For a budget both sustainable and fair

 

Above: Wayne Swan is under political pressure to produce a surplus for May 8th. But to re-engage with voters Labor needs to do a lot more; delivering truly meaningful and substantial social programs that appeal both to Labor's working class and liberal middle class electoral bases. This needs to be provided for through a progressive tax restructure including reform of superannuation tax concessions, dividend imputation and consideration of further 'super profits' taxes where appropriate.

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By Tristan Ewins

As the May 8^th 2012 Federal Budget approaches top Labor policy-makers will be nervous. While there is enormous political pressure to deliver a surplus only very substantial progressive new initiatives hold the prospect of re-engaging with Labor's traditional working class and liberal middle class support bases. 'Treading water' on policy simply will not do at this point. So many voters are 'disengaged' after years now of systemic smears and disinformation in the media. Very substantial new programs are the only chance, now, of breaking through: at the very least saving the Senate, and leaving behind a reform legacy that Abbott will not be able to uproot.

But what specific programs could Labor embrace in order to re-engage with voters; perhaps even to win in 2013?

Immediately there are a number of options which spring to mind:

• Medicare Dental
• Gonski recommendations on education
• Stop-gap measures in anticipaiton of the National Disability Insurance Scheme (NDIS)
• Further funding to improve the quality and equity of Aged Care; with a long-term official policy of establishing universal Aged Care Social Insurance
• Robust Cost of Living initiatives for disadvantaged and working class Australians, including pensioners and Newstart recipients
• Substantial investment in public housing to assist those low income families and individuals experiencing housing stress; with the additional benefit of increasing housing supply, driving down rent costs
• Targeted tax-driven cross-subsidies for sectors struggling under the weight of the 'two speed economy'; to include tourism, education and manufacturing;
• Fast rail and other infrastructure projects (eg: infrastructure for emerging suburbs) expedited along the East Coast, with the additional benefit of stimulus in states which are economically struggling.

It is difficult to estimate how much would be necessary in way of funding for industry cross-subsidies. Although a fast-rail line along the Australian East Coast – costing $100 billion - could "dramatically cut emissions" and provide great convenience for travellers, and those utilising rail freight.

Such infrastructure initiatives could be financed via the issuing of government bonds, which could spread debt repayments over decades, with competitive annual repayment rates.

Development of infrastructure in new suburbs is also crucial on practical, environmental and equity grounds: and could create jobs along the economically languishing South-East Coast. Urban design, including public transport, parklands and other social facilities are crucial for the quality of lives of those young families who have been driven by the Howard housing bubble and population growth onto the 'urban fringe'.

And while Cost-of-Living subsidies should aim to deliver a minimum of an additional 1 per cent of Male Average Weekly Earnings (approximately $600/year for individual adults) to assist mainstream working class and disadvantaged families with energy, water, mortgages and rent, this author does not have access to modelling to determine the cost.

Yet 'Cost of Living' is THE issue 'out there' with Australian families, including those working class and disadvantaged families it is Labor's duty to protect and assist. A big initiative, here: as significant or more significant than already suggested – could be THE crucial factor in re-engaging with Australian voters.

Labor also stands to gain, here, by linking Carbon Tax relief with broader Cost-of-Living Relief. In such a way Labor needs to develop a package in which all disadvantaged and mainstream working class Australians are significantly better off. By linking these issues Labor has a chance of changing public perceptions of the Carbon Tax, while addressing genuine Cost of Living stresses for those in need.

And tax cuts would be quickly forgotten, so Cost of Living Relief will be better addressed through a dedicated supplement, to be paid twice-yearly.

Public construction of new energy and water infrastructure could also have savings flowing on to consumers because of the lower cost of public borrowing.

Nonetheless, despite our lack of access to modelling in some areas it can be stated that were the government to reform taxation so as to bring in around an additional 1.5 per cent of GDP in taxation (approximately $22 billion out of a $1.5 trillion economy), this would provide substantial scope for the social welfare and industry assistance packages hinted at here, while also providing for the politically-desirable surplus.

Potential fund-raising mechanisms could include a move to either 75% or 50% Dividend Imputation (saving between $5 billion and $10 billion/year); eliminating superannuation concessions for the wealthy (saving approximately $10 billion/year); restructuring of income tax, reversion to the original Resource Super Profits Tax template, and reneging on projected Company Tax cuts.

