No. 233

MUCH DENIAL ABOUT THE COST OF THE NATIONAL DISABILITY INSURANCE SCHEME

Stone the crows! The political establishment is in denial over paying for the NDIS.

There was a small summer storm over the holidays when new welfare minister Scott Morrison’s suggested paying for the National Disability Support Scheme will require getting able-bodied people off welfare and into work. [i]

Opposition families shadow minister Jenny Macklin conjured forth clouds of complaint, accusing the minister of using the NDIS as a “disgusting and cynical” cover for budget cuts to come. [ii]

“For the minister to try to emotionally blackmail the parliament by casting doubt over the NDIS unless harmful changes to our social safety net are made is deeply concerning and disrespectful,” Greens senator Rachel Siewert whined in the wind.[iii]

They argue that the NDIS 0.5 per cent Medicare surcharge is intended to fund the scheme and according to the feds this will raise $20.4bn between 2014 and 2019. [iv]

But even this considerable chunk of change will not be enough to fund people now covered by the scheme. The Commission of Audit estimated that, by 2019-20, 30 per cent of funding will have to come from new outlays by Canberra and the states.[v] According to assistant social services minister Mitch Fifield the federal government will have to kick in $9bn of new money per annum.[vi]

And this will definitely not be enough as the scheme’s coverage, or matching funding for other welfare groups, expands. Which will not take long. Already the aged care lobby is demanding more money, arguing that it is unjust that people who develop a disability after retirement age will not have access to the NDIS. [vii] As Judith Sloan points out:

Unless there are clear guidelines about entitlement to the NDIS that are firmly implemented, the danger is that more and more individuals with milder disabilities will secure coverage. In this way, the potency of the scheme to improve the lot of the severely disabled will be quickly undermined.[viii]

So the Crows want to caw for Scott Morrison in acknowledging that funding the NDIS is going to require cuts in other aspects of the welfare system.

But they can’t, because the minister’s tough talk is only baloney. “The system should be there for people who need it, particularly for the age pension, where people have paid taxes their whole lives, they have earned their retirement,” he said last month. [ix]

This is a very scary statement for anybody who wonders where the new NDIS $9bn will come from. For a start, retirees are the largest source of potential savings. Granted, the government did try to index pensions to the CPI instead of, as present, average male weekly earnings. It is said this would save $900m a year.[x] However the legislation languishes in the Senate, where I am guessing it will quietly die, given Scott Morrison’s assurance about not hurting the deserving old.

The government certainly shows no signs of cutting any of the other gifts to the ancient and affluent. But it could save $19bn a year just by increasing the pension age and superannuation eligibility to 70 and by including owner-occupied housing in the old age assets test.[xi]

However, as Scott Morrison makes clear, the chance of the latter occurring is somewhere between buckleys and none, perhaps because although the old are key government supporters they are bleeding away from the coalition. At 44 per cent, support for the LNP among over 50s is at a five year low. [xii]

But if Scott Morrison’s commitment to quarantining the old from welfare cuts to fund the NDIS is alarming, the justification for it – that old people are owed because they paid their taxes, is outrageous.

For a start, on recent figures a majority of them didn’t. According to an ABS model, the lowest three population quintiles pay less in total taxes than they receive in government benefits.[xiii]

And the idea that taxes are an individual investment, which people can redeem through benefits is appalling – ignoring the responsibility we all have to contribute to the common good.

Which is surely the foundation of the NDIS, one that will be eroded by the storm of self-interest if this sort of calculation of tax as a deposit in a personal account prevails. As Swiss economist Bruno Frey points out, people are happier paying tax in countries where the state treats them with respect and does not assume they will avoid their obligations whenever they can than in nations where the government assumes citizens are always tax evaders.

The idea that individuals should calculate how to break even or, better still, come out ahead on tax paid and benefits recouped does more moral damage to the integrity of the tax base than all the tax avoidance engineering under the sun.[xiv]


Policy research and writing. Faster and cheaper than your agency.

Tell me what you need @ stephen4@hotkey.net.au


 

 

ENDNOTES

[i] Dennis Shanahan, “Blitz on welfare,” The Australian, December 24

[ii] Jared Owen, “Labor’s Medicare levy won’t pay for all of NDIS says Scott Morrison,” The Australian December 26

[iii] The Greens, “Morrison blackmails parliament over the NDIS,”

[iv] National Disability Insurance Scheme, “FAQs about the levy,” @ http://goo.gl/5BxjA2 recovered on January 5

[v] National Commission of Audit, vol 1 s9.2 NDIS @ http://goo.gl/7oxn9C recovered on January 5

[vi] Mitch Fifield, “ ‘Magic pudding’ NDIS myth,” The Australian, December 29 2014

[vii] Rick Morton, “Battle looms on NDIS shortfall,” The Australian, December 1

[viii] Judith Sloan, “Mildly disabled threaten viability of NDIS,” The Australian April 20 2103

[ix] Shanahan, “Blitz on welfare,” ibid

[x] Peter Martin, “Why our pension scheme is too generous,” The Age April 15 2014

[xi] Cassie McGannon, “Age pension reform needed for a fair, sustainable, welfare system,” The Conversation January 29 2014 @ http://goo.gl/sJcU4S recovered on January 5

[xii] Phillip Hudson, “Newspoll: male voters turn their backs on team Abbott,” The Australian December 29

[xiii] Australian Bureau of Statistics, “Equivalised private income quintiles,” (in) Government benefits, taxes and household income,” June 29 2012 @ http://goo.gl/I8kXdj recovered on January 5

[xiv] Bruno Frey, “A constitution for knaves crowds out civic virtues,” ANU Centre for Tax System Integrity, Working Paper 31, June 2002 @ http://goo.gl/6qC7HX recovered on January 5

'2012