From Privatisation to the GST - Letters of Relevance to Labor

Above:  South Australian Labor Premier Jay Weatherill has Upset and Awful Lot of People in the ALP with his Position on the GST!

Dr Tristan Ewins


Comrades and others; The following are a series of letters I've written over the past couple of weeks - in the hope of being published in The Age, The Herald-Sun, The Saturday Paper...  I'm hoping by republishing them here I can spur further debate.  Topics covered include 'How Federal Labor Must Respond to Jay Weatherrill on the GST', 'Privatisation Now and Then', 'the Holocaust and Cold War Atrocities - Never Forget',  'Why Isn't Shorten Cutting Through?', 'Infrastructure and Population'.  Most of the letters were never published debate here could help make up for that I think! :-)

Privatisation Doesn't Make Sense - Never did make Sense!

The Herald-Sun (27/1) makes a point of the fact the Liberal NSW Liberal Government will have $20 billion to spend following privatisation of electricity.  But it ignores the associated cost of this privatisation.  To pay for private dividends and corporate salaries increased structural costs will be passed on to consumers in full.  Energy will be more expensive – and that includes businesses as well as voters.  Dividends from the energy sector will also be lost to NSW voters – probably forever.  To get a picture of this: The Commonwealth Bank privatisation brought in about $7.8 billion (the total for the sale of the entire business!!!   )after being privatised by the Keating Labor Government.  But in 2015 the Commonwealth Bank registered a PROFIT (for only one year) of over $9 billion!  Meanwhile the Federal Government is having to pay Telstra several billions to access the very pits and wires that were privatised under John Howard.  How has any of this ever been in the public interest?

Remember the Holocaust - and ALL other Atrocities - So they are never repeated

Dvir Abramovich (Herald-Sun 27/1)  makes some crucial points about teaching young people of the dangers of hatred and prejudice, as epitomised most horrifically by the Holocaust, and the associated industrial scale murder and persecution of Jews, Poles, Russians, Roma, the disabled, and political dissidents. (mainly Leftists)  Such a public education program could be incorporated into a broader critical/active civics and citizenship curriculum reform agenda.  That is: reform the curriculum to empower all students to understand their rights and interests; to commit politically on the basis of their interests and acquired values; and to participate deeply in a truly and meaningfully pluralist democracy.  He also mentions Cambodia, Bosnia, Rwanda and others.  But one aspect that he neglected (unintentionally I believe) was the record of atrocities on the ‘anti-Communist’ side during the Cold War.  Over half a million leftists and trade unionists were murdered in Indonesia in 1965-66. And genocidal attacks during Guatemala’s civil war claimed between 200,000 and 300,000. As well as political mass murders in El Salvador, Nicaragua and elsewhere. Truly we must remember ALL of history’s shameful passages that we do not repeat them.  And that includes those committed ostensibly by ‘our side’. 

Why Isn't Shorten 'Cutting Through'?  And how can he change this?

Mark Kenny (28/1) argues Bill Shorten has failed to cut through since the elevation of Malcolm Turnbull as PM.  Yet the Liberal Party stands on the verge of another bout of bitter austerity: of the proportions which brought former Treasurer, Joe Hockey , undone.  For too long Labor has pinned its fortunes mainly to ‘socially liberal’ issues like Equal Marriage: neglecting robust social and distributive justice policies.  Hence the ‘socially liberal’ but ‘economically neo-liberal’ Turnbull has capitalised on the prevalent discourse.  Labor needs to change the prevalent discourse – and quick.  Labor’s strong endorsement of Gonski –  $3 billion on average a year - may show that Labor strategists are starting to learn their lesson. Other options could include more robust reform of superannuation concessions for the well off.  Superannuation concessions may cost taxpayers $50 billion/year by 2019, and Labor should be able to shave $20 billion of that from the well-off. Other areas of tax reform could include no further Company Tax cuts; gradually rescind Dividend Imputation; index the bottom two income tax brackets for fairness.  That could pay for a National Aged Care Social Insurance Scheme, reform of pensions and more, while improving Labor’s economic credentials, reining in the deficit.

