Academic journal article The Economic and Labour Relations Review : ELRR

The Impact of Breaching and Financial Penalties on Income Support Recipients

Academic journal article The Economic and Labour Relations Review : ELRR

The Impact of Breaching and Financial Penalties on Income Support Recipients

Article excerpt


In Australia there have always been financial penalties attached to noncompliance with unemployment benefit job search or other requirements. These penalties have become controversial in recent years mainly because of a massive increase in the volume of what is called 'breaching' towards the end of the 1990s, amounting to a rise of around 340 per cent between 1997 and 2001 (see Table 1). This stemmed from the intensification of requirements placed on unemployed beneficiaries as part of the Coalition Government's 'mutual obligation' and 'welfare to work' policies. It reflects how income support has shifted from being an entitlement for all those in a specified benefit category to a payment contingent on compliance with individualised, contractual agreements (Eardley 1997; Carney and Ramia 2002). Centrelink was required during this period to be more vigilant in enforcing income support rules, while within the new employment services quasi-market (the Job Network), agencies came under contractual obligation to report non-compliance with participation plans.

How far greater enforcement of requirements is actually expected to improve recipients' chances of gaining employment is unclear. Evaluation of similar sanctions in the UK and the US suggests that they tend to fall on the more disadvantaged recipients, but that their circumstances make them the least likely to comply (Vincent 1999; Goldberg and Schott 2000; Burke and Falk 2001; Saunders, Stone and Candy 2001; Britton 2002). In some States in the US at least, there has been some evidence that sanctions may be more effective where a return to compliance immediately reduces the penalty (Schnurer and Kolker 2002).

Whatever the intention, penalties involve significant financial losses for recipients. For a single adult in Australia in June 2002, these ranged from $384 for one administrative breach to a total of $3491 where three activity test breaches were incurred within a two-year period. (2) The proportion of all breaches that were imposed under the more heavily penalised activity test rules also doubled during the period up to 2002.

Welfare organisations mounted a successful media campaign against breaching from the late 1990s onward, drawing on small-scale surveys and case studies of clients suffering harsh impacts (eg., Australian Council of Social Services 2000a; 2000b; 2001). They supported the establishment of an independent review of breaching which recommended substantial structural and procedural changes (Pearce, Disney and Ridout 2002), and in response to public disquiet the Government made a number of changes to policy and practice that brought the numbers of breaches back down in early 2003 to pre-1997 levels.

Breaching was also one of the main issues that led to the delaying of legislation for the Australians Working Together package, first introduced in the July 2002 Budget, as this included subjecting new groups of beneficiaries, particularly some sole parents, to activity testing and thus, potentially, to the penalty regime. Following negotiations between the Government and the Senate (with intense lobbying by the welfare sector), the legislation was eventually passed in March 2003 with amendments that significantly reduced the scope and severity of penalties. The Government also agreed to establish a Breaching Review Taskforce, which reported to Ministers in December 2004. Subsequently, the 2005 Budget foreshadowed a revised system of penalties based on a partial suspension of payments until compliance is re-established. Final details of the new system were still being negotiated at the end of 2005, but welfare sector groups remained unconvinced that the initial proposals addressed all the problems identified with previous arrangements (Welfare Rights Centre 2005).

When the study on which this article draws (Eardley et al. 2005) was commissioned (in 2002) there was little systematic evidence either on the effectiveness of breaching as a compliance tool or on its wider impacts. …

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