Exclusive: Leaked Burke speech sets stakes for welfare reforms
In a major speech to private welfare operators, Tony Burke has warned there is ‘flexibility’ in contracts signed by the Coalition to establish the current welfare system.
A legal threat from at least one job service provider in the $1.5 billion-a-year privatised welfare system has prompted Minister for Employment Tony Burke to warn the sector that he has “flexibility” within contracts and he intends to use it. This is the clearest indication yet that he will seek to reform outsourced welfare operations, which he has previously said he cannot change.
In an unreported speech to the Workforce Australia National Forum in Brisbane late last month, Burke delivered a “blunt” assessment of Workforce Australia – the largest single Commonwealth contract outside Defence.
“I’ve thought long and hard about this speech, to be honest,” he said. “And I’ve been weighing up whether to just give the standard speech that had been prepared for me. It was a very good speech, but it probably wasn’t as blunt as some of what I have to say.”
Burke made it clear he does not bring “hostility” to the role but said he still needs to be convinced that the system is properly designed.
“I also tell you up front that as we’ve implemented election commitments – one provider sent a menacing letter with all sorts of legal implications as though there was a problem with us implementing our election commitments,” he said.
“That just caused me to go and get a copy of the tender and realise, yeah, there is still a fair bit of flexibility there. I’m bound by the contracts. I don’t break contracts. But I do know that where there’s a level of flexibility on one side, there’s a level of flexibility on both sides, and I want us to do this co-operatively. I don’t want this to descend into anything silly.”
The new Labor government is caught between opposing forces: decades of bipartisan ideological rhetoric that demands jobseekers prove they are working some way and somehow for their benefits, otherwise known as “mutual obligations”, and by now overwhelming evidence that this system punishes the unemployed without improving their chances of finding employment.
Much of Burke’s speech was spent admonishing providers for absurd abuses of process that had been reported in the media.
“We should be supporting people … not making everyone run around like hamsters in a wheel and do things that make them anxious, depressed … and less employable.”
“We must never fall into the argument of saying, ‘Oh, look, yes, sometimes things go wrong but most of the time we got it right’. With public funds we don’t get away with that argument,” he said.
“And while some of you are running charities, many non-profits, many for-profit commercial businesses, it doesn’t matter – in every instance, it still comes back to taxpayers’ money and we don’t get away with the argument ‘We get it right most of the time’.
And that’s been the case for all governments.
“John Howard didn’t get away with being able to say, nor did he try to, that Vivian Alvarez was the only Australian citizen who was deported, in a system where most of it was working. When we were in government we didn’t get away, between 2007 and 2013, with being able to say most of the school halls that were built were true value for money. And in fact, a higher percentage were value for money then on normal … public projects. We didn’t get away with that because there’s a different standard for taxpayers’ money.
“And in the last term of government, the previous government didn’t get away with being able to say most of the companies that got Jobkeeper were in fact eligible.”
After being sworn in as minister for Employment, Burke was provided with an incoming ministerial brief from his department. It confirmed a key criticism of the employment services system: there aren’t enough jobs for more than half of the caseload.
Of the 820,000 people in the Jobactive caseload when Labor came to government, 57 per cent were in the lowest skill category (Certificate 1 or secondary education) but just 14 per cent of advertised jobs were suitable for this cohort.
The numbers were better for higherskilled cohorts but national data obscures local mismatches. For example, a quarter of the then Jobactive caseload (now transitioned to Workforce Australia) had a Vocational Education and Training (VET) qualification while 42 per cent of advertised jobs across the country suited this group. There was no guarantee, however, that the jobs were located near the people trying to find them.
Three-quarters of the entire caseload of unemployed people, according to the figures briefed to Burke when he began the job, are long-termers. In other words, they have been on income support for more than a year.
More than a quarter cannot get enough work to move out of the welfare system. As the brief notes: “The Jobactive caseload is higher than the ABS estimate of unemployment, in part due to some participants working, but not earning enough to exit income support (27.5 per cent of the caseload).”
A Labor MP who requested anonymity in order to speak frankly said the implications of this data, often advocated by anti-poverty activists, are an open secret.
“One thing which is well known but which politicians can’t say openly is that a minority of the current long-term unemployed cohort are basically unemployable because of mental health issues, damage from drug use or they just have broken bodies from a lifetime of hard work,” the MP said. “Society could really be kinder to them.”
Burke reiterated his by-now familiar line that the $7.1 billion worth of Workforce Australia contracts signed by the Coalition just months before the federal election were not ones he would have signed. But he went further in signalling areas of future scrutiny for the sector.
