Responding to the 2012 Federal Budget – Better Late than Never!

above:  Treasurer Wayne Swan looking very satisfied with the 2012-13 Federal Budget

In this 'Left Focus' article Labor activist Tristan Ewins examines what Labor got right in its Federal Budget; what it got wrong; and the what the Conservative Federal Opposition's response says about Liberal Party Ideology.  Debate welcome!

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Tristan Ewins, May 24th 2012

Recently at this blog we discussed what would be desirable for the 2012 Federal Budget.   A few weeks after we ask the question: Was this the ‘battler’s budget’ Swan and Gillard have claimed it to be?; and on the other hand – have there been missed opportunities?

Summarising the coverage in ‘The Age’ and elsewhere the following features were notable:

Firstly there was a threadbare surplus of $1.5 billion – with over $30 billion of savings – but nonetheless a surplus.  Whether a surplus was actually necessary or desirable at this point is open to question.  On the southeast coast there appears more of a need for stimulus rather than austerity.  Bringing forward infrastructure projects there would therefore seem advisable. Certainly achieving a surplus has loomed as a political imperative for Labor, and despite recent (and rare) questioning of this ‘imperative’ in the media, past coverage had consolidated the impression that consistent and continuous surpluses were equal to “sound economic management”.  Liberal claims that Labor had not delivered a surplus since 1989-90 were hurting in the wake of that past, basically uncritical media discourse.  On the other hand a balanced budget over the course of the economic cycle is desirable; with debt servicing weighed against growth, improved capacity and productivity stemming from social investments.

Some of the largest savings were made from Defence – “Cut by $5.5 billion over four years”.  Certainly this was preferable to savings in social programs and welfare; although a growing Australian nation holds the prospect of more self-reliance in Defence over the long term.  This also could mean the prospect of greater foreign policy autonomy.

The Government has also saved approximately $1 billion, cutting by half Superannuation tax concessions for income earners on over $300,000/year: which surely was welcome, but arguably did not go far enough.   

Indeed the Australia Institute has argued that the cost of superannuation concessions has blown out to about $30 billion a year; and Richard Denniss specifically has claimed that $10 billion of this goes to the top 5% of income earners. (!!!) This money could have provided a fair go for single parents; improved the shamefully regressive ‘Newstart’ unemployment allowance by $50/week, and radically improved the quality of Aged Care for those needing high intensity care; and those preferring low intensity care in a more social environment. It also could have been redirected into mental health services where the government has a record of “robbing Peter to pay Paul” rather than sufficiently expanding funding for all areas of real need.  Setting the ‘high income benchmark’ at $300,000/year is being far too generous for many who are on ridiculously high incomes: and yet single parents are singled out to be pushed on to the Newstart Allowance if they do not find work – with the welfare of their children cast into serious doubt.   The rationale is not to upset so-called ‘aspirationals’ – But arguably there is more to gain electorally by consistently and visibly assisting low to middle income groups.

(See: http://www.abc.net.au/news/2012-05-08/swan-scrapping-company-tax-cut/3998784 ;  http://www.tai.org.au/?q=node/277 ; and http://www.abc.net.au/pm/content/2012/s3499255.htm )

A key theme for Swan was ‘spreading the benefits of the boom’; and yet the mining tax was not expanded in scope or degree.  Previously the Greens had been on record claiming that the cost to the Budget bottom line, here, was in the vicinity of $100 billion over ten years.   This begs the question: What kind of social and infrastructure investments could have been gained through a revision of this policy?  And what kind of effective cross-subsidies could have been provided for manufacturing, retail, tourism, education – all sectors struggling in the wake of the high dollar driven by the mining boom?   (See: http://greens.org.au/content/mining-tax-needs-review-ensure-revenue-australias-future )

The projected cut in Company Tax has been deferred – but should have been shelved entirely.  By ‘trumping’ Abbott with a similar 1.5% levy on big business as planned with his own paid parental leave scheme,  Labor could redirect that money to further initiatives in Aged Care, mental health or further cost of living relief for low and middle income Australians.  This would ‘back Abbott into a corner’, making it hard for him to justify his priorities; and making it difficult for him to impose a further Company Tax levy on top of Labor’s levy. 

Money could also have been directed in future social finance and ownership of transport, energy and other infrastructure – with the savings from lower borrowing costs, productivity agreements with unions, and a non-profit footing – delivering very significant savings for consumers.

