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!

 

Responding to Andrew Bolt: Is Social Insurance ‘Class Warfare’?

 

above:  Julia Gillard, Wayne Swan and the Federal Cabinet have the task ahead of themselves for the May Budget - hopefully extending Social Insurance into Aged Care and Disability support and services; as well as implementing the Gonski education reforms.  But funding these signature programs must not come at the cost of austerity affecting working class families, and vulnerable Australians.

nb: Readers sympathetic to the ideas expressed in this article are welcome to join the 'ALP Socialist Left Forum' facebook group as well;  see:  http://www.facebook.com/#!/groups/102658893193637/

 

Tristan Ewins

In the ‘Herald-Sun’ March 25 Herald-Sun propagandist-in-chief Andrew Bolt gave us a sense of the probable Conservative strategy come September.  Bolt accused Julia Gillard of a “politics of hate”, and of a “divide and conquer” strategy.  Some on the Left are suggesting a return to some kind of Accord (as attempted by Labor in the 1980s) -  partly in order to counter this kind of rhetoric.

The principle of social unity and comprehensive social peace under the aegis of “national reconciliation” by Hawke was a powerful discourse – but was also always problematic.  It was seen as the unions’ responsibility to compromise; to consent to wage restraint and labour market deregulation for relatively little in return.  All the while the very principle of industrial militancy – whether in defence of political rights or in the form of collective bargaining – was delegitimised.  Labor governed during these years. But despite a formal partnership in the Accord process, in reality the  labour movement was on the defensive. Wage restraint was accepted to ‘buy time’ and ensure short-term organisational survival. Over the long term the movement continued to demobilise.

While it is not the inevitable consequence, there is often the danger in corporatist arrangements that those groups so co-opted – for instance unionised workers – will have their interests subordinated to those of the state, and of the more powerful partner in any agreement – the capitalist class.  Quite likely Bolt would respond to such a suggestion – that there is a capitalist class, and that it promotes its own interests ahead of the interests of workers - as ‘class war rhetoric’.   But sadly it is simply a social fact – a fact almost considered ‘unspeakable’.  That is – that classes exist, and that at certain levels they have distinct and sometimes antagonistic interests.

And so today Bolt hides behind rhetoric of social peace – all the while the Conservatives he backs play their own ‘divide and rule game’.  They pit workers against environmentalists on the basis of lies about the impact of the carbon tax on cost-of-living pressures.  They seek to divide workers against job-seekers on the basis of distortions regarding the numbers of long-term-unemployed, and the assumption that welfare must be ‘punitive’.  On such a basis – resentment against the welfare dependent - they hope even to win the support of the low-paid. Yet they do not support wage justice for those very people whose support they court.  They speak the language of ‘social peace’ while working to remove industrial rights; worsen punitive welfare or even remove welfare entirely; exacerbate user-pays mechanisms in higher education; raise effective taxes for low income Australians; and abolish the low-income superannuation contribution introduced by Labor to assist disadvantaged workers.  

Meanwhile – regardless of whether it was his intention, Martin Ferguson’s stated aversion to “class war rhetoric” was a gift to the Conservatives.  This is a statement that must be viewed in the context of a monopoly mass media campaign which portrays all distributive justice initiatives as ‘class warfare’.  Any hint of progressively structured taxation - or progressive means-testing of benefits like the Private Health Insurance Rebate - has been consistently labelled as such. As most likely would be the removal of superannuation concessions for the top 5% income demographic.  (notably not the same thing as a new tax; or indeed a tax at all!)  It is a deliberate strategy. 

By contrast, attempts to stigmatise, vilify and criminalise trade unions and trade union activity do not attract the same label of ‘class warfare’.  And neither did the mining industry’s abuse of its enormous economic clout and pool of resources to launch a relentless campaign of fear against the original Resource Super Profits Tax – in defence of its own sectoral class interests – and against the interests of the country-at-large.   

That said - ‘democratic class struggle’ – so-dubbed by Swedish sociologist Walter Korpi – involves ‘historic compromises’ depending on the balance of class forces.  The problem, though, is that for decades Swedish workers negotiated from a position of organisational and electoral strength – whereas Labor faces a weakened union movement and a united front on the part of Australia’s monopoly mass media and mining establishment.  Labor needs to construct its own ‘historic compromise’ for modern times.  But the labour movement cannot afford the kind of compromise which would see it further weakened and demobilised.

