[updated September 2019]

The St Vincent de Paul Society does not support the cashless debit card.

There is no evidence that it improves the wellbeing of individuals or communities, either by reducing substance abuse or by increasing employment outcomes. The cashless debit card carries a high risk of unintended and expensive consequences for government and the community, including social exclusion and stigmatisation, increased financial hardship, the erosion of individual autonomy and dignity and an increase in the overall cost of social security provision.

See also: A pdf version of this briefing

Our Submission to the Senate Inquiry into the Cashless Debit Card Bill 2018

What is the cashless debit card?

The cashless debit card (also known as the ‘cashless welfare card’) compels income support recipients to have 80 per cent of their payments quarantined to a debit card that cannot be used for gambling or to purchase alcohol or withdraw cash. The remaining 20 per cent of a person’s payment is placed into their normal bank account. 100 per cent of lump sum payments from Centrelink (such as Family Tax Benefit) are also transferred to the debit card.

According to the Department of Social Services,[1] the card will be selectively applied in locations where “high levels of welfare dependence exist alongside high levels of harm related to drug and alcohol abuse”. It will “test whether reducing the amount of cash available in a community will reduce the overall harm caused by welfare fuelled alcohol, gambling and drug misuse.”[2]

Who does the cashless debit card apply to?

A trial of the card began in in Ceduna (SA) in March 2016 and the East Kimberley (WA) in April 2016. The 2017 Federal Budget extended the trial and announced plans to expand it to two sites. Proposed legislation[3] was introduced which would have enabled the card to be extended to an unlimited number of locations for an indefinite period. However, opposition from the Senate forced the Government to scale back its planned expansion of the debit card.

The card was rolled out in Goldfields (WA) in March 2018 and in the Bundaberg and Hervey Bay regions (Qld) in January 2019.

In Ceduna, East Kimberley and Goldfields regions, the card was mandatory for all people who receive a working age welfare payment, with the exception of Age Pension and Veterans’ Pension recipients. In Bundaberg and the Hervey Bay region, the card was mandatory for people aged 35 and under who received Newstart, Youth Allowance (Job seeker), Parenting Payment (Partnered) and Parenting Payment (Single). In all instances, the card was imposed on income support recipients regardless of their financial competence and drinking or drug habits.

Around 15,000 people are now on the cashless debit card and, in the 2019-20 Federal Budget, the Government[4] announced plans to further extend and expand the trial to 30 June 2021. This includes the transition of approximately 22,500 Income Management participants in the Northern Territory and Cape York to the card from April 2020.

A comprehensive evaluation[5] of mandatory income management has shown no widespread or sustained benefits at the individual, family or community levels. However, a review[6] of multiple evaluations has found that the most effective income management schemes are voluntary, target people with high need and provide a suite of support services. People in Ceduna, the East Kimberley and the Goldfields regions on the Age Pension and Veterans’ Pension can volunteer to be placed on the card but people in the Bundaberg and Hervey Bay regions cannot.

How does the cashless debit card differ from the BasicsCard and other forms of income management?

The cashless debit card is a form of compulsory income management which restricts how a person can spend their income support payment. Since 2007, the Government has implemented a range of different forms of income management.[7] These have varied in terms of whether they are compulsory or voluntary, the portion of payments that are income managed, and who is targeted.

Through the BasicsCard, the amount quarantined ranges from 50 to 90 per cent of a person’s income support payment and not all arrangements are mandatory. The BasicsCard is a debit card that can be used at approximately 15,500 approved outlets, including charities, for approved purchases (which excludes alcohol, tobacco, pornography or gambling products) and cannot be used to withdraw cash. The different types of BasicsCard arrangements include:

voluntary measures – where people volunteer to go onto income management and have 50 per cent of their income support payments managed;

vulnerable measure - where vulnerable youth or at-risk individuals and their families have 50 per cent of their income support payments managed;

child protection measure – where child protection authorities ensure income support payments are spent in the best interest of children and 70 per cent of a person’s income support payments are managed;

supporting People at Risk measure – where the Registrar of the Northern Territory Register of Banned Drinkers refers people to have 70 per cent of their income support payments managed;

long term welfare payment recipients and disengaged youth measures (Northern Territory only) – where people in the Northern Territory who have been out of work or study for some time, go onto these measures and have 50 per cent of their income support payments managed; and

Cape York Welfare Reform and Doomadgee – where the Queensland Family Responsibilities Commission refers a person to the Cape York Measure of Income Management to promote socially responsible behavior and ensure welfare payments are being spent in the best interests of the individual and their children. People on this measure can have 60, 75 or 90 per cent of their income support payments managed.

The cashless debit card differs from the BasicsCard[8] in that it is mandatory and the amount quarantined is set at 80 per cent. It is meant to be useable at all retailers (except those that primarily sell alcohol or gambling products), rather than just government-approved stores. The cashless debit card can be used:

in most stores that accept EFTPOS for products and services other than cash, alcohol or gambling;

to shop at approved online stores;

to pay bills and make recurring payments (such as mortgages); and

for online banking – with an app for both Android and Apple devices.