The Infrastructure Crisis and Population: A Response to a Herald-Sun Reader

 

Nola Martin (Herald-Sun, 1/2) blames the transport infrastructure crisis – crowded trains – on overpopulation. Increased population has good and bad consequences.  On one side we will run into difficulty if schools, hospitals, roads, public transport – fail to keep up with population.  On the other hand higher population creates ‘economies of scale’ in the public service, defence and other areas. (ie: we can get away with paying proportionately less there)  But the real problem is that public investment in infrastructure and services – like roads – is not ‘keeping up’ on account of ‘corporate welfare’ and subsidies for the well-off.  Company Tax cuts mean corporations aren’t paying for the infrastructure they benefit from.  And superannuation concessions for the well-off might cost taxpayers $50 billion by 2019 according to Richard Denniss of the Australia Institute.  When there’s not enough public money for infrastructure like roads this also leads to privatisation.  The problem here is since the private sector cannot borrow as cheaply as the public sector, and must pay dividends to shareholders,  the increased ‘cost structures’ are passed on – hurting the entire economy.  But as the Federal Election approaches Malcolm Turnbull is considering more tax cuts. (eg: Company Tax)  When will we learn our lesson?

SA Premier Jay Weatherill and the Debate on the GST; And the 'Revenue Problem' for Health and Education

Regarding his discussion of raising the GST; On the positive side at least South Australian Labor Premier Jay Weatherill IS saying there’s a revenue problem we have and not a spending problem. It’s good to actually confront that issue - and to prioritise health and education. The problem is that he's undermining Shorten on the GST – which could be crucial in the coming election. The best reply Shorten can come up with is promising to address BOTH the revenue problem and the Health crisis - including Aged Care. There are a host of possible measures. Hit superannuation concessions. Gradually rescind dividend imputation. Reform capital gains tax concessions. Rescind negative gearing. Restructure and increase the Medicare Levy. DON'T cut Company Tax.  Shorten has options! Outlining those options NOW - AS OPPOSED TO THE GST can answer Jay Weatherill's concerns re: 'the revenue problem'.   And we can then enjoy serious reform of Education and Health including Aged Care - where tens of billions new funding combined are necessary to make a serious difference. In response to the answering of those concerns Weatherill will probably then 'fall into line' on opposing the GST.

Treasury ‘White Paper on Tax’ seized upon by an Abbott Government Considering Regressive ‘Reforms’

The Abbott Government's 'White Paper' on Tax could see big changes to superannuation and the overall tax mix.  But the Paper seems oriented towards the Government's Ideological preference for 'small government', 'low tax' and 'simple/regressive tax' as opposed to a progressive tax system. Labor and the Greens need to enunciate a comprehensive alternative - also informed by a progressive ideology of equity and fairness.  Tristan Ewins looks at the alternatives.

 

Tristan Ewins

31/3/2015

The Federal Australian Treasury’s White Paper on tax reform seems to have been received well by the Abbott Conservative Government. 

Amongst other suggestions, it urges slashing the Company Tax rate to make Australia a more attractive place for investment.   

But arguably decreased Company Tax is not the answer and will only lead to further ‘corporate welfare’. 

The white paper complains that 70 per cent of Commonwealth tax revenue is drawn from personal and company taxes.  But what is the alternative?  A higher GST?  More user pays?  More austerity in the context of an-already stunted social wage and welfare state?

Dividend Imputation, Corporate Taxation, Corporate Welfare

On the good side, Gareth Hutchens of ‘The Age’  (30/3/2015) notes arguments have arisen for the potential rescission of Australia’s regime of Dividend Imputation. (tax breaks on share dividends; ostensibly to make up for ‘double taxation’)

For a start, lower Company Tax rates dilute arguments about the unfairness of ‘double taxation’.  Australia’s Company Tax rate has been reduced markedly since the Keating Government which introduced the dividend imputation system.  Countries such as the UK and France – which once had imputation – have now dropped the measure.  It no longer appears ‘necessary’ either for ‘fairness’ or ‘competitiveness’.

To clarify: Nicholas Gruen of ‘The Age’ pointed out in 2012 that the cost of Dividend Imputation to the Australian people (as represented in the Government) of over $20 billion a year!  

The result of falling Company Tax, dividend imputation and other pro-corporate measures has been much lower levels of tax paid by business, and the effective consequence of ‘corporate welfare’, in tandem with other effective corporate subsidies. 

For instance David Holmes  at ‘The Conversation’ has noted– “the fuel tax credit scheme to the mining industry”  which delivered $2 billion in corporate subsidies for mining corporate interests in 2011 alone; and a total of over $5 billion all up.