So if Labor is to revive the idea of an ‘Accord’ – it needs also to learn from the mistakes of the past.  The labour movement cannot afford further strategic retreats.  Though some ‘common ground’ with the liberal bourgeoisie may be possible on education and training, Newstart,, infrastructure, the price on carbon and other issues.  (for example, note the positions of former Australian Industry Group Chief Executive, Heather Ridout)

What should Labor do?   Further austerity and imposition of regressive user charges for everything from aged care to transport infrastructure are certainly not the answer. Yet somehow Labor needs to bring together diverse constituencies – white collar professionals, unionised industrial workers, students, low income workers, and ‘post-materialist’ elements concerned more with work-life balance, as well as environmental and liberal rights.

Gonski and NDIS are powerful weapons in Labor’s policy armoury; as is the frightening prospect of an Abbott government which would slash and burn welfare and services on an unprecedented scale.  Labor’s subsidisation of the wages and career paths of child care, aged care and other community sector workers – comprises a real step forward – and an advancement for women who are disproportionately represented in these fields.  More action is necessary, but hopefully Labor should be able to count on their active support, now, as the September election approaches. But Labor’s Sole Parents decision is a ‘running sore’ that must be rectified come the May Budget.  Another callous decision was  the policy of unfairly tightening disability pension eligibility, with some of our more vulnerable Australians relegated to a highly-deficient Newstart payment.

But if Labor does need to project a ‘historic compromise’ what should it look like?  I am suggesting the following positions as a basic policy framework for September, capable of mobilising broad support in the electorate without damaging industrial concessions:

Firstly: Equal opportunity in education – both in the sense of meritocracy, as well as in the sense of labour market requirements, and high quality education (including extensive liberal/civics education) as a social right.

Secondly: Social Insurance.  Progressively financed protections for all Australian suffering a disability, and for the Aged Care requirements of all elderly Australians; provided on the basis of need, and excluding regressive user pays mechanisms for low income and working class Australian families.

Thirdly: Maintained commitment to a price on carbon emissions, and to direct public investment in renewable energy; as well as subsidies for low income Australians especially to invest in renewables, and so to lessen cost-of-living pressures.

Fourthly:  Maintain the bulk of the Fair Work Commission’s industrial relations regime; except revisit the theme of modernised Awards; Intervene directly to raise minimum wages in real terms, and deliver on the previous promise that no worker be left worse off.  Defend pattern bargaining.

Fifth: Deliver a diverse Australian media, not only seeking to wind back virtual monopolism; but also encouraging new entrants into the sector for the sake of pluralism; and maintaining funding for a public ABC and SBS – with charters to deliver on diverse local content, and promoting political balance to deliver meaningfully on that policy of inclusive and authentic pluralism.

Sixth: Deliver further on effective cost of living relief for those who really need it; Achieve this through tax restructure and welfare reform (including raising Newstart) as well as increased minimum wages.  To that same end seek to contain further cost-of-living pressures by ruling out infrastructure privatisation and regressive user-pays charges for existing and future infrastructure; and by publicly funding future communications, energy and water infrastructure. (reducing borrowing costs; and including the National Broadband Network)  Commit that if user charges do apply for state-owned transport infrastructure that they will be progressively structured (excluding low income groups), spread fairly, and will not effectively discriminate against Australian families and workers – often in new, infrastructure poor suburbs -  who lack access to sufficient public transport.

Seventh and Finally:  Fund all these policies progressively. No more austerity for vulnerable groups.  An absolute Minimum policy of withdrawing superannuation concessions (not the same as a new tax!) for the top 5% income demographic, and reverting to 75% dividend imputation – drawing in $15 billion in new revenue.  Furthermore consider reform of the Minerals Resource Rent Tax, and implement a progressively scaled levy to assist in funding NDIS and Aged Care Social Insurance, cementing the principle of ‘Social Insurance’ in the public’s imagination and vocabulary.

