Responsibility for housing affordability
There is no head of power under the Constitution for the Commonwealth in relation to housing. Housing affordability and homelessness prevention are the responsibility of State governments.
Nonetheless the Commonwealth currently has two major areas of spending on housing – the provision of Rent Assistance and payments to the States for affordable housing and alleviating homelessness.
Rent assistance payments are provided to income support recipients. More than a million renters around Australia receive Rent Assistance at a cost of around $3.6 billion per year. Rent Assistance is not currently paid to public housing tenants.
The Commonwealth contributes approximately $1.3 billion to the States through the National Affordable Housing Agreement. A further $159 million is also provided through the National Partnership Agreement on Homelessness.
In addition the Commonwealth provides funding through the National Rental Affordability Scheme which seeks to address the shortage of affordable rental housing by offering financial incentives to business and community organisations to build and rent dwellings to low and moderate income households. Funding from this source is around $1.5 billion over four years.
Various reports from the COAG Reform Council on housing and homelessness suggest that there has been limited success in delivering affordable housing and reducing the incidence of homelessness. National agreements have added complexity and increased the administrative burden to all levels of government.
The Commission considers there is a strong case for the Commonwealth to limit its involvement in this area to providing rent assistance to income support recipients and continuing to offer State governments access to the Commonwealth’s one stop shop social services policy.
The Henry Tax Review outlined the case for extending Rent Assistance to public housing tenants, with these tenants paying the market rent of the dwelling. Under such an arrangement, the Commonwealth would need to increase aggregate Rent Assistance funding. However, this additional funding could be sourced from a redirection of funding currently contributed to the National Affordable Housing Agreement and the National Rental Affordability Scheme.
As noted above annual funding for these two programmes is currently around $1.5 billion per year.
The Commission considers that there is merit in considering this option further. Two benefits would arise from this approach. First, the market would determine rents for public and private housing. Second, abolishing housing agreements with the States would remove duplication of effort, improve accountability and alleviate the reporting burden for State governments. Commonwealth funding currently directed to the housing agreements should be redirected to fund the extension of rent assistance to public housing tenants.
The Commission notes that there may also be flow-on effects to eligibility for Rent Assistance arising from its recommendations on family payments, age pension and other social welfare areas. If this option is adopted, implementation should include an examination of ways of ensuring that Rent Assistance is well targeted and delivered in the most appropriate way.
Recommendation 38: Housing assistance
Housing affordability and homelessness prevention are primarily the responsibility of State and Territory governments. The Commission recommends the Commonwealth:
- limit its involvement in housing to providing Rent Assistance payments;
- extend Rent Assistance to public housing tenants, provided State governments commence charging market rates of rent; and
- fund the increase in aggregate Rent Assistance payments by re-directing Commonwealth funding from existing agreements with the States for Affordable Housing and Homelessness and the National Rental Affordability Scheme.
Vocational education and training
Vocational education and training has traditionally been a State responsibility. The Commonwealth has no constitutional responsibility for vocational education and training.
The States provide 97 per cent (or $6.4 billion per year) of government funding for vocational education and training. This includes $1.8 billion per year of Commonwealth money provided through the National Agreement for Skills and Workforce Development and the National Partnership on Skills Reform.
The Commonwealth directly provides only some 3 per cent (or $0.2 billion per year) of government funding for vocational education and training. This includes around $140 million per year for the development of skills and training through the National Workforce Development Fund. The Commonwealth also provides funding to encourage businesses to take on apprenticeships.
Given the amount of money all governments spend in the vocational education and training area, outcome achieved are not strong. For example, in 2012, the completion rate for trade apprentices was only around 56 per cent.
In recent years, the Council of Australian Governments has embarked on reforms in the vocational education and training sector aimed at lifting skills across the economy and better aligning skills to labour market demand. The reform agenda recognises that the sector must be responsive to changes in the labour market. The Commission supports the move away from a regulated and supply-driven system to a demand-driven, contestable market, as has been introduced in Victoria.
In its submission to the Commission, the Victorian Government raises concerns with the duplication arising from the Commonwealth funding its own vocational education and training programmes:
Commonwealth apprenticeships and youth transitions programs, and the National Workforce Development Fund, duplicate State training support and funding programs. This results in financial inefficiency, confusion and red tape for employers and service users, and limited opportunities to improve outcomes through a more integrated service system.
The Commonwealth’s supply-driven funding does not align with, and potentially undermines, Victoria’s demand driven approach. The Commonwealth and Victoria should work together to trial the consolidation of funding and programs at the State level.
The Commission believes it would make sense for the Commonwealth to pull back from its involvement in vocational education and training, with a view to providing full policy responsibility to the States.