But it goes much further than this.  Corporate welfare can also be interpreted as taking the form of a falling minimum wage and a falling wage share of the economy. In Australia specifically the wage share fell by about ten percentage points since 1959.  (see the associated graph via the hyperlink above)  That means higher levels of exploitation of working people by business. That is, Australian workers are subsidising corporate profit through lower relative wages.

Further, there is an assault on welfare rights to ‘make room’ for effective corporate tax subsidies; and ‘punitive welfare’ , ‘work for the dole’ etc, effectively reduce the bargaining power of workers because of an insecure and desperate ‘reserve army of labour’.

Also consider the proliferation of ‘user pays’ measures. (for example for access to transport infrastructure;  school ‘levies’; a higher cost of living re: water and energy etc)  User pays mechanisms can only spread as a consequence of lower taxes.  What we do not pay for collectively as tax payers, we will pay for (and usually we will pay more) in our capacity as private consumers.   

Declining levels of corporate contributions (via tax) to the construction of infrastructure, and the development of skills which the corporates benefit from – means the burden is increasingly paid by workers, consumers and individual (private) tax payers.  More corporate welfare!

Privatisation of communications, energy and water utilities and assets such as state-owned banks also saw an end to progressive cross subsidies. At the same time – progressively from the 1980s and 1990s - a more regressive tax mix (including the GST) ‘began to bite’.

Importantly, the argument that rates of corporate and personal income tax must fall because of ‘competition’ does not apply to all companies and individuals.  Many companies cater to Australian markets and Australian consumers.   The threat of capital flight is not universally applicable; and contributing to a ‘race to the bottom’ on corporate tax will result in spiralling and out-of-control corporate welfare.  Global action is necessary to stop the existing ‘race to the bottom’ on tax. 

To get the situation in perspective: Company Tax (now 30 per cent)  has been reduced by approximately 20 percentage points since the time of the Hawke Labor Government. 

The cost to the Australian people of this is tens of billions in revenue annually - which might otherwise have been directed towards infrastructure and education (which the corporate world benefits from after all), as well as health, social services and welfare. 

Even though a return to the ‘high water mark’ of corporate tax may not be possible, an increase to levels enjoyed by other advanced economies might be doable, and would make a big difference.  (nb: US Company Tax goes as high as 39 per cent; Japan 37 per cent and France 34 per cent – see HERE)

Furthermore, arguably most Australians are not so ‘mobile’ as the proponents of lower income tax suggest either.  Taxes also contribute to the quality of infrastructure and services which underscore the desirability of living in particular country. This includes the professionals which some say are likely to ‘pack up and leave’ if progressive income taxes remain.   Indeed the quality of education, services and infrastructure also acts as a ‘pull factor’ for investment and skilled labour.

Income Tax and GST

Treasury is also pressing for lower income taxes and a higher, less discriminate GST.  (eg: apply it also to education and food)

But because apparently an increase in GST is rejected by the Andrews Victorian Labor Government we might hope for a more equitable alternative.  

Unfortunately, though, it is more likely we will simply see further austerity.

The Treasury white paper apparently complains that only Denmark relies more on income and company taxation than Australia.   But ‘just because other people are doing something’ is not a strong argument to follow suit.  More appropriate would be to consider what –if anything – is wrong with the Danish tax system and economy.

Wikipedia states of Denmark that:

It has the world's lowest level of income inequality, according to the World Bank Gini (%),^[8] and the world's highest minimum wage, according to the IMF.^[9] As of January 2015 the unemployment rate is at 6.2%, which is below the Euro Area average of 11.2%.^[10] As of 28 February 2014 Denmark is among the countries with the highest credit rating.

So Denmark has a strong economy.  It has chosen ‘a different path’, say, compared with the Anglosphere. But its path of high, progressive taxes, labour market regulation and strong social welfare works! 

Finally the Treasury White Paper has considered the threat of bracket creep, and apparently the Abbott Conservatives are considering an increased GST as an alternative.

Bracket Creep refers to workers being pushed into higher tax brackets as a consequence of inflation, and (only nominally) increasing wages.  Both Labor and Liberal governments have a history of dealing with bracket creep by returning the proceeds to tax-payers through tax cuts.  Though even under Labor arguably this has sometimes been dealt with in a regressive way.   Higher brackets have been eliminated or cut - or raised so high as to minimise their progressive impact - and restrict (relatively) strong progressive taxation to only the most wealthy of all.  Arguably this is to the benefit of the upper middle class and the wealthy; and to the detriment of working people, including the working poor.  It means the working class and the poor pay more proportionately; and that those in need suffer with the constriction of the social wage and welfare.

