Victorian Budget 2021: $3.8 billion mental health investment unveiled

Successful business owners will fork out billions for a mental health levy, with the budget revealing Victorians will be Australia’s highest tax payers.

The Andrews government is doubling down on its spending splurge, including a $3.8bn overhaul of mental health services funded almost entirely by the state’s top companies.

Big business reacted furiously after it was revealed it would be hit with a $2.9bn levy over four years for the program.

It comes on top of previously announced land tax, stamp duty and windfall gains tax increases worth $2.4bn targeting the wealthy.

The state opposition on Thursday accused the government of “class warfare”.

But Treasurer Tim Pallas refused to apologise or concede it would discourage businesses from hiring, saying they had to do their bit to help the state’s most vulnerable.

The budget also revealed the state’s infrastructure blitz will continue with $90bn worth of projects on the books, while the government admitted to a massive $3.8bn blowout across 117 big projects.

Next year’s predicted public service bill was also revealed to have blown out by $1.1bn in just six months since the last budget. But Mr Pallas defended the continued big-spending, saying there was “no substitute for ambition when it comes to growing our economy”.

“We’ve been pretty clear, we’re going to make that investment and the continuing investment,” he said. “I would be the first to recognise that as a government, the more we put into the market the greater heat we put into the market.

Treasurer Tim Pallas addresses parliament with his budget speech. Picture: NCA NewsWire / Sarah Matray

“There is a massive infrastructure investment going on right across the eastern seaboard of this nation.”

Josh Frydenberg blasted Victoria’s big-taxing budget, saying it was “the worst possible time to put up taxes and slow our economic recovery”.

The federal Treasurer said it was “the latest reminder of the difference between Labor and Coalition governments”.

“While the Coalition is backing Australian families and businesses with lower taxes, Labor is whacking Victorian families and businesses with higher ones,” he said.

The senior Victorian MP said 8 out of 10 jobs were created by private businesses, and that “only a growing private sector can secure Australia’s recovery”. “That’s why we have extended record investment incentives in the budget to support business to keep hiring and investing,” he said.

Victoria’s massive ongoing infrastructure spend was also cited as an area of concern by credit agencies Moody’s and S&P, who both downgraded Victoria’s AAA rating following the 2020 budget.

Mr Pallas said Victoria was on track to return to a cash surplus by 2023 with almost $6bn to be wiped from the state’s deficit. But net debt was still expected to climb to a record high $156bn by 2024-25, or 20.3 per cent of the state’s economy, significantly higher than the government’s 12 per cent target.

Victorian Liberal opposition leader Michael O Brien will lobby the crossbench to vote against the mental health levy . Picture: Ian Currie

And government spending was forecast to hit $342bn over four years, including a public sector wages bill of $132bn.

Mr Pallas said there had been no economic consequences as a result of the cancelled Belt and Road Initiative deal with China. And it while was unclear when international students would return to the state, government forecasts predicted migration levels would return to pre-pandemic levels by mid-2025.

The budget received mixed reviews from big business. Victorian Chamber of Commerce and Industry Chief Executive Paul Guerra said while it ticked some boxes, the government had to stop using business as a “fund of last resort”.

“Business cannot continue to be taxed to fund project cost blowouts,” he said.

The Housing Industry Association also warned that the higher property taxes would hit housing affordability.

Opposition leader Michael O’Brien said he would lobby the crossbench to vote against the mental health levy, yet refused to commit to scrapping it if elected to government. But it is likely to pass parliament with six crossbench MPs confirming they support the tax.

“Mental health should be a core business for the state government the same way that state schools are, same way that police are,” he said.

“We don’t have a police levy, we don’t have a state schools levy, so why on earth does Labor want to have a mental health levy?”

He said he would also oppose the government’s property tax increases.

EMPLOYERS SLUGGED BILLIONS FOR MENTAL HEALTH TAX

Victoria’s peak business group has warned the private sector cannot continue to pay the price of government blowouts after big companies were slugged with a new levy to pay for mental health reforms.

The Andrews government on Thursday revealed a new charge on companies with national payrolls above $10m would be used to fund major reforms recommended by the Royal Commission into Victoria’s Mental Health System.

About 9100 businesses in the state will pay the new tax which is expected to take in $843m a year over the next four years.

