Tuesday, August 21, 2012

Gillard's very costly disability scheme

Late Friday afternoon, Treasury released a report it commissioned by the less-than-famous Australian Government Actuary (AGA) into the Productivity Commission’s costings of the National Disability Insurance Scheme (NDIS).

The Centre for Independent Studies (CIS) requested the report under the Freedom of Information Act 1982 to confirm the projected cost of the NDIS, which has been the focus of my research here at the CIS.

The AGA report was also picked up by the Australian Financial Review, which reported on Saturday (19 August 2012):

The cost of the National Disability Insurance Scheme could blow out to $10.5 billion a year by 2018–19, partly due to the industrial umpire’s decision to award big pay increases to community workers.

The warning from the Australian Government Actuary, in a document released by Treasury under freedom of information late on Friday, highlights further budgetary risks associated with big ticket spending items flagged by both sides of politics.

Reviewing the Productivity Commission’s costing of the NDIS, the actuary said that though the methodology was sound, it contained some risks.

‘Factors that have the potential to increase the estimated cost include the wage case for social and community sector workers, possible overstatement of offsets and the treatment of the psychiatric disability group,’ the actuary said.

The Productivity Commission estimated that the cost of the NDIS in 2018-19 would be $15 billion gross cost ($8 billion net). But this estimate is for the NDIS if it existed in 2009-10 and uses 2009–10 prices, population and costs. However, the NDIS will not exist until 2018-19, so there is at least nine years of population growth and price inflation missing from the commission’s $15 billion estimate.

The AGA has done the estimates to fill this gap in the public’s knowledge and found that the gross cost of the NDIS in 2018-19 will be approximately $22 billion and the net cost $10.5 billion.

The public has been poorly served in the debate surrounding the NDIS with misleading facts and figures. Hopefully, with better information, we can have a proper debate on what is promising to be Australia’s next public sector leviathan.


Opposition to multiculturalism emerges  in  in local elections

NICK FOLKES doesn't object to people learning a foreign language, or even dabbling in ethnic cooking. But call other cultures equal? That's "madness", he says.

"Our culture is better than the Muslim culture, it is better than the African culture," he said. "At the end of the day, why did they come here? There must be something wrong with their culture.

The Australian Protectionist Party firebrand joins a growing number of controversial far-right candidates chasing the xenophobic vote at next month's council elections.

Australia First, the anti-immigration party hoping to fill the political void left by One Nation, is running 23 candidates across western and south Sydney and the Blue Mountains, up from 15 at the last council poll.

The party's website takes aim at the Channel Ten program The Shire and its sprinkling of ethnic characters, labelling it "media contrived assimilation". Several candidates attempt to link urban sprawl and rate increases to immigration.

The artist Sergio Redegalli, who painted the controversial "Say no to burqas" sign outside his Newtown workshop, is making a first-time bid for Marrickville Council as an independent.

Mr Folkes, 42, an industrial painter from Rozelle, wants Leichhardt council declared a "sharia-free zone" and would scrap council grants to multicultural groups.

"There is a vacuum in politics at the moment. We believe that a lot of people, in time, will definitely vote for us," he said.

History indicates that day is a long way off. Mr Folkes attracted 289 votes, or 0.6 per cent of the vote, when he ran as an independent for the seat of Balmain last year.

A University of Western Sydney immigration expert, Kevin Dunn, said only 12 per cent of Australians held negative views towards cultural diversity and that anti-immigration candidates typically polled badly.

But their agendas could influence council decisions on issues such as building mosques or religious schools, especially during times of national unrest over boat arrivals.

"The general nature of debate at the national level has a direct effect locally in terms of community relations, attitudes and local politics," Professor Dunn said, and racist attitudes "fade or flourish" depending on public discourse.

Ready to counter the racial supremacists is the Unity Party, a multiculturalist group that has shifted its gaze to local government since its federal and state ambitions faded five years ago.

The party, which has two elected councillors, promotes cultural diversity and respect for religion and has fielded 40 candidates across NSW, the party's founder, Peter Wong, said.