It cannot be used to:

buy alcohol;

gamble;

buy some gift cards; and

withdraw cash.

The cashless debit card can be used at outlets that sell a mix of excluded and non‑excluded goods if the business has entered into a Mixed Merchant Agreement with Indue (the card provider). Second-hand goods can only be purchased using cash, which is limited to 20 per cent of a person’s payment.

Significant issues were reported in the Goldfields regions,[9] as most income recipients do not have an email account, or access to a phone or internet, which were essential for activating their cards and for other processes. There are continuing concerns about being unable to use the card in some locations including schools, shops, roadhouses and mixed businesses (e.g. motels which also sold alcohol).

Does cashless welfare work?

Existing evidence shows that compulsory income management:

does not result in widespread or sustained benefits – either to the individual or to their community;

leads to no discernible improvements in employment outcomes;

is poorly targeted;

is not cost-effective;

can result in strong negative experiences (e.g. social stigmatisation and exclusion, financial hardship, increased stress, financial harassment, discrimination); and

can damage financial management skills.

The most comprehensive evaluation[10] of income management could not find "any substantive evidence of the program having significant changes relative to its key policy objectives, including changing people's behaviours". This evaluation found no evidence of changes in spending patterns; no evidence of improved financial wellbeing; no evidence of improvement in community wellbeing, including for children; and evidence of the kind of learned helplessness that flows from making people dependent on the decisions of others. The review found that, "rather than building capacity and independence, for many the program has acted to make people more dependent on welfare".

A 2016 review of income management programs,[11] undertaken by the University of NSW, found that compulsory forms of income management have not resulted in medium or long-term behavioural change at the individual or community level. Instead, income management, and particularly compulsory forms of income management, often lead to unintended negative consequences and behaviours.

A review of the multiple evaluations of income management,[12] undertaken by the Centre for Aboriginal Economic Policy Research in 2016, also found no conclusive evidence of benefit. It noted consistent evidence that “compulsory income management can diminish financial management skills and increase dependency on the welfare system”.

Does the evaluation of the cashless debit card trial justify its expansion?

The most recent evaluation of the cashless debit card does not provide sufficient evidence to justify an expansion of the trial. Despite this, the Government has relied heavily on the evaluation, cherry‑picking findings to justify the card’s continuation and expansion.

The Australian National Audit Office 2018 audit[13] of the trial also found “the approach to monitoring and evaluation was inadequate…making it difficult to conclude whether there had been a reduction in social harm and whether the card was a lower cost welfare quarantining approach.”

The 2017 ORIMA[14] Evaluation Report provides conflicting and inconclusive findings, and has been widely criticised[15] for its reliance on piecemeal and skewed data,[16] anecdotal evidence, and questionable research methods.[17] In two separate reviews,[18] Deputy Director of the ANU Centre for Aboriginal Economic Policy Research, Janet Hunt, identifies “serious flaws” with the evaluation, noting problems with the survey design, lack of baseline data, invalid assumptions, and interpretive flaws. The Report ignores critical data,[19] including a sharp rise in assault incidence reports in the East Kimberley. It also does not separate the outcomes of the cashless card from the effects of other programs operating in the trial sites, such as the Takeaway Alcohol Management System in the East Kimberley.

The Government has also ignored the negative outcomes of the trial. The 2017 ORIMA[20] Evaluation Report indicates that a third of card users said the card “had made their lives worse”, a majority reported that violence in their communities had either remained unchanged or increased. Nearly half said they had run out of money to buy essential non-food items for children, with nearly a quarter (24%) saying the card had made their children’s lives worse.

There is also evidence that, for some, the card has increased financial hardship, social exclusion and stigma, while at the same time eroded self-reliance and autonomy.

While the rollout of the card in the Goldfields region[21] has gone smoothly due to community consultation and the establishment of shopfronts, some income recipients expressed concern about the stigma associated with the card that they feel and provided examples of direct discrimination. Concerns have also been expressed about the small proportion of cash available which cuts people off from the cash economy and more cost-effective means of purchasing items, such as second-hand markets and garage sales.

The appropriateness of the targeting of the cashless debit card[22] has also been questioned, as there are certain groups of people for whom the card was not considered to be working well for. In the Goldfields region, the card appeared to be working well for those with drug and alcohol dependency, those with previous experience of income management, those who are technologically literate and those who are already good at managing their money. However, the card was not working well for people with disability and their carers, people with mental health issues and older aged pension recipients (who were not on the cashless debit card) who were experiencing greater levels of financial abuse.

Claims the cashless debit card combats drug and alcohol addiction

Neither the evaluation of the cashless debit card nor the wider evidence base[23] delivers any evidence that curbing income support recipients’ access to cash reduces drug and alcohol addiction.

