In which Senior Counsel Assisting the Commissioner outlines what is understood concerning the establishment, design and implementation of the Robodebt Scheme at this point in the Royal Commission…...
Royal Commission into the Robodebt Scheme, Public Hearing 1, Transcript of Proceedings, 27 September 2022, excerpt:
MR GREGGERY: Commissioner, I appear today with Mr Angus Scott, Ms Renee Berry and Ms Salwa Marsh. The Attorney-General appointed each of us to assist this Royal Commission into the Robodebt Scheme as it is described in the Letters Patent.
Less than five weeks ago the Prime Minister announced the establishment of the Royal Commission, and an even shorter period of time has passed since the engagement of counsel assisting the Commission, our instructing solicitors and the appointment of Commission staff. The date by which the Commission is to report, as you have just identified, Commissioner, is 18 April 2023 and there is an obvious need for focus and efficiency to complete the task by the due date.
I will outline the broad context for the nature and scope of the inquiry before I address how the Commission will operate.
Turning firstly to the context for the inquiry, this Commission is not tasked with replicating the various inquiries and investigations into the Robodebt Scheme which have taken place, although much of the content of those inquiries is relevant to the scope of the Commission under the Letters Patent. The reports which have been produced from those inquiries and investigations are also relevant, at least to the history of the Robodebt Scheme and decisions to continue it.
The Letters Patent direct the Commissioner to inquire into the specific factual matters which are set out, with a focus on the “decisions and actions taken or not taken by those in positions of seniority”. The factual inquiry with its focus upon the role played by those in positions of seniority will be the basis upon which the Commission makes recommendations it considers appropriate. Those recommendations may include recommendations needed to prevent a recurrence of any failures of public administration which are identified in this inquiry.
The reference in the Letters Patent to the identification and prevention of the recurrence of any “failures of public administration” bears close similarity to a phrase which appears in the reasons of Justice Murphy of the Federal Court when his Honour approved the settlement of the class action brought in respect of the debts raised and collected by the Robodebt Scheme. His Honour's, reasons published on 11 June 2021, included the observation that those proceedings “… exposed a shameful chapter in the administration of 10 the Commonwealth's social security system and a massive failure of public administration”.
The reasons for judgment in the settlement of the class action are, as I indicated earlier, one of the many previous findings of others which are relevant to the Commission's task. The decision of Justice Murphy marked a significant occasion when the Australian Government 15 admitted that asserted debts based solely on income averaging from Australian Taxation Office data were not validly established.
In that context, the Commission is to enquire into a number of specific matters which were read out at the commencement of this initial hearing. In summary: the establishment, design and implementation of the Robodebt Scheme which raised and recovered debts for the Australian Government and which it later admitted it could not validly establish; who was responsible for the scheme and why they considered it necessary or desirable; the use of third party debt collectors in the scheme; the responses to concerns raised about the scheme, the systems implemented to address those concerns and what was known by persons in seniority as the basis for those responses; and the intended and actual outcomes of the scheme.
Can I turn now to what is known about the Robodebt Scheme. The Commission has already started its work and I will provide a brief overview of some of the relevant events which ultimately concluded with the admission made by the Australian Government to which I referred earlier.
The existence of Centrelink and its role is common knowledge amongst members of the public. It is the service delivery agency for a majority of Australia's social welfare payments.
In 1991 it gained the ability to crossmatch its data with data from the Australian Taxation Office. Crossmatching data enabled Centrelink to compare income declared to the ATO with income declared to Centrelink by persons who claim social welfare payments. The ATO continued to provide data to Centrelink since that time under various processes. For the purpose of this inquiry, the ATO disclosed income information to Centrelink which reflected the income information provided to the ATO by employers in the form of a PAYG summary. That summary often covered the whole of the financial year but in some cases the information related to a shorter period of time within the financial year. In contrast to the information provided to the ATO by an employer, Centrelink required information which usually related to a person's actual fortnightly income when it decided whether a person was entitled to social security payments.
