Scott Morrison referred to the Robodebt Royal Commission as a ‘lynching’. I call it a missed opportunity. Specifically, to consider the problem of welfare compliance from the taxpayers’ perspective and determine how to fix the gaping hole in the system that now exists following the federal court decision which said certain features were unlawful.

The royal commission reviewed a million documents and wrote a one-thousand page report and yet there was no discussion as to how to create greater integrity in a welfare system which comprises a third of the federal budget and is allocated entirely on self-reports of income and assets.

The omission is all the greater because this was the single objective of the expanded welfare compliance system (which Labor coined ‘Robodebt’) when the Cabinet agreed to it in 2015.

This is no criticism of the royal commission. It was operating within its terms of reference. It was Labor’s omission.

Consider the broader structure of the welfare system and how it operates. It was, and remains, the single largest part of the budget allocating over $150 billion in payments to five million people each fortnight.

In 2015, the bureaucracy estimated that 3.6 per cent of all payments were overpayments, largely from people inadvertently under-reporting their earned income. That’s billions of dollars. They estimated there were 860,000 people who owed money who were never checked.

This was the context that the 2015 Cabinet decided to expand considerably the number of welfare audits. I was not a member of that Cabinet.

A welfare audit was similar to a tax audit.  The audited recipient was asked to provide evidence of their actual earned income as a check against what they self-reported at the time.

If they provided the evidence, then that information was used to determine their entitlement and a debt was raised if necessary. If they failed to provide any evidence, then their Australian Tax Office data was used as the surrogate of their income earned each fortnight. The person’s annual income figure, held by the ATO, would be divided by twenty six fortnights; a process known as ‘income averaging’ that the Federal Court in 2019 found to be unlawful. (Not that any Minister – Coalition or Labor – knew this in the forty years that income-averaging was used, although some bureaucrats did as the royal commission uncovered).

There were serious flaws in the first few months of the expanded scheme. Some people didn’t get their audit notifications, while others found it impossible to acquire their old payslips or to navigate a clunky new online system. Debts were then raised under an unfair system, which caused distress. The royal commission was right to point this out and made sensible recommendations for the future.

No minister was aware of these initial flaws. It was one of over a hundred large projects being implemented by the Human Services Department and briefings from the bureaucracy were that the system was working well.

In early 2017, in the Turnbull government, I was Human Services Minister. After stakeholders and media reports raised concerns, I paused the raising of debts, removed the requirement for anyone to go online, and allowed individuals to use their bank statements as evidence of their income. (Banks are required to keep statements for six years and are nearly always provided freely). I instructed that every person who had a debt raised in the previous months be contacted and offered to have their debts reviewed by a Centrelink officer.

After these changes were put in place, the ‘Robodebt’ scheme resumed and continued for another two years with little noise or concern from Labor or the welfare lobby. Labor, under Bill Shorten, even went to the 2019 election promising to continue the scheme. Just as they had matched our promise to expand the scheme at the 2016 election.

The key issue today is what happens when a recipient doesn’t respond to a request for evidence of their actual earned income when they are audited. The answer is nothing. The ATO data cannot be used. The audit simply stops.

Imagine being selected for a tax audit, but if you don’t respond, the audit goes away.

The royal commission provided no solution to this problem.

It considered every one of the five million receiving benefits too vulnerable to get their bank statements when asked. And remember, these recipients were all income earners also.

Eventually, the Single Touch Payroll system will solve this problem as fortnightly income will be provided by employers to government in real time. But it will be several years before it is comprehensive.

In the meantime, over $150 billion will be allocated based on an honesty system with no enforceable checks.

For $200 million – the cost of the Royal Commission – it should have been addressed.

It was not. However, don’t expect the Albanese government to take this up (despite its now stated war on NDIS overpayments). Its objective was to use the royal commission to lynch the Coalition, as Morrison suggested.

It fulfilled this objective, yet has failed the taxpayer who wants a generous welfare system, but one where reasonable checks are in place.