There is even the prospect of emulating Abbott in terms ofa 1% increase in Company Tax for large enterprises, ploughing the proceeds into Aged Care. Given his own position on Paid Parental Leave and his eagerness to appeal to aged Australia Abbott would be hard-pressed to oppose such an initiative. It is worth noting that Company Tax in Australia is 30% as compared with 35% in some areas of the United States – so there is 'room to move'.

For now, though, it is also worth observing those initiatives for which we do have costings.

Implementing the Gonski recommendations for education could ultimately cost an estimated $5 billion/year. Although the Gonski report itself suggests the Federal Government would only have to pay for 30% of the Education initiative ($1.5 billion) – with $3.5 billion shouldered by the States.

Detractors have attempted to conceal their own vested interests with calls of 'class warfare', but the reality is that 'class warfare' has been waged not against the wealthy, but against poor and mainstream working class Australia with the neglect of public education and health care, and increasing dependence on levies for essential school infrastructure which are 'voluntary' in name only. The appeal of Gonski is in its emphasis on all students, including those most struggling – with a further emphasis on improving state school funding, but without withdrawing existing funding from the private sector. Implementation of Gonski would mean improved infrastructure, smaller classes, more teachers and more subject choice for all schools.

Meanwhile projected public dental initiatives have variously been estimated to (ultimately) involve costs running into the billions annually. Apart from crucial equity and human interest ramifications of universal public dental care, preventative public dental care could save the economy billions over the long term. Though according to the proposal put to Labor by the Greens the first phase of new public dental programs– focusing on the needs of children and low-income groups - need only cost the government $400 million for the upcoming financial year, and as much as "$8.4bn to $14.4bn across four years, depending on the options chosen".

The final expenditure priority we will consider, here, is Aged Care.

The Federal Government's standing Aged Care policy provides a real funding boost of only $577 million over 5 years.

Much more is needed,yet nonetheless by shifting its priorities and implementing means tests an improvement in service will be experienced by many.

While $1.2 billion has been devoted to providing better salaries and conditions with the aim of retaining aged care staff, user-pays mechanisms will not include any forced sale of the family home. User pays charges will apply for many – both for residential and at-home care. But full pensioners will pay no fees.

There will be 40,000 new home care places (Up to 100,000), relieving the impact upon the Aged Care budget of expensive residential care, while providing many aged Australians with the preferred option of staying at home. Further initiatives include $269.4 m for dementia, $1 billion for Carers' Respite (over several years) and the removal of the low care/high care distinction - which in the past saw aged Australians diverted into high intensity care facilities prematurely in order to save money. The 'My Aged Care website' is another good initiative, and the government has wisely avoided a 'free market in Aged Care'. Many amongst the aged are vulnerable and on their own enjoy little consumer choice or market power. ('The Age', 21/4/2012)

Yet again the initiatives go nowhere near far enough.

The Combined Pensioners and Superannuant's Association New South Wales (CPSA – NSW) has long argued for a Aged Care 'social insurance' model. While CPSA NSW is encouraged by the government's emphasis on at-home care, however, those most in need do not always have the choice. Billions in new funding are necessary to improve the quality of residential care, and to give the aged the choice of high quality low-intensity care in a social environment. (eg: hostels) Staff to resident and nurse to resident ratios are also crucial that those needing high intensity care.

And even for those remaining at home more programs are necessary to keep aged Australians socially engaged, and happy.

The problem with Aged Care is that for many it remains a 'hidden issue'. Aged Australians are suffering – for lack of care; because of poverty; because of social disengagement; and because of the dehumanisation and loss of individual identity that often goes with high-care accomodation.

As an absolute minimum Labor needs to devote an additional $1 billion for Aged Care in the financial year 2012-13; and announce a progressively-structured Aged Care Social Insurance Scheme over the long term – similar to the agreed 'National Disability Insurance Scheme' (NDIS). (covering care, but not pension entitlements) Specifially this author challenges Government Minister Bill Shorten to champion this cause – no less worthy as it is – as he championed the cause of disability insurance.

'The Surplus'

There are sound political arguments for Labor's pursuit of a surplus in the year 2012-13. The level of economic debate in Australia is for the most part quite low. The perspective on the Federal Budget is akin to peoples' ideas on managing a family budget. Hence apparently 'The books must be balanced'. But failure to produce a surplus will result in opportunist media-grabs by the Opposition – which irresponsibly maintains popular mythologies on economic management in order to hold on to political advantage re: perceived competency.

