Doling out punishment
the rise and rise of social security penalties

ACOSS INFO 220 — 26 October 2000 — ISBN 0 85871 316 0 - ISSN 1442 486 X

A joint research paper by the National Welfare Rights Network and ACOSS

Summary

Research conducted by the National Welfare Rights Network and ACOSS shows that the number of harsh social security penalties being imposed on people receiving unemployment benefits has dramatically increased. The key findings are:

• The number of penalties imposed for infringements of social security rules has increased by 250% in the past three years to a total of 302,000 in the 1999-2000 financial year.
• Almost 200,000 unemployed people and students were penalised in the year to 30 June 2000, with many being penalised more than once.
• Many penalties are being imposed improperly or indiscriminately, as evidenced by the fact that an extraordinary additional 172,000 penalties were applied by Centrelink but later revoked. This is around 35% of all penalties recommended.
• The penalties levied on unemployed Australians and students in the last year led to Government "savings" of an estimated $170 million.
• The high financial penalties are out of all proportion with the seriousness of the "offence" — a penalty of between $280 to $340 is imposed for failing to reply to a letter, and a penalty of between $630 and $1300 applies for failure to attend an interview.
• Case studies of people who have been breached show that homeless people are particularly affected by these harsh penalties because Centrelink or Job Network letters go to an old address or are received too late. Other vulnerable Australians likely to be breached are those who have difficulty meeting often complex social security rules such as:
• young people, with over 53% of people breached being under the age of 25;
• people with psychiatric conditions;
• people with alcohol or drug problems;
• people with low literacy skills;
• Indigenous Australians; and
• those who find a job but wait to declare their new earnings to Centrelink until their first pay cheque arrives.

The rise and rise of "breaches"

The number of social security penalties, called "breaches" by Centrelink, has sky-rocketed over the past three years — with total breaches increasing by 250% since 1997 and Activity Test breaches increasing by 291%.

A breach occurs when Centrelink imposes a penalty on an unemployed person or student for failing to meet an "Activity Test" or Administrative requirement (see page 6 for more detail).

• 120,718 breaches were recorded in 1997-98;
• 165,492 breaches were recorded in 1998-99;
• 302,494 breaches were recorded for 1999-2000.

It should be noted that breaches are not about social security fraud — they relate to infringements of often complex rules and/or increasingly tight Activity Test requirements. In fact, there has been no corresponding increase in the instance of actual welfare fraud. In 1999-2000 there were only 2,881 convictions for 'welfare fraud' — this is slightly down from the 1998-99 figure of 3,011 convictions.

In 1998-99, out of the more than 6 million Australians receiving social security, less than 0.1% — one tenth of one per cent — of recipients fraudulently obtained benefits.

One-sided obligations

Since its first election in 1996, the Coalition Government has significantly increased the obligations imposed on unemployed people.

At the same time, the planned expenditure on the amount of assistance it provides to help disadvantaged jobseekers was cut by $1 billion a year.

These measures have been undertaken under the policy mantle of "Mutual Obligation" and its one-sided nature is the reason that this term has become mainly associated with imposing penalties and punishment on unemployed people, particularly those who are young.

Administrative requirements and Activity Tests have been tightened and the obligations imposed on unemployed people and students have been increased by:

• Removing the "earnings credit" scheme which assisted casual unemployed people with the declaration of income, and introducing an Activity Test breach for failure to declare income.
• Increasing the use of "employer contact certificates".
• The introduction of job seeker diaries.
• Increasing the number of jobs a person has to apply for in a given fortnight (up to ten, depending on the particular region).

• Making the failure to notify Centrelink of a change in circumstances an Administrative penalty.
• Technological change which has led to the automatic, computerised generation of larger numbers of interview and referral notices by Centrelink.

Excessive penalties for breaches

A recent study by ACOSS and the state and territory Councils of Social Service found that two-thirds of welfare agencies and charities across Australia had experienced a rise in demand for their services. Many have specifically reported that the increasing number of social security breaches has added to the demand of low income people for emergency financial relief and material aid.

This is not surprising considering the rapidly rising number of breaches and the harsh effect that the penalties have on the pockets – and lives – of those affected.

Unemployed people already receive social security payments that are well below the poverty line. And, because applicants for social security must use up the major part of any savings or termination payouts before they become eligible for payments, they have nothing to fall back on once they are receiving benefits.

It is clear that breaches are pushing more and more Australians into poverty
and increasing the pressure on charities and welfare agencies.