Meanwhile – though Foreign Aid is rising by $300 million, Labor’s promises to more radically increase aid have been reneged upon – at least for the time being.  This will save an approximate $2.9 billion annually. But the question nonetheless looms: with more far-reaching tax reform could Labor have avoided having to make such “Hard Choices” on Budget priorities?   (See: http://www.smh.com.au/opinion/blogs/the-party-line/should-a-promised-boost-to-the-foreign-aid-budget-be-deferred-for-a-year-to-help-return-the-budget-to-surplus-20120510-1yei6.html )

Other crucial policy areas included $1 billion over four years “to kickstart the National Disability Insurance Scheme (NDIS)” ; “$577 million over five years to help aged Australians remain at home” and additional payments “of up to $210 a year for unemployment and similar benefits.”  (‘The Age’, May 8 and 9 2012)  

Providing tangible results for the NDIS ahead of the next election could be crucial in establishing the credentials of the government as being based on more than just ‘talk and distant commitments’.  So bringing forward the NDIS as much as possible is a very welcome development.  Though as this author has also argued in the past: the proposed Aged Care reforms while welcome do not go nearly far enough to provide for the basic needs of some of our most vulnerable aged Australians.  More financial support is needed for Carers; and more funding is necessary for residental care for those who choose it – and those who require high level care and do not have a  choice.  Sustainable quotas are also necessary for aged care workers and nurses; and resources to improve quality of life for all kinds of aged Australians suffering social isolation, financial stress, difficulty with day-to-day living, and the indignities that come from an under-resourced, sometimes profit-driven and under-regulated residential care sector. 

Over at ‘The Conversation”, meanwhile, there has been the observation that the Federal Budget “includes $515.3 million dentistry package” with  “$345.9 million…used to treat patients on long waiting lists and providing other vital services to adults.”  See:  http://theconversation.edu.au/what-the-budget-means-for-dental-care-in-australia-6792    But the Greens were justifiably critical of Government plans to axe the Medicare Chronic Disease Dental Scheme,  and have argued for means-testing of the scheme instead. 

However the flagship programs of Labor’s 2012 Budget were definitely its Cost-of-Living initiatives.   The Labor website proudly proclaimed the following initiatives on May 8^th” aimed squarely at “low and middle income families”: 

• An expansion in FamilyTax Benefit A with an increase of the benefit to low and middle income families with two children to $600/year, and $300/year for families with a single child.

• A “Schoolkids Bonus” to help 1.3 million low and middle income families meet the costs of schooling: $410 for each primary school child, and $820/year for each child in high school.

• Support for “the most vulnerable Australians”; Cost of Living Assistance for a million Australians: “$210 a year for singles or $350 a year for couples”; with “lump sum payments will be paid twice yearly”

• “tax cuts will be delivered in 2015‑16 for all taxpayers with incomes up to $80,000” through an increase in the tax-free threshold”

In ‘The Age’ such new initatives were given a price tag of about $5 billion – So they are inarguably very significant!

The government also stood on its record of increasing pensions in past years, promising “a new Low Income Supplement of $300 per annum” for “Any low income households that do not receive enough assistance through tax cuts and increases to payments to cover their average expected price impact”. (presumably in reference to the Carbon Tax)   (See:  http://www.alp.org.au/federal-government/news/helping-households-with-the-cost-of-living/  )

Imaginably this could be the beginning of an ideological offensive by Labor on the issue of distributive justice.  For years now the monopoly mass media have reinforced the perception that redistribution equals ‘class war’; while attacks upon welfare and organised labour apparently do not!   Abbott and the monopoly mass media have directed salvo after salvo against the very principle of redistribution to correct injustices inherent in unregulated laissez faire capitalism.  Facing very little criticism or scrutiny in the media,  Abbott even begrudged the very basic social solidarity of the once-off flood tax – to assist those effected by the Queensland disasters. 

Meanwhile important social initiatives have been dismissed in the press with the loaded expression “cash splash” – the intent clearly being to infer economic irresponsibility in a blatant piece of popular-psychological manipulation.

Yet as against this cyncial and socially damaging political tactic this author remembers very clearly former PM John Howard supporting the principle of progressive taxation some time before being defeated by Kevin Rudd in 2007.

And a very different Tony Abbott seemed to emerge from the Opposition Leader’s book ‘Battlelines’.   The following observation was made at the ‘Left Focus’ blog in 2010:

Interestingly, Abbott raises the opposition between compassionate conservatism and the kind of ruthless neo-liberalism that cares nothing for the social consequences of austerity (pp.xii-xiii). Here the author juxtaposes the “[single-minded] cutting [of] public expenditure … striving to deliver smaller government” to “compassionate conservatism, stressing solidarity with those who are doing it tough” (pp.xii-xiii). By this reckoning the “social fabric … has to be respected and preserved”, while individuals should enjoy such circumstances that they are “empowered, as far as reasonably possible, to live the life that he or she thinks best” (p.xii).  (references from ‘Battlelines’ by Tony Abbott) 

(see:http://leftfocus.blogspot.com.au/2010/04/battlelines-whats-tony-abbott-really.html )

The Conservatives need to decide whether to pursue a mix of economic conservatism and political liberalism; or whether to adopt a ruthless neo-liberalism which cares little for the poor and disadvantged; and for the political and civil liberties of citizens.  It is important to observe, also, that ‘economic conservatism’ need not imply economic liberalism, but rather could accept Keynesian assumptions (in past accepted by Liberal governments) on the mixed economy and counter-cyclical demand management.  Yet Joe Hockey seemed to be quite clear recently on QandA that he cared little for the traditional Australian spirit of egalitarianism.