Deeper arguments and realities do not always 'sink in'. Media speculation about the political imperative of a surplus is usually shallow and uncritical. Many voters do not seem to comprehend that investment in infrastructure can increase capacity, improving quality of life and increasing growth over the long term. And there are those who do not seem to see how stimulus is still warranted in many state economies as a consequence of the high dollar, and with falling confidence alongside the decline of tourism, education and manufacturing. Nor how lack of transport infrastructure in developing suburbs is a drag upon the broader economy – making investment there not only sustainable, but of positive benefit.

On the other hand Jessica Irving from the Sydney Morning Herald predicts that after already-projected cuts Swan will needto "raise taxes by $7 billion to achieve his surplus." And also that: "Tax increases on foreigners earning profits in Australia, say mining companies, would also have less of an impact on domestic demand, as would reduced spending on foreign-produced defence equipment."

Were the revenue proposals in this article adopted, alongside other measures suggested by Irving such as increased taxation of foreign profits in mining, that could still leave $15 billion for social programs, while the surplus was achieved.

But regardless of the perceived political imperative of a surplus for 2012-13 Labor still needs truly substantial policy initiatives if it is to re-engage with voters who have 'switched off' or 'turned away' after almost two years of sustained media onslaught. This can only be achieved with a commitment of resources which is truly substantial and appreciable in the 'big picture' of an economy valued at over $1.5 trillion.

Yet if Labor does produce such initiatives it might also manage to rally its own base, as well as the sympathetic social movements which could provide for social base for a real fight-back; and perhaps even a Labor victory in 2013.

Abbott a'Courting and Conservative? PPL, Nannies and the Nanny State

above: Tony Abbott
In this guest-post article Tom Holland provides a critique of Tony Abbott's complex ideological contortions.  Holland explores the tensions between 'Abbott the Conservative' and 'Abbott the economic liberal'.  Holland thinks it ironic that Abbott puruses policies for parental leave and elsewhere that could be described as 'socialist'.  The blog publisher (Tristan Ewins), however, observes that populist social programs have been implemented in the past by Conservative social forces seeking to broaden their appeal. (eg: Bismarck's 'practical Christianity' - Social Programs implemented in 1880s Germany partly intended to undercut the Social Democrats)

This article was originally published at Tom's blog on March 31st 2012. 

See:  http://cousinzoidfarb.blogspot.com.au/2012/03/abbott-acourting-and-conservative-ppl.html

Tom Holland

Tony Abbott has gone a'courting this year with big ticket policy proposals for women voters, and in the process has exposed confused purposes at the heart of Coalition policy formation and an ideological departure that will disappoint conservatives.

The extremely generous proposed Paid Parental Leave (PPL) scheme, and the recently announced plans to extend the child-care rebate to in-home nannies are policies designed to woo women voters to Mr Abbott and the Coalition. Both of Mr Abbott's proposed schemes have their merits and are likely to appeal to voters. But both policies are decidedly 'big government' initiatives, and are at odds with Abbott's attacks on the Government, most notably over the Carbon Tax and the NBN, and more broadly with 'small government' conservatism that underpins Liberal thought. Recent weeks have produced friction and confusion for the Coalition party room accommodating the growing divide between the tenets of their faith and the approach of their leader. Does this change in policy sit with Abbott's political philosophy, or does it represent a divergence in favour of populism?

Abbott, the Conservative

The Liberal Party in Australia is the custodian of two ideological traditions - Liberalism and Conservatism. One champions the importance of the individual while the other places faith in the importance of our society's institutions. The contentions of both philosophies create a natural contradiction, which continues to this day. But with the emergence of socialism, to which both were opposed, a pragmatic union of the traditions occurred in the modern Australian context in the form of the Liberal Party. Party members still identify as liberal or conservative, known as 'wets or 'dries', with Tony Abbott very much in the latter camp.

Damien Freeman wrote an interesting analysis of the the political philosophy of Tony Abbott in Quadrant in 2010, examining what Abbott saw as the obligations for a conservative politician to justify policy decisions. He notes that Abbott, in his book Battlelines, explains that a conservative is not burdened to produce a unifying ideological justification for policy in the same way as socialists or liberals.

Abbott argues that the other ideological traditions are obliged to impose and justify change based on their philosophical model on how they wish the future to be. He argues that progressive conservatives, rather than opposing change, accept the inevitability of a changing society and need to ensure that this change occurs in deference to the past and its institutions - “achievement is possible because ‘pygmies are standing on the shoulders of giants’”.

Whilst Abbott argues that an all-encompassing ideological justification is not required of the conservative, Freeman does enumerate a few ways Abbott believes policy can be explained. Firstly, the ideological explanation from either a liberal or conservative perspective. Secondly, an 'approach that transcends ideology' and goes to nationalism and the national interest. Thirdly, a purely pragmatic policy approach without ideological abstraction. And finally, what Freeman calls the 'counter-ideological approach' where policy is directed towards frustrating an opposing abstract idea rather than promoting one's own.