The following tables show that the penalties for social security breaches prior to July 1 2000, ranged from $281 for Administrative breaches (when the person's payment is reduced by 16% for 13 weeks) up to a massive $1,304 for a third or subsequent Activity Test breach.

These penalties are out of all proportion to the seriousness of the "offence". Remember that these are breaches of social security rules; they are not instances of social security fraud and cannot be considered "criminal activity".

Activity Test penalties which range from $632 to $1304 are clearly excessive and unjustifiably harsh when compared to the average fines for serious criminal offences such as "Assault occasioning actual bodily harm" ($681); "Break and enter" ($706); "Vehicle theft" ($627); and "Driving under the influence" ($546).

Social security payments rose on 1 July 2000 to incorporate GST compensation. The following table shows how much a single unemployed adult on Newstart Allowance or a single, independent person on Youth Allowance currently receives after a breach is imposed.

Multiple breaches

It is important to note that, because many people receive more than one breach during the course of a year, the number of individual people affected by breaches is less than the total number of breaches imposed.

The following table shows slightly more than 1.7 million people received social security payments that were subject to Activity Testing in 1999-2000. Of these, almost 200,000 received at least one breach.

As the table below shows, most people (69.5%) who were breached received only one Activity Test breach in 1999-2000. A significant number (22.2%) received two breaches, while 7.7% received three breaches.

Case studies from the National Welfare Rights Network, some of which are included below, show that people may be breached multiple times in a very short space of time – sometimes as a result of a single incident or episode.

10 most common reasons for breaching

Unemployed people and students are subject to two different types of punishments: Administrative breaches and Activity Test breaches.

Administrative breach penalties are imposed when people fail to satisfy administrative requirements, such as failing to attend a Centrelink office when required, failing to reply to correspondence, or failing to notify of changes in their circumstances.

Activity Test breach penalties are imposed when a person receiving certain payments fails to satisfy Activity Test requirements without a reasonable excuse. The Activity Test is designed to ensure that unemployed people are actively looking for work and willing to accept offers of suitable employment or undertake activities which are assumed to improve their employment prospects. It may also require people to participate in specific programs and/or education. For students, the Activity Test requires people to make satisfactory progress in their studies.

Social security breaches can be triggered for a broad range of reasons. The table below shows the ten most common reasons for breaching in 1999-2000. The case studies in the Appendix help explain how the problems can arise.

Overturned breaches and appeals

Although there were 302,494 breaches imposed in 1999-2000, a further 172,000 breaches were applied but later revoked by Centrelink.

In other words, there were actually about 474,000 breaches applied in the previous financial year by Centrelink, with more than one in three being later revoked. As the Department of Family and Community Services Annual Report states:

In addition to these imposed activity test and administrative breaches [302,000], a further 172,000 breaches were incurred but later revoked. This is around 35 per cent of all breaches recommended. Breaches can be overturned by the original decision maker or other Centrelink staff following a review of the breach decision. This may occur when customers provide an acceptable reason for not meeting their requirements or when further evidence is provided.

Anecdotal information from public servants suggests that breaches are sometimes used as a device to get a person who has been out of contact with Centrelink back in touch. Once the person attends the Office, the breach is then revoked. However, this is a very blunt instrument which does a lot of damage in the meantime.

The Social Security Appeals Tribunal and the Administrative Appeals Tribunal also received over 9,000 requests for review of a Centrelink decision. While precise data is not currently at hand, it is likely that a significant number of these appeals also related to breaches.

However, it is also common knowledge among welfare agencies dealing with social security recipients that many people who might otherwise successfully appeal an adverse breach decision are dissuaded from doing so for a number of common reasons:

• their lack of knowledge of their appeal rights;
• the complexity and difficulty of the process;
• incorrect information provided inadvertently by Centrelink staff discourages them from pursuing an appeal.

Breaches by age group

There is little data available about the characteristics of people being breached. (This is a concern in itself). There is, however, some data that shows the age of those being breached. It reveals that a disproportionate number of breaches affect young people.

In the 1999-2000 period 53% of all breaches were incurred by people under the age of 25. An even higher proportion (58 %) of all Administrative breaches were incurred by people under 25.

The number of young people affected by penalties is not surprising given that the majority of the "Mutual Obligations" introduced by the Government have been targeted at young people. However, from the experience of Welfare Rights Centres, it is this age group that is the least likely to lodge appeals.

Govt saves what unemployed people & students lose

The table below shows that unemployed people and students in New South Wales received the highest number of breaches of all states and territories. Somewhat surprisingly, Queensland experienced a higher number of breaches than Victoria, despite Victoria's higher overall population.