Prior to the implementation of the Robodebt Scheme Centrelink's calculation of overpayments or debts by analysing the ATO data and the Centrelink records involved direct human oversight by compliance officers according to the processes established within Centrelink. That process included the requirement that “evidence was required to support the claim that a legally recoverable debt exists”.
Debts which were established according to Centrelink's processes were able to be recovered in a variety of ways, including withholding social security payments or a portion of those repayments, the garnishee of annual tax returns and orders made on successful criminal prosecution for debts which amounted to a fraud against the Commonwealth. Often the overpayment of social security resulting in a debt did not involve dishonesty, although the allegation of a debt can attract the stigma of fraud. The complexity of Australia's social welfare system was the subject of at least one report publicly released in February 2015. That report directly addressed the many types of social welfare payments, the related complexity of the claims and administration processes in respect of each payment.
On 1 July 2011 Centrelink was absorbed into the Department of Human Services. The Department of Human Services was responsible for the administration of the social welfare system through Centrelink. The Department was renamed Services Australia in May 2019, but its function of administering the social welfare system through Centrelink remained unchanged.
Going back to 2011, a Government initiative announced improvements to the debt recovery process which included the automation of crossmatched data between Centrelink and the ATO on a daily basis. That automation was expected to increase the ability of the Government to identify and then recover debts. The Commission understands that the identification of a debt continued to be subject to Centrelink's processes which involved compliance officers using Centrelink's statutory powers to obtain evidence from employers and other sources to sufficiently and therefore validly raise a debt. The decision to raise a debt turned on the assessment by a compliance officer after undertaking that investigation.
From 2011 the data matching program identified approximately 300,000 discrepancies annually between the ATO data and the Centrelink data, and of those approximately 20,000 were the subject of assessment and decisions by a compliance officer.
In 2013 the Department of Social Services was created. It replaced the majority of the functions of the Department of Families, Housing, Community Services and Indigenous Affairs.
The Department of Social Services worked closely with the Department of Human Services. Broadly speaking, the Department of Social Services was responsible for the development of social policy advice for the Australian Government, which was administered by the Department of Human Services through Centrelink.
On 12 February 2015, according to the report of the Commonwealth Ombudsman into the Robodebt Scheme dated April 2017, the Department of Human Services sent an executive minute to the Minister For Social Services which was copied to the Minister for Human Services. That Executive Minute proposed a new online approach to compliance with the social security system which would allow the Department of Human Services to review all discrepancies going back in time to the 2010-2011 financial year. The new online approach to compliance was soon described as the Online Compliance Intervention Scheme. It was the first form of the Robodebt Scheme. That Executive Minute must have been produced after some planning, but it has not yet been made public by the Australian Government. According to the Ombudsman's report, the intended main efficiencies of the Robodebt Scheme reflected in the executive minute by identifying discrepancies between the ATO data and the Centrelink data were as follows: The capacity to undertake hundreds of thousands of compliance interventions automatically generating letters to customers notifying them of the discrepancy in reported income; relieving Centrelink of its responsibility from obtaining information from employers and third parties pursuant to its statutory powers before raising a debt; transferring the responsibility of proving a debt from Centrelink to a customer who then had the responsibility of disproving a debt; and moving much of the debt management process to an online process in which customers had to enter information directly into the online system.
The scheme was foreshadowed in a press release in May 2015 by the then Minister for the Department of Social Services in conjunction with a budget release of the 2015-2016 Budget Measures by the then Treasurer. The scheme was projected to create savings of $1.7 billion over five years.
A small two-stage pilot program was carried out in 2015, and the scheme commenced on 1 July 2016. It was fully implemented two months later, on 1 September 2016.
