Axing clean energy supplement has barely caused a ripple, but it should

Extract from The Guardian 

Lenore Taylor

Although the amounts appear insignificant, the cuts in payments to new welfare recipients will hit hard for the most disadvantaged Australians

Axing the clean energy supplement will in effect be abolishing the first real increase in Australian unemployment benefits in 20 years. Photograph: Mick Tsikas/AAP

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Saturday 13 August 2016 09.33 AEST 

For many people, $4.40 a week is a small sum – trivial even. A cup of coffee on the way to work, the parking change in the car console.

But for those Australians set to lose between $4.40 and $7.05 a week in one of the 45th parliament’s first legislative acts, many of them living below the poverty line, those small sums will make the dire choices of subsistence budgeting even more desperate.

The cuts will come from the abolition of the clean energy supplement, which varies according to the benefit: $4.40 a week for single unemployed, $7.05 a week for a single person on the aged or disability pension.

It’s a lethally clever way for the government to save $1.3bn over four years from 2.2 million of the most disadvantaged Australians, with less political blowback than other blunter attempts at welfare savings.

It’s lethal precisely because it seems like an insignificant amount, and because the cuts apply only to new welfare recipients, so no one actually loses anything they are now getting.

And, so the argument goes, the supplement was supposed to compensate for the carbon tax, and that got repealed, so the clean energy supplement has become an unnecessary and unjustifiable windfall. Something they don’t really need or deserve.

Perhaps that’s why it’s caused barely a ripple.

Except none of those arguments are true, and none can justify this cut to benefits, which both major political parties, and even the Business Council of Australia, have conceded for many years are way too low.

For those people affected, the amounts are not at all insignificant. For Rob, a disability support pensioner living in country Victoria and looking for work, losing $7 a week would mean cutting back further on heating, or possibly food.

“At the moment I only heat the lounge room and I set it to 18 degrees because I can’t afford the bills if I turn it up higher,” he says. “I budget about $5 a day for my main meals, so I might have to cut that  back, or I might rethink whether I visited a friend because I might not be able to afford the petrol money.”

Single parents are already struggling to pay for books or school trips.

And the impact will spread quickly. An unemployed person who takes a job and then loses it and reapplies for Newstart will no longer be eligible for the benefit. The government’s savings are based on estimates that within four years it will not be paying the supplement to 2.2 million people who would otherwise get it.

And, for welfare recipients, it really isn’t a windfall at all. In fact because of the way the supplement was introduced, if it’s cut they will be worse off than they would have been if the carbon tax had never happened. This is because the carbon tax adjustment also took into account a regular inflation adjustment that would have happened anyway. So, as explained in this blogpost, axing the clean energy supplement doesn’t take away a windfall; it actually leaves a single person on Newstart $1.80 worse off than they would have been if there had never been a carbon tax. The whole rationale for the “saving” is false.

And as well as ushering in a two-tier welfare system, with higher payments for existing recipients, and lower ones for those getting benefits after the supplement is cut, there also seems to be a double standard for what counts as a windfall.

The carbon tax adjustment payment for welfare recipients is incorrectly labelled as a windfall that must be removed, but everyone else’s compensation came in the form of a tax cut, a real windfall, which they got to keep. So the unemployed person loses $4.40 a week and ends up behind, but the person earning $60,000 keeps a tax cut worth about $10 a week and stays ahead.

The reality of what is being proposed here is even more shocking when you consider the recent history of Newstart in Australia.

Axing the clean energy supplement will in effect be abolishing the first real increase in unemployment benefits in 20 years. The last increase was in 1994, when it rose by $2.95 a week. Research by the Australia Institute shows that the cuts will put a family living on unemployment benefits on a historic 32% below the Henderson poverty line, exacerbating the steady erosion in the value of their payments.

The graph shows the difference between the Henderson poverty line and the amount of government assistance going to an unemployed family of four – two adults and two children. The data beyond 2015 are TAI projections based on the CPI forecasts in the Budget Papers (which is used to index unemployment benefits) the assumption that the poverty line will follow recent trends (at the average increase over the last 20 years). The graph also assumes the government implements its policy of removing the carbon tax compensation.The Australian Council of Social Service says the cuts are unconscionable and contradict repeated agreements from governments, business and unions that unemployment benefits should rise.A poll by the Australia Institute in Tasmania shows 60% of voters do not support the cut. But in the dying days of the election campaign, despite committing to review the adequacy of unemployment payments, Labor included the savings from cutting the clean energy supplement in its own budget calculations, giving the Turnbull government a powerful case to argue that the ALP should now back the legislation.So the 45th parliament will begin with legislation to reduce tax for people earning more than $80,000, and $48b in tax cuts for companies, and also $1.3m in “savings” from mean incremental cuts to the meagre payments to the most disadvantaged Australians, many of whom are already living in poverty. Is that really how it wants to start? And should those of us for whom $4.40 is loose change allow that to happen?