Leadership Speculation Again: Resolving the Crisis with Good Policy

 

 

 

above: With a possible Abbott government looming, Labor needs a clearer sense of where the real threat is coming from; Tristan Ewins argues that Reconciliation is necessary now if there is to be any hope; And robust policy could be the key!

Tristan Ewins, June 23rd 2013

Regarding ongoing leadership speculation in the ALP: What we have witnessed has been a ‘mutual scorched earth policy’ in the party and the caucus. We’ve had some figures (Rudd supporters apparently) leaking constantly to the media; and even accusing Gillard of‘class war rhetoric’. And on the other side we’ve had high profile Ministers besmirching Rudd’s character and saying they would NEVER work under him again. In short it is “mutually assured political destruction’: “political scorched earth”…

The ridiculous and self-destructive ‘class warfare’claims of some have been particularly damaging – as this has acted to discredit the social democratic and labour cause – the ideology and the principle of socially just redistribution and the liberal and social rights of labour…

The bad blood is now SO bad that I despair the party might never heal… What is necessary for hope of healing is to have such a powerful policy agenda that it serves as an irresistible catalyst to re-establish solidarity. 

This could involve reform of the mining tax. Regardless of his flaws: even if Rudd does not return to the leadership this could be a kind of ‘vindication’ for posterity. That could create an environment where all parties could ‘move on’ on the basis on conciliation… This could also involve clear and public recognition that he provided strong political leadership in response to the Global Financial Crisis, with the Education Revolution and with the Apology. For this both Rudd and the broader party deserve recognition. Unequivocal recognition of these achievements specifically could do a great deal in achieving healing.

But MOST IMPORTANTLY: Labor needs to revisit the issue of superannuation concessions to fund a strong social wage and social insurance agenda. A progressive agenda of ‘Whitlamite proportions’ could also be a healing influence – with all parties seeing that with so much at stake their consciences would not allow the currently mutual sabotage and ‘scorched earth’ approaches to continue.... 

What more could all this entail?

Firstly it should involve superannuation concession reform – aimed at building in a progressive and sustainable manner a powerful‘war-chest’ for an ambitious social wage and social insurance agenda. And a reversion to 75% - or perhaps 50% - dividend imputation – could also provide crucial funds.

So precisely which other policies would this war-chest fund? The following are a number of ideas which the author remains passionately committed to.

· National Aged Care Insurance providing for the human rights of all aged Australians; and funding that progressively without driving poor and working class families to sell their only substantial assets for what is inadequate care in any case.

· More robust funding for mental health initiatives, including public education programs to address stigma and encourage early intervention; and access to psychological counselling.

· Extensive Cost of Living Assistance for low income individuals and families including pensioners when it comes to energy, communications, transport, medicine and water. Furthermore: Public energy and water ownership can mean cross-subsidy rather than passing the prices indiscriminately on to consumers. And more federal funding for transport and energy infrastructure could prevent reversion to wasteful and expensive PPPs – or worse, fully private infrastructure.

· A commitment to keep the NBN public over the long term with cross-subsidised services for poor and vulnerable groups.

 

· Sustained support for Australian manufacturing and the liberal and social rights of labour- including encouragement for high wage, high skill manufacturing

· Welfare reform: especially of Newstart and the Student Allowance. And Revision of eligibility criteria for the Disability Pension – which have become too narrow and which serve to discriminate against genuinely disadvantaged and vulnerable people.

· Tax compensation through restructure of the tax mix for low income Australian workers so that they will not be worse off re: their disposable income ‘living week to week’ when superannuation contributions rise to 12%

· Direct public compensation/subsidy for skilled but low income workers – eg: in child care; and further reform of the tax mix to aid other low income workers.

 

· Federal money for public housing to take pressure from the housing market; And provide education funding of the scope originally envisaged in Gonski. 

· A rescission of bad and unpopular decisions on university funding and sole parents.

· Further reform of the National Curriculum to promote a liberal education agenda for active and informed citizenship, including ideological and political literacy

· Begin a genuine consultation process leading towards a Treaty with Indigenous peoples

· stamp duty relief targeted for low income individuals and families – so they are free to move to cheaper accommodation without having to pay the tax. For some people that could make a real difference.