But for Labor stronger action is necessary to place class faultlines and class interests in clearer relief.  The principle of class struggle is seen by many as being discredited even on the Left – which has reverted to a kind of modest social liberalism. But when we speak of class interests and class struggle this need not imply terroristic Stalinism; or to begrudge citizens their human and civil rights on the basis of class.  Rather the purpose of democracy is at least in part to set free oppositions of interest and provide a framework for their peaceful resolution.  Or where this does not work, to contain conflict to forms of civil disobedience which do not descend into an escalating cycle of violence. 

It warrants the question:  What problem does Tony Abbott and the Liberal Party have with workers and disadvantaged groups organising industrially and politically to pursue their legitimate interests; Indeed – to pursue justice, compassion, and  ‘the fair go’?  

And if he desires an agreed class peace, how does Abbott suppose this is possible on the basis of ruthless neo-liberalism – as opposed to the kind of Centrist Catholic Social Welfarism (or a ‘Social Market’ such as exisited under the Christian Democrats in post-war Germany) this author had hoped (but not dared to believe) he may have been open to? * 

Further, if redistributive policies are nothing but a ‘bribe’ (as according to Abbott) what are we to make of the ‘upper middle class welfare’ of the Howard years: and of Abbott’s own paid parental leave which offers leave with full pay to workers on as much as $150,000/year?  (See: http://www.news.com.au/money/cost-of-living/paid-parental-leave-scheme-stays-abbott/story-fnagkbpv-1226286894077 )

For Abbott, though, this is ‘non-negotiable’ as the polls consitently inform him he ‘has as problem with women’…

Conclusion

Having to achieve more but with less can drive efficiency – so there is some benefit in a government operating under tight fiscal circumstances.  Indeed, a comrade in the Socialist Left of the ALP recently commented to me that rather than spending billions more in areas like Aged Care that we could achieve more ‘electoral kudos’ (my term) with well targeted and innovative initiatives.

But sometimes there is no getting around the need for an injection of greater resources.  Much of this year’s Federal Budget was just reprioritisation – with little new money. Again: In accepting this framework Labor will repeatedly find itself in the position of ‘having to rob Peter to pay Paul’.  In public education, aged care, mental health, welfare, public housing, disability support and services, and crucial transport and other infrastructure: ‘trying to do more with less’ can only take you so far.  For instance: the Gonski recommendations for Education simply cannot be implemented without billions in new funding; nor can a sustained introduction of Medicare Dental.

By comparison – moving initially from 100% to 75% Dividend Imputation, further cutting superannuation concessions for the wealthy top 5% of income earners, reforming the Mining Tax, and applying an ‘Abbott-esque’ levy on business via Company Tax – along with other reforms – could have grown social expdeniture by 1.5% of GDP – or approximately $22 billion in new and improved initiatives.

And yet with $5 billion of largely redistributive, social-justice, Cost-of-Living oriented policies - this is arguably a traditional Labor Budget.  It puts many of Labor’s core low to middle income constituencies first in way we haven’t seen so much in quite some time.  

Now, though, Labor needs to turn the to source of the Cost-of-Living crisis.  Firstly, this must include implementation of the Gonski recommendations – so low and middle income families can feel secure sending their children to State and poorer Independent schools – at peace in the knowledge they will not be disadvantaged, and that there is no need to ‘go beyond their means’ in providing a private school education.   And reversing privatisation, and promoting public housing and infrastructure for emerging new suburbs also need to find themeselves to Labor’s ‘policy radar’ with policies that attack Cost-of-Living pressures at their very root. 

(*though for the record this author supports an outlook of sustained class struggle; even though it is notable that the kind of semi-corporatist structures such as have existed in Sweden provided channels of mediation of interest to citizens across class lines)

Double Standards when its comes to talk of ‘Class War’

above: Prime Minister Julia Gillard

Increasingly - in the Murdoch press especially - there has been talk of 'class war' in response to even modest proposals for progressive economic redistribution.  But redistribution against the interests of the disadvantaged and ordinary struggling workers has been going on for decades; intensifying under Liberal governments.  In this article Tristan Ewins works to illustrate that point, showing such examples as the increasingly regressive tax mix, and falling minimum wages.  Ewins argues for Gillard Labor to be brave in pursuing distributive justice for the disadvantaged, and orindary struggling Australian workers.

Tristan Ewins

June 26th 2011

In a column appearing in both the Herald-Sun and The Daily Telegraph recently Miranda Devine has had another go at Julia Gillard and the carbon tax.

Condemning Gillard and the proposed tax, she characterises it as:

“Wealth redistribution, pure and simple. A year on, there’s no secret what Gillard stands for. It’s just no one can believe it.”   http://blogs.news.com.au/dailytelegraph/mirandadevine/index.php 

And this isn’t the first time Miranda Devine has used such language either.

