Joint Press Conference - Revised Family Tax Benefit measures to fund $3.5 billion child care investment
- Minister for Social Services
- Minister for Education and Training
TREASURER: Thank you every one. This morning we stand here as three Ministers in the Turnbull Government but we also stand here as three dads – three proud dads, a few dads in the crowd as well, and a few mums too I suspect. This is, I think, a very positive day for families. What the Minister for Social Services has introduced into the House of Representatives today is a package of reforms that will do two important things. It will firstly ensure that we are producing the savings necessary to support the very important Jobs for Families package that Minister Birmingham will be introducing later in the year, which will provide Australian families with more choice. The other thing it does is it ensures that the way we are delivering family payments in this country, support for families, is better targeted. That it's more fit for purpose. That we're using the resources that taxpayers give to ensure families can be best supported and to meet their modern requirements and the modern challenges of families is being best directed to their areas of need and these are very important changes.
The measures today which were introduced into the House are a better and fairer family payment package system, that more effectively targets family support for today's needs. The package delivers commensurate savings to those that were first put forward in the 14-15 Budget, which ensures that we meet the savings objective as well and more significantly meeting the family payment reform and family support objectives of these measures when considered as a package. These measures have been worked up now between the three ministers you see before you and particularly also in my former role in Social Services, working with crossbench senators over many, many months to reengineer the measures that have been put forward in the 14-15 Budget. I will leave it to the Minister for Social Services to run through the various components of that package, but I want to thank the crossbenchers who we continue to work with on these measures and we continue to discuss these measures with.
More recently, the Opposition has indicated a willingness to engage with us on this, in the last week, and we welcome that – better late than never. They're always welcome to collaborate with the government on good reforms and we welcome the fact that they are now talking to the government about these changes. We thank them for that.
The welfare reforms that are being enacted here also act on the McClure report. The McClure report talked about decluttering our welfare system. This is a further step in that process. You will remember from the last Budget on the pension changes, there was also the reduction in one of the supplement payments; there were 55 supplements a year ago, there are now 54 and we'd be looking to take that number down further with these changes. On fitness for purpose – when the Family Tax Benefit Supplement measures were introduced, this was done under the Howard/Costello Government. It was done at a time when there was a surplus projected of around $13.6 billion. Now, we know that's not the case now. We're in a very different fiscal environment. That only underscores the need for us to ensure we are targeting payments and support as best as we possibly can. In the recent meeting between the convenors of the recent reform summit and the Government, there was a clear point made about the need for taxes to be fit for purpose. There's also a need for payments to be fit for purpose.
I will leave it now, I think, to the Minister for Social Services, Christian Porter to make comments on the package and then Senator Birmingham as the Minister for Education and particular responsibility for child care can talk about the Jobs for Families package because at the end of the day, that's what this is about – this is about delivering the savings - if you want to do something important for child care, you have to deliver the savings to pay for it. Jenny Macklin said, ‘you’ve got to pay for it somehow’. Well, this is the somehow – this is the somehow.
MINISTER PORTER: Thank you, Treasurer. Thanks, everyone, for being here. I will confess to you I have never physically stepped into this room before in Parliament House. It’s my first time here, I'm sure you will be very gentle with me and I do bring a very large package and I think a very important package. What I might do is just two things. First of all just, you have heard the second reading speech from which I think you can garner all the relevant details but I might just very briefly recap on some of those details.
As the Treasurer has pointed out this is two things - it is clearly a measure designed to slow recurrent expenditure growth inside the Family Tax Benefit system. But also, to reapply those savings in a way which we think produces a far better outcome for families and for the society in Australia as a whole by encouraging and enabling workforce participation. So, it works very much in conjunction with the child care reforms that Simon Birmingham now has stewardship of.
I might summarise the measures in three tranches. The first reform to the Family Tax Benefit Part B is about the rates. You will, of course, recall that in the previous measure which we are now reversing we had taken down the cut-off age to 6 years. We are now lifting that back up to 13 but we are making certain mitigatory payments because we have considered and listened to some of the issues about the particular difficulties in rearing children at 13 above that attached particularly to grandparents but also in single parent families. So, that cut-off age will now be 13. But there will be a mitigatory payment of $1,000 paid for the youngest child under 12 months for young children in families for that first year of life, but also for single parents and grandparents, where the child is aged over 13, there is a mitigatory payment of $1,000 to assist them because we recognise that they have particular work force difficulties.