"I think Australia is a lot more broad-minded since Pauline Hanson's time," Mr Wong said. "I don't really think those candidates will make great headway."


Federal aid to private schools still an issue for some on the Left

It's just gone 50 years since what is now called the Goulburn Schools Strike. On Friday July 13, 1962, six Catholic schools in the Goulburn diocese closed and instructed their pupils to enrol the following Monday in the government school system. Some 2000 Catholic pupils applied for entry into the public school system, which had only 640 vacancies.

The immediate cause of the protest was the refusal of NSW health authorities to install additional toilet facilities at Our Lady of Mercy Preparatory School in Goulburn. It was driven by members of the Catholic laity who were frustrated that they received no government support for the funding of the Catholic school system, which had been formed at the end of the 19th century.

The story of the Goulburn School Strike is documented in Michael Hogan's book The Catholic Campaign for State Aid (1978) and in the Commonwealth Education Department's publication entitled A History of State Aid (2006). The incident attracted widescale national media attention. Yet it was not successful, and within a couple of weeks, the Catholic school children returned to their original schools.

In her speech to the Independent Schools National Forum yesterday, the Prime Minister, Julia Gillard, referred to that "first, famous Menzies science laboratories program which gave so many independent schools a historic boost". Correct. The reference was to the decision of Robert Menzies's Coalition government, on the eve of the 1963 federal election, to commit the Commonwealth to provide financial aid for the establishment of science blocks in both government and non-government schools.

This did not happen by chance. The Menzies government had achieved only a narrow victory in the 1961 election. It was saved by a strong first preference flow from the Democratic Labor Party, which had been formed as a consequence of the Labor Split of the mid-1950s. B.A. Santamaria (the president of the Catholic lay organisation the National Civic Council) and others convinced the Coalition of the need to make a gesture to the largely Catholic DLP voters.

The tactic worked in 1963. So much so that it was tried again four years later. In 1967, the Victorian Liberal Party premier Henry Bolte was worried that he might lose seats to the Country Party. This time Santamaria, working with the DLP, sent a message to Bolte that the DLP could well preference the Country Party ahead of the Liberals if the Liberals did not make a gesture to DLP supporters.

Bolte got the message. In 1967 the Liberal Party announced that, if re-elected, it would provide a form of per capita payments to children attending non-government primary schools. By the end of the 1960s, the principle of government assistance to non-government schools and students had been firmly established. Soon after, Labor, which had long opposed assisting non-government schools, came on board.

From time to time, sections of the left have tried to change the policy. Before she became Labor premier of Victoria, Joan Kirner was active in the Defence of Government Schools (DOGS) organisation - which was really an attack dog aimed at non-government schools.

Appearing on Jonathan Green's Sunday Extra on Radio National last weekend, Ben Eltham declared that the $6.5 billion annually needed to fund the Gonski Report "would easily be found if private schools, the elite private schools in particular, were not receiving any funding at all".

Apparently Eltham is unaware of the message of Goulburn half a century ago. If government funding to non-government schools ceased or was significantly reduced, there would be a movement of students from the private to the public sector. This would amount to a significant cost to the Commonwealth and state budgets.

Then there is the politics. Many families in the suburbs and regional centres - where most of the marginal seats are located - want their children to attend moderate-fee, non-government schools. Mainstream Labor understands this, even if many inner-city leftists do not.

The hostility of the education unions to private schools turns on the fact that some non-government schools challenge the public sector model. Quite a few private schools have larger class sizes than their public school counterparts. Moreover, all give principals the right to hire and fire teachers and to terminate poor performers. The teachers unions, on the other hand, frequently defend the incompetent and the lazy among their members.

In the United States, Britain and now Western Australia, governments are establishing "charter" or "free" schools, which are publicly funded but operate independently from the education bureaucracy. The Coalition, led by Christopher Pyne on this issue, is beginning to embrace this initiative.

Prime Minister Gillard has performed well in standing up to the education unions and introducing such initiatives as the My School website. Her support for independent schools is in this tradition.