Indeed, there are probably a host of other possibilities – but depending on the scope of tax and superannuation reform we would be talking an annual war-chest for new initiatives of $10-$25 billion in an economy worth about $1.6 Trillion.

Regarding the leadership: there are substantial numbers of Labor parliamentarians, functionaries and rank and file who probably think that they want to set a precedent. Neither side wants ‘to give in to blackmail’ –but both sides are playing the ‘political scorched earth’ game.

It has to stop – and it has to stop now.

Calls for direct election of the Party Leader could well be a good move for the future – to provide a degree of authority surpassed only by the Conference itself.

Time is of the essence; and the threat of a right-wing neo-Conservative Abbott government far too dire. “Mutually Assured Political Destruction”;“Political Scorched Earth” – it has to stop now.

And more than leadership – regardless of what happens on that front – the key is a policy agenda to unite the party; recognise past wrongs on all sides; and resolve never to repeat those errors again.

(postscript) All that said it's important that yesterday 'The Age' in Melbourne was arguing for Julia Gillard to step down so there can be a change of focus to policy and ideas and away from the leadership. It shouldn't HAVE to be like this. We have been trying to put policies out there for MONTHS which have largely been ignored in the monopoly mass media. (including 'The Age' itself for a while)

So what are our choices? Concerted destabilization during an election campaign and in the face of a prospective Abbott government cannot be rewarded. But there needs to be recognition of past wrongs – and open and emphatic recognition of the earlier place of Rudd in ALP history - re: the GFC, the education revolution and the apology... This could help in restoring peace and good-will. But what if the media won't let the leadership issue go? And what if the destabilisation continues right up to the election in any case?

So what else could work as a 'political circuit breaker' without setting the bad precedent of rewarding systemic destabilisation? As suggested above a more robust policy agenda could provide an answer. (you would think this would win over progressive Left parliamentarians including Cameron and Carr) And some will be considering a ‘third option’of an untested leader to break the impasse. Possibly the destabilisers might be satisfied with the 'precedent' this would set with regards the original 'coup' against Rudd in 2010. But would this be seen as a ‘poison chalice’? And would it create the impression of more instability? Whatever happens – all this needs to be finalised quickly. Labor needs to throw itself into the campaign unreservedly and cannot afford the constant distraction of the leadership as opposed to policy.

Sincere and constructive debate welcome!

Superannuation and Dividend Imputation the Key for Delivering in the May Budget

Above:  Gonski is crucial in moving closer towards educational equal opportunity

 

If Labor wants to win in September it needs bold new initiatives – without ‘robbing Peter to Pay Paul’.  Reforming superannuation concessions and dividend imputation may provide Labor with the ‘warchest’ it needs to ‘break through;’ to disengaged voters.   Labor also needs to deliver in the immediate term as well – as voters may be sceptical of commitments only for the ‘distant future’.

 Tristan Ewins,  March 2013

As the May Federal Budget approaches and Liberal state governments increasingly move to sabotage the Federal Government’s Gonski proposals purely for political purposes – it seems increasingly likely that if Gonski is to succeed the Federal Government must ‘pick up the entire tab’.  The National Disability Insurance Scheme (NDIS) will also involve a heavy cost, and Labor simply cannot deliver without progressive reform on the revenue side.   More unpopular austerity – as in the case of Sole Parents – which saw disgust and cynicism amongst parts of the electorate – is not a viable option. And in any case it simply should not be part of the Labor ethos –‘to take from Peter to pay Paul’ – seeking to spin these matters to create only an illusion of overall progress.

Mark Kenny, writing for the Sydney Morning Herald explains how resort to superannuation investment has become a prime means of tax avoidance for high income groups.. Hence:

“High-income earners simply have greater scope to save and thus evade the 46.5 per cent marginal tax rate on income by sending it into super. The result is that what is saved on the aged pension budget through self-funded retirement winds up being less than what the superannuation policy costs in tax revenue foregone.”