Then, second of all, the major area in which we can drive restraint in expenditure, recurrent expenditure growth here, is by looking at the end of year supplements. At the present time, the supplements which are paid under the FTB-A system, which is the per-child system, are $726. I won't give you the cents figure but $726 per child. What we are seeking to do is phase those payments down and then have them cease in this way - so $726 would be reduced to $600 on 1 July 2016, then $300 on 1 July 2017 and then the following year it would go down to zero. We would in effect phase down and end the supplements in the FTB-A stream. Equally, the present supplement in the FTB-B stream which is the per-family stream is $354. Again, in those relevant years we'd take that down in yearly stages from $354 to $300, then to $150 and then down to zero so to phase out that FTB-B supplement. Now, that is the significant save in this process. That would allow us to reform the part, FTB Part A fortnightly payments and youth payment fortnightly rates which would end up being a spend of around $585 million. So, those are the mechanics of the changes that we're putting into place.
I might just now make some general comments about why it is that we believe that this is a superior package to the one that we're replacing. No equivocation about this, it is a different approach and it approaches the problem at the end of the system being the supplements rather than at the continuation of the system being the fortnightly payments. I just want to make a few comments about that. Firstly, as the Treasurer noted, what we are seeking to do here is to link genuine structural reform in the child care system, that's what Simon Birmingham will talk about today, with genuine structural reform in the Family Tax Benefits system. As you all know the McClure report stated that there were 20 general payment types and 55 subcategories of payment. As a new Minister, and I've been here for just over three weeks, it is an imperative, in my observation, that we continue the process that Scott Morrison, when he was in the position, started of grinding down those 55 sub payment categories. The system is unworkable. So far we managed to get it down to 53. I'm a cricket fan. Getting a half century is great in cricketing terms. It is terrible to be over the half century mark in supplement payment terms.
What you will note in the child care package is that we are replacing three very complicated payments with one very simple payment, if we are successful. Here we will be removing two supplementary payments and buttressing the fortnightly payments which is in our observation, based on everything we've heard during the tumultuous efforts to try to have the first variance of this Family Tax Benefit from the first budget moved through the Parliament, we’ve heard and listened and we've decided it's a much better thing to look at the supplements because it's more in the nature of genuine reform.
As the Treasurer noted, the supplements were introduced in 2004 and it was a very different world in 2004. As the Treasurer noted, the predicted surplus in the year that these supplements was introduced was going to be $13.6 billion. Shannon Noll was No. 1 on the hits in 2004 – a very, very different time.
TREASURER: Still a fan. He is from the shire.
MINISTER PORTER: Treasurer, you need to get out more!
MINISTER BIRMINGHAM: Out of the shire!
MINISTER PORTER: It was a very different system, and what had happened is that preceding 2004, there had been a very large number of complaints about a very large number of people who had accumulated debts under the system, largely because of underestimation of their income with respect to the availability of FTB payments and in some instances not merely underestimation but under reporting. This in large part was meant to alleviate that problem. Now, what we know is that in 2018-19, the ATO is going to move to a single touch payroll system. We expect that that will very substantially mitigate the instances of overpayments. What that single touch payroll system will do is allow live real-time delivery of data about fortnightly income to both Centrelink and the ATO. So, here was a supplementary payment system designed to cope with a certain problem, a problem very much stabilised in recent years and we expect is really going to be significantly decreased through technological change over the next two years. The payment purpose, the reason why it was designed is being alleviated and will be alleviated and what we have been looking for is payments inside that excruciatingly large number of 55 that are sensibly no longer fit for purpose and we believe that this is one of those. If I might put to you all - one of the virtues of this approach is that – and again we've listened on this – is that family expenses and family budgets flow in this fortnightly cycle. Things that happen at the end of the year are separate to that fortnightly cycle. So, the cost of living has happened at this fortnightly cycle so we are taking savings from a payment that is no longer fit for purpose in the end of year supplements, transferring it to the child care package and then using some part of it to buttress up and increase the fortnightly payment so that as the daily living cycle and weekly living cycle and fortnightly living cycle goes on, families are better equipped to cope with that rhythmic fortnightly pattern and the real-time demands of fortnightly budgeting.