They will pay 0.5 per cent for every $1 above the $10m threshold while an extra 0.5 per cent will apply for wages paid over $100m.

The money will be put aside to pay for the creation of dozens of new mental health support services and to completely restructure the broken system.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra said he supported the “once in a generation” reforms but there were big concerns about a new tax on businesses.

Mr Guerra said he believed the $10m payroll threshold fell “probably a little low” for where it should have been, and said any increased tax would ultimately have an impact on economic activity.

“We think this (reform) will have lasting effects, not only from today but well into the future as well,” he said.

“Having said all that, we’re really concerned that businesses continue to foot the bill for these reforms against the backdrop of ongoing cost blowouts in government projects.”

“We know the reform there is required for mental health … We know that comes at a cost … What we’re saying is that cost can’t continue to be borne by business,” he said.

“We can’t expect business to keep propping up when there’s cost overruns on pretty much all the major projects in Victoria.”

Business Council of Australia chief executive Jennifer Westacott said the decision set a “very dangerous precedent”.

“It doesn’t make sense to target employers with a payroll tax hike which will hamstring their ability to create jobs and drive the recovery,” she said.

“These are the same employers who kept workers on their books during more than 100 days of lockdown, paid them when they couldn’t work because of government decisions and kept services running.’’

Rick Corney.

Opposition Leader Michael O’Brien said reform was needed but the levy was not the way to fund it. “You don’t help mental health by taxing people out of a job,” he said.

When asked why the tax was not shared across all Victorians, Treasurer Tim Pallas said some parts of the community had benefited during the pandemic. “We have made a decision that it is not only appropriate but fair that big business makes a substantial contribution,” he said.

Professor of Youth Mental Health at Melbourne University, Pat McGorry, said the budget would save lives in future. “This is a historic budget. I never thought I would live to see the day when mental health and mental illness treatment would be at the heart of a state budget,” he said.

NEW SYSTEM BASED ON COMMISSION PLANS

Victoria’s broken mental health system will be almost entirely thrown out under an expensive and expansive promise to rebuild services from the ground up.

A new mental health system built on a foundation of community-based services has been designed to offer more immediate help close to home in the hope early interventions can help Victorians, in line with recommendations of the royal commission.

To be funded by a levy on big business, the unpreceden­ted $3.8bn spend dwarfs the $869m mental health funding in 2020-21 — then a record.

A further 104 acute mental health beds will be added to the system under a $310m boost to acute services, including 35 specifically for women.

More than $1.5bn will be spent on what Mental Health Minister James Merlino labelled a “front door” for mental health care, with community-based care expanded through dozens of new support services.

While up to 60 of the local care services have been promised, the 2021-22 budget only paves the way for the first 20 under a $264m package to provide early care for adults.

The first six of those services have been fast tracked to open in Benalla, Brimbank, Frankston, Geelong, the Latrobe Valley and Whittlesea by the end of next year.

Mr Merlino said an extra 3000 workers were crucial in rebuilding the “chronically understaffed” mental system.

Brittany McVeagh welcomed the focus on funding for young people’s mental health issues. Picture: Tim Carrafa

In line with key recommendations from the royal commission, the staffing boost includes $40.7m to expand workers with lived experience of mental health issues.

“This represents the biggest social reform in our state’s history. Most importantly though, these investments will change lives and save lives,” Mr Merlino said.

A further $950m will be spent creating 22 new “reformed” area mental health and wellbeing services to ­replace existing services.

The mental health system overhaul’s major focus is on younger people, with $842m split into two streams of funding for services focusing on those aged 0-11 and another on those 12-25 — the years in which 75 per cent of all psychiatric conditions are diagnosed.

Youth Prevention and Recovery Care units will be opened in Melbourne’s North East, Barwon, Gippsland, the Grampians and Hume. Services in Frankston, Dandenong and Bendigo will be upgraded.

Mental health reforms are being stepped up from birth, with 13 infant, child and family, mental health and wellbeing services for those under 11.

Outreach programs for suicide prevention will add youth services at the Royal Children’s, Alfred and Monash Children’s hospitals, as well as Orygen to offer one-on-one support for younger people.

A program to deliver mental health services into primary schools is also being expanded.

Originally published as Victorian Budget 2021: $3.8 billion mental health investment unveiled