“I, for example, would not have designed a system – and it doesn’t mean it won’t work – but I would not have designed a system where the provider can also be the trainer, can also be the labour-hire company doing the employment,” he said.
“There are big, big risks in that, and it’s going to be up to those who won the tenders to prove me wrong. It’s going to be up to those who won the tenders to show that the potential conflicts that are there in the program design do not result in the misuse of public money and that they do result in working for the caseload that we have. But I tell you up front what I have is not as I would have designed it.”
The Saturday Paper has reported on how the new Workforce Australia contractual arrangements do not crack down on employment service providers shuffling unemployed people between related corporate entities but rather endorse it.
Asuria People Services, for example, won a $116 million contract under the new system. It also owns a subsidiary named Australian Employment and Training Solutions or
AETS. In addition to offering qualifications in cyber security, aged and disability care or early childhood education, AETS is also licensed to provide both the employability skills training and career transition assistance under Workforce Australia, for which bonus payments from government are offered.
It is this system of mutual obligations that is responsible for so much of the taxpayer outlay and the erosion of quality training: it’s all about churn.
“If we strip away the marketing spin and rhetoric, I agree with ACOSS’S
[the Australian Council of Social Service] conclusion, that really there have been two overarching objectives of successive governments over the last 20 years, since the Liberals under John Howard fully privatised Australia’s employment services system,” Labor MP Julian Hill, chair of the new house of representatives select committee on Workforce Australia employment services, said in his speech to the National Employment Services Association CEO Forum in Sydney on Tuesday evening.
“Firstly, to drive down, at pretty much any cost, the number of people claiming welfare benefits at any and every point in time. Every dollar saved at a single point in time has been claimed as success. It matters not if someone is made less employable because of what we do to them, condemned to poverty or consigned for life to insecure work.
“Secondly, to constantly drive down the cost of running the employment services system. To the point we now invest less than half the OECD average, which is also seen as success – regardless of quality or impact.”
Hill was asked to chair the inquiry by Tony Burke who claims, as minister, to be looking for any opportunity to make changes to the system now, within the contracts, rather than just waiting for the contracts to expire in four years.
“I’m not ignorant of the power of these stereotypes in the community and the political danger in challenging these truisms,” Hill said. “I chat to people in my community and this comes up regularly at street stalls, morning teas and all over the traps. But when you engage honestly, Australians are fairminded and reasonable,” Hill said, referring to the image of the “dole bludger” fashioned over preceding decades.
“The response I give is that ‘Yeah, no doubt some people take the piss, and mutual obligation done properly is important. But most people want to work, and we need to be careful not to torture the 95 per cent to find the 5 per cent who are doing the wrong thing’.”
Hill said employment service providers often operated as a private security arm of Centrelink and while they were involved in enforcement, the rules were written by government.
Between January and June last year, for example, job seekers had their payments suspended temporarily almost 1.3 million times. A further 745,000 instances of payment suspensions would have happened were it not for the unemployed being able to convince a private provider they had a “reasonable” excuse for failing to meet mutual obligations.
Frequently – and only in reports that have emerged in the media because official complaint channels have failed – these suspensions have been revealed as provider error or as the cause of a chain reaction of other financial and social injuries.
“Some people aren’t capable of work at a given point in time for legitimate reasons, and we should be supporting people, training them and requiring them to do things that will help them get work and good secure jobs,” Hill said. “Not making everyone run around like hamsters in a wheel and do things that make them anxious, depressed, stigmatised, ashamed and less employable.”
By Hill’s own admission, the system does not result in proper work. Casual jobs count for so-called “outcome” or bonus payments, and as such officials are less interested in longevity. The system measures outcomes only up to six months. Beyond that, nobody knows what happens to those who “successfully” exited the caseload.
Despite these obvious deficiencies, Labor will not end mutual obligations. Burke and Hill want the government to tinker with them and are laying the groundwork to do so via the house of representatives inquiry.
“One of the things I’m really interested in finding a way through is how can we better value secure work,” Burke told providers in Brisbane.
“Now, I know all the different forms of employment, and casual will always be the easiest to be able to place people. Always. But there is a world of difference after six months if someone has a part-time or full-time compared to whether they have a casual job.
“And at the moment we have a system that views them identically. I am really interested in what we can do to help prioritise and properly incentivise people finding their way into secure jobs.”
Legal threats or otherwise, even a mild intervention by Burke will meet some resistance from the multibillion-dollar job provider network: they’re worried about job security, too.
The Saturday Paper approached Burke for comment but did not hear back.