But this is not an honest Liberal-National Federal Government.  Joe Hockey made the ingenuous claim, for instance, that Australians pay 50 per cent of their income in tax.  

As Ben Phillips explained at ‘The Conversation’:

“ Nobody in Australia pays 50% of their income as personal income taxation. According to NATSEM modelling, around 3.5% of those who have a tax liability actually face a top marginal tax rate of 49 cents in the dollar. Around 25% of taxpayers are paying a top marginal tax rate of at least 39 cents in the dollar.”

To summarise – Australia’s income tax system involves several brackets.  Higher brackets and rates only apply after specific thresholds are met. So as Phillips insists: NO-ONE is paying 50 per cent of their income in income tax! 

Hockey is not stupid.  Surely he understood this.  Apparently he was attempting to tap into populist anti-tax sentiment through a deceptive and false argument.

But depending on your notion of ‘the good society’ tax as a whole needs to go up; and the tax and spending mix also needs to be reformed.

Negative Gearing, for instance, benefits upper middle class investors; but does not create much in the way of new employment.  And important social programs demand higher levels of social expenditure.

Crucial priority areas which need substantial public funding include:

·         Full implementation of the National Disability Insurance Scheme as well as ‘lifting up’ the standards and resource base for state schools; Extend the NDIS to apply to aged disability pensioners

·         A big public investment in a National Aged Care Insurance Scheme: to provide for the needs of aged Australians both at home and in care

·         Investment in a comprehensive Medicare Dental Scheme

·         Implement Programs to ‘Close the Gap’ on both Indigenous Life Expectancy and Life Expectancy for the Mentally Ill

·         A big investment in new Public Housing stock – solving the housing affordability crisis by increasing supply

·         Fair Welfare and amelioration of Poverty – Raise all welfare payments by at least $35 a week on top of the current indexing arrangements; Thereafter implement fairer indexing arrangements for Newstart, Sole Parents and Student Allowance;  Relax criteria and significantly slow the withdrawal of payments for disability pensioners attempting to re-enter the work-force; Eliminate welfare poverty traps

·         Restructure the Higher Education Contribution Scheme (HECS); raise the repayment threshold and lower interest on debt; suspend all debt for former students who acquire a disability which interferes with or prevents work

·         Public investment in public infrastructure – Including the National Broadband Network – with Fibre to the Home Broadband

At a crude estimate these items would likely cost over $50 billion a year to implement out of an economy valued at around $1.6 Trillion.

Options to fund include Company and Income Tax reform, and withdrawal of Dividend Imputation;  but also the following

·          reform of Superannuation Concessions for the wealthy and the upper middle class*

·         cut Negative Gearing and plough the proceeds into Public Housing;

·         implement an Inheritance Tax;

·         Restore the original (Rudd-inspired) Mining Tax

·         Increase and progressively restructure the Medicare Levy

·         Implement a banking sector tax on super profits

·         Implement progressively-structured infrastructure levies on business and individual taxpayers– to provide for communications, transport, energy-related and water and sanitation related infrastructure – without regressive user pays mechanisms or inefficient/wasteful private finance

·          Implement a progressively structured Aged Care Levy

The Treasury ‘white paper’ on taxation seems at a first glance to largely comprise a ‘wish list’ for Liberals pursuing an ideological ideal of small government, low taxes, and high levels of inequality. (which the Liberal ideologues put down to ‘merit’)   Labor and the Greens need to develop their own responses.  And hopefully this post will contribute meaningfully to that process.

 

*It should be noted, however, that even $1 million in accrued superannuation will  provide a relatively modest retirement income of $33,000 a year.  (compared with a Single Aged Pension of just over $22,000 and in the case of a couple roughly $17,000 each)  This is far from grandiose – though assuming the recipients’ home is owned it provides relative comfort compared with those fully dependent on the Aged Pension.   (more than $10,000/year additional income)   But The Australia Institute has suggested that cuts in Superannuation Concessions  - which cost taxpayers tens of billions annually – could instead be channelled into a more robust Aged Pension – lifting the full Single Rate to just over $26,000/year, and just under $40,000/year for couples.   The rate at which the Aged Pension is withdrawn could also be slowed, benefitting those with smaller superannuation accounts – and especially women – who have suffered as a consequence of interrupted working lives and the devaluing of ‘feminised’ professions.

