The Government knew Centrelink’s debt recovery program would incorrectly tell clients they owed money if human oversight was reduced, but continued to do so in a bid to cut costs.
Cost-benefit analysis of the Centrelink program — which compares employment data from the Australian Tax Office and Centrelink — found more than 860,000 clients were wrongly told they had debts between 2010 and 2013.
The debt recovery program had human oversight during these years but more than 1 million discrepancies were found, with an average debt value of $1,400 per person.
In response to questions from Labor during Senate Estimates in 2015, the Department of Human Services admitted some welfare recipients had identified more than one discrepancy in their accounts.
“Analysis identified that in 85 per cent of instances the discrepancy would result in a debt, and the likely average debt value is approximately $1,440,” the response said.
In mid-2016, the Government introduced changes to reduce the amount of human oversight and automate the compliance program, after a pilot program confirmed savings could be made.
“Using the newly-developed streamlined intervention approach, the savings now far outweigh the cost of undertaking the activity and far outweigh the cost of the overall measure,” the response said.
Tudge insists ‘the system is working’
Human Services Minister Alan Tudge said on Wednesday the program would be continue, and rejected claims it was flawed.
“The system is working and we will continue with that system,” he said.
“I’m not aware of individuals who are completely convinced that they don’t owe money but have been given a debt notice.”
The Commonwealth Ombudsman launched an independent investigation into the system and Labor has called on the National Audit Office to investigate.
Coalition ministers and the Department of Human Services have insisted automated letters are not “debt letters”, and that welfare recipients have ample opportunity to update their records.
But Centrelink clients have told the ABC private debt collectors were contacting them about thousands of outstanding dollars, despite still contesting the debt.
In some cases, welfare recipients were being told to provide Centrelink with pay slips dating back to 2012.
Mr Tudge rejected reports clients trying to update their details had struggled to contact Centrelink on the phone, instead asking people to be patient if they were required to wait “longer than what they would like to wait”.
A ‘blunt instrument’ being used to save money
Australian Council of Social Services chief executive Peter Davidson called on the Government to suspend the automated program until it could be independently reviewed.
“The Government has a duty of care towards people who call on it for support, especially those on low incomes,” he said.
“It has breached that duty of care with this debt recovery program, which is why the program must cease in its current form to prevent further harm.
“We are hugely concerned that people are paying back debts that they do not owe because it is too hard to prove that they do not owe it.”
St Vincent De Paul has also called for the program to be suspended, claiming it was a “blunt instrument” being used to save money.