When Abbott defeated Malcolm Turnbull and Joe Hockey, both liberals, for the leadership of the party, he restored a conservative approach to politics and brought with him his political philosophy. Through the prism of Freeman's analysis, one can identify where Abbott would justify his efforts up until this year. He opposes the Carbon Tax on counter-ideological grounds, takes a hard stand on asylum seekers on what he sees as nationalistic grounds and could justify his opposition to pokies reform on liberal ideological grounds. But when one considers recent policy announcements, it is difficult to explain these using Abbott's own methods.

The Nanny Scheme and Paid Parental Leave

This week it was announced that a Nanny scheme would be referred to the Productivity Commission by a new Abbott Government as a matter of priority. It would entail extending the non-means-tested child-care rebate to nannies, who are not currently covered. The child-care rebate increased under the Rudd Government to 50% of costs to a maximum of $7500 per annum per child with child-care subsidies already costing $3 billion dollars a year. The nanny scheme threatens to increase this burden.

While it is likely to produce some migration of children from centre to nanny care, thus ameliorating the expense, it will still be a costly undertaking for the tax-payer. Mr. Abbott has said the scheme must come from within the constraints of the "existing budget envelope", but given that he rejected the proposal at the last election due to its sizeable cost, this does not seem a realistic expectation. More recent comments from Liberal sources have suggested that Abbott knows this.

The other key policy announcement by the opposition recently was the PPL scheme, which is more starkly contrary to their aims of minimising government spending. The Coalition's PPL scheme will pay a new mother a full replacement wage for 6 months, including superannuation, of up to $150,000 per annum and is expected to cost $3.2 billion. Counter-intuitively for the Coalition, it will sting its natural business constituency to pay for it. Under the scheme, a levy of 1.5% tax will be applied on businesses earning over $5 million.

In this sense, it is not dissimilar to the Carbon Tax which Mr Abbott has lambasted as overreaching government interference in the economy, and has routinely warned will drastically increase the cost of living with flow-on costs to consumers. Perhaps this is not lost on some members of the Coalition with the scheme drawing uncharacteristically public opprobrium from the Liberal backbench and mixed signals from the front bench.

Abbott, the Populist

So lets return to Abbott's methods for explaining conservative policy. These policies are contradictory from a conservative point of view with government funding of the family unit via the PPL, only to disband it with incentives for carers to return to work through the Nanny scheme. Neither scheme is easily justified through nationalism, nor pragmatism when there are adequate existing schemes. And they can hardly be described as counter-ideological as each are 'big government' policies which will spend more on these issues than the social-democratic government of the day.

The Abbott opposition has spent much of its tenure attacking Labor for imposing a nanny state on Australians. Yet now, they have introduced two cornerstone policies, which have been described as close to Abbott's heart, which are closer to socialist in philosophy than liberal or conservative. As Emma Alberici put to Barnaby Joyce on ABC's Lateline programme, if "the Coalition in government would reverse the nanny state, [why are you] saying the state should pay for nannies?"

The answer lies with Abbott, and a departure from the political philosophy that guided him this point. Perhaps a still personally unpopular Abbott, faced with a re-united Labor Party, even with a recent thrashing in Queensland and abysmal polling at present, senses that he must lift his efforts to personally appeal to voters. The PPL and Nanny scheme are policy for populism's sake, and we may see more of it yet before the next election.

Talking about Aged Care

The following article by Tristan Ewins examines the huge deficit of Aged Care services in Australia; and the need for progressive tax reform to fund a radical improvement in the sector. The author regrets that Aged Care did not seem to have been prioritised by the Greens in a recent survey: but is hoping this will change with a shift of policy by botht the ALP and the Greens.  At its conclusion, the article also includes a response to ALP activist Daniel Pocock on the question of the appropriate funding mechanisms for Aged Care and similar social services.  At the Facebook 'ALP Socialist Left Forum' page Brenton Baldwin has argued that Aged Care will be a priority for the Federal Government in the coming Budget.  Let's hope they get it right!

by Tristan Ewins

The Greens are to be applauded for their recent web-video putting the case for a reformed Mining Tax to fund social welfare and services, and to invest for the future.

See: http://greensmps.org.au/mining-tax

But while the Greens provided a survey asking people which areas they think the money from such reform ($100 billion) should be spent, they did not include Aged Care. I was upset at this for a number of reasons – all related to the urgent need for reform in that area.