For instance in the Herald-Sun on May 12^th 2011 she beats up the spectre of “class war taxes” in response to Labor’s Budget. ( see: http://www.heraldsun.com.au/news/special-reports/federal-budget-2011/story-fn8melax-1226054252544   )

 In response:

Briefly, the main aim of the carbon tax is to create market signals to drive changes in investor and consumer behaviour: to do our part (as all nations must) in reducing emissions .

But that established: it is possible that modest distributive goals could be pursued as a by-product of overcompensation. And why not?

This brief article will consider inequality, redistribution and the double-standards at play with language of ‘class war’ which has been so common recently.

It’s interesting, isn’t it, how attempts to tax the wealthy and relatively wealthy – to give a fair go for ordinary workers and the poor; or improve the wages and conditions of the most disadvantaged workers – is labelled “class war” in the right-populist monopoly media. And yet all these years that Australia has been drifting towards greater polarisation of wealth and income, and greater disadvantage for the poor: this has not aroused the same kind of ‘outrage’.

The wage share of the economy has been falling for decades; with an accompanying intensification of the rate of exploitation. 

Larvatus Prodeo reported this year that the wages share of national income was at its lowest level since 1964; slightly over 52%.  And to be fair the wage-share of the Australian economy had been contracting for decades under both Labor and Liberal governments; as the leadership of both parties accepted the notion that wages need be depressed to restore profitability.

See: http://larvatusprodeo.net/2011/01/06/labour-market-myth-busting/]  ;  And: http://mattcowgill.wordpress.com/2011/01/03/the-state-of-the-labour-market/

Yet if structural forces in the capitalist economic system were driving these changes; why then were workers not at least duly and properly compensated with collective capital share? 

 Even under Hawke in the 1980s, celebrated increases in the ‘social wage’ came in the form of tax cuts; and so necessarily led to a smaller pool of funds for welfare and services. A veritable ‘double-edged sword’.

But there is more. 

Under both Labor and Liberal governments – but especially under the Conservatives - the ‘tax mix’ has been restructured as to be less progressive. Income tax had been gradually ‘flattened’. Dividend imputation has reduced the proportionate tax burden of the wealthy; and the GST in taxing consumption has affected the poor disproportionately. Accompanying compensation for lower-income demographics, here, was largely neutralised by regressive restructuring of the tax and welfare mix elsewhere.

Meanwhile, concessions and incentives in superannuation for the relatively wealthy and the outright wealthy have come at the cost of potential social programs in health, education, aged care, infrastructure and welfare.  

Privatisation of retirement pensions may well lead in the future to the marginalisation of the public aged pension, with impoverishment for many women, and those disadvantaged whose labour market participation has been sporadic, or who have been trapped in ‘low-end’ jobs. 

It begs the question of whether the government should rather be pursuing a more progressive and democratic model of collective capital formation.

Furthermore for decades there has been increasing labour market deregulation, and an end to the old style of progressive cross subsidies for essential utilities as a consequence of privatisation – or of corporatisation in-anticipation of future privatisation.

Privatisation has also resulted in falling government revenues for vital social programs, and increased costs for everything from power and water, to the use of private toll roads.

‘User pays’ ends up having the same effect as regressive-flat taxation.  And demand for increased profit margins with privatisation have seen structural increases in the cost of basic necessities; while the added cost of borrowing for the private sector in order to modernise infrastructure has also been passed on to consumers.  And in these new markets – eg: for power – ‘small consumers’ are disadvantaged due to their limited purchasing power.

With regard to minimum wages, recently the ACTU has noted:

“While the average Australian income has jumped 21 per cent in real terms since 2000 and company profits have increased by 50% in the past five years alone, the real value of the minimum wage has increased just 7.1 per cent.” 

And also importantly during the Howard years:

“Average award wages dropped by around $30 a week and some award workers had their real wages cut by almost $100 a week.”

The ACTU has observed that falling minimum wages have affected over 1.4 million workers in recent years.  (See: http://www.actu.org.au/Issues/MinimumWagesCase.aspx )

And in addition to all this -  there are many workers – including on low incomes – who have faced reduced wages and/or conditions under the government’s ‘Award modernisation’ process – despite promises to the contrary.

Importantly: There are many who have no sympathy for the unemployed as a result of constant campaigns of vilification on the pretext that ‘dole-bludging’ is rife. And yet Australia has stringent active labour market policies, pursued under both Labor and Liberal governments, with provisions that could reasonably be described as ‘punitive’.