(Read more: http://www.smh.com.au/opinion/politics/for-richer-or-poorer-class-warfare-opens-on-a-new-front-20130208-2e3jp.html#ixzz2MMN0j7MX)

Richard Denniss of the Australia Institute has been one of the most determined critics of the existing system of superannuation concessions. In August last year he put the argument that while those concessions cost the public $30 billion in late 2012, they will cost $45 billion as early as 2015.  This is well in excess of the entire Aged Pension budget – which was only $25 billion in 2012.  And in 2012 $10 billion of these superannuation concessions were going only to the top 5 per cent income demographic.    Denniss has argued:  “We estimate, for high income earners, up to 60 per cent of their lump sum is actually the contribution of the taxpayer.”    http://www.abc.net.au/worldtoday/content/2012/s3568235.htm

The ACTU, meanwhile, has urged the Government to target the top 10 per cent income demographic.  And were superannuation concessions revoked for that top 10 per cent group, at an estimate it could bring in over $15 billion -  enough for the government to fund Gonski and the NDIS without having to depend upon the Conservative states.  (nb: though NDIS will cost more over the years as the full program is phased in)   http://www.theaustralian.com.au/national-affairs/treasury/wealthy-in-wayne-swans-sights-on-superannuation/story-fn59nsif-1226572182403

Yet even as Tony Abbott and the Liberal Party condemn Labor for considering revoking concessions for some of the most privileged, they are committed to withdrawing superannuation tax breaks for low paid workers. Bill Shorten has pointed out that the restoration of a 15 per cent tax rate on these Australian workers will affect 3.7 million people, including 2.1 million women.  It could cost these workers $500 a year: which is not inconsiderable for those on low incomes.  This is blatant hypocrisy from Abbott.

See:http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/002.htm&pageID=003&min=brs&Year=&DocType

So what should Labor do?  Gonski and NDIS are potentially landmark reforms which appeal strongly to Labor’s base. Withdrawing superannuation concessions from the top 10% income demographic would make these policies affordable regardless of the Liberal states’ spoiler tactics.  And withdrawing Labor’s unjust policies on Sole Parent payments could moderate the backlash from this callous and self-destructive decision.

But arguably Labor needs a more robust electoral war chest in order to ‘break through’ to a cynical electorate which has already ‘turned off’ in parts of the country. 

Another area of potential reform is Dividend Imputation  - which the Henry Tax Review considered axing a few years ago.  Dividend Imputation seeks to eliminate so-called “double taxation” of investments by providing credits on dividends.  This is fine for small investors – but should the wealthy be receiving a massive tax break as a consequence?   Especially when the Company Tax rate has been cut again and again for decades. 

Writing for ‘The Age’ Nicholas Gruen pointed out late in 2012 that the Dividend Imputation system costs the government in excess of $20 billion a year!  That being the case he went so far as to suggest getting rid of the entire system; demonstrating that the benefits of the system in spurring additional investment are minimal anyway. A spare $20 billion annually – on top of rescission of superannuation concessions for the wealthy – invested in health, education, aged care, welfare, infrastructure, and foreign aid – could work wonders!  It could also help Labor balance the budget over the course of the economic cycle without further callous austerity.  (indeed, quite the opposite!)  http://www.smh.com.au/business/dividend-imputation--20bn-for-the-taking-20120917-262h2.html

Even were the dividend imputation rate only incrementally reduced, an initial reversion to a 75 per cent imputation credit could bring in over another $5 billion; and a 50 per cent rate – argued for in the early 1990s by economist, John Quiggin, could bring in over an additional $10 billion.  

Finally,  the Greens have argued for lifting the Minerals Resource Rent Tax (MRRT) rate to 40 per cent, eliminating loopholes and removing “generous accelerate depreciation provisions.”   This, they argued, could raise $26 billion our four years.   http://www.theaustralian.com.au/news/breaking-news/greens-disappointed-with-mrrt-result/story-fn3dxiwe-1226573649144

‘Doing the math’ this would translate into an additional $6.5 billion a year on average.  