Budget Cuts spell Disaster for the Vulnerable

above:   Expect this to become more common on Australia's streets with the implementation of the 2014-15 Abbott/Hockey/Cormann Austerity Budget.

 

Tristan Ewins

The Government of Tony Abbott has proposed a Budget that makes a mockery of his claim to ‘spread the burden’ of ‘reform’ fairly.   The Budget has also made a mockery of the government’s claim to ‘credibility’ regarding its mandate – and the extreme violation of that which is now going on before our eyes.   Massive cuts to health, education and welfare fly in the face of the Government’s pre-election commitments.

We will now go through some of the most alarming aspects of that Budget drawing on the observations from ‘The Age’ and the “Herald-Sun” .

Health:  The Abbott Government is imposing an additional $7 charge for each GP visit, and an extra $5 for those needing pathology services. (eg: blood tests)   For those with no option but to regularly visit the doctor, and have blood tests taken, this could add up to $120 extra a year.  An awful lot if you’ve just been forced onto Newstart, or had all support payments withdrawn!  

Indeed, in  ‘The Age’ Ross Gittins argues health austerity may lead the ‘poor sick’ to delay seeking help until their conditions become acute.  And for those who do not care about anything without a dollar sign attached to it – this could cost the Budget and the economy over the longer run.

The rationale of providing a disincentive for ‘spurious’ visits to the GP is also very doubtful given the already-widespread application of co-payments;  and it is open to question whether pathology services are used ‘spuriously’ in any case.   If the government had balanced these changes with increases to pensions and progressive reform of the tax mix the policy may have sidestepped its otherwise regressive and counter-productive consequences.  But the opposite is now the case.

Education:  In higher education university fees will be deregulated leading to a ‘two tiered’ system at best. ‘Elite’ universities will be free to charge whatever they like – with the very real possibility of $100,000 or even $200,000 degrees. This ‘user pays’ aspect will also be applied to make up for an average 20% cut in Federal Higher Education funding supporting the cost of degrees. 

Abbott and Pyne argue there will be scholarships; but the reality will be a quality of education  generally dependent on the depth of a students’ pockets – rather than merit.  (as a consequence of the prohibitive cost)   Arguably ‘equal opportunity’ should involve extra and widespread subsidies and quotas for students with disadvantaged backgrounds.  And an understanding of education as ‘a social good’ beyond labour market requirements.

Student Loan repayment thresholds will fall regressively and interest rates on loans will sit around about 6 per cent.   For someone whose life is disrupted by disability, for instance, (or perhaps parenthood) university debts could easily spiral out of control.  The Conservatives claim students must ‘contribute’ towards the cost of degrees.  But surely this occurs already through the tax system; and progressive tax is the best way to ensure students (and business) contribute proportionately to the financial benefit gained.

The ‘united ticket’ on Gonski is also to be dropped assuming the Coalition wins the next election and has the opportunity to do so.  (though to be honest even Labor was not fully implementing the Gonski recommendations)

Finally on Education the School Chaplains program will receive a boost of approximately $250 million over five years.  But the contempt for which this government holds the poor and vulnerable exposes the lie of their upholding ‘Christian values’.

Local Government: $1 billion over four years withdrawn – probably leading to an increase in Rates or user pays – or otherwise a degradation of services

Aged Pension and Retirement:   The age of retirement will rise gradually to 70 by 2035; and Pension means tests will be frozen for three years – making it difficult even for part-self-funded retirees with limited means.   Arguably we are now living in conditions of great  ‘material abundance’ compared with many decades ago.  Aside from the systemic imperative of endlessly expanding markets under capitalism, abundance means arguments to ‘work us into the ground’ are not practically or morally defendable.

Other Welfare:   This is where the Abbott/Hockey/Cormann austerity really begins to bite against some of the most vulnerable of all.   Despite offensively deceitful  rhetoric of ‘spreading the burden’ the vulnerable will be driven into the most spiritually crushing poverty; and ACOSS has argued this will lead to a possible sharp rise in homelessness given the withdrawal of ‘the social safety net’.