In my own research and my office's research in considering this in detail after many options were considered, I will just read to you one website that we found which was an accounting website that provides advice to families. It said ‘if it turns out that you have been overpaid, the supplement will first be used to help offset any overpayment of the FTB or child care benefit. If you have been underpaid, you will receive a nice top-up payment along with your supplement’. Now, this is the sort of advice that's being given to people about the nature of the supplements and they're not my words, they're words on a website but it gives you an indication as to how people still understand, quite properly, that the purpose of these payments was to mitigate against debt and that is a problem that we think in relatively swift time we can largely alleviate, which is why we are staggering the payments down.
Finally, if I might just say, allied to the increase in the FTB-A fortnightly rates which is around $10 we will also be increasing the fortnightly Youth Allowance rate by $10.44 and the same amount increase for DSP recipients at the relevant age of a child. That in itself is a reform because it will align the three payments together. And previously having disalignment amongst three payments, amongst the same cohort was causing all sorts of problems and disincentives in terms of people moving in and out of family homes and in and out of circumstances to access payments.
So, if I might say in summary, it is unequivocally a different approach. It tackles the problem at the end of the financial cycle. It helps people in the fortnightly real-time live family financial cycle. It applies funds that are being saved to the purpose of child care that Simon Birmingham will now talk about it and it reapplies some of the payments to that fortnightly stressful cycle that families go through.
MINISTER BIRMINGHAM: Thanks very much Christian and Scott. It is very important today that we acknowledge not just the significant changes that are being made in structural terms to our welfare system but acknowledge that this is an overall package that is supporting significant structural change to how child care and family support operates across Australia. My clear message to people is when looking at the impacts of these changes that Christian and Scott are speaking about, they must be looked at in the context of the child care changes the Government is proposing as well. Because we are delivering the most significant reforms and most significant additional benefits to Australian families in child care support that Australia has seen. These changes ensure that as a nation, families will actually have the support they need when they depend upon it to be engaged in the Australian work force.
This package of reforms to the welfare system is integral to funding our $3.5 billion additional support for child care. That is a $40 billion commitment to child care and early learning that our government is delivering for Australian families. And it provides most importantly, more support to Australian families who depend upon child care, more support to the Australian families who need the support of Government to make the bills for child care stack up for them to participate in the workforce.
Australian families earning between $65,000 and $170,000 will – on average – be around $30 a week better off as a result of the child care reforms our Government is proposing. That is real money that helps to pay for child care and helps them to participate in the workforce. That means they’re getting more assistance to be participants in the workforce. Some 240,000 Australian families are estimated to increase their workforce participation and involvement as a result of the reforms. 38,000 of those families are jobless homes, where neither partner or, in a single parent case, they are not participants in the workforce.
So by making child care support more generous and simpler and more accessible, more people will get in to the workforce and more Australian children will have role models of working parents that help set them up for their lives in the future. It is a significantly simpler system that is being delivered in child care as well, as Christian acknowledged. Taking three complicated different child care payments and turning them into one single payment, the child care subsidy, that will be available to Australians.
These types of reforms are really directed at making sure our systems in Government work as simply, and efficiently, and effectively as possible; that Australian families are able to interact and engage with them in a simple way and understand how to access them. But that, of course, they are ultimately delivering the public policy benefits that we want to see, which is support for families who need it, where and when they need it – support that helps those families participate in the work force, support that is targeted to those who are most in need. And all of these measures brought together, deliver that outcome which is why I urge Australians and the members of the press gallery here to make sure that in looking at the package of measures in relation to welfare reform and family tax reform today, they look at it as an integrated package that brings together the child care reforms as well, which, when put together, deliver substantial benefits to help many, many Australian families who rely upon our child care system for their workforce participation.
QUESTION: Can I just clarify, so, the revamp of all these measures remains budget-neutral in so far as it is going to achieve the same saving. Is that correct? Could you tell us what that saving is, what the new forward estimate is?
