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Feb 5, 2014

How the age of entitlement is being restored for the Liberals' friends

Declaring that the age of entitlement is over makes sense as long as voters believe it's fair. But the government is being anything but.

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Treasurer Joe Hockey has emerged as the spine of a government that, a little like the Howard government, has arrived in office on the back of community unhappiness with its predecessor but unsure what it actually wants to achieve once it’s finished pulling down Labor’s work. Hockey’s resolute holding of the line on rent-seeking, after the disgrace of the GrainCorp decision, is welcome. But his salesmanship is letting him down. And, worse, so is his consistency.

Having tolled the bell yet again on “the age of entitlement”, Hockey has left the government open to allegations that entitlement is actually only over if the government wants to target the unions involved in your business. Otherwise, the spigot of taxpayer money is still open. No one in the government has been able to explain the difference between SPC Ardmona and the handout to Cadbury’s Hobart factory except Sharman Stone, who pointed out it was in a marginal seat, nor the difference between the SPC and another handout to a Tasmanian seafood processor (announced by rugged individualist Jamie Briggs). And that’s before you get into tax expenditures, which are a mishmash of generations of often conflicting policy objectives.

Governments — all governments — love to hand out taxpayers’ money for political benefit. Sometimes it doesn’t even have to be a marginal seat — the government promised to waste $10 million helping to redevelop Brookvale Oval for Abbott’s local footy club. Every time the government hands out a seven-figure amount from now on, Hockey’s words about the end of the age of entitlement will be used to belt the government.

But there are more substantial inconsistencies, because for the Liberal Party’s mates and supporters, the age of entitlement isn’t over at all; in fact, it is being restored.

First, there was the reversal of Labor’s decision to require better record-keeping and reporting for fringe benefits tax on novated leases. Note that this wasn’t a tax rise, as widely portrayed, but merely a requirement that people currently avoiding, or possibly in some circumstances evading, tax demonstrate they are doing so for the legitimate reasons they claimed. It was designed to end a straight-out tax rort perpetrated by the parasitic salary packaging industry, at the expense of every taxpayer without a novated lease. Hockey has reinstated the rort, at a cost to the rest of us of $1.4 billion over four years.

However, that’s as nothing compared to the government’s plans to reverse Labor’s Future of Financial Advice reforms, quietly revealed right before Christmas by Assistant Treasurer Arthur Sinodinos. Sinodinos proposes to dump the “opt-in” clause for financial advice fees that requires financial planners to actually get their clients’ permission to automatically skim off fees every year for advice clients have never sought and don’t want. Sinodinos also wants to get rid of requirements for advisers to reveal fees to existing clients and dramatically water down requirements designed to end the conflict of interest in which financial planners push clients into products planners stand to benefit from.

“… good treasurers don’t just take tough decisions, they skillfully explain them to voters and bring the electorate along with them.”

While much of the financial planning industry, large and small, is eager to move to a professional model for the financial advice that would turn away from the decades of self-interest and fee-gouging of clients, a rump of planners with close ties to the Liberals want to retain their ability to exploit the disengagement of most Australians about their superannuation in order to skim off a never-ending line of fees. The Liberals, in any event, strongly support the retail super sector of the industry, run by the big banks and AMP, which routinely underperforms the industry funds despised by the Liberals for trade union involvement.

Sinodinos’ changes may cost financial planning clients, i.e. ordinary consumers, $130 billion in lost retirement savings, which the age pension system of the future will have to help make up. It puts all other handouts by government in the shade.

At the same time, the government has also scrapped Labor’s plan to tax superannuation earnings over $100,000 a year for high-income retirees (i.e. Liberal voters) at 15% — while dumping assistance for low-income earners to increase their super contributions (i.e. Labor voters).

Perceptions of equity are the key here. When Hockey correctly talks about needing to explain to the community the need for a change in the way they view entitlements, whether it’s via the Business Council’s Commission of Audit or through refusing handouts to businesses, the message will only be politically effective if voters perceive that there will be equity in the reform process. If politicians tell voters they need to make a sacrifice, they need to make sure voters believe there will be equity in that sacrifice, that no one section of the community is getting a free ride while the rest of us are giving something up.