The real test, however, will turn on funding. Her speech yesterday did not resolve this issue.


Welfare housing under scrutiny in Victoria

Public housing is set for an unprecedented overhaul under the Baillieu government. Three public documents have set the scene. In March, the Auditor-General declared in a special housing report that the "social housing" system was financially unsustainable. In April, the Housing Minister, Wendy Lovell, released a discussion paper, Pathways to a New Victorian Social Housing Framework, declaring "the status quo is not an option".

Pathways was accompanied by the canvassing of alternative financial models for the future of the sector by private consultants KPMG.

Critics such as Swinburne University lecturer Terry Burke say that all three reports are flawed in their own way. The Auditor-General's narrow financial snapshot disregards the federal cuts to housing spending and also the social background of people who rely on public housing. The department's report fails to examine how its own policies have transformed public housing into welfare housing. The third paper, he says of KPMG's work, airs impractical financing options.

"This is a problem in Australian social housing. Governments think they can employ private accountancy firms to come up with some magic bullet formula which will allow them to fund public housing without any subsidy. That's just nonsense."

Burke says the history of public housing and the failure of the private market to house low-income earners has been forgotten. Simply, he says, some low-income earners will require a housing subsidy. The real question is what form that subsidy takes and who provides it?

Opposition housing spokesman Richard Wynne says the government seems intent on "the easy road of selling off housing stock and raising rents on the poorest in our community."

Workers in the social housing sector - which includes the Office of Housing and low cost accommodation run by non-profit agencies - say the government's thinking points to privatisation, higher rents, short-term leases and less secure tenure for residents, an end to the "home for life" culture of public housing.

"Unlike private rental agreements, public housing tenants effectively have open-ended leases," says Pathways, meaning tenants can remain for decades even if their personal circumstances change significantly. Rents are capped at a maximum of 25 per cent of tenants' income. In fact, few pay that much.

The government talks of tenants moving out of public housing as their employment and economic circumstances improve. Expressions like "public housing has become a destination and not a pathway" suggest that long-term tenure will be reviewed.

But the Council for Homeless Persons, in its response to Pathways, says that compared to the general public, public housing tenants have "more disabilities, poorer health, lower levels of education, lower incomes and poorer work histories". The major barrier to employment was poor health, particularly mental health problems.

A government spokeswoman says over the five years to 2011, more than a third of people leaving public housing moved into the private rental market. "Although the private rental market is tight in some areas, it has absorbed a number of tenants who have moved out," she says.

The spokeswoman added that long-term tenure would continue for those for whom a way out of public housing was not feasible, such as age pensioners, or people with severe disabilities or mental health issues. No decisions have been made about the proportion of tenants who may be able to move into the private market, she says.

Citing the tax review by former Commonwealth treasury secretary Ken Henry, the government argues public housing is unfair, since those who occupy it are manifestly better off than people of similarly modest means who rent privately.

An unemployed couple, for example, receiving a $439 fortnightly Newstart allowance would pay at most 25 per cent of their income in rent. Renting privately would consume 55 per cent of their income. The review said the higher average level of assistance to public housing tenants was not "targeted to need".

But critics reply that it is precisely targeting to greatest need that has helped to create chronic underfunding of public housing. Conceived in the 1930s as a means of housing low-income working families who could not afford private rents, it has transformed into an extension of the welfare system.

Eighty six per cent of residents rely on Commonwealth welfare benefits. Increasingly they depend on disability pensions as well as age, veterans pensions and other benefits. In government-speak, they are people "with high and complex needs" who are economically and socially disadvantaged.

In its response to Pathways, Jesuit Social Services was sceptical at the possibility of large-scale movement into the private sector. "For some, but clearly not all tenants, capacity might be built so that they can enter employment and transition out of public housing. It is important that the expectations about the potential for this outcome are realistic … [age and disability] pensions are the primary source of income for a large majority of public housing tenants. Individuals in receipt of these benefits have been assessed as unable to work."

