federal area. That is where I think Social Security ought to receive credit, because some others have been very tardy and very reluctant to follow suit.

  However, I am aware of the legal argument that the 1990 amendments may not have been totally effective as they provided a loophole whereby the receiver of the information could claim that they were unaware that the information was unauthorised. I note that the Secretary of Social Security does not agree with this argument and I hope that the current amendments will close any loophole.

  The second social security related Bill before the Senate is the Data-matching Program (Assistance and Tax) Amendment Bill 1992. Initially this Bill sought to discard the sunset clause inserted in the original Bill by the coalition which meant that parliamentary approval was required to continue the data-matching program beyond two years of operation. I know that some have argued this is a rather arduous task, but I believe it is a necessary task so that we, as representatives of the people, and the public can scrutinise more closely this process and the procedure that takes place in the data-matching operation. The Government relented when the shadow Minister, Mr Connolly, foreshadowed that the coalition would seek to extend the sunset clause until January 1994 with a further report from the matching and assistance agencies in October 1993.

  The data-matching Bill seeks to make two further changes to the original Act. First, it seeks to amend section 11 of the principal Act to enable the source agency to commence remedial action without the required 28 days notice in cases where the discrepancy is solely attributable to the agency's own administrative error. The coalition has no objections to this amendment.

  Second, it seeks to extend the length of time allowed in step 5 of the data-matching process from 24 hours to seven days. In his second reading speech, the Minister stated that:

This will assist in the generation of more accurate results . . . more accurate results could be achieved if preliminary matching results could be tested and the Data-Matching Agency's algorithm changed if necessary to eliminate false positives and false negative results.

When the original legislation was before the Senate Committee, departmental officers were adamant about the accuracy of the results that would be obtained from data-matching. However, in the latest Social Security data-matching report it is revealed that, in the latest data-matching cycle, 80 per cent of so-called matches were not acted upon.

  In the recent Estimates hearings, a Social Security official readily admitted that in the early stages some data-matching programs were nowhere near as sharp and refined as they could have been. It is amazing to hear this when we heard the evidence at the Legal and Constitutional Affairs Committee about it being such a whiz bang system; it was going to be A-okay and we were going to get 95 per cent correct matches. The official said that he did not think the program would get to the stage where 90 per cent of matches would be cases where there is an overpayment. Now officials are saying that we are not going to quite achieve what they said when they were originally setting up the data-matching program.

  Long may the Senate remember the former Minister for Social Security, Senator Richardson—if we can remember him—claiming that he was so concerned about the privacy considerations relating to data-matching that step 5 would be no more than 24 hours in duration. Thankfully, the coalition's amendments to the original Bill resulted in stringent operational requirements to protect the privacy of individual Australians. While not opposing this amendment, which has the Privacy Commissioner's approval, I remain concerned that this Bill will provide for unlimited, ongoing changes to the matching algorithm. Surely once a particular algorithm has been refined, there is no need to continue to send the information back and forth between the matching and source agencies during later matching cycles.

  A concern I expressed during the briefing was that permitting agencies to have this extra time may mean that they are a bit sloppy in setting up their original algorithm and that they may think, `If it does not work this time, we will have another go at it, and we will have time to do it'. I put those agencies on notice that we will be looking very carefully—because we have been told the number of times that they repeat a data-matching run—at how often they have to do it to see whether they have fallen into the trap of thinking this is a bit easy and, `If we don't get it right the first time, we'll have a second bash at it'.

  The coalition's main concern about the implementation of the data-matching legislation is the fact that the Government's estimates of the savings that would have derived from this program have nowhere near been realised. For example, in the Social Security portfolio it was originally estimated that $290m would be saved during 1991-92. In actual fact, the savings amounted to $25.3m. All sorts of excuses were given as to why there were shortfalls. There was the fact that there has been a recession; and the fact that other measures were much better than had been anticipated. All sorts of other excuses were given as to why the savings were not as great.

  That was the gun that was held at our head. Senator Lees would remember this. We were told, `These will be the savings. If you do not have this data-matching, this is the cost it will be to the public'. There was no concept that other processes would reap benefits, or correct estimates of the benefits of the other mechanisms to reduce fraud. So the Department has again given us estimates that are not very good; they are very rubbery, in fact. I think the Senate was, in some ways, hoodwinked about the benefits which would be derived from data-matching. We are now living with it and, as far as the coalition is concerned, we monitor it very closely.

  The third social security Bill before the Senate is the Social Security Legislation Amendment Bill (No. 3). This Bill seeks to introduce the more substantial initiatives announced in the Budget. It provides for an increase in mobility allowance of $10 a fortnight from 1 January 1993. The mobility allowance will be indexed with the CPI. A person will be allowed to take a six-month advance in mobility allowance. The mobility allowance will be extended to people with disabilities who are looking for work or doing voluntary work. We support these amendments which will provide more incentive and facilitate re-entry into the work force. It needs to be stated that a coalition government will introduce a disability allowance of $45 a fortnight for people with a 70 per cent and higher impairment.