Labor is seeking to follow in the footsteps of the Obama presidential campaign – mobilising ‘on the ground’ on an unprecedented scale.  But the social forces Labor is hoping to marshal will demand more than rhetoric; with “one step forward, two steps back”, or ‘robbing Peter to pay Paul’. Already teachers, aged care workers, child care workers and community sector workers have good reason to support Labor in 2013.  A revisitation of the MRRT, with some revenue being deployed to support industries impacted by the high Australian dollar – could also get some employers ‘in Labor’s corner’. 

At this point the possibility of ‘Bob Katter’s Australia Party’ holding the balance of power should not be dismissed either.  Some on the Left support ‘free trade internationalism’, but if an accommodation with agrarian interests is what it takes to spare Australia an Abbott government, dealing with Katter should not be ruled out.  Indeed, it was just such a manoeuvre that preceded decades of social democratic hegemony in Sweden beginning in the 1930s.  Katter is also sympathetic when it comes to industrial rights.  Though if it comes to that Labor should bargain hard in the search for common ground, and not relent on matters of social conservatism or environmental sustainability. 

Labor has a long and difficult task ahead of itself, fostering party unity and mobilisation in the wake of recent events.  But we should not give in on the struggle before it even really begins.  The May Budget will be crucial. Labor must be in a position to fund Gonski, the NDIS and Aged Care Insurance without austerity elsewhere.  For Gonski and the NDIS alone it has to raise over $20 billion in the context of a $1.4 trillion economy. (more to include Aged Care Social Insurance) 

Australia is one of the lowest taxing nations in the OECD.  Specifically, Australia’s federal tax intake (excluding state taxation)  is about 30% of GDP compared with 48.5% in Sweden.  So there is certainly scope for tax reform to provide for disability and aged care social insurance, as well as reform of education and welfare. This is what Wayne Swan and Cabinet need to keep in mind as the May Federal Budget is developed.  It will be the best chance Labor has to turn the debate around, and win credibility on funding its crucial signature policies.

Responding to Simon Crean on ALP unity and Government Policy

above: Victorian Labor MP, Simon Crean

Today veteran Labor MP Simon Crean helped facilitate a spill of the Labor leadership once yet again.  Without the numbers, and with Rudd refusing to contest the spill, Gillard was re-elected unopposed.   But Crean has raised issues that are crucial for the Party as the May Budget approaches.  Unfortunately, the author, Tristan Ewins, finds he cannot agree with Crean when it comes to reform of superannuation concessions and other fiscal reforms which might well be necessary to pay for NDIS and Gonski. 

(initiatives that will ultimately cost over $20 billion a year in the context of a $1.4 Trillion economy)

(nb: Also I have corrected a rather large typo as well!!!; So apologies to anyone who may have been shocked by the apparent argument I supported infrastructure privatisation!  Rest assured that is NOT the case!  I did not catch the typo until after I rushed to publish with the events unfolding rapidly around us...)

By Tristan Ewins

Today in a media interview Simon Crean put a strong argument against the constant destabilisation process going on within the Federal Parliamentary Labor Party.  As he argued, the prospect of an Abbott government is frankly “scary”.   The tens of billions in cuts Abbott would follow through with would result in unprecedented damage to Australia’s welfare state and social wage.   The stratification of our education system would continue apace to the point where constructing a constituency for revivifying the state sector would pose a very difficult challenge.  Punitive labour conscription policies for the unemployed.  would acquire previously unthinkable dimensions.  Finally, Paid Parental Leave under Abbott would be skewed towards the truly wealthy at a time when the entitlements of poorer Australians are under attack.   One way or another the ‘leadership question’ needs to be permanently resolved ahead of the May Budget.  Labor needs a progressive Budget the whole Party can unite around in May.

A few hours, however, it seems are a long time in politics!  Just moments ago there was a spill for the Labor leadership positions. Crean had been instrumental in bringing the spill about – but without Rudd contesting it, Gillard was re-elected party leader unopposed.

From this Labor activist’s position there are two crucial issues.

One – is that the leadership speculation and destabilisation must be ended finally and categorically.

Secondly, Labor must remain on the policy front foot – and not step away from its commitments to Gonski and NDIS. 