The Jesuits say strong evidence shows only a very small number of tenants successfully move out for the long term. If the government knows this, its ambitions seem to disregard it, as if it views securing a public housing unit as the battler's version of winning Tattslotto, only with better odds.

"You do wonder sometimes if people know who they are talking about, if they get inside the skin of the very people they are making decisions about, that are really dramatic and life-changing [decisions]," says Jesuit Social Services chief executive Julie Edwards.

Pathways suggests that fairness might improve with regular tenancy reviews so residents would need to demonstrate that they were still deserving of a place. Short-term leases are another option, as the report expressed it: "to reframe some public housing as a time-limited intervention that responds to an immediate need".

Swinburne University's Terry Burke says the government's ambitions defy the facts. "They don't seem to understand their own data, which shows that the bulk of their tenants are on Centrelink benefits, and on incomes which require a full [rent] subsidy."

Few residents, he says, pay anything like the rent the private sector would demand. "They are expected to pay 25 per cent of their incomes in rent and for many tenants that's too high, so any discussions about getting a higher rent from them is enormously problematic."

Burke says encouraging tenants to move out may not help if all it means is they churn through homelessness and the social housing sector.

THE government says its problems are compounded since much of its housing stock was built for larger working families, yet its longest waiting list is for single-bedroom units.

"This inflexibility in the system is leading to longer waiting lists … as tenants wait for an appropriate [dwelling]," according to the government's report.

Perhaps too much should not be made of this since the waiting list for three and four-bedroom accommodation remains substantial, at 8068 families. The government's rhetoric, however, creates the impression of a generally dysfunctional system.

Lower rental income is limiting the ability to maintain housing stock, the government says. The auditor's office says that the $56 million gap between rental income and operating costs caused by targeting to greatest need is expected to grow to $115 million in 2015.

Viewing the housing deficit from another perspective, Fiona Kranenbroek says that at present it is almost matched by the annual subsidy for the formula one Australian Grand Prix.

The government's report paints a bleak picture of public housing. The government also asked consultants KPMG to propose future ways of supporting the sector. KPMG suggested public-private partnerships as a way of renewing housing stock, transferring government housing to non-profit agencies, or privatising government housing to lease back from investors.

Burke says none of these options will do much to increase the supply of affordable housing. "Whether it's housing bonds, public-private partnerships, all of them require the ability to service some sort of debt, and with incomes so low, public housing agencies do not have the ability to provide a viable interest repayment on bonds, a viable return to PPPs, unless they are subsidised," he says.

"The big problem for all the states is that the national affordable housing agreement, which largely funds public housing, does not supply enough money, and that started really with the Howard era," says Burke.

"We should just see housing as a merit good in the same way we see education, transport and healthcare, where government puts in a subsidy in recognition there are going to be some people whose incomes are too low to live in the private housing market."

He says there may be a place for shorter-term leases but the debate the government has begun neglects two important things: that federal funding cuts are the core of the problem, and public housing's relationship to the wider housing market. Greater security for private-market tenants, and rejigging negative gearing to foster investment in new dwellings rather than existing housing, have a role.

"You need solutions in the wider housing market to deal with problems in public housing," says Burke. "You can't look to internal solutions, refinancing, to solve the problem if you don't deal with the Commonwealth and the failure of the private sector to supply affordable, appropriate housing."

The government spokeswoman says no decisions have been made about alternative funding, including PPPs, but it is necessary to explore possible financing models.

"We have inherited a public housing system in crisis as a result of the poor management of the housing asset portfolio over a number of years," she said. Despite that, already new houses had been delivered in Westmeadows and Norlane, in Geelong, with more to follow.

Opposition spokesman Richard Wynne responds that both Westmeadows and Norlane were begun when Labor was in office. He says the Baillieu government has contributed no new funding to public housing in its two budgets.

"The financial challenges Victoria faces are the same as those confronting every housing authority in the country," says Wynne. "That's despite the fact that every year in office Labor committed funding above its obligations to the federal government, including a record $500 million in 2009, the largest one-off injection by a state government ever."


No comments: