Justice in the Collection of Fines

Prior to the election Labor announced that if elected the party would put in place a new and quite different set of arrangements for the collection of fines. The essential principle is that fines would be paid on the basis of an offender’s income, through the income tax and welfare systems. This is an important, sensible and progressive reform to the fine enforcement system.

Over recent years there has been widespread support for reforms to the fine collection system, including from the Law Council of Australia. In part because of a recognition of the extraordinary administrative costs of the existing arrangements, and in part because unpaid fines can start a process that can even lead to imprisonment.

The first spark in this reform began in 2002 with economist Professor John Quiggin, now at the University of Queensland, who shared the idea with me, when we were both employed in what is now the Research School of Economics at the Australian National University. John Quiggin explained that the collection of low level criminal fines – for example, for offences such as assault, driving under the influence of alcohol, and break, enter and steal – was highly inefficient and potentially vastly damaging.

As much as half of all fines aren’t paid initially, police and the courts being needed to impose further fines when this happens, and when these aren’t paid either community service might be imposed, but a lot of offenders don’t show up. In some jurisdictions this would lead to the loss of a driving licence after which an offender might still drive and be involved in accidents. This can then result in imprisonment, with major adverse consequences for offenders and at great cost to the public purse.

Criminologists Arie Freiberg and David Tait helped us set the scene for an academic paper, to which I contributed econometric expertise. It was clear from our collaboration that an alternative mechanism, collecting fines based on income, could work well and thus mitigate the major costs of the current clunky and wasteful system. The basic template is similar in principle to HECS in which university tuition is paid when and only if a graduate earns above a certain income, currently $54,000 per year. For fines collection the level of incomes involved would need to be lower and the contribution levels small to minimise harm to the most disadvantaged.

So-called “income contingent” payment systems have major benefits: they ensure that debtors are protected from major hardships in repaying, and they guarantee that there won’t be defaults through lack of an ability to repay. Moreover, as pointed out by Joseph Stiglitz, the Nobel Prize winning economist and advocate of income contingent mechanisms, systems such as these are incredibly efficient at collection, and if designed properly the system would increase overall repayments.

A critical aspect of the Labor plan is that it has been motivated by the need for governments to do something about the extraordinarily high levels of Indigenous incarceration, and with this real prospects of offenders coming to significant harm just from the non-payment of fines. The Labor media release noted that in Western Australia 1,100 fine defaulters are in goal, and that approximately half of these are Aboriginal people.

Moreover, two years ago the death in custody of Ms Dhu, a 22-year old incarcerated for a $1,000 unpaid fine, brought the issue to national attention. It is difficult to imagine a more pernicious and less socially desirable policy that allows this to have happened.

The so-called Fine Enforcement Contribution Scheme (FECS) can resolve less dramatic fines issues, such as for traffic and parking offences. It is worth noting that at any point in time State/Territory governments are owed upwards of $3billion in unpaid fines. This can all be sorted out judiciously and fairly through the income tax system, like HECS does, in combination with the use of Centrepay, an automatic income contingent deduction mechanism of the welfare system; issues of fair design would have to be worked out through consultation.

The arguments for FECS being introduced are overwhelming in terms of social justice, the avoidance of major personal trauma for individual offenders, and with respect to administrative simplicity and revenue consolidation.