No. 157

THE WELFARE STATE IS BACK IN BUSINESS

STONE the crows! What’s to be done when welfare is a zero sum game?

Much of the media spent much of last week explaining how people slugging savings into super was stealing from those innocents at the Australian Tax Office  – “Superannuation is designed backwards. It gives the biggest subsidies to those who need them least. For Australians on truly enormous incomes those subsidies are obscene.” Which makes it sound as if Canberra sends plutocrats cheques.[i]

This all comes from the ATO’s estimate of revenue it foregoes because taxes are not levied on income streams, which it calls “expenditure”. In the case of superannuation, under the existing rules (unless something has changed since Friday) the ATO will not collect $30bn[ii].

Um, spot the flaw in this argument – this is not money that belongs to the ATO, it is cash people have earned and want to salt away for old age.

In any case, you could tax people who earn $100,000 plus from super at the top marginal rate and it would not make a blind bit of difference to Treasury’s overall outgoings, what with their only being 16,000 of them.[iii]

But, for all the outrage from people like the bloke in the AFR, who was so upset he mixed his metaphors – suggesting the government had declared a class war, when it was not playing political football, this is not an argument advocates of lower taxes on self help will win.[iv] Not now the welfare state is back in business.

And if you think it isn’t, you are not paying attention to Senator Kim Carr who advocates “a fair go from government”.[v] In particular, for everybody who is already on an earner from Canberra – like pension dependent, single parents.

For readers who summered on Mars, the Gillard Government has slugged singles with kids over eight by switching them from the parenting payment ($340 a week plus losing 40c in the dollar for earned income over $85pw) to the unemployment benefit ($270pw plus loss of 40c in the dollar over $60 earned). [vi]

This is tough stuff, punishing 80,000 sole parents. The Crows hope it will encourage many to get work, which is what happened when Bill Clinton was railroaded by Republicans into cutting welfare for unemployed single parents in the 1990s, with resources switched to children in all sorts of low income families.[vii]

But, whatever occurs, the Feds say it will save $728 million over four years, compared to the $948 million the super changes will raise over the same time. [viii]

The superannuation lobby argues that the Feds should stop changing the rules on savers, which is a fair point. Senator Carr responds that for people on the existing single parent payment, “There is a real difference between never getting a payment and losing it.”[ix]

However, the Senator’s idea of who should receive welfare also extends much further than single parents. On Friday, he wrote to the AFR making the case for continuing subsidies for the car industry:

Australia still needs to put its money on (sic) the auto industry. It incubates vital skills. It develops new technologies. It supplies the contracts and innovations on which other sectors rely. Above all, it sustains the jobs that pay the mortgage and put food on the table.[x]  

Perhaps there is a case for taxing people on super savings to assist very poor people. Some of Senator Carr’s colleagues certainly think so. Jan McLucas, his successor at Human Services, is “understood to be in favour of using the budget to address the cuts in payments to single mothers”. [xi]

The Opposition is also keen for the community to support mothers, just different ones. Tony Abbott wants a business levy to fund a $2.7bn paid parental leave scheme, which will pay new mothers their full salary for six months (capped at $150,000) to stay at home with their babies.[xii] It should be a workplace entitlement, not a welfare entitlement, he says.[xiii]

So who should collect the cash and who should cop the canning? The Crows, misery guts that they are, think just about every large welfare program, be it in the form of payments or concessions, should take a trim. Not to fund their own bird-brained ideas of who is most deserving, mind. But to pay for the welfare state our ageing population ensures will keep growing.

It’s already expensive. In 2011 national health expenditure was $130bn, or 9 per cent plus of GDP, up from $77.5 billion or 8 per cent of gross domestic product in a decade back.[xiv] This year, the Feds will fund the same amount for welfare payments.[xv]

No amount of slugging single mums or people who saved hard is going to fund this sort of system. We all either pay more or get less from the feds.

 

ENDNOTES


[i] Peter Martin, “Stopping leakage of funds is a super idea,” Sydney Morning Herald, April 3

[iii] Laura Tingle and Sally Patten, “Super hit on wealthy investors,” Australian Financial Review, April 6

[iv] Lucille Keen, “Shifting goal posts penalise retirees,” AFR, April 6

[v] Kim Carr, “Fair go when it comes to welfare,” The Australian, April 4

[vi] Department of Human Services, “Changes to parenting payment,” March 15 http://www.humanservices.gov.au/customer/enablers/centrelink/parenting-payment/changes-to-parenting-payment recovered on April 7

[vii] Matthew Gray and David Stanton, “Lessons of US welfare reforms for Australian society,” Australian Institute of Family Studies, November 2002 @ www.aifs.gov.au/institute/pubs/rp29/index.html#abstract recovered on April 7

[viii] Pia Akerman and Milanda Rout, “Find a job Jenny Macklin tells single parents whose benefits are being slashed,” The Australian, January 1, David Crowe, “Swans $10bn super pitch for election,” The Australian, April 6

[ix] Carr, “Fair Go,” ibid

[x] Kim Carr, “Auto industry still needs money,” Australian Financial Review, April

[xi] Patricia Karvelas, “New minister keen to fix cuts to mums,” The Australian April 6

[xii] Michael Gordon, “Liberal split on parental leave,” The Age, March 6

[xiv] Australian Institute of Health and Welfare, Health Expenditure September 26 2012 @ http://www.aihw.gov.au/publication-detail/?id=10737423009 recovered on April 6

[xv] Australian Government, Budget 2012-2013, Budget Paper Number 1, Statement Six @ http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst6-01.htm recovered on April 6

'2012