The measures include:  

·         A six month waiting period for under 30s applying for Newstart; and then ‘Work for the Dole’ 

·         Very tough eligibility criteria for the Disability Support Pension;  particularly for those under 35

·         Unemployed under 26 forced on to the abysmally inadequate ‘Youth Allowance’

Sole Parents will also be affected by the withdrawal of Family Tax Benefit B, and deserve more robust compensatory support than Hockey’s offer of $750 per child  between the age of 6 and 12.  (see: http://www.abc.net.au/news/2014-05-13/budget-2014-ftb-cuts-worth-billions-to-hit-families/5446896 )

Furthermore: the *formula* for determining pensions will be altered by the Coalition Government.  Pensions will be indexed to inflation rather than Average Male Weekly Earnings – with a gradual fall in payments ‘by attrition’.    John Collett at ‘The Age’ believes this could cost pensioners $100 a fortnight “in several years’ time”.

The consequence will be utterly desperate circumstances for the jobless; especially the young jobless.  And those without family to fall back upon will probably end up homeless.  (those forced to move away from the support of family to find work will be hit doubly hard) This is the ‘American model’ that the Conservatives seem to be aspiring to.   The creation of a desperate class of working poor – motivated by the very real fear of falling even further down the social ladder – into homelessness; and the destruction of all hope.  But for neo-liberals this desperate ‘reserve army of labour’ is ‘functional’ in weakening the bargaining power of workers.

 It is also becoming apparent that the Federal Coalition’s $300 million cut to pensioners’ concessions will apply to everything from water to energy. (so much for fighting ‘cost of living’ pressures) Some ofthe Victorian Conservatives are outwardly angry with Abbott, as $73-$75 million in cutbacks to pensioner concessions will flow on to Victorians specifically. This could be the beginning of an internal rift within the Conservative parties: whose ‘endgame’ could include driving (or for some others providing a pretext) for desperate state governments to lobby for an increase in the GST rate, or a broadening of the GST base.



Theoretically the GST can increase in the context of a more progressive tax and welfare mix to compensate the poor and vulnerable, and average workers. But the odds are more in favour of a regressive mix – with GST ‘reforms’ hurting low income earners and pensioners again who had already been hit hard. Arguably a more regressive mix for Hockey involves a swipe at ‘the undeserving poor’ – in favour of those ‘millionaire wealth creators’, and some ‘self-funded retirees’ whose very comfortable conditions of retirement are effectively subsidised by taxpayers to the tune of tens of billions in tax concessions every year.



Also importantly: with cuts in the Carbon Tax, Mining Tax and Company Tax overall revenue is still likely to fall. The question that follows is thus: Will the GST be promoted to overcome ‘the infrastructure deficit’ – or will infrastructure privatisation reach previously unheard of extremes; with the public being fleeced in the context of ‘user pays’, and the relatively unfavourable cost structures of private enterprise? Few in the Liberal Party (or even Labor) look set to accept the proposition that a mixed economy is better for capitalism, and better for workers and the disadvantaged at the same time. So this Budget is likely only ‘round one’ of a protracted assault upon Australia’s social wage and social insurance.

Conclusions

Those enjoying incomes of around half a million a year will have to pay $6400 extra in tax. But again in a morally abhorrent fashion the government is contending that this has seen a ‘spreading of the burden’.   While millionaires will barely notice the ‘mosquito bite’ that is the temporary, so –called ‘budget repair levy’ – the effect on the poor and vulnerable will be utterly crushing and permanent.

‘The Age’ argues that the Coalition is now set to withdraw $80 billion “from schools and hospitals over the next decade.

Hockey argues Australia is “a nation of lifters, not leaners”.  He has little appreciation of the fact some of us have no choice to lean lest we fall down.  He is willing to judge the vulnerable; but he is unwilling (and probably unable) ‘to walk in their shoes’.    Under such circumstances the civilised and compassionate thing to do is to provide support for those who have the need.   Altering the formula for calculating pensions as they are, the Conservatives instead exhibit contempt for these people.