Under recent changes long-term unemployed will be compelled to work two days a week ‘for the dole’, and yet no corresponding increase in payments for these people has been announced.  http://thecourierpigeon.com.au/government-gets-tough-on-the-unemployed/851664/

The OECD has seen fit to criticise Newstart as woefully inadequate compared to unemployment pensions elsewhere.  Writing in late 2010 for ‘Inside Story’, Peter Whiteford reported how under Newstart “unemployed adults receive about $470 per fortnight”, and how  

“Since 1996 the level of Newstart for a single person has fallen from around 54 per cent to 45 per cent of the after-tax minimum wage.”  (despite the fact minimum wages themselves have fallen)

(see:  http://inside.org.au/why-unemployment-benefits-need-to-be-increased/ )

Finally, during the Howard years a number of programs sprung up that were lambasted as ‘middle class welfare’. Included, here, were Family Tax Benefits ‘A’ and ‘B’ – introduced to assist in the costs of child-rearing- and provided even to those on high incomes. http://en.wikipedia.org/wiki/Child_benefit

There has been confusion, here, on the Left, with some arguing in favour of ‘universalism’.  But while many of us (this author included) support in-principle Swedish-style social-democratic universalism, the facts ‘on the ground’ in Australia are those of a relatively tight social wage and tax regime.  With a limited scope to expand progressive taxation, and hence expand welfare and social programs - a higher degree of targeting and means testing is necessary in the Australian context.    

Interestingly, though, Bernard Keane notes at ‘Crikey’ how Labor has failed to markedly reform the Family Tax Benefits regime.  He concludes how:

“In [Labor’s recent]…budget…[Family Tax Benefit payments are] forecast to cost $18 billion in 2011-12.”

And thus

“…FTBs are now Labor’s as much as they are Howard’s, which makes the “war on the middle class” rhetoric from News Limited and its journalists even more risible.” http://www.crikey.com.au/2011/05/12/why-labor-now-owns-middle-class-welfare/

All these years ‘redistribution’ has been going on.

Redistribution from low and middle income earners to the wealthy, and to the upper middle class. 

Redistribution from workers to the ‘corporate bottom line’ as a consequence of eroding real wage share, labour market deregulation, privatisation (including ‘Public Private Partnerships) and user pays. 

And more redistribution from workers to big corporations with effective ‘corporate welfare’, as corporations no longer contribute adequately or proportionately towards the costs of education and infrastructure from which they benefit.

 There has been impoverishment of pensioners – and especially the unemployed. (again I reiterate: despite stringent and indeed punitive active labour market policies)

 And there has been vilification of trade unions and stigmatisation/criminalisation of industrial action even where only used as a last resort.  This has resulted in a greatly reduced capacity for workers to fight back in the face of these changes.

So amidst all these changes over the past thirty years or so: how often have we heard terms like ‘class war’ thrown around in the mass media as a response?  

The answer: Not often. Not often at all. 

And yet if there is the prospect of  even a mild degree of redistribution in the context of overcompensation for the proposed carbon tax, the ‘class war bogey’ is brought out just as it always is when it comes to the interests of the privileged, and the relatively privileged. 

If those on lower and middle incomes are to receive a ‘fairer slice of the pie’ in terms of the tax mix, provision of social services, and welfare for those in need, it is only reasonable that those in the top 20% of incomes demographic pay their fair share one way or another.  If those on low to middle incomes are to enjoy a ‘fair go’ it can be no other way.

That said, Prime Minister Julia Gillard has recently announced that families on incomes above $150,000/year will miss out on carbon tax compensation. That’s roughly 10% of Australian families. (‘The Age’ 25/6/11)  

 Unfortunately – as far as redistribution via overcompensation goes, the kind of strategy it seems Gillard is suggesting would provide a far shallower pool of funds to work with than would be the case were the top 20% incomes demographic excluded. 

Perhaps given this context pensioners will miss out on overcompensation even under Labor; and those on low to middle incomes won’t receive the more robust degree of overcompensation they deserve.  This could prove a missed opportunity for Labor – in maximising the reconsolidation of its ‘class base’.  Although doubtless Gillard sees it as a strategic choice to keep more voters ‘on side’.

Nonetheless, perhaps it’s not too late for compromise. Perhaps if pressured by the Greens and Labor’s Left Prime Minister Gillard could strike an agreement to withhold compensation for the top 15% of households, to be redistributed to those genuinely ‘doing it tough’.  A higher carbon tax rate in this context could be another option - an alternative to lower compensation 'cut-off thresholds' - to increase the total pool of funds available for redistribution from the top 15% to those in genuine need.

Regardless of the very cautious and modest nature of Gillard’s proposal, doubtless it still will not please critics such as Miranda Devine, and other Murdoch writers.  Devine seems to have an aversion for the very concept of progressive redistribution – no matter how mild.  But as far as this author can tell she has barely considered the situation of those who have been left disadvantaged by decades of “neo-liberal reform”; and the very real process of redistribution which has occurred to the detriment of workers and the poor.   Indeed: After all these years of redistribution from low and middle income groups TO the wealthy and the upper middle class, the modest forms of progressive redistribution suggested here should simply be seen as a tentative move towards some kind of 'correction'.

Yes Labor is struggling in the polls. Elements of Labor’s core class support base have been drifting away gradually for a long time under the perception that Labor no longer represents their interests.   But the prospect of progressive redistribution to the advantage of the vast majority of Australians who are on low to middle incomes is what the conservatives are scared of.  They’re afraid of a Labor Party which takes action to re-consolidate its class base.