TREASURER: The original package, when you update it, when it was introduced in 14/15 was delivering over a four-year period, and this is the cost of the reversal, this is what I have to be clear about - we are actually reversing out all of the 14/15 measures that related to Family Tax Benefits, as a result of what Mr Porter has introduced today into the house as Social Services Minister. So, they are all going out, and that is a reversal of savings of some $3.7 billion over that period. What we are able to introduce is additional revenue measures that total some $2.4 billion in relation to those measures that he has introduced. But I would also note, that as a result of other measures that we introduced recently on the family day care child swapping measures, that is raising an additional $930 million over the Budget and forward estimates which takes this up to $3.362 billion over the forward estimates. Now, that is what it is over the Budget and forwards, but with the phasing of those arrangements some of these measures kick in earlier, some of them kick in later. When you get beyond the forwards, that’s when you start to get complete parity. Now, as I said, it was largely in the same ballpark and when you’re talking in the billions there is a few hundred million that has to continue to be resolved in terms of how we go forward with MYEFO and the Budget and we are confident we can address those measures. And there are other measures that are still before the Senate in terms of the large family supplement and the portability arrangements of the Family Tax Benefit. Together, those measures are around $215 million over the Budget and forwards. So, this is largely a commensurate saving with the original budget measure and that has always been the plan because, as Jenny Macklin said, the child care package has to be paid for somehow. There is no free money when it comes to paying for child care, and we have been very appreciative of the universal support for the Jobs for Families package. I am assuming that extends to the opposition, they have been very supportive of it, but without this package, you can’t pay for the Jobs for Families package, and if Labor is supporting the Jobs for Families package, then they need to announce the saves that are going to pay for it.
QUESTION: [inaudible] so why didn’t you get it right the first time?
TREASURER: We’ve listened, we’ve revised it, we’ve re-engineered it and I think the Government has worked collaboratively with the crossbench, which all the team here has done. I think it should be a positive thing, that where a Government has been in the first instance – the measures were put forward to deliver savings. These measures deliver, I think, system improvement, more effective and more efficient delivery of payments. It isn’t just about the saves, it’s about actually delivering a better welfare system, it’s about delivering a better system of family payments which is targeting it. Australians expect us to use the money they give us wisely and to target to the need. They don’t expect us to put cash splashes out there at the end of each year. They expect us to put family support payments to work and more and more Australian families know that they need to work more to make sure they can deal with rising costs of living and one of the impediments of families working more has been the unaffordable cost of child care. The percentage of two income families today is a lot higher than it used to be, particularly when they are saving to buy a house and trying to buy a house. They know that both parents have got to work. Now we have got to remove the impediments to them being able to be in the workforce. And that’s what this child care package does. It doesn’t just help them with the cost of child care, it helps them earn more to deal with all the bills and the other objectives and aspirations they have for their families.
QUESTION: When the savings in this announcement are set against the outlays on the Families package – is there anything left over to improve the budget deficit? Can you say anything about how much that would be and when it would kick in?
TREASURER: Over the Budget and forwards, this largely washes its face when it comes to the child care package and the other measures that we have. Once we move beyond the Budget and forwards then you see a contribution to the bottom line over time. And I think that’s very consistent with the approach we are taking to the Budget. I noted the obvious yesterday that the Budget will be in surplus when expenditure is less than revenue. And that means you just keep working towards that outcome and we will get to that outcome but we will do it in a way which continues to maintain support and strength and growth in the economy and support and strength and growth for jobs and I would expect that’s what Australians want us to keep a fine balance on.
QUESTION: Mr Porter I understand the argument that swings and round-a-bouts, what you’re losing in family payments, you pick up in childcare as Minister Birmingham articulated. But a lot of families don’t use child care, but they will lose money from family payments. How many families will be worse off because of these changes?
MINISTER PORTER: We’ll distribute the breakdown data on that and as you’ll appreciate there is some complication to it. If I can say in broad terms there’s one round-a-bout and two swings here. So, if the round-a-bout is where we make a save, that is the end of year supplement, but the two swings are that there is a $10-odd increase to the regularised payments under FTB-A and the families who are receiving child care will be very significantly better off under the package that we hope to pass. So, your point is noted but I’d say that it is mitigated by the fact that a lot of the FTB families are also in the child care market but that is not the only benefit. There is a very considerable spend here, over half a billion dollars, to increase that base rate of the FTB-A. As I put earlier, the approach that we’ve taken is that if the payment is properly designed to assist families with that regularised budget cycle, then any generosity is much better pitched at that regularised budget cycle whereas this end of year payment has been used to mitigate debts for some people, well that number has steadied and will decrease and for other people it is an end of year benefit which is separate to that regularised budget cycle. Let me say to you that a payment, an end of year supplement, designed to help people mitigate a debt is now being paid to an overwhelming majority of people who don’t have any debt. So, we have looked into the system for payments that are no longer fit for purpose. So, point noted, but I think it can very much be overstated by virtue of the fact that there is a correlation between the families.
