A Final Plea for Federal Labor and the May Budget: Progressively Fund Gonski and NDIS – and No More Austerity!

 

Above:  A message for Bill Shorten -  Please do whatever you can to lock in funding for Gonski, and for the NDIS which you were instrumental in championing;  And Please do not do so at the cost of further callous austerity as in the case of Sole Parents!

 

In the following article Tristan Ewins argues that Labor needs a credible narrative on NDIS and Gonski - with progressive funding mechanisms 'locked in'.  He argues that it is an Abbott government which would really 'divide Australia'; and again that reform of Superannuation Concessions for the top 5% or 10% income demographic are key to delivering on Labor's Social Insurance, and educational 'equal opportunity' agenda.

 

(nb:  Just in April 5th:  Bill Shorten confirms that about 16,000 wealthy Australians will be targeted - those with superannuation incomes over $100,000 a year (ie: superannuation savings of about $2 million or more) - bringing in about  "$350 million over the forward estimates period."  (now the ABC is reporting a higher figure of $900 million; but SBS says that's 'over four years')  The question is STILL - where is the rest of the money ($20 billion or more) coming from for NDIS and Gonski?  At Facebook Richard Denniss is calling the decision 'pathetic'.  PLS read on - and your comments and ideas are welcome here!)


by Tristan Ewins

Increasingly Coalition rhetoric in Australia emphasises what it labels the ‘divisive’ nature of Labor policies. Abbott poses as the bearer of conciliation; of ‘good government’; of a ‘traditionally classless’ Australia where issues of distributive justice never even come in to the ‘national conversation’.  Of course the old egalitarian Australian ethos rested on labour movement traditions: on a strong labour movement, and far-reaching industrial relations regulation. But as far as Abbott is concerned ‘why let the truth get in the way of a good story’?

In fact, the person with a ‘plan’ to divide Australia is Tony Abbott.  The Abbott ‘plan’ is to create ‘two Australias’: divided on the basis of the quality of health care, education, aged care, child care, parental leave and transport infrastructure that citizens can afford or otherwise enjoy.  Quite likely, the Abbott ‘plan’ is to entrench these divisions to the point where they become permanent. That is - to the point where the Conservatives ‘capture’ a vital ‘middle demographic’ which develops an economic self-interest in the withdrawal of welfare and social wage mechanisms for the less-well-off, and including the end to all pretence of ‘educational equal opportunity’.  Further down the track there is the potential prospect of that ‘classic Thatcherite mixture’ of labour market deregulation and ‘trickle-down’ economics; resting upon the development of a permanent layer of exploited and politically disengaged working poor. The ‘Abbott plan’ would also almost certainly mean that user pays mechanisms – and potentially privatisation - are applied to make up again for budget shortfalls. Ordinary workers would also suffer the brunt of such attacks. 

Labor needs to differentiate itself from Abbott at a fundamental level.  Labor’s commitment to Social Insurance must mean socialisation of risk regarding health care, aged care and disability care – providing real social security for all Australians and their families. It must mean collective social consumption in these areas to provide the best value for all.  And socially-financed infrastructure needs to avoid the drawbacks of privatisation and regressive user pays mechanisms.  Labor needs to generate a winning narrative along these themes.

But while quality public education, as well as collective consumption and social insurance are in most peoples’ interests, such policies come with a price.  With that in mind I return again to the question of superannuation and tax reform –  concerned that in the face of another ‘fear campaign’ Labor may be on the verge of ‘losing its nerve’ before the May Federal Budget.

In ‘The Age’ today - April 4^th 2013 - this writer was concerned to hear that Labor Minister for Superannuation, Bill Shorten claimed that changes to superannuation concessions would not be adverse to people earning “up to four times the average weekly wage”.  That is in the vicinity of or over $250,000/year if applying to full-time work; or according to the Herald-Sun on April 2 – around ‘the top 1 per cent’.  Though if including part-time work as well the figure would be much lower – ie: closer to $200,000/year. 

Referring to a paper written by Labor MP Andrew Leigh from 2006, Matt Cowgill pointed out in ‘The Drum’ in 2011

“only 4.5 per cent of Australian adults have an income that exceeds $100,000 per year, and only 1.5 per cent have an income that exceeds $150,000 per year.”   (http://www.abc.net.au/unleashed/2614076.html

Those figures are now out of date, but they would remain close enough to the current reality to impart some idea of who are the real ‘battlers’ – as well as who are doing very-well. (and how many of these there really are)

Further: despite claims that millionaire status ‘does not mean what it used to mean these days’, studies by the Australian Bureau of Statistics from 2011 showed barely 10% of Australians enjoyed a “net worth” of over $1 million.

So do the millionaires really need further tax breaks?  Even when some individuals may face retirement on ‘a mere $50,000/year’, what do we have to say for Aged Pensioners – who have worked their whole lives – now trying to survive on about $20,000/year – and less if treated as a couple?  

By contrast, this author has long argued for superannuation concessions to be removed from at least the top 5% income demographic – which would bring in around $10 billion according to Richard Denniss of the Australian Institute.

Bill Shorten had been instrumental in backing the National Disability Insurance Scheme, and had made no secret of his discomfort regarding austerity against Sole Parents.   Yet Shorten now appears to be going significantly further than Labor MP Joel Fitzgibbon’s concern for his constituents in the mining industry earning a ‘meagre’ $140,000/year. 

And let’s be clear: Even in the ‘Herald-Sun’ on February 9^th 2013, Karina Barrymore observed that the average final superannuation savings for women was only $112,000 – and $192,000 for men.  

Genuine ‘battlers’ cannot afford ‘welfare for the rich’ in the form of massive tax breaks for people who can save more money in a year than others can aspire to save in a lifetime.  And these are tax breaks which discriminate against average working Australians – who simply don’t have the spare income to divert in to superannuation tax shelters.  Such tax breaks come at the cost of the infrastructure, services and welfare upon which the vast majority of Australians depend.  In a sense it is ‘class warfare’, yes.   But it has been a ‘war of aggression’ against poor and working class Australians: waged in the interests of the wealthy, and in the interests of the ‘upper middle class’ – who find themselves in the  ‘ideological and economic orbit’ of those most wealthy. (Importantly while the upper middle class may not be 'fabulously wealthy' - a term deployed by Craig Emerson - they are certainly very comfortable compared with the vast majority of workers - and quite capable of paying their fair share towards the social good)

Admittedly, though, the position of some mining workers can be ambiguous – as they enjoy high wages – but many depend on their industrial organisation to get a fairer deal from the mining bosses.  Their living expenses can also be higher than average Australians. Many are torn between solidarity with fellow unionists, and a sense of their economic interests as part of a relative ‘labour aristocracy’.

And yes, the chorus of claims of ‘class warfare’ are hurting Labor. There remains an idea of an ‘idyllic’ and ‘classless’ past; and old Labor stalwarts such a Bill Kelty are harking back to the Hawke years of consensus and ‘national reconciliation’.  But comprehensive ‘class peace’ was always chimerical.  Attacks on the wage share of the economy, as well as the social wage and welfare state, and industrial rights – never ended.  Though even former Conservative Prime Minister John Howard himself stated at one point (while still in government)  that he favoured the principle of progressive taxation!  And during the early period of the Accord, on the Left there was not an abandonment of social and distributive justice – but an aspiration to expand social wages as occurred in Sweden.  Yet today distributive justice and a compassionate welfare state are considered ‘unspeakable’: branded as “divisive” and of representing “class war”.

But this is ‘the crunch’. When considered together the NDIS and Gonski  will cost the Budget bottom line in the vicinity of $20 billion. And that is without even considering the huge infrastructure backlog affecting the states, with the prospect of regressive tolls  for new and maybe even existing roads, and insufficient public transport options for many workers to even have a viable choice how they commute to work. 

It is also without considering the plight of our most vulnerable aged citizens: their unnecessarily pronounced suffering as a consequence of insufficient funding for Aged Care; and the highly regressive ‘user pays’ mechanisms that increasingly apply.   

nb: For more comprehensive critiques of the the Aged Care crisis in this country see here: http://leftfocus.blogspot.com.au/2009/02/another-look-at-aged-care-crisis-call.html

And for a more recent critique by this author see here: http://leftfocus.blogspot.com.au/2012/04/talking-about-aged-care.html

NDIS and Gonski in particular have become ‘signature’ Labor policies.  So where is the money coming from?  

And let’s keep in mind: Come September people will be asking the same question of Abbott.  

Labor needs to ensure its ‘signature’ policies are fully costed without further regressive austerity!  This is the precondition for making the most of exposing the radical austerity that will underscore Abbott’s ‘plan’ for Australia.

On March 21^st Jessica Irvine – also from the ‘Herald-Sun’ - suggested a whole suite of potential policies, including an increase to 30% of taxation rates on those on incomes of $300,000 and above.  That apparently would bring in $500 million a year.  (about 2.5% of what is necessary to pay for Gonski and NDIS!)    Perhaps Irvine’s intention was to foster less significant expectations – in order to make ‘root and branch’ reform of superannuation concessions politically awkward and damaging for Labor.

The monopoly media is also attempting to rush Labor into a commitment – perhaps to protect the interests of the wealthy, and to render NDIS and Gonski ‘unfundable’.  Allowing time for further speculation could also be damaging – as it was with the Carbon Tax.  But not nearly as damaging as getting it wrong: dropping ‘signature’ policies, or turning again to callous austerity (eg: Labor policy on Sole Parents) in a ‘Zero Sum’ outcome for Labor’s constituencies.

