Coalition-era Commonwealth bureaucrats felt pressured to find new ways to rein in potential welfare fraud and non-compliance, the Robodebt royal commission has heard.
For the first time, the commission, before Catherine Holmes SC, is hearing from the Department of Human Services which initially proposed the tax data matching scheme that became known as Robodebt as a means of debt recovery for the government.
The agency's former national manager of compliance risk, Scott Britton, told the commission the department was "overwhelmed with work".
"There were a number of pressures at the time … I had a very large branch," Mr Britton said.
"I loosely called it [the department] a 'big machine' as far as there was a lot of operational activity, a lot of processing, a lot of staff, a lot of issues, just generally, day-to-day challenges … just general management-type challenges.
"There was certainly an increasing level of pressure, probably … starting in 2010, 2012, on reflection, where we started to see measures coming through, we had opportunities to start to look at modernising compliance activity," he said.
Mr Britton told the inquiry DHS staff were under "internal" pressure to come up with new budget savings for the department.
"Through this period we were being continually asked for the provision of new ideas, new proposals, new concepts, additional savings — that in itself created additional pressure," he told the inquiry.
"These were measures designed to generate savings … financial returns for government."
The commission heard the department hatched the scheme after identifying large amounts of potential non-compliance by welfare recipients costing "potentially billions of dollars".
"We were overwhelmed with work, we couldn't cope with the volumes," Mr Britton said.
"There has historically been significant levels of non-compliance [by customers] within welfare programs."
Mr Britton said non-compliance refers to "a potential or actual discrepancy between the information provided by the customer and the information that was obtained particularly from the tax office or other data sources."
Counsel assisting the commission, Angus Scott, asked Mr Britton if there were "large amounts of potential non-compliance which the department did not have the capacity to investigate".
"That's correct," Mr Britton replied.
"[And] you felt under increased pressure to find ways to somehow investigate those potential non-compliances?" Mr Scott asked.
"Yes I did," Mr Britton said.
"Am I right that if those potential compliance could be investigated, a very significant body of funds could be recovered to the Commonwealth?"
"That's correct," Mr Britton said.
"My understanding of your evidence is that it was not uncommon when the budget was under consideration for your branch to be looking to identify means of increasing compliance activities to increase savings for the Commonwealth for the purposes of budget?" Mr Scott asked.
"Yes," Mr Britton responded.
The commission heard Mr Britton nominated former Department of Human Services (DHS) director, Jason Ryman for an Australia Day Achievement Award in 2017 for his role in leading the "Online Compliance Intervention" project – which became known as the Robodebt scheme.
"I don't recall receiving anything to say that he was successful in the nomination I put forward," Mr Britton said.
The inquiry, sitting in Brisbane, is examining how the scheme, which used tax office data and income averaging, was developed and implemented.
It was scrapped in 2019 after being found to be unlawful as a result of legal action undertaken by some of those targeted for debt recovery.
A class action by lawyers for those wrongly targeted for debt collection led to a settlement with the Commonwealth and the repayment of $721 million in recovered debts.
Debts raised despite no response
The commission was shown an email from May 2015 from senior bureaucrat Owen Lange addressed to Mr Ryman, the DHS's former director of compliance risk, CCing Mr Britton, regarding a "pilot plan" for the scheme.
It says: "We are going to have a % [percentage] of customers that do not contact, despite our invitation, and these customers will have their debts raised regardless at the day 21 mark."
Jason Ryman wrote back: "You are right in your assessment … what we are thinking is that those who choose not to contact are satisfied with the information in the letter and the process we will apply in calculating the debt."
"There's an assumption being made that somebody's chosen not to respond to the letter," Mr Britton said.
The commission was also shown a graph, attached to the email, which showed the "overall response status of all cases initiated to date", which showed a total of 58 per cent of customers "who have not contacted within the prescribed period of time (21 days).
The inquiry heard this meant "the match data has/will be applied to the customer's record".
When asked whether DHS staff investigated why customers did not respond, Mr Britton said there was a point in which DHS staff would call them on or around day seven to see if they had received a debt letter.
"That was one of the initiatives to try and better influence the behaviour to respond and clarify the details," Mr Britton said.
'The best information we had'
Mr Ryman gave evidence on Tuesday afternoon and was questioned over the data-matching method, central to the scheme.
An algorithm matched income data averaged over a year to generate debts, but the inquiry heard the calculation was flawed because benefits were based on fortnightly earnings, which are subject to change.
"Did you understand that assumption would have been untrue for a great many recipients of Social Security? That is, the assumption that the recipient earnt the same amount of income each fortnight?" Mr Scott asked.
Mr Ryman replied: "Yes."
"How was this system allowed to be set up on that basis? What was your thinking? … because it wouldn't be true for a great number of recipients," Commissioner Holmes SC asked.
"The thinking was … it was about using the best information we had at the time to make the determination," Mr Ryman said.
"Did it occur to you, given the nature of the assumption that was intrinsic in this process that was under consideration, that the scheme when it was eventually rolled out would be unlawful?" Mr Scott asked.
Mr Ryman, replied: "No."
