Budget 2021: Taxpayers carry the can as firms finally fold

Taxpayers will have to cover $1bn in outstanding entitlements of workers over five years, with claims jumping by 50 per cent next financial year.

Industrial Relations Minister Michaelia Cash. Picture: Gary Ramage

Taxpayers will have to cover $1bn in outstanding entitlements of workers over five years, with claims jumping by 50 per cent next financial year, as companies ­initially saved from liquidation by temporary government measures during the pandemic are wound up.

Figures published in the federal budget show claims on the Fair Entitlements Guarantee, which picks up the bill for employee ­entitlements when a company collapses and cannot pay workers what they are owed, will rise from $184m this financial year to $278m in the 2021-22.

The budget papers forecast total claims will be $208m in 2022-23 and $161m in each of the two subsequent financial years.

Industrial Relations Minister Michaelia Cash said on Wednesday the FEG had an initial spike in claims in March 2020 as a result of COVID-19, followed by a slowdown after government support measures and other temporary changes to the law were introduced. Senator Cash’s spokesman said the measures significantly reduced the incidence of company liquidations from March 2020 and, consequently, FEG claims.

“The FEG special appropriation, which reflects payments to claimants under the scheme, is ­estimated to increase from 2020-21 to 2021-22 as companies that did not go into liquidation because of temporary government measures, such as the suspension of the prohibition on trading while insolvent, are wound up,” he said.

“The $278m estimate for 2021-22 is a reduction on the estimate in the 2020-21 budget, which was $512m. This adjustment has been made in recognition of the improved performance of the economy since October 2020.”

ACTU secretary Sally Mc­Manus said the data undercut the government’s budget narrative.

“The government is telling one story about the economy but the details of the budget tell another — no wage growth and provisions for large numbers of companies to go under show that we are at a fragile stage of the recovery,” she said. “Businesses need working people spending money, and to do that working people need secure, reliable jobs and wage rises.”

Australian Council of Social Service chief executive Cassandra Goldie welcomed the government’s commitment to reduce unemployment below 5 per cent but said “it should go further”.

“The 700,000 people on unemployment payments long-term will need a lot more help to secure the limited jobs available,” she said. “We welcome the extension of the JobTrainer program and the Local Jobs Program. However, the $200m annual cut to employment services, together with tighter job-search requirements, mean that employment services will focus more on policing benefit requirements than positive help.”

Business Council of Australia chief executive Jennifer Westacott expressed concern about ­labour shortages. “Farmers are telling me they can’t get people to pick their crops,” she told Sky News. “ICT companies are basically cannibalising themselves because they would normally be bringing people in from overseas. If we want to get some of these sectors really growing in Australia, manufacturing and so on, you need to bring the skilled people out who train people on the job, who then expand our capability.”