ACOSS Budget analysis 2015-16

Summary: The impacts of this Budget must be assessed in light of the previous Budget, which casts a long shadow. While the 2015-16 Budget delivered welcome new investment in early childhood education and care and charted a fairer path on pension reform, the combined effect of the two budgets is to leave people on low incomes to once again bear the burden of Budget restraint. ACOSS estimates that, combined, the two budgets strip approximately $15 billion over four years from basic services and supports affecting low and middle income households, with total projected cuts of $80 billion from health and schools funding to the states over the next decade. Disappointingly, the 2015-16 Budget retains severe cuts to payments and programs from the 2014-15 Budget, in some cases linking savings measures from 2014-15 to new spending measures, and delivers new cuts to child dental and community health programs. At the same time, despite some modest action towards revenue repair, the Budget failed to deliver the structural reform needed to ensure Budget sustainability into the future. The experience of the 2014-15 Budget shows that the alternative approach of eroding the social safety net through cuts to services and supports will not be accepted by the community or the Parliament. Despite a $5.5 billion package for small businesses, the Budget it unlikely to stimulate the kind of productive economic activity necessary to deliver significant jobs growth and fails to invest in skills. However, the investment in new youth transitions and mentoring programs is welcome and will partly address the gap left by the discontinuation of the previous Youth Connections program. Steps to consolidate existing wage subsidy programs to improve program flexibility are also welcome. Regrettably, instead of reversing last year\u27s proposal to make young unemployed people wait six months for income support, the waiting period is reduced to one month and applied to a younger cohort (under 25 years). There is no justification for this measure. The ‘families package’ includes necessary and overdue investment in early childhood education and care and effects structural reform to the current complex payment system. Yet key features leave it unbalanced and unfair, relying on cuts to family payments for low- income families, and providing generous subsidies to families on high incomes. Combined, the two budgets represent a $9 billion reduction in spending on family payments over the forward estimates of which approximately $6 billion in savings will adversely affect low-income households. Our analysis suggests that low-income and disadvantaged families will be significantly worse off if the 2014-15 and 15-16 Budget measures pass, notwithstanding the boost the child care investment discussed below. The impacts of payment rate freezes will be felt over time. In 2015-16, the impacts of restricting the Part B payment to families with children under 6 years will mean that a single parent with one 8 year old child stands to lose $48.50 per week and a single parent with one 12 year old child stands to lose $62.50 per week due to the loss of FTB Part B and end of year supplements. Many children in low-income families will also lose 12 hours a week of early childhood education that helps improve their life chances. Further, the changes to the Paid Parental Leave scheme announced two days before the Budget will leave many families worse off and further behind their overseas counterparts and the 26 week minimum leave period recommended to support maternal-child bonding and breastfeeding. The reforms to the pension assets and income tests present a welcome change in direction and a fairer approach to securing the future of the retirement incomes system. We now need a similar approach to superannuation reform, which is even more important in building a strong and durable retirement income system. The 2015-16 Budget failed to reverse the funding cuts to vital policy, advocacy and service delivery across social services, health and legal assistance and in Aboriginal and Torres Strait Islander communities. Disappointingly, it delivered new cuts to child dental health programs, community health programs and remote housing as well as a further round of cuts to the public service, with ‘Smaller Government’ measures across departments. This raises concerns about the capacity of the bureaucracy to provide an adequate standard of service to members of the community, especially where there is a direct interface with the community, and its capacity to provide sound policy advice to the Government. Finally and perhaps most importantly is the story of what was missing from the 2015-16 Budget. Three days before the Budget was delivered, the Councils of Social Service (COSS) Network released a report showing that 83% of people relying on the Newstart payment or Youth Allowance do not consider it to be enough to live on with nearly half of those surveyed having unsustainable levels of personal debt, and more than a third forced to skip dental and medical appointments or forego treatments as they cannot afford to pay for them. Nearly one in five reported missing meals in an effort to make ends meet. The Budget failed to take steps to invest in affordable housing programs or to address serious gaps in the social safety net including: the low rate of allowance payments; the inadequate indexation of allowances and family payments (which are still indexed to the CPI only); and the low rate of Commonwealth Rent Assistance, which has failed to keep pace with rent inflation. This Budget should have begun the work to safeguard the social safety net into the future, by trimming unfair tax concessions for superannuation and reforming negative gearing and capital gains tax breaks. Tax reform must be the next priority for responsible, fair and measured action