Tuesday, 1 March 2011

Time To Get Politically Aware to Save a NDIS

The Productivity Commission’s (PC) Interim Report into disability funding was made public yesterday. It is superficially superb but ultimately disappointing. Those in the disability sector hail it as a triumph. I see it as deeply flawed document, which may have potential, but that is unlikely because it is so politically ignorant. If this report were a car it would look like a new convertible, but it would stall once you turn the engine on.

As I have argued previously I’m opposed to the whole concept of an NDIS without proper investigation. The PC report has answered some of my questions by developing a rather monolithic and simplistic three tiered criteria. I have issues with these criteria, because although I fit into the criteria quite snugly, there is lots of grey area. I have trouble seeing where people with vision and hearing impairments fit in for example. What about those who have a mental illness? Further, are those with behavioural impairments (such as autism) going to be included? The report does not answer these questions. I have a feeling the people who fit into those last two categories will be left hanging yet again.

Aside from these concerns, I am happy with the policy methodology. It seems that the NDIS supporters have received what they wanted from this report. It reads like the National Committee for an NDIS themselves could have written it. As such, it promotes their interests, and those of people with disabilities, their carers and the service providers. Therefore these parties greeted the report with near universal acclaim. As usual they read what they wanted and ignored the most important aspect of all. How is this entire policy going to be implemented?

The greatest challenge for a NDIS to succeed is to actually get the program legislated and through parliament. Without this process the words contained within the report are a waste of everyone’s time. In the morning after glow, there are claims that an NDIS has ‘bipartisan support’. It does not. It actually makes me wonder if anyone championing a NDIS has even thought about the political struggle it will take to get this through. As pointed out in today’s Sydney Morning Herald ‘The Productivity Commission is proposing the most important social reform since Medicare without a plan to fund it…’

Many advocates have pointed out it is not the PC’s job to examine the political consequences of the policy. I disagree, but let’s say that they are right. This places a greater onus on the stakeholders who have a vested interest in the NDIS to sell the political advantages of the policy. Given the Australian political climate at this time, it will be a very tough, and I believe impossible, policy to sell. The key sections of the report’s overview read:

First, the Commission is proposing a National Disability Insurance Scheme (NDIS) to be overseen by a new organisation, the National Disability Insurance Agency. This would provide disability-related services and supports to the community at large, but with a particular emphasis on funded supports for people with significant disabilities and their carers.

Second, the Commission is proposing a National Injury Insurance Scheme (NIIS) to address catastrophic injuries from accidents, such as quadriplegia, acquired brain injuries, severe burns and multiple amputations. The scheme would comprise a coherent set of state-based, no-fault arrangements for providing lifetime care and support, building on existing schemes. It would have the same basic goals as the NDIS, but would be funded differently…

The Commission has concentrated on two models, based on hypothecation from new or higher taxes, or from general revenue using a specific legislated formula. Most tax bases are ill-suited to hypothecation because they are either too small relative to the demands of the NDIS or involve significant inefficiencies. The Commission has ruled out all state and territory government taxes. At the Australian Government level, only taxes on consumption or personal income would be suitable. 
Given the difficulty of changing GST arrangements, the only realistic tax base for a new hypothecated tax would be personal income. Were the Australian Government to introduce a new disability insurance levy, it should be implemented by adding an increment to existing marginal tax rates, rather than involving different income thresholds or new complex tax schedules.

However, better still, the Commission favours an arrangement in which — according to a legislated formula — the Australian Government directs payments from consolidated revenue into a National Disability Insurance Premium Fund. This approach means that the Australian Government could use whatever is the most efficient tax financing arrangement at the time, or partly fund the NDIS from savings in spending elsewhere.

The Commission has not nominated a specific source of additional tax revenue or cuts in expenditure elsewhere. The reality is that the Australian Government will come under increasing fiscal pressure as a result of an ageing population (as shown by successive Intergenerational Reports), and the arrangements for financing the NDIS would need to be considered against that background

This arrangement would not be reliant on the vagaries of Commonwealth, and state and territory budgets. Because the scheme would commence in stages, not all the money would have to be funded by the government up front. The Commission considers that the funding of the scheme is manageable, taking into account a wealthy and growing economy, and the fact that Australian taxpayers only need to finance the additional amount of resources needed to fund a proper disability system….

In 2009-10, the Australian Government provided funding to the disability sector of around $1.7 billion, while state and territory governments provided funding of around $4.5 billion — or a total of $6.2 billion. The Commission’s preliminary estimate is that the amount needed to provide people with the necessary supports would be an additional $6.3 billion, roughly doubling existing funding.

Accordingly, the real (or net) cost of the NDIS would be around $6.3 billion a year. That could be funded through a combination of cuts in existing lower-priority expenditure and more taxes.
That’s right $6.3 billion a year to fund a NDIS. This is in circumstances where the parliament remains politically deadlocked, relying on three conservative leaning independents in the House of Representatives to pass any piece of legislation. Assuming this is achieved, the process has to be replicated in the Senate where the politically fickle Greens will hold the balance of power. In economically conservative times where there is a political uproar to introduce a levy to help follow citizens cope with floods, the public (and therefore the politicians) will not be keen to add an extra cost not already forecast in the budget, even if it does have good intentions.

In many ways an NDIS is like the Carbon Pollution Reduction Scheme (CPRS), the majority of people might believe it is a good idea if they actually understood it, but they are not willing to sacrifice anything in order to implement it. This is why celebrating the release of the report yesterday is sheer madness. The CPRS has had two separate reports and a Senate Inquiry in its various incarnations. Yet there is still no tangible policy. People are inherently more predisposed to saving the environment, rather than helping a bunch of cripples they do not know.

So the next challenge is to respond to the interim report, acknowledge the good work the PC has done, and suggest ways to improve it. More importantly those with a vested interest in the report need to develop a political strategy to convince the 228 Federal parliamentarians to adopt this policy.

Wish us luck we will need it.


  1. Interesting piece. Well done.
    At this time I see the NDIS as the disability equivalent of the NBN, an irresponsible flight of fancy that everyone can desire and demand, but something that no-one really knows and understands the details of.

  2. So true.... Most sensible article I have read since the PC released it's report!!