At least 160,000 people to be removed from NDIS as Labor unveils ‘unavoidable and urgent’ cuts

At least 160,000 people are expected to be removed from the National Disability Insurance Scheme by 2030, as the Albanese government looks to claw back savings by changing who can access the scheme.

The health minister, Mark Butler, also announced on Wednesday the $50bn scheme’s growth rate will be brought down to just 2% every year until 2030 in an effort to curb annual plan inflation and produce billions in savings before the 12 May federal budget.

The government will dramatically increase the categories of service providers required to register with the federal government, adding more higher risk activities, including personal care, daily living supports, and supports provided in closed settings.

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Butler also told the National Press Club in Canberra that unannounced changes to eligibility rules would reduce the number of people using the scheme to about 600,000 by 2030, down from forecasts of 900,000 participants.

There are about 760,000 people on the scheme at the moment, meaning at least 160,000 will no longer be able to access the NDIS within four years.

“These are hard decisions – but they’re unavoidable and urgent,” Butler said.

“And I’ll be seeking passage of these immediate controls in the budget session of parliament.”

Butler said that instead of costing more than $70bn at the end of the decade, the cost for the scheme will be brought down to about $55bn.

“The NDIS costs too much and is growing too fast, put alongside any comparable government program,” Butler said.

“And unless we take action to make it sustainable, it simply will not be there in the future for the Australians who need it most.”

Labor had originally flagged plans to limit growth to between 5% and 6% annually, but the changes will go further.

The scheme’s cost grew by more than 10.3% last year and is on track to cost $63bn by 2028-29. It is projected to support more than 1 million participants by 2033 and to reach $95.8bn in 2034-35, according to the latest quarterly update.

Martin Laverty, one of the architects of the NDIS design and the boss of disability provider Aruma, said the changes would be significant.

“Direct commissioning of disability accommodation, plan management and support coordination will be a gamechanger,” he said.

“It can pre-vet providers to bolster participant safety and quality compliance, it can set prices paid to providers at rates meeting these safety and quality standards, and it will save taxpayer dollars through more efficient supply demand management by matching services to where they are needed most.”

The changes look likely to start a new war of words with the states and territories and face opposition from disability advocates and the Greens.

Guardian Australia revealed earlier this month Labor had quietly established a razor gang to drive budget savings in the NDIS. Led by former Treasury official Anthea Long, the taskforce in the health department was launched after the 30 January national cabinet meeting.

Queensland is yet to sign an operating deal for the new Thriving Kids program, due to begin in October. Announced by Butler in August last year, it is designed to support children with autism and developmental delays.

The Australian Criminal Intelligence Commission (ACIC) warned this week organised crime gangs are using the scheme to launder money, earn income and hide assets, law enforcement officials have warned parliament, seriously undermining probity in the $50bn program.

“When we talk about fraud in the NDIS, we are not talking about people with disability, we are not talking about families who have been put on a plan or offered support,” Butler said.

“The fraud in the NDIS is being perpetrated by lowlifes who are scamming both the taxpayer and people with disability.”