Firstly: We have an ageing population. Even to maintain current quality of service will require greatly increased funding.

Secondly: Staff including nurses are underpaid, and there are inadequate ratios. This impacts upon residents’ quality of life – as staff need to turn residents in their beds to avoid bedsores; check to ensure residents are eating their meals; facilitate exchange and communications between residents to ensure they remain socially engaged… Not having enough nurses and staff to check that residents eat their meals can result in starvation and literally a physical 'withering away' so that those concerned cannot even stand up or walk.

Thirdly: The current funding mechanism is grossly unfair: requiring families to sell or take equity out against their homes operates like a regressive tax. Yet levying more proportionately from the wealthy and the upper middle class is considered ‘taboo’ and referred to as ‘class war’.

Finally: There are broader questions of quality of life for these most vulnerable Australians that barely register in our public discourse. Provision of gardens could provide an escape and a diversity of scenery that in its way could radically improve quality of life. Private rooms could help maintain a sense of dignity, private space and connection with past and one’s identity which could also radically improve quality of life. In the future information technology could be crucial in keeping residents socially and intellectually engaged.

Furthermore where possible residents should be taken on outings to create diversity and quality of life. And those aged Australians who would be better suited to lower intensity care – eg: hostels – should not be forced prematurely into high intensity care in order to ‘save a buck’.

By the same principle there must be greater assistance for aged Australians to remain living in their homes – if that is what they choose; and for family/carers’ to provide the necessary support without having to make too great a sacrifice.

When the shortfalls are considered: service quality, the funding mechanism, the wages and conditions of staff – and the ageing population is also taken into account – a figure of an additional $3.5 billion/year to be invested in the system -  is not unreasonable at this point, with 'more in the pipeline' for the future.    Though this should be in the context of a funding mechanism which operates like a progressive tax – and enables investment in the quality of life for vulnerable families, and working class families who deserve better after spending a lifetime paying their taxes. A more robust mining tax could pay for such Aged Care reform.

My hope is that the Greens and the ALP will respond to this issue and run with it as we approach the next election. But the Coalition often takes the votes of many aged Australians for granted. They should also be pressed to ‘put their money where their mouths are’ when it comes to Aged Care. The bottom line is that this is a matter of basic human rights – and of the acute suffering of our most vulnerable spending their final years in circumstances of public neglect, dehumanisation and despair.

If any of you reading this are Greens/ALP members I urge you to take this issue up in your branches and via your parliamentarians. For the Greens especially – their survey should have included reference to this most critical of issues. Here at ALP Socialist Left Forum I think we would all appreciate an official response.

And if by some miracle there are Conservatives reading this – I ask them to look within their hearts – to their basic underlying humanity – To confront the suffering and neglect experienced by our most vulnerable aged – and to DO SOMETHING.

In place of tax cuts instead commit funds for aged Australia.

Tristan Ewins

Around March 16 2012 Daniel Pocock at Facebook argued against using MRRT money this way:

“I definitely think the bias should be on construction of long-lasting public infrastructure. That will create jobs, more taxes, and the taxes on salaries should fund the welfare state. I think it is actually dangerous to use taxes from non-renewable resources (like mining) to fund ongoing expenditures (like welfare).”

To which I respond here:

I appreciate that the MRRT money isn’t going to last at current levels forever. Hence I can understand Daniel’s concern about being ‘structurally locked in’ to funding Aged Care or other social wage measures via the MRRT.

On the other hand BOTH investment in infastructure AND welfare measures are necessary - and using the MRRT money could be part of that picture - using MRRT money to 'free up' *other* money for Aged Care.

MRRT money could also be put in a Sovereign Wealth Fund with the profits from that being directed - sustainably - into Aged Care and other services as well. The point, here, is that Sovereign Wealth Fund investments could provide a source for social wage expenditure for decades into the future. But since then that fund would be slow to build up it begs the question where the money would come from for Aged Care now.

That means there would have to be tax reform elsewhere. I support such an agenda 100% - raising in the vincinity of $20 billion new money a year for programs like Gonski, the National Disability Insurance Scheme, Aged Care and welfare reform. The question is whether Labor and the government can be convinced of the need for such a far reaching agenda.

Arguably Labor is now in the position where only a radical policy shift – only a radical ‘delivering of the goods’ – can shift voters’ perceptions and voting intentions. Radical reform of Aged Care could be part of this ‘big picture’ policy agenda which could turn the tide for Labor again by re-engaging with working class Australia.