No. 108

Britain runs out of money – it’s official. A lesson for Australia

STONE the crows! Didn’t Australians get the memo warning against unsustainable welfare spending?

Evidently not – or if they did nobody paid any attention to the Chancellor of the Exchequer who last week warned what happens after state spendathons. “The British government has run out of money because all the money was spent in the good years,” George Osborne said in the best example of talking down pre-budget expectations the Crows can recall. [i]

But Australians appear to assume that could never happen here, that the good times will get better, because people keep coming up with ways to increase outlays.

Lily Arthur, who represents a forced adoption victims group, came up with the spending suggestion of the week. These women needed a small Centrelink allowance, she said, “so they can get some things in life to make themselves comfortable.” [ii]

That Ms Arthur speaks for women who were terribly treated is beyond doubt and as the Crows are kindly birds they will ignore the absence of any connection between a past wrong and improving their circumstances in the present – a “comfortable” allowance – good grief!  But what scares the feathers off them is her innocent assumption that the state has both resources and responsibility to play the indulgent aunt to all.

And they are even more alarmed when putatively policy-literate people do the same thing. Like Liberal MP Russell Broadbent who launched a party-room attack on Tony Abbott’s $6.3bn plan for paid maternity. The Crows cheered this outbreak of policy discipline but alas found they cawed too soon. Russell Broadbent thinks the money better spent on the proposed national disability insurance scheme. [iii]

This is a hell of a better idea than Lily Arthur’s comfortableness benefit, even the Productivity Commission, not much known for liberality with the public purse, supports a disability insurance scheme at an estimated $6.5bn (on top of the $7bn the state now spends).[iv] But while the needs of people born with disabilities (not to mention those who acquire them through illness or accident) are manifest the question can be legitimately asked – is this a case where the state can afford to be just, let alone generous?

Especially when there are so many other new ways to expand welfare spending – like the National Advisory Council on Dental Health’s belief in “universal and equitable access to dental care for all Australians.”

Because this might cost a considerable quid, they believe the feds should first focus on the oral health needs of children and low-income adults. This is a snip at between $6bn and $10bn “across forward estimates”, which the Crows assume is a way of making proposals to pile $2.5bn per annum onto the budget for each of the next four years look less scary. [v]

The oral elite have a case, crook teeth must make life a misery and it make no sense that every Australian has a right to treatment for a pain in their guts but not in their mouth. Then again paying for it will take more change than Finance has lost under the lounge. As Health Minister Tanya Plibersek made it clear last month, when she had read the report and we hadn’t.

A universal dental scheme … would cost $5 billion to $6 billion a year. I don’t think that any government is in a position to flick the switch one day, and the next day be talking about a $5 or $6 billion dental scheme. We have to do better but we have to target the people who need the most help first.[vi]

Which is precisely what the dental gentry suggested.

And that is the point. There is a case to make for all the welfare schemes announced this week – even Lily Arthur’s comfort allowance will find friends. Just as there was widespread support for Fair Work Australia’s decision last month to pay publicly funded community agency welfare workers more on the grounds that, well they aren’t paid much and should have parity with public servants.

But equity gets expensive, there is $15bn a year in proposals debated last week. What confounds the Crows is the assumption that it can be paid for without other cuts or more taxes – which of course it can’t.

It may not seem so to the 25 per cent of Australians who pay nearly 70 per cent of income tax. [vii] However, ours is an efficient welfare system, which would horrify the pork barreling pensioners of Europe for the way it focuses assistance on the bottom quintile of the community.

According to social policy researcher Professor Peter Whitford, Australia scrubs up well compared to the rest of the OECD, with “less ‘middle class welfare’ than any other country, lower churning than nearly all other countries, and the highest level of transfer efficiency in reducing inequality.”[viii]

Even so ever-increasing demands for ever-more welfare spending, grind governments down and what may be affordable now won’t be when the economy turns down, as it will – disability insurance, dental care and comfortableness allowances are recurrent.

That the structural deficit is expected to exist until the end of the decade demonstrates how little room for increased recurrent expenditure there is.[ix] This, and the Gillard Government’s need to present a headline surplus in May, appears to have stopped the disability insurance scheme for the present. [x]

But a scheme with supporters across the parties, the endorsement of The Australian and Australian Financial Review, not to mention the Productivity Commission, will not go away.[xi] Neither will the dental plan once its supporters get organised.

There are always many more advocates for increased welfare spending than defenders of the public purse.

But the more new welfare programs Canberra commits to, the sooner a treasurer will have to do an Osborne. And there won’t be much comfort in the comfort allowance then.


[i] Rowena Mason, “George Osborne: UK has run out of money,” The Telegraph March 3

[ii] Sue Dunlevy, “Victims of forced adoption ‘need more’ ” The Australian, February 28

[iii] James Massola, “Liberal Broadbent calls on Abbott to divert maternity pay to disability scheme,” The Australian, February 28

[iv] Productivity Commission, “Disability care and support,” Productivity Commission Report 54 (July 2011) @ www.pc.gov.au/__data/assets/pdf_file/0014/111272/disability-support-overview-booklet.pdf 2 recovered on March 3

[v] Mary Murnane et al, “Report of the National Dental Advisory Council”, February 2012 @ www.health.gov.au/internet/main/publishing.nsf/Content/A1972FE9D3527C51CA2579B0007737CE/$File/Final%20Report%20of%20the%20NACDH%20-%2026%20February%202012%20(PUBLICATION).pdf recovered on March 3

[vi] ABC TV, “Health insurance rebate about finding balance: Plibersek”, Lateline, February 14 @ www.abc.net.au/lateline/content/2012/s3430931.htm recovered on March 3

[vii] Sinclair Davidson, “New tax stats,” April 6 2011 @ http://catallaxyfiles.com/2011/04/06/new-tax-stats/ recovered on March 3

[viii] Peter Whitford, “Transfer issues and directions for reform: Australian transfer policy in comparative perspective,” Melbourne Institute, Australia’s future tax and transfer policy conference, June 18-19 2009 @ http://taxreview.treasury.gov.au/content/Content.aspx?doc=html/conference.htm recovered on March 3

[ix] Tony McDonald, Yong Han Yan, Blake Ford and David Stephan, “Estimating the structural budget balance of the Australian Government, Australian Treasury nd @ http://www.google.com.au/search?q=structural+deficit+australia&hl=en&gbv=2&prmd=ivns&source=lnt&tbs=ctr%3AcountryAU&cr=countryAU&sa=X&ei=ivhRT7PbHsOdiAecgLH4Cw&ved=0CBEQpwUoAQ&gs_sm=12&gs_upl=15634l18897l0l20451l9l9l1l0l0l0l371l1319l2-3.2l5l0&oq=structural+deficit+australia&aq=f&aqi=g-v1&aql= recovered on March 3

[x] Stephen Lunn and Sue O’Reilly, “Disability plan stalls over cost demands,” The Australian, February 13 Lenore Taylor, “Canberra won’t commit to disability scheme, says states,” Sydney Morning Herald, March 3

[xi] “Disabled need strong advocate,” The Australian, September 14 2010, “Treat disabled as consumers,” Australian Financial Review, August 11 2011

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