  This Bill increases the employment entry payment for DSPs from $100 to $300 while the 12 months continuous entitlement requirement is also removed. A $100 employment entry payment will be introduced for sole parents in receipt of special benefit and widow B pensioners. An education entry payment for disability service pensioners commencing education will also be introduced. Again, the coalition supports these changes which are designed to encourage people into the work force. It also should be noted that Fightback increases employment entry payments for sole parent pensioners and the long term unemployed from $100 to $400 and $200 respectively.

  The Government announced in the Budget that it would change the method of calculating rent assistance from 20 March 1993. The current $25 a week threshold will be replaced by four thresholds depending on a person's family and marital status. The weekly rate of rent assistance will be increased from 50c to 75c in each dollar of rent paid above the threshold. While the Department claims these changes will increase rent assistance for 68,000 beneficiaries, a saving provision has been inserted to protect current beneficiaries who would otherwise be disadvantaged. As happened with deeming, this savings provision will mean that people with identical incomes and in identical circumstances will be treated differently under the Social Security Act.

  The Budget decision to move forward the indexation of pensions and benefits from 20 March 1993 to 28 January 1993 is a poorly disguised, politically motivated bribe in the run-up to the next Federal election. That maybe gives us some clues as to the election date. Single pensioners will receive $6 per fortnight increase while married pensioners will receive $10 per fortnight increase. These pale into insignificance compared with the Fightback commitment to increase the single pension by $24.10 per fortnight and the married pension by $40.20 per fortnight and maintain indexation.

  The Government also announced in the Budget that the fringe benefits income test for pensioners would be removed. In theory this would mean all part rate pensioners would become eligible for the fringe benefits provided by local councils and State governments as well as the Federal Government. However, the vast majority of these benefits are provided by the States and this initiative is dependent upon obtaining the agreement of the States about appropriate compensation.

  Undoubtedly the initiative in this Bill which has engendered most debate is the Budget decision to treat capital gains and losses from listed shares and securities as income under the Social Security Act. Community opinion in relation to this proposal is divided. On the one hand, leading retirement incomes expert Mr Daryl Dixon supports the initiative, claiming it will reduce the artificial distortions that presently favour some investments over others. The Australian Pensioners and Superannuants Foundation is `generally supportive of the changes themselves' as they will treat people consistently. However, it is concerned about what it perceives to be their retrospective effect. On the other hand, ACOA, the Australian Council on the Ageing, is opposed to the initiative for a number of reasons. Its chief concern relates to its belief that it is a de facto assets test which entails an unacceptably harsh pension withdrawal rate.

  A number of points must be made about this proposal. First, it must be remembered that the Government estimates that 60,000 people will be affected by this initiative. This represents 5 per cent of all age pensioners. One-third of these pensioners will have a reduction of less than $10 a week. The Government has stressed that a relatively small percentage of pensioners will be adversely affected to any significant extent by this initiative.

  Secondly, it needs to be pointed out that this proposal brings the treatment of listed shares into line with other types of investments such as managed linked investments. In 1988, the Government moved to prevent pensioners from circumventing the incomes test by treating unrealised capital gains from these investments as income. This proposal will rid the system of the current distortion whereby managed investments and listed shares are treated differently under the income test.

  Thirdly, in relation to concerns about the retrospectivity of the proposal, it must be pointed out that the Government has decided to apply the new rules from September 1993. This will give shareholders significant time to change their investments if they so wish.

  Finally, it should be noted that there remains at least one investment avenue that will continue to be outside the unrealised income test. Income on property is treated on a receipt basis rather than an accrual basis. The Department claims that property has to be treated differently as it is a lumpy investment which usually must be sold as a whole rather than in portions. However, this does not mean that the Department should not be vigilant in ensuring that valuations of property investments are accurate and up to date. This has not always been the case in the past. In fact, one only has to look at the ANAO report in an efficiency audit released in June 1991 to see that this has not always been the case. It should be noted that the Government moved to rectify this situation in the 1991 Budget.

  The coalition will support the divisions of the legislation relating to the treatment of unrealised capital gains on listed shares and securities under the income tests. However, I must stress, and it must be remembered, that these amendments will only take effect from September 1993. Consequently, I give notice—and again stress—that the coalition will review these provisions when in government.

  The coalition is concerned about the mechanics of this proposal. In particular, we are concerned that the proposed formula to be used may not treat capital gains and capital losses equitably and fairly.

  The coalition is also concerned about the amendments in the Bill which will mean that both unrealised capital gains and income applying to allocated pensions will be treated as earned income for the purposes of the age pension assets and income test. The ISC has recently developed rules which expand the definition of annuities in such a way as to include allocated pensions.

  Unfortunately, these proposed amendments to the Social Security Act, by denying allocated pensions the same treatment already given to annuities in the income and assets test, may undo that good work and fly in the face of the stated policy of encouraging allocated pensions.

  In the evidence to the Senate Select Committee on Superannuation the Department admitted a `similarity' between annuities and allocated pensions and advised that it would undertake a review of the treatment of annuities. Given that this proposal has not been the subject of any coordinated review to ensure equity of treatment, the coalition will move in the committee stage to delay the onset of these amendments until 1 October 1993 or until the completion of a further inquiry by an appropriate Senate committee, whichever is the latter. Otherwise, the coalition supports these two Budget Bills, and the Data-matching Program (Assistance and Tax) Amendment Bill, although we are extremely concerned about the hasty way that they have been forced through the Parliament.