But financial planners are having their free ride restored. So too novated lease users and the salary packaging companies. So too high-income retirees.

Voters already believe — regardless of how they vote — that the Liberals look after the big end of town and are less interested in low-income earners. Labor is using that as a theme of its criticism over the government’s lack of support for manufacturing. Without careful management, the government will reinforce those perceptions, perceptions that it wants low- and middle-income earners to make sacrifices while it looks after its mates. It will not merely undermine support for its reform, it will undermine support for the government itself.

As Hockey should know, good treasurers don’t just take tough decisions, they skillfully explain them to voters and bring the electorate along with them. So far, Joe’s just been good at the former.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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40 comments

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40 thoughts on “How the age of entitlement is being restored for the Liberals’ friends

  1. tonyfunnywalker

    Hockey is running to an agenda paid for the Liberal party sponsors as they all stand in line for the handout to recover their investment.
    The Commission of Audit peopled by the has beens’ and cronies and the underhanded behaviour of Ministers and PPS working under the radar of public and parliamentary scrutiny to milk the electorate that elected them on behalf of their sponsors.
    The typical behaviour in a Dollarocracy of vote buying for their own self interest and gain.
    Wasn’t this what Labor and the Greens were accused of?
    Your article does not cover half the rorts built into the taxation system where expenditure on avoidance exceeds the benefits accrued by the avoiders and the legal cost of recovery. As the ACCC has found it is very expensive to recover payments – especially if you lose or the company claims bankruptcy and asset transfer.
    Its a game – keeps the accountants and lawyers on side and for many seriously damaged claimants a deterrent to challenge beyond a class action and that takes years – the ANZ is a case in point.
    It would have been more purposeful for Hockey to reform the Tax System and amend the Tax Act which is a confusing abomination of legalese and gobbledygook rulings on the most absurd and trivial and often outdated premise for claim.
    The bashing of the poor/ retired/ working families / is easy and where Swan was accused of starting a class war Hockey is returning Australia to a society of “unfettered privilege reserved for the privileged” and where the underprivileged are fair game to be ripped off — often with criminal intent. You don’t have to watch ” Wall Street” to understand that – and how many bankers are in jail!!!! Jimmy is right we all knew that this was the agenda – but the electorate was more concerned with scandal and beat-ups cheer-lead by the press.
    The advertorial nonsense sold as news or explanation to investors and shareholders is equally scandalous with the Block Vote of the vested interests; brought into play when remuneration and/or reduced dividends are questioned. Three strikes and out is too lenient for a self perpetuating oligarchy. Corporate Transparency Blah _ Blah Blah.
    Hockey has the job ahead of him and he has already fallen over thanks to Sinodinos, Abbott and Cormann ( beyond parroting 3 word slogans what is he good for – he is an embarrassment) and of course Abetz.
    The bashing of Labor Voters at every turn – forgetting there is an election in 2016 and it not all low paid workers / pensioners and working families voted Labor; many voted Liberal ( some for the first time ) and this is their reward – a cut to their living standards.
    Voter churn is already evident. Is not the Dollarocracy that will re elect Abbott irrespective of the dollar spend its the common voter who have been :duped once and never again”.
    The Liberals lost Indi at the last election, the “SPC lies” means the Murray will be lost especially if Ms Stone is pilloried and forced out of the Liberal party to the cross benches probably to be joined by other ‘river electorates” in SA and NSW as well as they see their political survival doomed.
    It does not end here- next river industry that is close to collapse is the wine industry. ( killed by the same factors as SPC- climate change, high dollar and its dependence on the WET tax rebate subsidy). An interesting fact Bernard to think about is the ” multiplier effect of a collapse” of the fruit and wine industries. In wine and I assume in fruit – for every person employed at a winery the expanded wine industry supports the employment or part employment of 5+ other people in packaging, logistics, retail, hospitality and now tourism. Mechanisation has not reduced employment as industry diversification into tourism and hospitality has increased employment dependence; rather than reduce it.
    A visit to the South of France and the EU generally, where over 1.5 million hectares of grape vines have been grubbed is a clear reminder what the River Region will look like when the orchards and vineyards have gone as well as the tourists —– deserts are not very attractive destinations.
    No wonder growers are committing or contemplating suicide.
    Abbott has a death wish of his own —to be a one term PM – assuming he keeps the leadership that long.

