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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