TREASURER: On this, this is the other point, what this package does is it enlarges the pie for families by helping and supporting families to be able to work more. If you are working more, you’ll be better off on this package. You will be better off if you’re working more; a day a week more, half a day a week more, you’ll be better off under this package and I think that’s an important point. The other one, particularly for stay at home Mums or stay at home Dads, for that matter, for those who have infants less than 12 months, they will actually be better off on every single scenario here. They will be better off because we are increasing the payment for those under 12 months on top of what is already there and the increase to the base payment, as Christian has said, by an additional thousand. We’ve also recognised that for children above the age of 13 and above who are in single parent families or where a grandparent is the custodian, that their needs are also being recognised in a continuing payment as well.
QUESTION: But families with two parents and teenage kids they are worse off, they lose their…
TREASURER: Not if people are working more. Remember, under the previous government what they did is in addition to having $15 billion worth of savings put through the Family Tax Benefit system by adjusting thresholds and freezing payments and doing all of the things they’ve accused this government of doing as being abhorrent, they did all of those things when they were in government. The other thing they did is they made the changes to parenting payments you’ll recall when they said when a child turns 6 you went off the parenting payment and you had to go on to Newstart and the previous government’s rational for that was when your child turns six, you can go into the workforce. Now, when this measure was first introduced it applied exactly the same principle as the previous government. Now, the Opposition rejected that. They can explain the difference between those two situations. What we’re saying is when your child now turns 13 that there is the opportunity for people to seek to be in the workforce at that point and when you’re in the workforce working a day a week you’ll be better off under this package.
QUESTION: Jenny Macklin on radio this morning seemed amenable to most, this without locking her in, but she did express concern…
MINISTER PORTER: Do you have the power to lock her in?
QUESTION: No, no. She did express concern about one element and that was reducing the payments for single parents and grandparents of teenage kids. Is this a whole thing? You are not going to cherry pick? The Parliament have to pass the whole thing or nothing?
MINISTER PORTER: This package is the result of a range of negotiations and the question was asked earlier why a new package. Well, pragmatism, I think, is the answer to that. To note that there is a new package is not to be, I think, able to fairly characterise the old package as unreasonable. We have met with difficulties in having the old package negotiated through the Senate and there is a lovely motto for the US marines; improvise, adapt and overcome. That is what this package represents and if there are negotiations that are ongoing we will be good US marines in the conduct of those negotiations.
QUESTION: So, some of it is negotiable?
TREASURER: Look, we’ll continue the discussions as well as with the crossbench. The opposition hasn’t indicated yet their support for this and that is a matter for them but, as I said before, if they don’t support this package then they can’t actually go to an election and tell the Australian people they are able to provide greater and more affordable child care – that is why these two things are linked because they can’t afford it. But we will continue to talk to the opposition, we will continue to talk to the crossbench. Those discussions have been going on since May and what we have got here today is the product of that collaboration. So, yeah it is a better package, it’s a better package, it’s a better offer and it also achieves the Government’s savings objectives. So, we haven’t had to walk away from that and nor would be because as a Government we know you have got to pay for what you spend and that is a very important principle. We have got time for one more.
QUESTION: Mr Porter, how confident are you that that problem of overpayment which leads to those end of year debts can be eliminated and if it can’t be eliminated because of software problems or whatever that is going to leave a lot of people in trouble, isn’t it?
MINISTER PORTER: Well, eliminate is a very strong word. I don’t think that any rational government is going to be able to suggest that they can completely eliminate a problem but I would say that we are talking about a very quantum shift in how we do business and this feeds into the notion of the WPIT for Devo fans the Welfare Payment Infrastructure Transformation project. So, the platforms that we have been operating and which the previous government put no effort or money into fixing are arcane. They are really very poor. We are investing considerable funds into re-engineering those platforms, part of that is the single payroll system. So, eliminate – no. Very substantially mitigate against a problem that in the past was fair to warrant measures – I think the answer to that is yes. I am very confident that we will substantially eat into this problem of over payments.
TREASURER: I was going to say, I need to clarify one thing that is very important despite my great affection for Shannon Noll as a fellow Shire resident I remain Tina Arena’s number one fan in this Parliament. Thank you.