IN that context two questions raised by Simon Crean still remain problematic for this Labor Party activist.  Those questions concern infrastructure privatisation and treatment of superannuation concessions.  I am hoping that the options of removing superannuation concessions on the one hand; and of maintaining public infrastructure on the other - have not been sacrificed.  The consequence of forsaking reform of superannuation concessions in particular could potentially mean there would be insufficient funding for NDIS and Gonski….

Infrastructure privatisation?

Beginning with the matter of infrastructure privatisation: Simon Crean raised the issue of employing Superannuation funds to pay for basic infrastructure.  While this is far preferable to the kind of privatisation preferred by the Conservatives, superannuation funds would also seek maximum return for their investors.   Certain union-dominated superannuation funds might benefit, it is true: but potentially at the expense of the public more broadly in their capacity as consumers.

Also even the most robust superannuation funds will not achieve the credit rating of the Federal Government. 

In short, superannuation investment in infrastructure would be great for the superannuation funds, but an inferior deal for consumers and taxpayers. When it comes to infrastructure: roads, public transport, water and energy infrastructure etc – public sector investment still delivers a ‘better deal’.   It can raise funds more efficiently, and it can run on a ‘not for profit’ footing. 

Preferably infrastructure user tolls of any kind should be avoided – as usually tolls take a form approximating regressive flat taxation.   Servicing public debt sustainably over the long term would deliver the fairest outcomes;  but progressively-structured  taxes may have to rise as consequence.

Reforming the tax mix is a better option – and as we will soon argue there are a number of progressive options available.   But if tolls are introduced in any way, they should take the form of tolls on public owned infrastructure – as occurred for a period with the Westgate Bridge in Melbourne and the Sydney Harbour Bridge.   That is: they should comprise temporary measures, without the drawbacks of privatisation.   And if they are applied at all, they can potentially resemble progressive taxation with a ‘tiered system’ for public and commercial use, and for individuals and families in particular income brackets. Indeed, such a system could form part of a ‘quid pro quo’ between the Federal Government and the States. It would assist the Federal Government in freeing funds for Gonski and NDIS while at the same time maintaining a progressively structured model of infrastructure finance.

Superannuation Taxation?

The other potential ‘bogey’ Simon Crean raised was that of "taxes" on superannuation.  (a misnomer because the concessions comprise tax relief rather than taxes in of themselves) 

Admittedly it is true that a fear campaign has already begun on the theme of superannuation concessions.  The upper middle class is concerned their retirement lifestyle may be threatened; and while many struggle to make do on the Aged Pension alone, the upper middle class see an annual retirement income of over $50,000/year as a ‘right.’   A recent segment in the 7:30 Report presented the matter in a most unbalanced fashion. 

But is the theme of social class helpful for Labor?  Or is it a source of division, and hence electoral marginalisation?  And what does class conciliation really mean in a context where employers are opposing minimum wage increases, attempting to wind back penalty rates, and trying to prevent labour organisation?  Does it mean anything in the real world, or is it just an Ideology behind which social democracy has self-liquidated?

Already in another recent article we have noted that superannuation concessions have risen to prominence as a massive instrument for tax avoidance by the very wealthy – at the same time as user-pays mechanisms for the most basic infrastructure are being considered.  Specifically, 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. 

In that same article we also observed that – by comparison – then entire Aged Pension Budget was only $25 billion in 2012. 

This is more than ‘middle class welfare’. It is ‘upper middle class welfare’, and a subsidy for the wealthiest of all – the top 5 per cent – effectively paid for by everyone else. Despite Ideologies of class conciliation, distributive injustice is a glaring reality – which we must choose whether or not to facilitate and excuse – or whether to work for a more socially just alternative.  Tax avoidance and tax minimisation from the wealthy impacts upon the welfare and social services we all depend upon in Health, Aged Care, Transport, Welfare and so on.

In that same article this author demonstrated that by halving Dividend Imputation the government could bring in over $10 billion, and by removing superannuation concessions for the top 10 per cent income demographic Labor might recoup as much as $25 billion altogether. 

And elsewhere the Greens had argued that raising the Minerals Resource Rent Tax (MRRT) rate to 40 per cent, eliminating loopholes and removing “generous accelerate depreciation provisions” could raise $26 billion our four years. 

