Watchdog that investigated robodebt agencies appears before royal commission

Bombshell advice on an illegal Centrelink scheme that was sent to Scott Morrison when he was the minister in charge has been aired at a royal commission.

The watchdog which investigated the agencies responsible for robodebt may have stopped the program two years before it was eventually disbanded, had it seen a crucial document prepared for Scott Morrison.

The royal commission into robodebt has heard the Department of Human Services withheld information from the Commonwealth Ombudsman when it was investigating the failed Centrelink debt recovery scheme in 2017.

Former acting senior assistant ombudsman Louise Macleod appeared before the Brisbane-based inquiry on Wednesday, where she wasshown a bundle of documents which flagged the welfare compliance program that became known as robodebt could be unlawful before it was implemented in 2015.

Among them was a brief on the draft policy proposal for the scheme prepared for the former prime minister when Mr Morrison was social services minister in early 2015.

Counsel Assisting, Angus Scott KC, pointed to critical comments Department of Social Services officials had made on this brief, including that the scheme was incompatible with existing legislation.

Senior representatives from the government watchdog have appeared before a royal commission into robodebt. Picture: NCA NewsWire / David Geraghty

The Ombudsman’s 2017 report identified flaws with the way robodebt was being run by the DHS and DSS but stopped short of declaring the program was unlawful.

Ms Macleod said on Wednesday the Ombudsman’s office was only given the final policy proposal draft when it was investigating robodebt in 2017 and didn’t see earlier the documents flagging the scheme’s potential illegality.

Asked if being aware of the documents would have changed the outcome of the ombudsman’s investigation, she said: “I would like to think so.”

“We would have definitely been asking questions of the departments, basically, ‘Please explain what this is about?’ And I would hope calling out that this was enough to say it was unlawful … publicly, in a report,” she said.

Asked if she felt “misled”, Ms Macleod said: “To be honest, it annoys the hell out of me, yes. And, it’s really disappointing. You know, it demonstrates to me they know (the department wasn’t) participating in good faith.”

Robodebt was an automated method of calculating welfare recipients’ alleged debts by matching their reported pay with their supposed annual incomes, which were estimated by averaging data from the Australian Taxation Office.

The scheme ran from 2015 to 2019 until it was discontinued after being found to be unlawful. By this point it had falsely accused thousands of people of owing the government money and been linked to a number of suicides.

The royal commission has previously been told the DSS advised in late 2014 the robodebt proposal would require legislative change and wouldn’t hold up against a legal challenge otherwise.

Former prime minister Scott Morrison appeared before the commission in December. Picture: NCA NewsWire / Gary Ramage

Mr Morrison told the inquiry in December that, before he took a final policy proposal to cabinet in March 2015, the DSS had changed its view and advised new legislation was not required.

But he conceded there was a “fundamental change” between his department’s early advice and the final document he presented to cabinet.

Michael Manthorpe, who served as commonwealth ombudsman between 2017 and 2021, was due appear before the inquiry on Wednesday afternoon.

The commission has previously been told that senior bureaucrats who were facing a PR crisis over robodebt instructed the ombudsman to substantially amend its 2017 report into the scheme to make it less negative.

Jason McNamara, a former general manager at Services Australia, which was then called the Department of Human Services (DHS), appeared before the inquiry in December and admitted to having sought to influence the ombudsman.

Correspondence made public for the first time at the commission revealed the watchdog provided a draft copy of the report to DHS officials so they could provide feedback on it before it was published.

One bureaucrat said in an email to colleagues that it was “a great opportunity to effectively co-write the report”.

Another email reveals the DHS “quite deliberately crafted” a recommendation in the report that reduced the number of people who could be exempt from having a 10 per cent “recovery fee” added to their debts.

The DHS suggested edits to make the report less scathing, including removing the phrase “inaccurate debt”.

The royal commission is examining why robodebt was set up and how it ran until 2019 despite its serious flaws being widely known from 2017.

The scheme cost the commonwealth nearly $1.8bn in written-off debts and compensation paid to victims who mounted a class-action lawsuit.