Gillard gets it right

Ever since the Hawke government announced the “Trilogy” commitments in 1984, promising no increase in the revenue and expenditure shares of national income, Australian politics has been, in effect, a conspiracy of silence about the central issue of economic policy, that of the appropriate balance of private and public expenditure. The steady growth in demand for services like health and education has ensured that no reduction in the public sector share has been feasible, while the market liberal dogma enshrined in the Trilogy has prevented any increase.

In retrospect, it’s striking that Hawke’s commitment came just after the reintroduction of Medicare, funded (in part) by a levy on all incomes. Medicare’s success has made it politically untouchable. On the other hand, it has been assumed (though without much supporting evidence) that any increase in taxation (not matched by offsetting cuts) is politically impossible.

The Gillard-Swan government was, until yesterday, ruled by this doctrine. With their unfortunate habit of making categorical commitments out of aspirations, both Gillard and Swan had repeatedly ruled out a levy to fund the National Disability Insurance Scheme (by contrast, “conservative” state premiers like Newman were happy with the idea) But, as a recent Grattan Institute report has made clear, there is no way of meeting the needs for health and education without a substantial increase in revenue (as well as cuts in low-priority direct expenditures and tax expenditures).

So Gillard has announced a proposal for a 0.5 percentage point increase in the Medicare levy, raising $3 billion a year. Abbott has equivocated so far, but has stated his support for the NDIS, which leaves him no honest options except to go along.

If we could achieve consensus on paying for improved services through higher taxation in this case, we might finally have a serious debate about what, as a community, we are willing to pay for.

61 thoughts on “Gillard gets it right

  1. @kevin1
    Saul Eslake (Liberal Party member) has a nice list of rorts too:

    ”I have to translate the words ‘negative gearing’ to people overseas because it just sounds crazy to have a system that rewards people for losing money. Removing it would be close to the top of my agenda.

    I have a list of what I regard as the worst tax decisions of the last 20 years. One is the halving of the headline rate of capital gains tax [in 1999] that made negative gearing attractive. The others are the abandonment of indexation of petrol excise, the Senior Australian Tax Offset – the measure that says if you are over 65 you pay less tax on a given amount of income than if you are under 65 – and the abolition of income tax on super fund earnings paid to people over 60.

    ”They would be my contenders for the dumbest tax decisions of the last 20 years. Frankly, I can’t choose between them.”

    Peter Martin The Age, 1 May 2013″Negative gearing losses a key drain on revenues”

  2. John Quiggin makes an excellent case. It is interesting to note that those who criticise the NDIS do not apply the same logic and reasoning to the Opposition’s position. If the NDIS will not deliver for those with disabilities, then why are those with disabilities and their carers so ardently in favour of it? Private insurance is profit based, public insurance is focussed on providing the service. The Coalition’s only committed promise on Medicare is to devolve health care to local communities and hospitals, which sounds like the Federal Government will absolve itself from funding public hospitals. There is no commitment to funding from the National level. If Medicare is privatised, which appears to be the intention of devolving to the local level, it will not just be the disabled who will suffer as a result of a profit-based health care system.

  3. Barry Brookes expressed concern that the increased levy would mean that people would have less money to spend at his stores. I expect that he will chuck a fit once I tell him that it costs me 28 cents to send a text from my mobile phone. After all, that’s all money I could be spending at Myers. I feel glad that Barry will no doubt soon be crusading for economic justice for the poor and/or unsociable Australians using prepaid mobile phone services.

  4. Arrrgh! I got my Brookes mixed up! I meant Bernie Brookes! I don’t know how I could have made that mistake! Well, actually I do know, so I guess that makes me a liar.

  5. @John Quiggin

    Thanks, I’ll let it go.

    Simply restated:

    Billions will be spent. Even my critics here can’t be specific about how this thing is going to work and exactly where the billions will go. I am generally concerned about transparency, oversight, accountability and (a word I despise) “outcomes”.

    I see that the unbridled joy has just started to be tempered with some circumspection about those very issues (here and in the general media) – I see that as a positive thing.

    The future will tell whether I had any reason to be concerned about those things or whether I was just an untrusting fool.

  6. @Megan
    Megan, there is a difference between a blueprint (which is what you want) and a roadmap (which enables a choice about direction but the destination is unclear.) The latter is uncertain (it’s a vision) but wouldn’t you expect “real” change – root and branch – to be like that? The journey unveils knowledge about what we want.

    If you think this is a bunch of dreamers indulging themselves, I hope you look at the PC Report (hey, they are as hard-headed as it comes!) and especially the “cameos” I referred to in a previous post, which put some flesh on the bones of the model, and are real scenarios about diverse beneficiaries. The benevolent/govt led model is out of date in today’s society where distributed knowledge and “bottom up” driven programs are the only way forward. People with disabilities don’t want to be “dependents”, just part of a society which acknowledges diversity, and their outsider status means they often know more – living in a mainstream and an alternative culture – than what “we” do!

    This provides the opportunity for social transformation through structural reform because it hands back decision making power over everyday living. It will show what’s possible when trust and power is devolved to the people who are supposed to benefit, and potentially will open the eyes of many mainstream people who need to see “change in action” about how it is possible, and can be initated from below.

  7. @kevin1

    I’ve been asked to drop it.

    Please don’t take any lack of further comment or response from me in this thread as acquiescence, concession or acceptance of anything you’ve written.

  8. @Megan
    That’s wrong. Our host JQ said “So, I’ll invite you to restate your position briefly, then take this debate to the sandpit.” This is not closing down dialogue, and I’d like to continue it. I don’t expect “acquiescence, concession or acceptance”, just dialogue – this is an important discussion. Please continue to put your opinions out there and engage with others’ opinions.

  9. @kevin1

    I’m not sure an assertion of interest in continued dialogue should commence with “That’s wrong.”

    I wasn’t going to raise this but, are you aware that the organisation behind the site you linked to at #12 is run by John Della Bosca?

    I will definitely continue to put my opinions out there. Nothing has stopped me from doing that in the past and nothing will stop me from continuing to do that, but thanks for the encouragement.

  10. @Megan
    Simply put, the billions of dollars will be spent on giving people with disabilities the things they need.

    The lack of specificity is because people with disabilities have such widely varying needs. It’s ridiculous to ask for a specific list of every specific thing that will be funded, because it’s impossible to make such a list.

    Simply put, again, the way it will work will be that people with disabilities will write plans that describe what they need, and funding will be available for whatever’s in those plans once the plans have been approved.

    Why you (or anybody) would have a problem with either of those ideas is more than I can see.

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