The Liberal Government would likely want to play down the legitimacy of claims to disability pensions on the basis of mental illness, for instance – playing upon popular misperceptions in order to legitimise a callous agenda.  Liberal MP Andrew Robb could possibly set them straight on that were they willing to listen…  If he has it in his heart perhaps he should make some kind of statement against these attacks against disability pensioners.  (many of whom do not have relative material wealth to fall back on)

Finally ‘labour conscription’ applied to disability pensioners able to work 8 hours or more a week  comprises further cruel exploitation of the most vulnerable.   Better to provide positive incentives for flexible community work – with untaxed payments on top of the pension -  rather than ‘the big stick’.  Flexible opportunities are crucial as disability can inhibit a person’s ability for regular work.

Abbott’s radical abandonment of the welfare state comprises both a rejection of ‘Catholic social welfare Centrism’, and also of the very-conservative but welfare-minded tradition of the Democratic Labour Party from which Abbott originally emerged.  It flies in the face of Pope Francis’s warnings about the dangers of unbridled capitalism lacking of social conscience.

What remains to be seen now is how Labor will respond over the coming years. Will Shorten ultimately capitulate on welfare, social wage and social insurance in order to maintain ‘small government’; or will he follow the principled path instead of ‘short term opportunism’?

In the meantime progressive social movements need to coalesce and prepare for the fight of their lives.

 

Hard Copy Sources:  ‘The Age’ and the “Herald-Sun'; May 14th and 15th 

Things to Think About as the Federal Budget Approaches

above:  Joe Hockey and Tony Abbott will claim Australia 'is living beyond its means' - but behind this rhetoric there is simply an Ideology of small government - regardless of the human cost.

 

Tristan Ewins

As the Federal Budget approaches for 2014-2015 there has been speculation to the effect that the Government may resort to PAYE income tax bracket creep or a GST hike in order to fund its spending.   The ALP is rightly critical of any GST option that is not part of a broader progressive package. (perhaps Shorten may not even support a GST increase in any form or context) Increasing the GST base - either generally, or by ‘broadening its base’ to apply to food and health -  could be highly regressive.  But the bracket creep option is also potentially regressive – as low income earners could see themselves pushed upward into higher brackets without any real increase in their disposable income. (Again: it depends on the ‘overall package’ of the tax/welfare mix)

Further, the Government is considering raising the age of retirement, or cutting back Aged Pension eligibility.  Some are also agitating for a cut back in the Disability Support Pension rate – and possibly also eligibility.  That includes the Treasurer himself, Joe Hockey.

The ‘pension option’ is deemed by some to be ‘inescapable’ because of the ageing population, and the ‘incentive’ for people to claim the DSP as opposed to NewStart. 

We are living longer, it is true – but it is not true for all of us.  And indeed – while some are living longer – they are also living with loneliness, frailty, and sometimes indignity.   This begs the question why higher Aged Care expenditure is not on the agenda – as opposed to pension austerity.  

There is also the question of what matters most in life: the chronic capitalist commitment to endless economic growth regardless of the social cost – or the opportunity for older Australians to enjoy a retirement in comfort and dignity; enjoying opportunities for personal development not possible beforehand during their working life.

Finally – we need to maintain perspective. 

‘Deloitte Access Economics’ claimed the Government could save $2.4 billion over four years by limiting increases in the disability pension to inflation.  But when placed into perspective this is pittance to the Government when compared to the effects on the comfort, dignity and relative independence of the disabled.   And even if this amount would grow as the aged population increases,  according to ‘Wikipedia’: “the economy of Australia is one of the largest capitalist economies in the world with a GDP of US$1.57 trillion.”  Despite an ageing population – caring for those people will still be ‘well within our means’.

So while the Disability Support Pension costs “$15 billion a year” and the Aged Pension currently costs $38 billion  – probably rising to $55 billion in 2050  – that needs to be considered in the context of a (current) GDP of approximately $1.6 TRILLION. (Aus dollars; and a much larger GDP by 2050 also!) 

And while the Government claims it will not attack existing disability pensioners – the cost over the years might be high in the form of attrition against new disability pensioners.

Indeed, there is even the danger that the National Disability Insurance Scheme itself may come under threat; or that only those with the most profound physical disabilities will be considered worthy of support by a government trying to ‘wriggle out’ of previous (pre-election) disability commitments.

So while the Government could save some money through attacks on the living standards, dignity and relative independence on the disabled (linking the pension to inflation rather than wages growth), it should be honest that its real motive is not some ‘budget emergency’ – but an Ideological commitment to small government no matter the human cost.

