'Easy' legal concerns are included in robo-debt briefing for Scott Morrison, investigation hears

Previous document warned proposed debt recovery measures would have 'fundamental impact on social security policies and laws', royal commission says

Legal concerns over what became a robodebt scheme were "watered down" but are still included in the briefing document prepared for Scott Morrison, a royal commission has heard.

Investigations into the failed Centrelink debt recovery scheme had previously heard that the Department of Social Services in late 2014 held incriminating internal legal advice warning that the primary method used to increase the debt might be unlawful.

An important line of inquiry for the royal commission is what the Department of Social Services (DSS) and another department, human services (DHS), are doing with that legal advice, including whether legal issues are being held or shared with senior civil servants and ministers. DSS is in charge of social policy, while DHS, which handles the administration of institutions such as Centrelink, is pushing for Centrelink's debt recovery proposals.

The inquiry on Monday heard that a draft briefing for Morrison, who was minister of social services at the time, from February 2015 had warned the proposed debt recovery measures would have a "fundamental impact on social security policy and legislation".

However, later drafts instead suggested it would have "significant implications", which senior adviser assisting Justin Greggery said had "made the language easier".

"It appears that the language change has had an effect or is designed to make ministers more inclined to give their approval to the proposal because it reduces the potential for significant hurdles," Greggery said.

Greggery submitted the revision to Matthew Flavel, the deputy secretary of the Department of Social Services who had been nominated to represent the organization on the commission. Flavel was not in DSS at the time.

Flavel noted that the report "still says it has 'significant implications for social security policy and legislation' and goes on to say 'needs to be assessed'".

"[It was] at the stage of saying, in layman's terms, 'Would you like us to do more work on this to put together a budget proposal?'" Flavel said.

The inquiry heard the revisions were sent by top DSS officials to senior members of DHS.

After giving officials the green light to draft a proposal in February 2015, Morrison received a formal policy proposal for what would become a robodebt scheme – as well as other welfare compliance measures – in March.

The budget measures were included in the May 2015 budget but the law was never amended, ultimately resulting in a $1.8 billion settlement four years later after the government admitted the Centrelink debt recovery scheme was unlawful.

While his language was softened, Flavel told the investigation that his recollection was that executive minutes documents sent to Morrison had mentioned the potential need for legislative changes.

Greggery said: “An executive minute for relevant ministers was developed apart from the policy advice and legal advice communicated by DSS to DHS. I'm trying to understand how it happened. Did DHS ignore that advice?”

Flavel replied: "My recollection since then is that it refers to the fact that there may need to be legislative changes."

Morrison has been granted leave to appear on the commission. It was not clear in what terms the possible need for "legislative change" was communicated at the time, or what further advice was given to Morrison.

Flavel, who reviewed internal documents before appearing on Monday, said after the proposals were finalized he found no evidence of the risk the plan was presented to ministers.

“I don't see anything to suggest any specific advice was given from the senior level of the DSS at the time … regarding the risks inherent in the proposal,” he said.

Asked "why not" by Greggery, Flavel replied: "Yes, it is a mystery."

The investigation had previously notified the same attorney at DSS who warned that the policy would be unlawful by the end of 2014 was only given two days to provide further feedback on the formal proposal in March 2015.

DSS attorney Anne Pulford said it meant they had no opportunity to provide proper legal advice and were only able to raise potential legal issues. It is not clear how senior officials at DSS and DHS used the legal warning Pulford's team provided.

Christopher Birrer, deputy chief executive at successor agency DHS Services Australia, told the investigation on Monday that the benefits of the scheme were overstated "and the risks were understated" in February 2015 executive minutes told Morrison.

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