By contrast when the Conservatives speak of cutting taxes to reward ‘hard work’, they’re usually talking of ‘relief’ for those on higher incomes. The underlying assumption is that ‘the market is just’: that those on higher incomes deserve increased benefits for their effort.  The implication is that they work harder than others. 

 But in an Abbott ‘tax reform’ package, you can be certain that it is those on low incomes – including some very hard working people – who would miss out in outright terms compared with upper-middle class and wealthy taxpayers. 

We speak here of people on minimum wage and thereabouts: cleaners, child care workers, retail and hospitality workers, textiles workers, and many manufacturing workers.  These are the same people who would suffer from a winding back of the social wage, or the effective introduction of ‘flat taxes’ with user-pays mechanisms in the context of Public Private Partnerships.  And Abbott’s proposed tax cuts must draw from the Budget bottom-line somewhere.

Too many people have been disadvantaged and suffered injustice in recent decades. And it is a process which always accelerates under Conservative governments.

Increasingly, though, there are those who once felt they could depend on Labor to defend their rights and interests – who no longer believe this to be true.  This is even undermining Labor’s membership base; its mobilisation as a social movement.   

Now, though,  is Labor’s opportunity to re-establish its credentials as a party with values; a friend of the disadvantaged, and true to its class base.

Is this a real Labor Budget?

above: Treasurer Wayne Swan thinks he has the economic policy settings right

In this latest 'Left Focus' article Tristan Ewins asks:  What are the high and low points of Federal Labor's 2011-12 Budget?   Labor seems to be prioritising return to surplus, and containing inflation. But has social justice been lost in the process?

nb: If you find this article interesting PLS join our Facebook group - to link up with other readers, and to receive regular updates on new material.  see: http://www.facebook.com/group.php?gid=58243419565


Federal Labor’s 2011-12 Budget is framed by a variety of political and economic imperatives: fear of being outflanked by the Conservatives on the populist right with welfare and refugees; fears of inflation and increased interest rates as the economy picks up; and the symbolic drive for a surplus by 2013 – regardless of natural disasters at home and abroad which have impacted upon our economy. I intend to consider the high points and low points of the budget, with some views on how it may have been improved, and what progressives ought be aiming to achieve in the future.

Firstly, the high points

The $1.5 billion in new initiatives for mental health is both welcome and necessary. ‘The Age’ has observed there are an estimated 600,000 Australians “with debilitating mental illness”, with the most severely affected second only to indigenous Australians in mortality rates. (presumably including suicide) http://www.theage.com.au/business/federal-budget/new-services-to-benefit-mentally-ill-20110510-1ehin.html

The emphasis on ‘early intervention’ for young people is notable – as surely prevention is better than cure – most importantly in terms of preventing human suffering, but also for the budget bottom-line. Though more resources should be devoted to improving social participation and reducing social isolation.

Meanwhile some of Labor’s savings make good sense. The practice of parents using children for purposes of ‘income splitting’ in relation to the low income tax offset on unearned income will be cut back severely to $416 per annum. Tighter superannuation contribution caps for the over-50s demographic comprise an attempt to stem an effective tax-minimisation strategy, and reduced concessionary arrangements for upfront payment of HECS debt by students will save $480 million over four years, affecting mainly higher income groups. http://www.news.com.au/money/federal-budget/the-budget-what-it-means-for-you/story-fn84fgcm-1226053524859

Also very notable was the government’s announcement that it intends to enact separate legislation to means test the Private Health Insurance Rebate. http://news.ninemsn.com.au/mobile/article.aspx?id=8247906&_sp=2045&noid=6303&_s=eb0745b1-ffdd-4839-b584-91e50ee86c21

These savings are targeted for fairness, and are welcome insofar as the alternative may have involved further cuts to health, welfare, education, or crucial infrastructure. They are welcome in providing the scope to increase income support for families with teenagers in study aged 16-19, as well as ‘bringing forward’ the Low Income Tax Offset to apply to workers’ weekly pay instead of being accessible only with their end-of-year tax return. http://www.abc.net.au/news/stories/2011/05/09/3210940.htm

In relation to the government’s skills policy Treasurer, Wayne Swan had observed that: “skills shortages could constrain our economic growth and mean missed opportunities for Australians". http://www.smartcompany.com.au/economy/20110510-federal-budget-2011-3-billion-workforce-training-and-participation-projects-to-combat-skills-shortages.html

In this context the government has committed $3 billion in new money over six years including a National Workforce Development Fund (industry-based training with 130,000 places over four years), support for new apprenticeships, and incorporating a renewed commitment to skilled migration. This is the Budget’s true centre-piece. http://www.smartcompany.com.au/economy/20110510-federal-budget-2011-3-billion-workforce-training-and-participation-projects-to-combat-skills-shortages.html