‘Pension austerity’ needs to be considered in the context where all Australian families should benefit from the social insurance paid collectively by all of us – for the sake of our peace of mind – both for ourselves and our loved ones.  And also hopefully because we care about each other as a society.This must include a robust disability pension alongside robust disability insurance.

For those who care about distributive justice, and compassion for the poor and vulnerable, surely there must be better solutions than what is apparently being considered by Hockey and the Liberal Cabinet. 

And indeed there ARE better solutions.  Superannuation Concessions could be wound back – and income tax increased on the basis of a progressive restructuring. Tens of billions could be saved here alone.

To elaborate: It is true that tax cuts delivered overwhelmingly to upper and middle income Australians during the Howard years were recently estimated as costing the Budget around $40 billion a year alone.  And as Richard Denniss has argued on several occasions – superannuation concessions have been of benefit largely to the top 5 per cent income demographic (millionaires basically), a well as the ‘upper middle class’; and more broadly are estimated by the Treasury as costing “$45 billion a year by 2015.”

To summarise: The Government has several potential alternatives on the table they could consider – and the Shorten Opposition should be pursuing these progressive options also.

First: Wind back superannuation concessions for the wealthy and the upper middle class, saving tens of billions.

Second:  Restructure personal income tax.  Perhaps allow bracket creep in the higher brackets – but INDEX the lower two brackets. And perhaps add a bracket for the highest income earners.

Third:  Increase the GST – but only as part of a ‘total package’ which includes increased welfare, tax credits or other tax cuts for lower income Australians, maintenance of exemptions on food and health, and extension of GST exemptions to funerals as well.  Calibrate the overall ‘tax mix’, here, to deliver more progressive outcomes.

Fourth:  Embrace the necessity of ‘larger government’ if ‘the Australian way of life’ is to be preserved – including a fair age of retirement and protection of the most vulnerable from grinding poverty. In this acknowledge that ‘the size of government’ in Australia is already low by international standards.

Fifth:  If the Government is concerned there is an ‘incentive’ for pensioners to apply for the Disability Pension because of the extraordinarily low Newstart unemployment benefit – then INCREASE NEWSTART to respectable and socially sustainable levels – and acknowledge that while the Disability and Aged Pensions are higher – disability and aged pensioners are still living in poverty!

Sixth:  Reconsider spending priorities with ‘upper middle class welfare’. Specifically, reconsider the structure of ‘Paid Parental Leave’, and impose tighter means tests of Private Health Insurance Rebate payments.

Budget pressures also need to be considered in the context of a growing infrastructure crisis.

Federal and State Liberal Governments are at odds with construction unions – not only because of  alleged criminality – but more crucially because there IS an infrastructure deficit – which when combined with robust conditions for workers in the Construction industry make it harder to maintain ‘small government’ alongside basic transport, communications and education infrastructure demands.  And construction workers should not have to pay the price for a right-wing Ideological fixation on reducing the size of government.

Regrettably, there is also an Ideological opposition to public housing at the same time as the dream of home ownership has drifted out of the reach of so many young Australian families since the Howard-era housing boom.

Some Liberals had  considered the GST option perhaps because they realise the infrastructure deficit will have consequences that ‘flow on’ to the private sector. (though in Victoria Napthine now rejects the GST option)   

We need to consider both the impact upon our competitiveness from the ‘infrastructure deficit’– but also the social cost to poorer families in emerging suburbs which lack transport infrastructure and schools.

Finally, today's Conservatives could do worse than to consider the example of the German Christian Democrats from the 1950s – who embraced a "social market" model. As Eric Aarons has explained,this approach suggested "a social vision couched in moral as well as economic terms…", and "recognition of the fundamentally social nature of organised production". Further, it implied a "moral community" "required to legitimate the social order…" , and the"[prevention] of the emergence of a 'two-tier' society" including a layer of permanently poor. (Aarons pp 33-34)

Christian, 'compassionate conservatives' in the Liberal Party do not have to follow the austere, heartless path of economic neo-liberalism. While this writer is a proud liberal democratic socialist as well as a Christian, sometimes it is necessary to promote lines of communication when so much is at stake. We cannot support this kind of 'neo-liberal class war' against the vulnerable and disadvantaged: a budget which hits the poor and the vulnerable in order to redistribute wealth towards the wealthy and the upper middle class.

 

Aarons, Eric; Hayek versus Marx And Today’s Challenges; Routledge. New York, 2009