Julia Gillard’s rush ‘risked NDIS’, says Productivity Commission

The Productivity Commission has condemned Julia Gillard’s rushed rollout of the NDIS.

Former PM Julia Gillard. Picture: Calum Robertson

The Productivity Commission has condemned Julia Gillard’s rushed rollout of the National Disability Insurance Scheme as “risking the financial sustainability’’ of the program and warned that imprecise governing legislation could have its future ­decided by the courts.

A draft position paper released­ yesterday also criticises the states for using the NDIS as a pretext to withdraw services such as mental health and warned that the scheme faced a litany of cost pressures brought about by imprecis­e projections about future­ take-up rates.

The federal government is expected­ to use the paper to increa­se pressure on the states to dramatically rewrite the way the $22 billion scheme is funded and delivered. Social Services Minister Christian Porter, who has respon­sibility for the scheme, said the report was “vindication” of his position that giving states veto powers over rule changes relatin­g to the NDIS was a waste of time when “on the ground” issue­s became clear.

The report, which urges Western Australia to sign on to the original national scheme, has been released as The Australian can reveal the new McGowan government in that state is deadlocked with the commonwealth over a return to the NDIS.

WA wants to unwind a last-minute Barnett government deal to run a parallel scheme but wants more attractive terms made available to other states when they first signed up in 2012.

This tension is a microcosm of the broader tussle for control of the scheme. Perversely, any change to scheme governance arrangeme­nts — despite recommendations from the commission — must be agreed by the states, making them difficult to achieve because the states would likely be worse off financially.

“From the very outset upon taking the portfolio, and fully understanding the blueprint that was left for the rollout of the NDIS, the view that I formed was that the governance arrangements could be significantly ­improved,’’ Mr Porter said.

“And while they were not proving to be a major impediment right now, I can foresee a time when the ability to respond quickly to on-the-ground challenges there is potential for real future concern. The interim Productivity Commission report, hav­ing heard an enormous amount of evidence, seems to be unequivocal in this view.”

Mr Porter said all of these ­issues paled compared with a battle between Malcolm Turnbull and Bill Shorten to legislate a 0.5 per cent rise in the Medicare Levy to pay for the rest of the scheme. “Everything we talk about in this report is dwarfed by the singular issue of getting this funding through,” he said.

The draft paper explicitly notes that there are signs ­already that the speed of the rollout is “compromising” the scheme and “risking the financial sustainability” of the project.

In a sweeping list of concerns, the commission warned that the finances of the scheme would be at the mercy of future court decis­ions based on interpretations of the words “reasonable and neces­sary support” in the NDIS Act.

It mandated the end of a lucrative ride for states by forcing them to cease charging “in-kind” services to the National Disability Insurance Agency by 2019-20.

The commission has acknow­ledged the federal government “bears all the risk of any cost overruns but not all the control”.

Under current settings, the funding burden grows faster for the commonwealth because states have a fixed “escalation” of their contributions of 3.5 per cent each year. “An alternative way to set escalation parameters would be to explicitly link them to scheme costs, so that the proportion of funding allocated to the Australian government and the state and territory governments is maintained over time,” the commission says.

“While the NDIS is sometimes described as an ‘uncapped scheme’, the ultimate cap — and test of financial sustainability — is taxpayers’ continuing willingness to pay for it.

“Cost overruns could lead to pressure to reduce the scope and certainty of care and supports provided under the NDIS, or requir­e governments to provide more funding at the expense of other programs.”

Under the Barnett government deal, made just before WA’s March election, the state agreed to fund 100 per cent of the administration costs of the state-run program and 75 per cent of any cost overruns. In every other agreement, these costs are worn by the federal government.

The Australian understands the new Labor Disability Services Minister, Stephen Dawson, wants to junk the agreement and be welcomed back to the national scheme on a deal with ­financial concessions similar to those made to other states under Ms Gillard, but has been rebuffed.

Mr Dawson confirmed WA was in discussions with the commonwealth. He said WA would press ahead with the state-administered NDIS rollout next month because it has no time to stop it, while continuing talks on a return to the national scheme.

Mr Porter said the federal government “has provided all the information that could be reas­on­ably considered necessary for Western Australia to make a decision­ about the NDIS in WA”.

The commission’s report cited a litany of other cost pressures in the scheme, even as it said progress was on track and on budget. Neither the commission nor the NDIA have updated their projections for total scheme costs, however, because the data to do so is not mature enough. It excoriated states for withdrawing from services, especially mental health ser­vices, without being upfront about their plans to cut and run.

Labor’s disability reform spokeswoman Jenny Macklin — who was minister when the NDIS began — said she “shares the (commission’s) concerns about problems with the ­planning process, including the quality of the plans, rushed ­planning conversations and the need for more specialised training for planners”, but did not mention the rushed rollout.