Such an approach would require an equivalent adjustment in funding. Section 6.2 discusses opportunities to improve vertical fiscal imbalance between the Commonwealth and the States to facilitate a clarification of roles and responsibilities. Vocational education and training should be considered in this context. Alternatively, the Commonwealth could provide the States with an annual lump sum, with limited conditions, such as requiring appropriate levels of national reporting on outcomes and national quality assurance.
In terms of quality assurance, Section 9.1 recommends that the Tertiary Education Quality Standards Agency be merged with the Australian Skills Quality Authority.
The transfer of responsibility to the States should be done on the basis that the States continue to pursue reforms to ensure vocational education and training is demand-driven and responsive to industry requirements.
The transfer should also simultaneously address the need to improve Australia’s occupational licensing arrangements.
At present, many occupations are licensed separately in each State, with the licence determining the work that can be performed in that jurisdiction. For many occupations, holding a licence in one State does not entitle an individual to work in another. This has long been recognised as an impediment to labour mobility in Australia. It is also an area where the Commission considers that the Federation has failed to deliver a sensible outcome for Australians over many years.
While mutual recognition of licences between States has been progressively introduced since 1992, the system remains unwieldy and ineffective. Workers seeking to have their credentials recognised in another State are often required to undertake additional training and must pay additional licence fees. It can take up to a month to receive accreditation for mutual recognition of qualifications and licensing.
In July 2008, the Council of Australian Governments agreed to establish the National Occupational Licensing System for a number of specified occupations. The intention was to ensure licences issued by any jurisdiction would be valid in all States. This approach was abandoned by the States in 2013, in favour of improving mutual recognition arrangements. It is now incumbent on the States to quickly and effectively streamline these arrangements.
Recommendation 39: Vocational education and training
Currently the States provide the vast majority of funding to the vocational education and training sector, with the Commonwealth contributing through tied grants to the States and some specific Commonwealth programmes. The Commission recommends that the Government wind back its involvement in the vocational education and training sector by:
- transferring policy and funding responsibility for vocational education and training to the States, with Commonwealth funding to be provided either as:
- a single annual lump sum with minimum requirements for national reporting and quality assurance; or
- as part of a broader reform of federal financial relations;
- abolishing all Commonwealth vocational education and training programmes including the National Workforce Development Fund and Commonwealth support for apprentices; and
- requiring the States to continue reforms to achieve demand-driven vocational education and training outcomes and improve occupational licensing arrangements.
Since the early 1990s there has been a greater focus on mental health policy with governments at all levels consistently increasing both health and non-health expenditure.
An estimated $6.9 billion was spent on recurrent mental health-related services during 2010-11. Of this, $4.2 billion came from State governments, $2.4 billion from the Commonwealth Government and $257 million from private health insurance funds (Chart 8.3).
Source: Australian Institute of Health and Welfare.
Commonwealth Government direct funding for mental health included Medicare-subsidised mental health-related services and subsidising over 23 million PBS prescriptions for mental health-related medications in 2011-12.
State governments fund and deliver services and assist with broader needs, such as accommodation. The largest proportion of spending was on public hospital services for admitted mental health care. Community mental health care spending and residential mental health services are also provided.
The multiple components of mental health mean that it is difficult to establish accurate and up to date expenditure information and data on mental illness is not consistently collated or sufficiently aggregated. Medicare, for example, does not disaggregate many of the mental health related services provided.
Mental illness ranges from low prevalence through to severe conditions that often co-exist with other health difficulties and social challenges. For example, over 50 per cent of people admitted to alcohol and drug treatment facilities have a history of mental illness and it is estimated that up to 80 per cent of people will visit a General Practitioner for initial assistance for their mental health condition.
The mental health system is complex and fragmented across employment, education, Indigenous programmes, aged care, welfare and the National Disability Insurance Scheme.
There are overlapping funding and service delivery responsibilities, a lack of coordination and integration of mental health and the broader social and welfare services, and the absence of information to demonstrate whether the right amount of money is being spent and in the right areas of mental health.
In September 2013 the Government announced that the National Mental Health Commission would be undertaking a national review of mental health services to ensure that services are being properly targeted and not duplicated and that programmes are not unnecessarily burdened by red tape.
In keeping with its principles, the Commission considers that the review should identify ways to better target mental health funding for the most vulnerable and identify opportunities for coordinating and integrating mental health services with broader social and health services. The review should also examine how fragmentation in the services system and overlapping roles and service delivery responsibilities can be reduced. This should be considered in the context of broader reforms to the health system proposed in Chapter Seven.
