Bid to fully fund NDIS sparks $6bn search

The government needs an extra $6bn to fully fund the NDIS and will also announce a new demerit point welfare system.

Treasurer Scott Morrison in Canberra yesterday. Picture: Sam Ruttyn

Scott Morrison will tonight ­announce full funding of the ­National Disability Insurance Scheme beyond 2019, in a move that has forced the government to find an extra $6 billion in annual savings to meet the implementation costs.

The government is also ­expected to announce a demerit point based system for welfare ­recipients who skip mutual obligation appointments.

The Australian understands a fully-funded NDIS will be the centrepiece of the budget’s social policy component following a three-year battle with Labor and the Senate to pass savings measures that would help pay for it.

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The government claims that the NDIS funding gap created by Labor has left the Coalition to fund an extra $4bn in the 2019 outlays, rising to $6bn a year beyond that. It is understood that extra savings, beyond those secured through the Senate earlier this year in the government’s omnibus savings and childcare reform bill, have been found within the social services budget as well as other portfolios.

The government last night would not rule out tax or levy increases in the budget to cover the entire $22bn cost of the scheme, as threatened by Malcolm Turnbull in February this year as a “penetrating statement of the obvious” during the battle with the Senate over $4bn in savings measures.

The Australian understands that a proposal to make the ­highest-income earners carry the burden of the required savings, through a compulsory 1 per cent Medicare surcharge, was taken to the final pre-budget meeting of the expenditure review committee. The government would not confirm whether it survived the final budget package taken to and signed-off by cabinet yesterday.

The Australian understands that the plan would see those in the ­highest-income brackets forced to pay the extra levy ­regardless of whether they have private health insurance.

The Treasurer will confirm that the 2 per cent deficit levy on high-income earners imposed three years ago will be lifted as promised. Imposing a 1 per cent Medicare surcharge would mean they receive only half the benefit.

Mr Turnbull yesterday promised his government’s second budget would help Australians “realise their dreams”, saying it would reflect fairness, opportunity and security.

It is believed that while the government will recommit to a white paper timetable to lift Defence spending to 2 per cent of GDP by 2021, it will announce significant savings in implementation of ­projects.

Commitments for the preservation of services, including the NDIS as well as the $18bn education package announced last week, will be partly paid for through higher, unexpected resource revenue, following a surge in key commodity exports and profits from non-mining companies improving. The budget is ­expected to show a return to ­higher company tax revenue after almost a decade of stagnation.

While providing a short-term boost, the government will take a conservative approach to any longer-term forecasts, with lower wage growth acting as a brake on revenues.

Mr Morrison has said that one of the government’s priorities would be to ensure that services were maintained, with the NDIS, which has been subject to heavy criticism over its implementation, being a critical feature. This has presented a significant challenge.

The Australian revealed in ­February the annual cost of the NDIS would jump by $10bn to $32bn at the end of its first decade. In 2028-29, the NDIS would have a yearly funding hole of more than $7bn. The $3bn in savings secured by the government in the omnibus bill combined with savings from the Disability Support Pension are believed to be enough to cover the 2019 shortfall.

But the government had yet to secure a plan to keep funding a growing gap in the later years for a scheme that will help 460,000 people with uncapped support.

The government was last night also being tipped to impose levies on banks to fund a new ombudsman to hear customer complaints and create a compensation fund.