Social reform, not a new tax

UNLIKE many other areas the Labor government has chosen the path of successful reform with this week's Productivity Commission report proposing a revolution in the way disability support is perceived, organised and funded in Australia.

This draft report has one sure consequence. It destroys the status quo in disability policy in this country. It documents a policy shambles that diminishes the lives of nearly 400,000 disabled Australians and constitutes an unacceptable risk to anybody who suffers a disability.

The Productivity Commission report was instigated by assistant Treasurer Bill Shorten last year in his previous role as parliamentary secretary for disabilities. Shorten's decision lays the basis for an enduring reform down the track.

The commission's vision is built upon three core ideas: that disability must shift decisively from a welfare to an insurance philosophy; that the national government must take disability responsibility from the states; and that the best funding mechanism is not the much vaunted tax levy but from consolidated revenue via a guaranteed formula.

These three principles are the key to successful disability reform. Indeed, the Productivity Commission report embodies a technique Australia needs far more: sweeping social reform made viable on the basis of sound economics and governance.

Gillard Labor welcomes the report. But it comes with a hefty price tag, an extra $6.3 billion annually from 2015-18, double the current bill. This is certain to become a test of Labor's values because, in a tight fiscal position with competing demands, the government will be obliged to prioritise disability support above other spending commitments.

After the report's release Community Services Minister Jenny Macklin backed a major rethink but warned that change "does not come easily or quickly". Julia Gillard's comments in parliament yesterday were highly cautious, saying she recognised "there is more the nation needs to do". Frankly, Gillard should have been more supportive.

Inside Australia's fierce lobbying for government resources disabled people and their carers have been marginalised for years. "As I spoke to the various groups it was obvious that they were poor and they lacked political power," Shorten told The Australian of this constituency. "Each group had a series of different demands from those concerned with cerebral palsy to autism to physical impairment. I formed the view there was a need to find one big reform idea. But that case for reform had to be based in economics. It couldn't just rely on emotion."

Shorten likens the issue to a political iceberg. "I am convinced this is a much bigger issue in the electorate than many people operating inside the beltway may think," he said.

Presiding commissioner Patricia Scott said: "Every day nearly 100 people acquire a significant disability. This will have life-long impacts on them and their family. Under the proposed new schemes, people would not wait years for suitable wheelchairs or only get two showers a week." Associate commissioner John Walsh said: "We have a 'death spiral' in the current system with ageing carers unable to cope."

The status quo, entrenched in welfarism, reliant on inadequate state revenue, cannot meet the disability demands. The report brands it as "inequitable, fragmented and inefficient". Support is delivered via welfare, charity and family. There are multiple examples of injustice. For example, while no-fault catastrophic car accident insurance applies in NSW and Victoria, it does not apply in most other states that have a fault-based model. So, your fate depends on where and how you are disabled.

Many carers are chained to the present system until they die, forced to re-prove their child's disability to every new agency, burdened by complete lack of choice or power in a system where "all power is vested in the service provider". With inadequate funding more rationing of disability support is certain. At present, Canberra funds the sector $1.7 billion annually and the states contribute another $4.2 billion.

The commission argues that more money within the current model just perpetuates failure. It recommends a conceptual break to a national disability insurance scheme, a universal plan giving all Australians coverage for long-term disability support but not for lost income. The NDIS would be an independent statutory authority run on commercial principles. The philosophy is that the nation pools its resources to cover everyone against disability risk. It would apply to people with current and future permanent disability. They mainly fall into three groups: those with significant constraints on self care (about 225,000 people), those intellectual disabled (about 50,000) and those where intervention can bring improvements, for example, in autism and cerebral palsy (about 80,000).

The scheme would be governed by national standards. People would have choice of provider. If they wished, they could manage their own funds. The insurance principle minimises the lifetime costs and creates incentives for best practice and efficiency. It discourages use of the disability support pension as the norm.

On the pivotal issue of financing, the report says the best option is not a disability insurance levy (another tax) but a legislated formula for fixed payments from consolidated revenue leaving the Australian government to decide the fiscal choices between tax rises and spending cuts. This would become a test of Labor's overall fiscal prudence and discipline. The extra $6.3 billion cost equates to an annual $280 premium per person for insurance cover.

The commission insists the national government assume full responsibility for the scheme and funding and recommends state taxes be reduced by the amount of revenue they had paid to disability services.

Former NSW Labor minister and political veteran, John Della Bosca, now national campaign director for this cause, sees the avoidance of a new levy as critical to the politics. The report's reception has not been ruined by brawling about another new tax. "The contrast with the debate on carbon is apparent," Della Bosca says. "The initial feedback is encouraging because this reform needs bipartisanship at the political level."

Della Bosca is right. It would be a sign of supreme weakness if Gillard Labor succumbed to the report's fallback option of a new levy to fund the scheme thereby putting the reform at risk. Speaking for the opposition, shadow ministers Kevin Andrews and Mitch Fifield said the status quo was busted, called for a new system and signalled that support from consolidated revenue was the desired path.

Amid the current rancour here is something rare: the hope for reform based upon bipartisanship.