There are also some bright spots amidst a largely disappointing welfare agenda. Employer subsidies aimed at helping the long-term unemployed and the disabled to re-enter the workforce are welcome: as is a restructuring of Disability Support Pension eligibility enabling the retention of some payment up to a maximum of 30 hours a week. For some disability pensioners – for instance those suffering mental illnesses – this is welcome on the basis that such peoples’ capacity to work fluctuates irregularly. http://www.jennymacklin.fahcsia.gov.au/mediareleases/2011/Pages/b05_10052011.aspx

Single Parents will also face incentives to work, with an easing of means tests. http://www.theage.com.au/business/federal-budget/tough-love-work-rules-20110510-1ehi8.html

Finally, a record $4.3 billion is being provided for the regions, targeting areas like health, infrastructure, and vocational and higher education. And an emphasis on skilled migration - with 16 000 places allocated to the Regional Sponsored Migration Scheme - will prove crucial to regions facing critical skills shortages in areas such as health services. http://www.minister.immi.gov.au/media/cb/2011/cb165287.htm

The commitment to regional Australia illustrates that where country-independent MPs hold leverage over a minority Labor government they will be in a position to ‘deliver the goods’. A mutually beneficial move could be for these independent MPs to enter into a ‘pact’ with Labor now, foreshadowing the possibility of another minority government, involving guarantees of a continued flow of resources for regional Australia. This could even provide a spur for additional independent contenders: and at least in theory provide impetus for a new party. Emphasis on consolidating regional population centres could ultimately be crucial in ameliorating the effects of urban sprawl in the major cities.

But Tony Windsor must reconsider his demand that Carbon Tax money be diverted from compensation for affected groups to investment in renewable energy programs. If there is to be new investment here it needs to be funded separately. Overcompensation and support for trade-exposed industries are just too crucial for Labor in ‘selling’ the Carbon Tax and achieving re-election. And despite talk of ‘cash churning’ the resulting market signals should still provide the desired effect.

Disappointments

Perhaps the most glaring disappointment is the government’s capitulation regarding the never-ending campaign of vilification against the unemployed, single parents and to some extent disability pensioners.
Disability Support Pension (DSP) recipients under 35 will face a more stringent “impairment test” . They will also be compelled to attend regular interviews (every three months) reassessing their capacity to work. This will apply to those “assessed as having a work capacity of at least eight hours a week.” http://www.jennymacklin.fahcsia.gov.au/mediareleases/2011/Pages/b05_10052011.aspx

With regard to ‘NewStart’, the unemployment benefit: long-term unemployed will now be compelled to ‘work for the dole’ 11 months of the year, two days a week. http://thecourierpigeon.com.au/government-gets-tough-on-the-unemployed/851664/

And unemployed 21 year olds will be shifted to the ‘Youth Allowance’. (at a rate $43 a week less than the poverty-level Newstart allowance). The targeting of this demographic seems largely arbitrary, and hence unfair. Many people will be of this age upon completion of tertiary study. For young people thrown into unemployment, and yet struggling to pay rent and bills, search for work, and feed themselves – this is a cruel blow. Perhaps some of the costs will simply be passed on to parents.

And yet Single Parents will be shifted on to Newstart Allowance (a $56/week reduction) when their child/children reach the age of 12. (down from 16) http://www.businessspectator.com.au/bs.nsf/Article/Groups-question-tough-love-welfare-GQGNM?opendocument&src=rss

One wonders whether the politicians, who expect these women (and some men) to raise a young family, and balance this task with paid work, understand the pressures and demands of raising a family alone. Do they really suppose a 12 year old child is in a position to care for themselves? The stresses of these new arrangements will undoubtedly also ‘flow through’ to young dependents in the form of emotional pressures and academic disadvantage.

The unemployed and single parents comprise ‘soft targets’, the vilification of whom is regularly beat up in the dominant right-populist monopoly media. And even still, expectations that savings can be made by targeting ‘rorting’ of the Disability Support Pension betray a lack of understanding of how debilitating some conditions – for example, mental illness - can be.

It warrants the question: does Labor accept the logic of its own policies, or is this a ‘sacrifice’ to placate those looking for scapegoats? Already Abbott is claiming so-called ‘tough love’ measures do not go far enough. So if Labor’s policies do comprise some strategic ‘sacrifice’ – then will this logic of retreat know any end??

Yet even amongst these attacks upon the most disadvantaged, ‘The Australian’ and Tony Abbott are talking of ‘class war’ against ‘middle Australia’ with some welfare cutbacks for households on $150,000/year and more. http://www.theaustralian.com.au/national-affairs/budgets/thats-not-a-knife-wayne-swan-as-budget-cuts-middle-class-welfare-but-increases-jobs/story-fn8gf1nz-1226053971008

Assaults upon the rights of pensioners, the introduction of regressive user-pays principles for everything from roads to schools, the gradual abandonment of progressive distributive mechanisms – these are considered ‘objectively sound policy’. But any attempt to achieve a modicum of distributive justice involving a greater proportionate burden upon the upper middle class is branded by the Conservatives a ‘war on middle Australia’.