Most people who receive income support do not have a problem with illicit drug use or alcohol dependency. Most have never used hard drugs. For example, a larger percentage of unemployed people have never used any illicit drug compared to employed people (57.1% compared to 48.8%) (AIHW, National Drug Household Survey, Ch.8 Specific Population Groups, Table 8.5, Drug use by employment status )[24]

The 2017 ORIMA Evaluation found that 34% of people did not drink, gamble or take drugs prior to the trial, and 43% reported no change to their consumption of alcohol, drugs or gambling.

For those with serious drug and alcohol addictions, cutting off access to cash may result in ‘circumvention’ behaviours,[25] with addicts seeking out other means to access alcohol and drugs, often with detrimental consequences for those around them. In both the trial of the cashless card and other forms of income management, there is evidence that people with serious addictions have resorted to range of circumvention behaviours including offering non-participants the use of their card in exchange for cash, alcohol or drugs to a lesser value; on-selling of purchased items for cash; informal work; stealing; and ‘humbugging’ and financial harassment of relatives and other community members.

Is there any way to move off the cashless debit card?

Once on the cashless debit card, there are few options for exiting it.

The Government[26] has just broadened the exit criteria to take into account a person’s ability to manage their affairs generally, including their financial affairs. Applicants have to “demonstrate reasonable and responsible management of their affairs generally, including financial affairs.”

No criteria or forms are provided on the Department of Social Services’ website and no time frame for assessment is specified. Applications will be considered on a “case-by-case basis and take into account criteria such as the interest of children, if the applicant has been convicted of an offence or served a sentence of imprisonment at any time in the last 12 months, risk of homelessness, and health and safety of the individual and community.” Further evidence may be required with examples including rental agreements or bank statements.

The Secretary of the Department of Social Services is the decision-maker and no process is outlined for review of decisions made.

A better approach would be to make the card voluntary, not mandatory, and to assess an individual’s needs and potential to benefit from the card, before they are placed on it.

How much does administering the cashless debit card cost?

Implementing the cashless debit card is extremely costly.

As at June 2018, the total cost of the trial in Ceduna, East Kimberley and the Goldfields regions was $34.2 million[27] (APH, Question on Notice No. 14, 21 February 2019), with $14.832 million paid to the private company card provider, Indue Ltd, to cover all operational aspects of the card (APH, Question on Notice No.20, 21 February 2019).

Expanding the card to more communities will increase the overall cost of social security provision, without clear evidence that it is providing benefits for the individuals and communities affected.

The ANAO’s 2018 audit[28] found that aspects of the procurement process to engage the card provider and evaluator “were not robust… operational aspects of the trial such as efficiency, including costs, were not fully monitored ..and the trial was not designed to test the scalability of the cashless debit card.” Regardless of these findings, the Government has continued to push through extensions and expansions of the trial.

The expansion of the trial to the Northern Territory and Cape York is estimated to cost $129 million.[29]

Why is the Government expanding the cashless debit card?

The Government[30] is expanding the cashless debit card because it believes that the card will prevent the use of income support to purchase drugs and alcohol and that people will be more determined to get a job, get off welfare and become self-sufficient.

To support this policy agenda the Government has adopted punitive measures that infringe on the human rights of privacy and social security and remove people’s agency to manage their own affairs (Report 6, 2018).[31] Other punitive measures include proposed drug-testing of income support recipients, longer payment waiting periods, keeping allowances low, and increased activity requirements and non-compliance penalties for unemployed people. This approach pushes people further into poverty, making it more difficult for them to get a job and become self-sufficient. It also deflects attention away from the underlying causes of poverty and disadvantage.

Most people below the poverty line[32] rely on social security as their main source of income and being on income support is not transitionary for many people. The average length of time on Newstart[33] is 156 weeks and almost half of these recipients have been on the allowance for two to ten years.

Income inequality in Australia is higher now than it was in the 1980s. Rising inequality reduces social mobility by making it harder for disadvantaged Australian children to avoid becoming disadvantaged adults. More low-income households are experiencing housing stress. Repeat periods of homelessness are on the rise. One in four unemployed people are long-term unemployed and one in nine families with children are jobless (AIHW Australia’s Welfare 2019).[34]

Rather than introducing measures that penalise people who do not have a job, governments need to work with the community and unemployed people to address inequality and housing stress, which will lead to improved wellbeing and genuine pathways to employment.

How do we support people in need of income support?

The Society recognises there are deep-seated social and economic problems in many communities across Australia. This is especially so where a lack of local job opportunities, inequitable health outcomes, low resilience and morale and the effects of alcohol and drug abuse compound the disadvantage that arises from under or unemployment.

We know from the first-hand experience we have with Australians who experience disadvantage that they need a hand up in a way that supports their human dignity and choice.

A simplistic ‘blanket approach’ means that individual circumstances and communities are not taken into account and there is limited or no capacity to treat different cases and situations differently. The lack of training, health and support services and viable employment opportunities, particularly in regional and remote locations, are the real issue. For example, the majority of income recipients in the Goldfields region[35] have indicated that there were “considerable service gaps and that... in order to be fully effective, the cashless debit card needed to be part of a suite of policies and programs such as enhanced health and community services, improved housing, greater policing and alcohol management.”