  2. tonyfunnywalker

    Jimmy, I agree and you will note that the ABC have employed a former Murdoch media editor as a means to get a fair hearing although that is never assured. The Media have a great method creating ” noise” when it appears that Labor had the high ground.
    It destroyed the Rudd/ Gillard government driven by beat-ups, muck raking, personal insult and triggerng Rudd’s short fuse. Abbott also has a short fuse as well as saying the first thing that comes into his head irrespective of the facts and that’s why Peta Credlin keeps him on a short leash and his media appearances are scripted by his minders.
    His use of Fox News evasive answers — a training that has expanded to include Abetz, Turnbull, Briggs ones that she can trust – while loose cannons are unavailable or quarantined to short scripted dorothy dix questioning the sort of thing that Abbott enjoys in his sessions with Alan Jones and Ray Hanley where Abbott actually says nothing at all.
    The ABC outburst was scripted and revved up by Hanley and the SPC gaff was Abbott trying to score points ( the old Abbott) without reading the brief properly and it went horribly wrong. If Gillard on Q&A had suggested that ” retribution” would lead to a ‘house being burnt down’ the tabloids would have been in ‘melt down’ but as it was Barnaby Joyce – it was allowed to pass through to keeper. Communique’s which is now the practice of the PM’s Office can go wrong too; as Hunt who really has little ideas what he is talking about most of the time today praised the Carbon Tax. This was picked up in glee by the Greens who sent it viral before the mistake was picked up.
    In Blogs like this one — the Liberals have a team of attack- dogs with interesting names monitoring and responding to anti Abbott Government comments. Again they are briefed to be on message and are becoming a focus of fun as they try and defend the daily disasters, lies, contradictions that appear. News Ltd censorship is still tight ( Putin would be proud of them) but the ones they allow and their speed of publication suggests that junior staffers are manning the laptops with spurious names and addresses or tame blogers who are rewarded with a free subscription for supportive comments when they occur.
    The Conversation is very ‘ho hum’with little contribution from what might have been a better informed source – but their articles and blogs are no better or worst than that found in the lesser tabloids.
    It is more difficult to create noise with blogs but absurdity still prevails even with Crikey with the interminable vilification of Flannery as a result of a charlatan who got under the Fairfax radar as an authority of climate change or rather its denial but the discussion went on and on — of pointless point scoring.
    The shift to the ALP is the fact that people voted for Abbott because they were disgusted with the Leadership circus only to find that they are now saddled with electing a PM whose sole purpose in life is to punish anyone he does not like or he thinks did not vote for him and to reward the people who “bought” his election and now are standing in line to collect.
    The thing that galls most is that Abbott has totally abdicated the function and debate of government — around 40 groups of cronies, lackeys and “hangers on” make his decisions for him.
    He has farmed out government to failed retired generals and CEO’s and anyone else where can ensure that vested interests of the sponsors are protected irrespective of the damage that this will create not only to the individual elector but to some of our proud institutions such as education whose curriculum is being returned to the time and doctrinaire of BA Santamaria and his ilk or by adopting the already failed education policies of Gove in the UK.
    In other-words the Abbott Government is a lazy, clueless bunch of Muppets driven by the sponsors of self serving, self perpetuating of greed and unfettered but unelected power.
    If Abbott totally falls apart they will just walk away – and they suspect it will – hence the rush to “collect” before the whole pack of cards collapses as Abbott was never up to the job they wanted him to do in the first place and they have just found out just how poor and unprepared this government really is.

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