Recommendation 40: Mental health
Mental health services are characterised by overlapping funding and service delivery responsibilities and a lack of coordination across jurisdictions.
The Commission supports the proposed review by the National Mental Health Commission and recommends that the review pay particular attention to removing the significant duplication between the Commonwealth and the States that currently exists in mental health services.
Natural disaster relief
The Commonwealth Government provides financial assistance to State, Territory and local governments, and to businesses and individuals to help them deal with the consequences of major natural disasters.
Recently, Commonwealth disaster expenditure has had a significant impact on the Budget due to major flooding events that occurred in 2010-11 and the following two years, particularly in Queensland.
Over this period the Commonwealth has contributed $5.8 billion toward State and Territory disaster reconstruction costs and further contributions of $5.8 billion are incorporated in the forward estimates. This large and volatile expenditure poses significant and ongoing risks to the Budget. See Chart 8.4.
Source: Department of Finance.
The Natural Disaster Relief and Recovery Arrangements is the main form of Commonwealth assistance. Funding to State and local governments is determined by the claims submitted for eligible funding and in line with a designated formula.
Consistent with the general approach taken that the Commonwealth should avoid attempting to duplicate the functions of the States, the Commission recommends that the current claims-based process be replaced by a grant arrangement to the affected State after a major natural disaster. The grant would be paid over a number of instalments.
The level of Commonwealth contribution would vary depending on the size and severity of the disaster event, but could be set at between 25 per cent and 33 per cent of likely reconstruction costs (with the amounts based on assessments by insurance expert assessors).
The Commonwealth Government also supports individuals and businesses through two mechanisms administered through Centrelink.
- The Australian Government Disaster Recovery Payment is short term, non means‑tested financial assistance payment for eligible Australian residents adversely affected by a major disaster, of $1,000 for eligible adults and $400 for eligible children.
- The second form, the Disaster Recovery Allowance, provides short term income support to employees, small business persons and farmers who experience a loss of income as a result of a major disaster, subject to means testing. It is paid at the equivalent to the maximum rate of Newstart Allowance or Youth Allowance depending on the individual’s circumstances, for up to 13 weeks.
Commonwealth support should be restricted to those that suffer severe hardship. Take-up rates for the Disaster Recovery Allowance and similar wage subsidies have typically been very low and provide poor signals to employers to undertake better business and risk planning. It is suggested that the Disaster Recovery Allowance be abolished
Recommendation 41: Natural disaster relief
Recognising the primacy of State governments in dealing with natural disasters, Commonwealth involvement should be significantly reformed including by:
- replacing the Natural Disaster Relief and Recovery Arrangements with a grant in the case of each major natural disaster, with the Commonwealth contribution based on a designated proportion (between 25 per cent and 33 per cent) of the estimated reconstruction costs; and
- maintaining the Australian Government Disaster Recovery Payment but abolishing the Disaster Recovery Allowance with the Commonwealth's direct contributions being paid to only those individuals severely affected by natural disasters.
Community Investment Programme
The Community Investment Programme provides funding to improve the responsiveness and integration of local community services to increase the participation of vulnerable people in community life.
Total funding for the Community Investment Programme in 2013-14 is $43.2 million. The Commonwealth Government has a long history of providing grants funding to the community sector.
There are four streams of grants funding under the Community Investment Programme.
- Community Capacity Building Projects – this stream provides grants to community organisations to deliver local projects to strengthen communities and assist disadvantaged individuals to participate in community life. Current funding agreements expire on 30 June 2014, except one which expires on 30 June 2015.
- Volunteer Grants – this stream offers ad hoc grants of between $1,000 and $5,000 to not-for-profit organisations to help cover the costs of volunteers, including training, fuel and any required background checks. Grants rounds are conducted on an annual basis and funding for 2013-14 is fully committed.
- National Secretariat – this stream provides funding for seven peak organisations to manage relationships with stakeholders and provide advice to government. Funding agreements expire on 30 June 2014, except one which expires on 30 June 2016.
- Indigenous Community Links – this stream supports Indigenous community members and their families by providing links and referrals to a range of mainstream and Indigenous services, such as welfare and social support, employment, legal and housing. Funding is provided for Indigenous Community Links to 2014-15.
The Commonwealth Government does not have an explicit constitutional head of power to deliver community development programmes. Community grants for development and volunteers are currently provided by at least some State governments. There is scope for the Commonwealth to transfer responsibility and funding for these programmes to the State governments
Recommendation 42: Community Investment Programme
There is scope for the Commonwealth to transfer responsibility for community development programmes to the States, the level of government closest to the people receiving the services. The Commission recommends that the Commonwealth transfer funding and responsibility for the Community Investment Programme to the States.