Cashless Welfare Trial Set to Proceed Despite Reservations as to Effectiveness

Thursday 22 October 2015 @ 11.07 a.m. | Legal Research | Taxation

On 14 October 2015 the Social Security Legislation Amendment (Debit Card Trial) Bill 2015 (the Bill) passed both houses of the Federal parliament and looks set to proceed in 2016. The key purpose of the Bill is to amend the existing social security legislation to enable a trial phase of proposed new "cashless welfare arrangements" in response to one of the main recommendations contained in the Abbott government commissioned report by Mr Andrew Forrest (The Forrest Review of Indigenous Jobs and Training see Chapter 2: The Healthy Welfare Card).

What the Bill Amends

The Bill will amend the Social Security (Administration) Act 1999 (Cth) (the SSA Act) to enable the trial of cashless welfare arrangements. The Bill also amends the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth),  the Social Security Act 1991 (Cth), the Social Security (Administration) Act 1999 (Cth) and the Stronger Futures in the Northern Territory Act 2012 (Cth) to make consequential amendments.

What the Trial is For

The Bill's explanatory materials indicate that the purpose of the trial is to test the concept of cashless welfare arrangements by disbursing particular welfare payments to a restricted bank account, accessed by a debit card which does not allow cash withdrawals. Also the trial is to test whether significantly reducing access to discretionary cash, by placing a significant proportion of a person’s welfare payments into a restricted bank account, has the effect of reducing the ". . . habitual abuse and associated harm resulting from alcohol, gambling and illegal drugs". Further, the trial seeks to test whether cashless welfare arrangements are made more effective when community bodies are involved in the process.

How the Trial will work

The deduction of 80 percent of payments received by people on a working age welfare payment (newstart allowance for example), will be placed in a restricted bank account and a person will not be able to use the debit card linked to the restricted account to access cash or purchase gambling products/services, alcohol or illegal drugs.

As recognition that society is not entirely "cashless" yet and that people need some cash for minor expenses (school lunch money or bus fares being the examples given in the explanatory materials), the remaining 20 percent of payments will be available for use at the welfare recipient's discretion.

The aim, according to the government, is that in trial locations, the debit card will work like any other bank card except that while seeking to ensure the card works at all existing terminals and shops, it will not work at those selling restricted products (including online shops).

Where the Trials are to be Conducted

The Bill's explanatory materials indicate that the trial will be conducted in up to three locations, selected on the basis of high levels of welfare dependence where gambling, alcohol and/or drug abuse are causing unacceptable levels of harm within the community. According to the Minister's (Mr Tudge (member for Aston - Parliamentary Secretary to the Prime Minister)) second reading speech, the first trial site will be Ceduna in South Australia because:

"The leadership in the community have publicly called for this reform and see it as a mechanism to potentially address some of the welfare-fuelled alcohol and drug abuse that affects the community."

Reaction and Comment

The proposed legislation was initially supported by the Federal opposition but just before it passed it appeared their support was diminishing with Labor’s families spokeswoman, Ms Jenny Macklin, reported as saying that consultations had been inadequate. However, further negotiations with the government saw the Bill pass with the opposition's support.

The Greens remained opposed to the Bill and did not support the trial, their spokesperson Ms Rachel Siewert, writing for newMatilda.com, saying that practicalities about the card's operation were not resolved and important unanswered questions remained:

"It is clear from questioning in the Senate that the Government hasn’t resolved many of the practicalities of how this system will operate. The Senate has now voted on a measure where there are many important unanswered questions."

Ms Siewart is also critical of implementation details such as yet unsolved question about minimum card purchase amounts, lost cards and merchant surcharges, among other matters:

"That means we still don’t really know how the measure will be implemented in practice. There are unsolved problems and questions about minimum card purchase amounts, merchant surcharges (the 2-3 per cent costs that can get added on when you use a card) and replacing lost cards and various decision making processes during the trial."

She also refers to communities who have rejected the idea, indicating that support for the trial is not as unanimous among indigenous communities as is represented by supporters of the legislation:

"One of the proposed trial sites, the Shire of Halls Creek, recently rejected the measure. They set out several reasons for their decision, including; the evidence income management is a flawed approach, the practical impact of the measure on people who need cash for everyday transactions, the lack of other resources, and the failed consultation process."

In the view of the Greens, limiting cash will not solve the problems that the trial is aimed at solving and they point to similar experiments in the Northern Territory as evidence:

"Communities facing significant challenges need genuine social services that help individuals deal with the challenges they are facing. Limiting cash will not stop alcohol or substance abuse, people will find other ways to access alcohol, this was evidenced in the NT."

The Australian reported that, like the Greens, the Australian Council of Social Service (ACOSS) also called for for a Senate inquiry to hold off backing the trials pending further consultation. The ACCOS chief executive Cassandra Goldie and the South Australian director Ross Womersley, reported as:

". . . [arguing] that the card is an 'unprecedented level of intervention in people’s lives . . . It is therefore reasonable to ask the Senate committee to ­ ensure crucial protections are in place for individuals before ­ recommending that the trials should proceed”.

Other reports indicate real fears that the cashless welfare card could discriminate unfairly against indigenous people with The Guardian reporting that:

"New data obtained by the National Welfare Rights Network (NWRN) shows that in one of the trial sites, Ceduna in South Australia, although Aboriginal and Torres Strait Islander people account for 30% of the population, they would make up 72% of people forced onto the cashless welfare card."

In all, The Guardian report indicates an estimated 583 Indigenous people in the area would be forced to use the card, along with 224 non-Indigenous people.

Another concern raised was that a cashless welfare card could breach any right to privacy that might exist. As The Guardian reported recently, a Parliamentary Joint Committee on Human Rights issued the Social Services minister with a request to explain how the proposed Bill was compatible with human rights, specifically the right to privacy. The report is quoted in The Guardian as saying:

“This restriction undoubtedly impacts on how a person is able to conduct their private life and represents the extension of government regulation into the private and family lives of the persons affected by these trials, . . .”

Next Steps

According to the Minister's second reading speech the cashless welfare trial is expected to start in the first quarter of 2016 and it will be interesting to see whether the expected outcomes materialise and how the scheme actually turns out when implemented. 

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