Cabinet documents 1998-99: The government wanted to tail welfare cheats. The Attorney-General's department knew it was a bad idea

Two decades before the Robodebt debacle, where the government has been found to have been unlawfully raising debts against people using averaged income data from the Australian Tax Office, records from the Howard government show there were concerns about another attempt to crack down on alleged welfare overpayments.

In 1998, cabinet approved a proposal from then Family and Community Services Minister Jocelyn Newman (the mother of later Liberal National Queensland premier Campbell Newman) to introduce "optical surveillance services" to assist in investigating cases of serious social security fraud.

It came off the back of a pilot done between August 1997 and March 1998, where people suspected of fraudulently claiming Centrelink payments were followed by private investigators.

The minister predicted the savings would substantially outweigh the costs.

"It is expected that in a full year as a result of investigations involving optical surveillance around 1800 customers (including some partners of customers investigated) will have their ongoing fortnightly social security cancelled or reduced and around a third of customers will also have debts raised against them. In addition, around a quarter will be prosecuted," the newly declassified cabinet documents read.

It was expected there would be a cost-benefit ratio of at least 1:5.

The submission - dated November 1998 - asked for funding of about $1.8 million in 1998-99, $3.3 million in 1999-2000 and $3.3 million per annum in subsequent years to carry out the proposal.

"Based on the pilot study, gross savings in the order of $10.37 million are expected in 1998-99, $19.26 million in 1999-2000 and $20.55 million [per annum] in subsequent years," it reads.

However the Attorney General's department pointed out that in the pilot, nearly 40 per cent of people tailed were found to owe no money in the end.

"It is important that should this proposal be approved, Centrelink improve its procedures for choosing cases to investigate in this way so as to reduce the proportion of cases in which people who are correctly receiving payments (and people with them when they are photographed or filmed) are subject to optical surveillance," the department said.

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The department also raised concerns that outsourcing the surveillance to private firms meant the privacy commissioner would have no power to investigate any potential breaches of privacy by private investigators.

Ultimately, the proposal - dubbed the Enhanced Investigation Initiative - began in July 1999.

Centrelink hired 21 companies across Australia to carry out surveillance on suspected welfare frauds, its 1999-2000 annual report says. Strict privacy safeguards were put in place, while private investigators had to undergo probity checks in order to work on cases.

"To the end of June 2000, a total of 1446 cases were referred to providers. Of these, 1063 have been finalised resulting in a debt or reduction in payment to 747 cases," it reads.

"Savings to future outlays as a result of cancellation or reduction of payments total $4.2 million. Debts of $4 million have been identified for recovery action."

However, Centrelink admitted the surveillance uncovered no money owed in 30 per cent of cases.

Despite this, the government heralded the initiative as a "success".

"It has proven that by using the evidence gathering power of this initiative, inroads can be made into areas of welfare fraud, such as those associated with the cash economy," the report said.

Centrelink still uses private investigators to crack down on suspected fraudsters, but in more recent times has hired people to trawl the social media accounts of customers in order to detect possible overpayments.