Labor needs to press home the argument that someone must pay for health, education, infrastructure and the social security safety net. And if those on relatively high incomes do not pay their share then who will pay instead? Also while the very rich should pay their fair share, the tax system needs a broad enough base to fund the social necessities provided by government.

Chris Lewis, writing for ‘Online Opinion’ and quoting The Household, Income and Labor Dynamics in Australia Survey points out that restricting welfare payments to households on incomes of $150,000 and more “will [only] exclude about 15 per cent of income groups.” http://www.theaustralian.com.au/national-affairs/budgets/were-not-rich-but-wealthier-than-most-sydney-family/story-fn8gf1nz-1226054297260

Class interest is an unavoidable factor of political and economic life -although the Conservatives attempt to obscure the issue with false appeals to the principle of ‘classlessness’; where distributive justice is labelled ‘class war’ but assaults upon the most vulnerable are unquestioned. At other times fears about refugees and resentment against marginal groups are beaten up as a ‘wedge’. Finally there is appeal to ‘competence’ on ‘economic management’: usually constructed as adherence to the dominant neo-liberal ideology.

Many a radical in the 19th and early 20th Century imagined an in-built working-class majority would make transition to socialism inevitable in the context of universal suffrage. Since then, however, the class homogenisation imagined by Karl Marx was replaced by many layers of differentiation within the working class. The idea of a (predominantly white collar) middle class self-identity has long since impeded working class solidarity. Essentially, though, the Conservatives are still afraid of a Labor Party which appeals consistently, unashamedly and unambiguously to the class interests of the majority; a move which could reconsolidate Labor’s ‘natural base’.

Conclusions

This Budget – including its welfare and training provisions - is about pushing the economy to full capacity – anticipating a reinvigorated mining boom . There is the accompanying goal of containing inflation and hence interest rates and cost of living pressures. Greater participation should also ‘increase the size of the pie’ from which a larger and proportionate investment in infrastructure and social services could spring.

Labor governments of times past would attempt to contain inflation by working with the trade unions. But with the lack of such arrangements so-called ‘tough love’ measures on welfare aim to increase labour market participation by ‘any and all’ means necessary. Apparently this includes labour conscription, pressures upon the disabled and vulnerable single mothers, and continued relegation of the unemployed to dire poverty. By expanding a ‘reserve army’ at the bottom end of the labour market, Swan supposes he can contain the inflation genie.

It is conceded that labour market participation can ameliorate social isolation; though this can be pursued without the punitive elements contained in this Budget. As suggested, there are better ways of promoting growth and containing inflation than these. (ie: via agreements with organised labour which nonetheless do not erode real wages; but also through tax measures targeting consumption at the upper end to reduce inflationary pressures in the most equitable manner possible)

Despite this it is notable that Gillard Labor has broken with a long tradition amongst both Labor and Liberal governments of delivering income tax cuts ‘as a matter of course’. The political pressure to return to surplus by 2012-13, and pressures to maintain some modicum of social justice have ensured that.

Yet a higher and progressively-structured flood levy could have stemmed pressures to enact austerity. And delivering on an unnecessary and costly cut in Company Tax simply put the government under more pressure. However, a National Disability Insurance Scheme could have seen Labor ‘on the front foot’ – pursuing a big ticket reform agenda re-establishing Labor’s ‘can-do’ credentials. A ‘NDIS’ especially could have been crucial in expanding by billions real funding for disability services and income support to meet the true level of human need.

Instead the government is ‘dying a death of a thousand cuts’, depicted as indecisive, and victim to a deceptive fear campaign on the Carbon Tax.

The question that arises, therefore, is: ‘where to now’ for the government?.

Harsh ‘Work for the Dole’ provisions could actually spur public sympathy for reform of Newstart. The best could be made of a bad situation by tying these provisions to significant across-the-board increases in the Newstart pension (perhaps $50 a week), and signficantly greater increases for those directly involved in the program. Its severity could also be diluted with time; with more ‘carrots’ and less ‘sticks’. The Greens should demand such compromise through the negotiation process.

It is also crucial for Labor to drop its commitment to restrain proportionate growth in public expenditure ‘no matter what’. A NDIS must deliver significant NEW funds into the system. And in addition to existing shortfalls for services, welfare and infrastructure, sooner or later Labor must address in a progressive manner the pressures of an ageing population and a growing population.

Tens of billions are needed for aged care, health, medium-high density social housing, and transport infrastructure. This expansion cannot go on forever, but a reasonable goal for the time being would be to increase the tax base progressively by 1.5% of GDP per term of government. As this author has argued before, Labor should consider restructure of income tax or dividend imputation, a wealth tax, or a National Disability Insurance Scheme - or a mix of these options. And following a broader restructure and indexation of the bottom two income tax brackets, Labor could also let bracket creep ‘do some of the work’.

Only by meaningfully grappling with these issues can Labor overcome the impression of indecisiveness; reclaiming its status as a real electoral contender; as a government of vision, social conscience, and active social and economic reform.