The NDIS will cost us more than we’re being told
It’s official, the National Disability Insurance Scheme (NDIS) will cost taxpayers around $22 billion a year (gross) in its first full year of operation, a marked increase on the $15 billion figure that is being widely used in the public debate.
The NDIS will provide lifetime care and support to Australians born with a permanent and severe disability or who have acquired one.
The current system of support (which costs around $7 billion a year, not including the disability support pension) has been characterised by the Productivity Commission as “underfunded, unfair, fragmented, and inefficient, and gives people with a disability little choice and no certainty of access to appropriate supports.”
It is clear that there is a need for changing the way we support people with disability, but unfortunately, the public has been misled about the overall cost of the scheme.
The widely used figure of $15 billion is the commission’s estimate of the gross cost of the NDIS. However, this figure was based on 2009-10 prices, costs and population. The commission took a “snapshot” approach to estimating the cost of the NDIS – and the result was a $15 billion a year NDIS, in 2009-10.
The problem is that the NDIS will not be fully operational at least until 2018-19, meaning that the commission’s $15 billion estimate did not take into account nine years of wage growth, price inflation, and population growth to 2018-19.
The revised figure of $22 billion comes from a report by the Australian Government Actuary (AGA) released under a Freedom of Information request by The Centre for Independent Studies.
This means that the $15 billion figure being used by politicians and commentators in the public debate massively understates the cost of the NDIS when it would be fully operational.
That is why the AGA’s review of the costings of the NDIS is so important. It fills the nine-year gap left by the commission and estimates that the NDIS would cost $22 billion (gross) and $10.5 billion (net) in its first full year of operation in 2018-19.
Given the poor track record of governments in implementing significant projects on time and on budget, the Gillard government would be well advised to pay careful attention to the risks that could generate a cost blowout in the NDIS.
It will need to make some tough decisions about which people with disability will get support, and the nature of that support.
A combination of high public expectations, workforce supply issues, inadequate funding, a lack of cost control mechanisms, poor assessment processes, flaky governance arrangements, and bureaucratic inefficiency could all see the estimated $22 billion yearly cost blowout by billions more.
Unfortunately, political cowardice has already crept into the NDIS debate. State premiers baulked at helping to pay their fair share of the NDIS at COAG in July and called for another new tax like the Medicare levy to pay for it.
We now know that the NDIS will cost around $22 billion in its first year, but this does not make the case for a new tax stronger because as the cost of the NDIS grows, the tax base supporting the NDIS will grow with it. What it does do is make the need for cuts to existing expenditure more apparent.
The worthiness of the NDIS puts all government expenditure into perspective. Given the copious amounts of middle-class welfare and the prospect of Tony Abbott’s overly generous paid parental leave scheme – the NDIS presents an opportunity to re-evaluate current and future government expenditure in a moral light: Do they pass an “NDIS test”?
Every government-funded grant, subsidy, project, program or junket should be judged against the need of a person with disability who needs a wheelchair, someone who needs help to get out of bed and to have a shower, a person who needs a guide dog, or a child who needs speech therapy – the sorts of supports the NDIS will fund.
It is welcome to see the Prime Minister say that there are going to be increased savings to help cover the cost of the NDIS. The question now is: Where are the savings going to come from?
An “NDIS test” will help make these decisions easier. In comparison to the NDIS, many other government programs are not worthy of the same level of support. More cuts from existing and future government programs that fail an “NDIS test” are needed to help cover the cost of what will be a leviathan-sized entitlement scheme.
Andrew Baker is a Policy Analyst at The Centre for Independent Studies. He is author of the upcoming publication The New Leviathan: A National Disability Insurance Scheme.
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