While ‘The Age’ has generally been giving Labor a much harder time since Gina Rinehart became the most significant individual shareholder in Fairfax, it pretty much ‘got it right’ on the super concessions debate in a recent editorial.  Hence the following:

“The rich can avoid the 45 per cent tax rate on earnings above $180,000 by diverting large sums into super at the same concessional rate of 15 per cent that applies to everyone else. Treasury figures show 37 per cent of the value of concessions flows to the top 5 per cent of earners…”

Super is being exploited to subvert a long-accepted, progressive policy of taxing higher earnings at a higher rate. Super concessions become more generous for higher earnings. The average male retiree, Treasury figures show, gets about $270,000 in age pension payments and tax concessions. The concession alone is worth $520,000 on average for the top earners - well over twice the total average ''nest egg'' of male workers nearing retirement and more than four times their female peers' balance. The top 20 per cent of earners get half the value of all concessions.  

And we reiterate the same point here as made in an earlier article:

“Superannuation concessions are currently around $30 billion, and will cost $45 billion perhaps as early as 2015. And the top 5% income demographic alone is already receiving over $10 billion of those existing concessions.  (See: http://www.abc.net.au/worldtoday/content/2012/s3568235.htm )

Taken proportionately, that would also mean $15 billion in concessions for the top 5 per cent alone by 2015.

Drawing additional revenue from ‘the top one per cent’ quite simply does not target a broad enough base to bring in sufficient funds.  If Bill Shorten and others want to ‘back down’ on superannuation concessions, and other very significant progressive options for tax reform, then Labor’s signature policies are either finished – or they will come at the cost of deep austerity elsewhere.   Even further means testing of benefits such as the Private Health Insurance Rebate cannot bring in anywhere near the kind of money that is required on their own.   The only other possibility is a series of budget deficits: and that cannot be sustained over the course of the whole business cycle either.

While the ACTU at one point was arguing for action to remove superannuation concessions for the top 10% income demographic, this author is again arguing for an absolute minimum policy of removing concessions from the top 5 per cent income demographic. This would bring in about half the money necessary for Gonski and NDIS.  Further tax reform would also be necessary – perhaps of the Minerals Resource Rent Tax – and of Dividend Imputation.  At ‘Crikey’ John Quiggin was on record as supporting an increase in the Medicare Levy to pay for NDIS specifically.

There is no need to make policy on superannuation concessions retrospective – as Simon Crean says concerns him.  But there is the need to make the system sustainable – as Swan, Shorten, Wong and others have readily admitted.   But if Labor will not at the very least remove or very significantly wind back concessions from the top 5 per cent (or more preferably the top 10 per cent)  then the sustainability of superannuation concessions is ‘out the window’.  As quite possibly are Gonski and NDIS.  One way or another Labor needs to exact at least $10 billion for this year – and more in future years - by removing overly-generous superannuation concessions.

Most importantly: Labor needs those improvements provided through such reform - in social services, welfare and infrastructure - ‘on the record’ and cemented in the public consciousness well before the September Federal election.

Australia is a growing nation which demands investment in transport, communications and education infrastructure.  And Australia is an ageing nation – with health and aged care costs set to rise. (with aged care services already grossly inadequate for many – involving untold human suffering) 

NDIS and Gonski demand about $20 billion in new annual funding.  Aged Care requires an injection in the vicinity of $5 billion annually if the government is serious about providing quality of life, supporting Carers and removing regressive user pays mechanisms. Then there is the need for reform of Newstart; and for strong investment in transport infrastructure and health services.  And simply increasing the retirement age shouldn’t be seen as an option for a Labor Party concerned with ‘work/life balance’.

For a long time Labor has proudly claimed the mantle of “small government” – arguing it has held the size of government down proportionately compared even with the governments of John Howard.  This quite simply is no longer sustainable.  If Labor does not expand taxation progressively and very significantly we will see further user pays mechanisms for education,  for health and aged care, and for transport including roads.  Privatisation simply makes matters worse – saving the government’s budget bottom line – but passing increased costs (of administration, profit margins, and finance) on to consumers.

This author would warn Shorten, Wong, Swan and others: There are pervasive elements of the media that will spin everything and anything Labor says and does against it.  But austerity against Sole Parents hurt Labor’s credibility severely. And failure to provide for NDIS and Gonski sustainably would leave the government without a compelling and credible narrative.

We need far-reaching reform of tax and superannuation concessions in the May Budget.  Without credibility on funding our ‘signature’ policies, and a record of delivering on such commitments, Labor will not be in a strong position to capitalise on the sweeping austerity, human suffering and social injustice which would follow an Abbott government.

Labor must not lose its nerve.


nb:  I sincerely hope I am wrong in this article and that Labor does find a way of funding Gonski and NDIS come the May Budget.  I'd be glad to be able to admit I was wrong!