Budget Must Support Community Services

Australia’s peak welfare body has called on the Turnbull Government to set a new course with its upcoming budget and sustain essential community services.

In its official submission to the Federal Budget, the Australian Council of Social Service (ACOSS) said the government must “realign its spending priorities and strengthen the tax base”.

ACOSS CEO Dr Cassandra Goldie said the government should strive to make things right with the first budget to be delivered under Prime Minister Malcolm Turnbull.

“The Government must not repeat the mistakes of the last two budgets which focused almost exclusively on the spending side and did little to secure the revenue required to fund essential services,” Dr Goldie said.

“Governments cannot restore their budgets and fund services with one hand tied behind their back. The shortfall on the revenue side must be acknowledged and tackled. Structural reform of the way services such as health are funded and provided must also be undertaken.”

ACOSS proposed $9.5 billion in savings in 2017-18 from reforms to strengthen the tax base, and the reallocation of $6 billion “to address unmet need in vital services, including affordable housing and community services and to address major inadequacies in our safety net, including unemployment payments and rent assistance”.

Goldie said ACOSS’s proposals built on the common ground about fiscal repair achieved by community, business and unions at the 2015 National Reform Summit.

“On the revenue side, we tackle tax concessions no longer fit for purpose, and remove tax distortions in the treatment of investment income. We advocate a redesign of superannuation tax concessions to ensure they are consistent with the objectives of the retirement income system, an objective agreed by the summit,” she said.

“The impact of our revenue generating measures will grow in value and steadily erode the budget deficit over time. This is essential to adequately fund services, retain and build confidence, and steadily reduce the deficit.

“On the spending side, it’s time to abandon an approach that simply shifts costs to service users, people living in poverty, and state governments. Instead, we should be focused on ensuring services are delivered cost effectively, for example by relying less on subsidies for private insurance in health.

“We will not resile from advocating budget action to ease the worst income poverty and to address gaps in essential services, like dental health and affordable housing.

“The single most important investment the government could make in this budget to reduce poverty is the long-overdue increase to the unemployment payment, which is currently $37 a day.”

Goldie said the government should aim to achieve genuine tax reform by limiting unfair tax breaks and unintended loopholes that mainly benefit people who are on higher incomes and erode the tax base.

She said tax avoidance through private trusts and companies had been overlooked in the debate so far.

“It is too easy for people with higher incomes to shelter their income through trusts or private companies where it’s taxed at a flat rate of 30 per cent,” she said.

“We propose that private trusts be taxed as companies, and that income retained should be taxed at the top tax rate, apart from a ‘reinvestment allowance’ comprising a fixed proportion of the assets of the company. Together these measures would deliver as much as $2.5 billion in revenue in 2016-17 and build over time.”

ACOSS also said the budget should do more to support unemployed people.

“This budget must invest in the capacity, health and wellbeing of people who are unemployed by finally delivering the urgently needed increase to the unemployment payment, which was last raised by a meagre $2.95 in 1994,” Goldie said.

“The payment currently provides a single person who is out of paid work with just $37 a day to meet basic living costs, well below the poverty line. A modest boost to the payment would have an immediate effect on reducing poverty.

“To improve the targeting and impact of Commonwealth programs, ACOSS recommends the reallocation of existing expenditure in key program areas to minimise waste and improve effectiveness.

“This includes redirecting funds for ineffective employment programs, especially Work for the Dole, to more effective and flexible employment assistance, restructuring the family payments system to better target assistance to families in greatest need, and retargeting investment in early childhood education and care from higher to lower income families.”

Goldie said a lot of work had gone into building common ground among different stakeholders and the latest budget must build on that.

“Through the National Reform Summit, business, community and union groups, including ACOSS, agreed that as an overarching fiscal goal, the budget should be progressively returned to structural balance over 10 years through a staged reform process. Groups also agreed that those on the lowest incomes should be protected in the reform process, which should tackle both revenue and spending,” she said.

“We encourage the Government to build on these foundations and use this Budget alongside the tax and federation reform processes, to set the direction for balanced and fair reform.”