The Federal Government has settled the class action lawsuit brought against it over the Robodebt extortion scheme, agreeing pay $1.2 billion to victims of the unlawful automated debt recovery programme.
The class action has been underway for some time, but gained momentum last year after a successful lawsuit brought in the Federal Court by Victoria Legal Aid. The court in that case found that raising debts which relied solely on income averaging was against the law.
As a result, the Federal Government discontinued the programme, which it had been using since 2015. And earlier this year, Centrelink was tasked with contacting thousands of Australians who had been adversely affected and were entitled to partake in the class action.
The Federal Government’s settlement terms
In May 2020, the Government agreed to pay back $721 million to more than 370,000 people who were wrongly pursued.
The current settlement of $1.2 billion includes that amount, plus $112 million in compensation and discontinuing its pursuit of $398 million in debts that were illegally raised.
It’s clear now that Robodebt was a complete and utter disaster for the Government. While victims have today received a glimmer of justice, and many will be relieved to have debts waived or to receive compensation, the fact remains that many thousand financially vulnerable Australians were put under enormous stress, some pushed to suicide, believing there was no way out of the crippling situation.
Robodebt – which is officially title Online Compliance Intervention – was introduced by the Turnbull Government.
It used algorithms for ‘debt-averaging’ – which is calculating a person’s average fortnightly income based on their annual tax return figure.
The problem with such a scheme is that it fails to make allowances for those who work part-time or on a casual basis, as well as people who have seasonal jobs, or those who claim social security payments for part of the tax year only. Instead, the system made assumptions regarding income, rather than taking into account pay slips and other real evidence.
This resulted in hundreds of thousands of people being wrongfully issued with debt notices. The victims were then vigorously pursued to settle the debt, which continued to accrue interest while it remained unpaid.
Many complained of receiving notices with inflated debt figures based on incorrect calculations or misinformation within the system. Others, receiving payments such as Youth Allowance and Newstart, were required to verify their income dating back as far as 2010; a nearly impossible task for many.
In some cases, Centrelink threatened to deduct money from current salary until the money had been repaid in full.
And for those fighting the system, their angst was compounded by legislation introduced in 2016 to stop anyone owing Centrelink money from travelling overseas.
The class action was due to start in Court today, but the Federal Government has put forward a settlement deal which must now be approved by the Court. A scheme will then be established for people to access the compensation owed to them. These will be paid next year.
Lack of ministerial accountability
In today’s announcement, Scott Morrison dismissed suggestions that Government Services Minister Stuart Robert should lose his job.
This, once again, raises the issue of whether there is any real accountability in government. However, the Labor party, who backed the class action, is adamant that the Robodebt failures will not simply fade away once the legal process is complete.
Labor is demanding a Royal Commission into the scheme, saying there are still many questions that need to be answered. It points to the fact that the Government became aware that there was no lawful basis in income averaging long before it sought to cease the practise.
Social security law expert Matthew Butt raised serious questions about the legality of income averaging in early 2017, in particular highlighting the directions for the limitations on its use under legislation and within the Department of Human Services’ own guidelines.
In 2018, Terry Carney, AO, an Emeritus Professor of Law at the University of Sydney found that there was no legal basis for the debts raised.
Scott Morrison was an original champion of the system. As Treasurer in 2016, and Social Services Minister before then, Mr Morrison joined a long line of ministers, including Christian Porter, Alan Tudge and Stuart Robert, who championed automated welfare debt recovery as a way to save the Government time and money.
Now, of course, any money ‘saved’ by the unlawful system will be offset by what it has actually cost.
Unfortunately, those financials will never be able to account for the human cost – the unnecessary pressure, anxiety, and emotional toll, the sense of mistrust generated by system introduced by a government elected to act in the people’s best interest, and of course, the lives lost, which the government has still failed to acknowledge in any way.