How bureaucrats and Morrison misled a government and created a lethal policy

The robodebt scheme involved the use of annual tax data to average a welfare recipient’s income and automatically generate a “debt” the recipient either had to contest online or pay up. It began life in the bowels of the Department of Human Services (DHS) in late 2014 as a “broad-scale cleanup of the PAYG reviews”.

It was an idea departmental executives were keen to put forward as a savings measure in the 2015 budget, particularly after the arrival in December 2014 of new social services minister Scott Morrison, who portrayed himself as a tough welfare cop. The policy could raise up to $1 billion or more, they thought.

Except robodebt was illegal under the Social Security Act — raising of welfare debts had to be based on actual income earned in a fortnight, not on annual income averaging. It was also unfair, because it generated “debts” that didn’t exist or were far too high. And everyone involved, with the possible exception of some junior officials in the DHS, knew it was illegal.

How did some of the most senior officers of the Australian Public Service, which once considered itself one of the best civil services in the world with a strong reputation for competence and integrity, develop a policy they knew was illegal and unfair?

Catherine Holmes’ robodebt royal commission report shows how — and who did it. For anyone who has worked in the public service, or who is interested in public policy, it makes for ugly, yet compelling reading, like watching the crew of the Titanic steam across the Atlantic. It reflects what happens when bureaucratic practices and a rotten departmental culture and leadership meet with a uniquely mendacious politician, in Morrison.

Officials of the Department of Social Services (DSS) — the DHS’ policy counterpart and Morrison’s own department at the time; Marise Payne was the minister for human services — knew the moment robodebt was floated that it was illegal. They got legal advice by December 2014 that it was inconsistent with the Social Security Act and relayed it to the DHS. If the proposal was to proceed, it would require legislation to change the act.

That was a major problem for the department. The Abbott government already had a host of what became “zombie” savings measures in the disastrous 2014 budget stalled by the Senate. It was clear that a bill to amend the Social Security Act to allow for welfare recipients to be pursued on an unfair basis would never get through. Moreover, it was clear that even if there was a chance, it would take far longer than the time required for the measure to form part of the 2015 budget.

So DHS officials pursued what turned out to be an effective end-run of the Senate and the DSS. They told themselves that the DSS’ legal advice — which would be reaffirmed twice between then and the 2015 budget process — was wrong, and got their own legal advice from their own lawyers, though the request was vague and addressed other legal issues, not income averaging. And in January 2015, they began preparing a minute that would make its way through Payne to Morrison about the proposal, in consultation with the DSS.

That meant the DHS had to find a way around or through the DSS. They opted to pretend that the income averaging at the core of the proposal had been removed. The commission found that DHS official Mark Withnell “had changed the wording of the PAYG proposal to remove any reference to ‘smoothing’, ‘averaging’, ‘apportioning’ or the need for legislative change … It seems that, DSS having raised legal and policy issues with income averaging, DHS’ solution was simply to remove reference to income averaging in the brief”.

And Withnell’s boss, DHS deputy secretary Malisa Golightly, called a DSS senior officer, Cath Halbert, and demanded DSS soften its opposition to the proposal and suggest there was “latitude” to make the proposal work, when there was none. DSS duly softened its position, though the final minute that went to Morrison noted that DSS believed legislative change would be required and DSS and DHS would continue to work on policy and legislative change.

But when the late Golightly spoke to her DSS counterpart after Morrison saw the minute, she told her “Mr Morrison had ‘expressed an interest’ in developing the ‘PAYG proposal’ as part of the 2015-16 budget but that it was’difficult to pass legislation through the Senate at the time’ … Ms Golightly said that Mr Morrison ‘wanted to implement the measure in a way that did not require legislative change'”.

The next step was the development of a new policy proposal (NPP) for the 2015 budget process. Crucially, DHS crafted the NPP to suggest robodebt would not be a change to the way overpayments were calculated for welfare recipients — despite its senior officials Withnell, Golightly and secretary Kathryn Campbell knowing perfectly well it was all about income averaging, which was a fundamental change.

The effect was to mislead the expenditure review committee, the cabinet subcommittee tasked with putting together budget proposals. In particular, the NPP was marked as not requiring legislative change. Who was responsible for misleading cabinet into approving the establishment of a scheme that would immiserate tens of thousands of people and lead many to suicide?

Mark Withnell:

Mr Withnell did not misunderstand the true nature of the proposal and was not under some misapprehension that DHS had abandoned the concept of averaging. He knew that the NPP did not describe the averaging component to the proposal, or the legal impediments to it and he knew that it was likely to mislead cabinet by those omissions. He was a party to that process … The commission’s view is that Mr Withnell engaged in deliberate conduct designed to mislead cabinet.

Malisa Golightly:

Ms Golightly was responsible for the development of the NPP, and was a senior public servant. She was heavily involved in clearing the draft NPP, and engaging with Mr Withnell in developing the NPP. The commission concludes that she was aware that, as presented to cabinet, it was misleading.

Kathryn Campbell:

In oral evidence, Ms Campbell accepted that the NPP was apt to mislead cabinet. She contended that her failure to eliminate its misleading effect was an ‘oversight’. That would be an extraordinary oversight for someone of Ms Campbell’s seniority and experience. The weight of the evidence instead leads to the conclusion that Ms Campbell knew of the misleading effect of the NPP but chose to stay silent, knowing that Mr Morrison wanted to pursue the proposal and that the government could not achieve the savings which the NPP promised without income averaging.

And what about Morrison? Was he a hapless victim of bureaucrats? He insisted to the royal commission that he believed at the time income averaging was “foundational” to the way welfare operated and thus didn’t need legislative change — but was unable to produce the slightest piece of evidence to back up his claim. The commission investigated the use of income averaging and the advice provided by bureaucrats about it (it had only been used previously with the agreement of recipients in the past) and concluded there was no way for Morrison to credibly claim he’d been told that. That is, Morrison misled the royal commission.

And Morrison allowed his own colleagues to be misled.

Mr Morrison knew that the use of income averaging was the primary basis of the ‘new approach’ described in the executive minute and that DSS had advised DHS that legislative change was required to implement the DHS proposal in that way. The NPP represented a complete reversal of the legal position without explanation. Mr Morrison was not entitled without further question to rely upon the contradictory content of the NPP on the question of the DSS legal position when he proposed the NPP to the ERC … Mr Morrison allowed cabinet to be misled.

It would not be the last time that Morrison misled his colleagues. His mendacity to voters, the media and his own fellow ministers would become a characteristic of his political career. But unusually, on this occasion, he was enabled by public servants who have profoundly tarnished the reputation of the APS and provided a textbook example of allowing serving the minister to get in the way of basic integrity.