Finally,  based on statistics used by “Crikey’ last year, increasing Company Tax by one per cent could potentially bring in an additional $1.5 billion a year.  That kind of money could prove very useful come September if ploughed into Aged Care or mental health, for instance. It is about time to draw a line under decades of corporate tax cuts.  For decades now a regime of ‘corporate welfare’ has taken root, with lower taxation for Companies and wealthy private investors – at the same time as government struggles to pay for basic infrastructure and education expenses – which the corporate sector shares the benefits of.

The Bottom Line

The bottom line is as follows. 

Federal and State Governments are facing a ‘legitimation crisis’ stemming from their inability to pay for basic infrastructure, and their plans to revert to user-pays mechanisms on the understanding that real progressive tax reform is ‘unspeakable’.

And Labor is in a bind in so far as it is not yet proposing a concrete, fair and sustainable way of financing Gonski and NDIS -  policies which it is committed to and on which Labor’s credibility rests.

But if Labor implements reforms rapidly following the May Budget; and can establish that tax measures are aimed squarely at the upper middle class and the wealthiest of all – It can demonstrate that state-financed infrastructure, as well as Gonski, NDIS and Aged Care insurance are in the interests of the vast majority.  (Though arguably NDIS should involve a more broadly-based levy in addition – to establish the principle of ‘social insurance’.  A ‘mixed’ funding mechanism could also bring in additional revenue for Aged  Care – where user pays mechanisms and the often poor quality of care are a national disgrace.)

On the other hand, if the media is still speculating on the form of tax reform and superannuation reform by September, the uncertainty and fear mongering could be damaging. It was protracted speculation which left a lasting negative impression with regards the Carbon Tax even after implementation should have put paid to the fear campaign.

But even if superannuation concessions were revoked and that revocation locked in’ for only the top 5% income demographic – It would still yield a pool of over $10 billion.  And the modest measure of implementing 75% dividend imputation would yield over $5 billion.  Taken together, those measures would comprise a very good starting-point from which to fund NDIS and Gonski, even though further initiatives are also desperately necessary to fund far-reaching reform of Aged Care. 

The Greens’ proposals for reform of the Minerals Resource Rent Tax (MRRT) – bringing in about $6.5 billion a year - could be enough to provide for a strong suite of policies for Aged Care reform – including  removal of user-pays mechanisms for poor and working class families, and improvement in areas such as staffing, diversity and quality of environment, privacy, facilitated social interaction and so on.  Another option would be to establish National Aged Care Insurance with a Medicare-style levy – but with progressive tiers.

‘Middle Class welfare’?

Finally, there is the prospect of freeing funds through the further curtailment of ‘middle class welfare’.   Adam Creighton over at ‘The Punch’   has argued that “More than 11 per cent of households in the top 20 per cent of the income distribution – with incomes above $115,000 – receive some form of welfare payment from Canberra…”   He argues further that: “Family Tax Benefit B, which is paid to households with incomes up to around $175,000 a year, is the main culprit.” 

To elaborate: According to “The Australian’ “NATSEM's* modeling shows that removing [Family Tax Benefit B] from families with combined taxable incomes of $100,000 onwards would save about $500 million a year. “  That money could be employed to reverse the callous government policies for Sole Parents, with hundreds of millions to spare.

Further means testing could also apply to the Private Health Insurance Rebate, removing it entirely from singles in the $97,001-$130,000/year bracket and for families in the $194,001$-260,000/year bracket.  At an estimate, this could bring in additional hundreds of millions every year.

But it is VERY notable that these measures pale in comparison with what could be saved from more ambitious reforms of superannuation concessions for the wealthy,  and a partial curtailment of Dividend Imputation.” 

And over-targeting of welfare has the potential to narrow the demographic support base of the welfare state over time.  More broadly, there needs to be a balance between means testing of welfare, and the principle of universalism - for instance as embodied in Medicare.

Conclusion

When Labor’s credibility depends on the sustainable funding of Gonski and NDIS it simply doesn’t make sense to rule out two of the most effective and progressive means of paying for those programs. And Labor cannot afford more of the callous austerity that cost the government deeply in terms of a popular backlash against cuts to Sole Parents. Reform of superannuation concessions MUST stand; and reform of Dividend Imputation must also remain an option in providing the necessary funds for those programs. 

·         NATSEM = “the National Centre for Social and Economic Modelling