There were a number of flaws in the system which, if not actually known at the commencement, were publicly identified soon after the implementation of the scheme. The flaws, including the fundamental flaw which was admitted by the Australian Government in the Federal Court, were specifically drawn to the attention of the then Minister for Human Services by the Australian Council of Social Service, ACOSS, in their letter of 21 December 2016. That letter identified consistent reports of debt creation by averaging annual income over 26 fortnights contrary to the actual fortnightly entitlement test with the consequence of “a false notice of overpayment”. In a follow-up letter to the Minister on 19 January 2017, ACOSS called for an immediate end to the automated debt recovery system and reiterated its deeply held concerns that the scheme involved the following: The reversal of the onus of proof onto people receiving payments; a failure to properly investigate the accuracy of automated data matching; a lack of human involvement in the detection of and calculation of overpayments; the requirement for people to gather evidence from up to six years earlier; an automated debt recovery and deduction of amounts from people's income support without human intervention; and practical difficulties for recipients speaking with a Centrelink staff member.
The Robodebt Scheme continued from that point in time for almost three years until November 2019. On 28 February 2017, the financial assumptions underlying the objectives of the Robodebt Scheme were questioned in a report produced by the Auditor-General. Questions too were raised about the budget assumptions on which the financial objectives of the scheme were based.
Those questions are relevant to the scope of the topic of the intended and actual outcomes of the scheme in a financial sense, and also to the questions of the process in which the scheme was developed.
The Administrative Appeals Tribunal, the AAT, is the tribunal which decides appeals against Robodebt decisions amongst others. On 8 March 2017, a Member of the Tribunal decided an application to review an automatically generated debt under the Robodebt Scheme. The debt was set aside by the tribunal member on the basis that there was no evidence of a debt. The Decision was remitted to Centrelink to decide afresh according to further directions. Those directions were two-fold: No debt or debt component is able to be found on extrapolations from ATO records; and the earnings component of recalculated debts as may be raised must be based on and confined to any fortnightly salary records obtainable in the exercise of Centrelink's statutory powers.
In short, the legal framework for the AAT's decision on the merits of the debt was that the online compliance process involving income averaging did not provide evidence of a debt. That finding ought to have been of significance to the departments of social services and human services because of its pre-Robodebt policy which required evidence “to support the claim that a legally recoverable debt exists”.
More AAT decisions followed to the same effect. The Commission expects to receive evidence that more than twenty such decisions of the AAT were delivered up to 30 May 2017 in which it was found that income averaging based on ATO data did not validly establish a social security debt.
The Department of Human Services made changes to some aspects of the online compliance system to overcome other inadequacies in the transparency and usability of the online system, however, the fundamental flaw remained.
In the face of public questions about the process, Ministers and those in senior roles in the Australian Public Service asserted that the system worked well.
On 2 March 2018, the Robodebt Scheme alleged a debt against Deanna Amato who then applied for declarations in the Federal Court, including that the debt was not lawfully raised.
On 27 November 2019 orders were made with the consent of the Australian Government to the effect that the demand for payment of the alleged debt was not validly made to Ms Amato because the information relied upon was not capable of proving a debt. That is the declaration referred to in the Letters Patent. On 18 November 2019, that is less than two weeks before the Government consented to the order in Ms Amato's case, Services Australia - formally the Department of Human Services - announced that it would not raise debts in sole reliance of apportioned ATO data, that is averaged income.
On 20 November 2019, the class action was commenced in the Federal Court.
It was a further six months before Services Australia announced it would repay approximately $721 million in debts raised by the Robodebt Scheme against approximately 381,000 Australians and it was in July 2020 when it announced that it would withdraw all debts raised of approximately $398 million based on income averaging from Australian Taxation Office data.
The settlement of the class action involved the remaining claims for interest and costs which amounted to a further $112 million to be paid by the Australian Government. The reasons of the Court referred to evidence which showed that the Commonwealth Government asserted debts totalling at least $1.7 billion against 453,000 Australians during the life of the Robodebt Scheme.
That brief overview provides a sufficient factual context for the specific questions which are set out in the Letters Patent. That said, we are aware of the temptation to prejudge matters based on previous reports and inquiries and we will avoid doing so. Counsel assisting will consider the subjects of this inquiry with fresh eyes to assist the Commission to determine these matters according to your position of independence.
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