Nonetheless it is quite possible that Labor has ‘done a deal’ with the miners. If so it is a fundamental matter of democracy that this ought be made known to the public. The alternative is the kind of ‘Iron Law of Oligarchy’ referred to by political scientist, Robert Michels – whereby political and economic elites determine agreements ‘behind the scenes’ – cutting ordinary citizens out of the equation.  (the anathema of democracy) Yet at the same time trust is an extremely valuable thing in politics – and even if Labor has made the wrong call on any deal, it would be understandable were they to remain true to that commitment. 

The Greens are thinking of ‘holding Labor over a barrel’ over the MRRT. And ideally the tax does need to revert to its original form as intended by the Henry Tax Review.  But if this is politically impossible the Greens must co-operate with a Labor Government that makes big progressive social initiatives possible through thorough-going reform of superannuation concessions and dividend imputation.

To put all this in perspective the Australian economy today is valued at approximately $1.4 Trillion. The Gonski package – crucial for the very viability of our state school system into the future – and to the opportunities of hundreds of thousands of students - will cost about $6.5 billion a year to implement.  And the NDIS – crucial to some of our most vulnerable Australians and their families - is assumed to being going to cost at least $15 billion a year when ‘fully operational’ in 2018.  (but only phased in gradually)

See: http://www.probonoaustralia.com.au/news/2012/11/campaign-rejects-ndis-cost-%E2%80%98scaremongering%E2%80%99#

But what else can Labor do to ‘break through’ ahead of September; with the May Budget perhaps being its last opportunity to bed down such major initiatives?

For a long time this author has argued for reform of Aged Care.  It is an issue that effects many of us. Even the younger among us will have family who may need care in the future.

The unnecessary acuteness of suffering experienced by many aged Australians is a matter of national shame.

For those needing low-intensity care there must be high quality, affordable options available.  The  2012-13 Aged Care Reforms proclaimed the end of  'Living Longer. Living Better.'  This must include those with low care needs as well as those needing high level care.

Residents in high intensity care need privacy – they need their own rooms if they so desire.  They need heating and air-conditioning, dental care, facilitated interaction, quality food, and ‘changes of scenery’ - perhaps including access to gardens.  In the future some of those who remain alert and in need of mental stimulation could do with access to information technology.   There are also problems with staff to patient ratios, including a need for more registered nurses.

More generally there is a need for more robust career paths for aged care workers; with better training being complemented with better wages and conditions.  This will also improve the quality of care experienced by aged residents.

For those older Australians wanting to stay at home – and well enough to do so –  there is a also need for regular interaction to ward away the loneliness from which so many suffer. And Families and Carers also need additional support in order to make home care viable.  Staying at home is only an option for many with significant support, and the Combined Pensioners and Superannuants Association has long argued support services here are under-funded.

A minimum additional annual $5 billion devoted to Aged Care would be a start (though certainly not the ‘final word’) in working towards these ends; while also beginning a phase-out of user pays mechanisms that hit average and working class families. Working class and middle income Australians should not be forced to sell their family homes (using the equity in the home - even incrementally,) with an effective regressive ‘flat tax’ in order to secure care for their loved ones.  All the more so while there are massive tax breaks for quite wealthy Australians that go into the tens of billions

The NDIS will care for some of our most vulnerable – but not all of them.  Care for the Aged is just as crucial.

In order to ‘break through’ to cynical Australians who have ‘switched off’ from Labor, the government needs big initiatives that capture the public’s imagination. The government needs to mobilise the welfare sector, labour movement and other social movements behind it with a raft of measures unprecedented in our time.  Yet another dilemma is how to find ways of actually delivering to the public between now and September in such a way as to avoid cynicism about ‘distant’ promises. 

By withdrawing superannuation concessions for the wealthy and reducing dividend imputation Federal Labor can amass a very substantial war chest.

One thing is clear.  Without substantial reforms bringing in the revenue for the coming May Federal Budget Labor will be left with very limited options.  ‘Business as usual’ will not win Labor the election.

The Policy of the Combined Pensioners and Superannuants Association can be found via the URL below;  They generally lead the way in campaigning for the rights of aged Australians, including those in need of care:

http://www.cpsa.org.au/index.php?option=com_content&view=article&id=41&Itemid=82