There are a series of political issues at present that show the commentariat and electorate are remarkably confused about who should benefit from government payments and concessions. Are such payments mainly designed to help those in need, or should we compensate people who pay tax for not using the public services on offer? Is it the role of government to subsidise the private choices people make, or should taxes be used mainly to provide a good public option?
There are often accusations of middle-class welfare thrown at the payments that tend to go to women, such as child care rebates, but there is little recognition of the extent of rich people’s welfare. Some of these payments are hidden as tax expenditures, i.e. rebates and concessions. Whether these payments are delivered by direct payments or tax concessions, their impact on the budget bottom line is the same. Others are subsidies to institutions such as private schools that are not tied to any particular use, but can be used to build pools or subsidies fees.
The recent fuss about the health insurance subsidy didn’t really deal with the question of why government should subsidise private insurance when there is a public system. The rationale is that the use of the private system relieves the pressure on the public system but this raises questions whether queue jumping seriously deserves a subsidy. There is little evidence that using the private sector has improved the public sector services or reduced its costs. In fact, these services may be worse as more articulate potential users buy themselves out with public support
Similarly, last week saw some very defensive responses to the inequities of the retirement income system, in particular the beneficiaries of the super tax concessions. The responses are from the industry to Bill Shorten’s belated interest in the excessive concessions going to the very well off. ASFA’s report attempts to justify top income earners collecting up to $500,000-plus in public-subsidised tax concessions to fund their retirement. In its rush to protect the “business”, ASFA absurdly claims that this concession is not really much more than the $382,000 paid as a pension to a low-income earner.
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This raises the question of why they should get any public subsidy at all! They can amply afford to fund their own retirement and are most unlikely to claim the pension. It is worth mentioning that paying them a full pension would be cheaper than giving them these concessions by more than $100,000!
The Gonski Report will today trigger a debate about the appropriate levels of funding of private schools. There are arguments about giving parents and children wider choices and maybe the public system needs to become more diverse. However, there are questions about whether the funding of schools should also carry extra obligations such as enrolling all children who are eligible, fee levels and how money is spent per child.
These are three of the many debates that should implicitly or explicitly question what services and payments government should fund and provide. We need to discuss that whether the public sphere is just a safety net for those who can’t afford to buy services in the open market. Or should taxpayer funds provide quality universal services accessible to all, with those who choose to purchase alternatives paying for these themselves?
Once upon a time, there were few public services, but from the late 19th century, the government moved on education and health services as part of the industrialisation and democratisation of society. The post-war welfare state recognised the dangers of disaffected unemployed people and recognition of rights to decent living was also necessary for democracies to survive.
The benefits of universal quality services is that we all share the entitlements. This communality is part of our sense of who we are. If some choose to opt out, it should be because they want a different option, not because the quality is not good enough. If public services become residual services, the default option, they tend to deteriorate. The aphorism, that services to the poor become poor services, still applies as it is the more privileged users that tend to complain if they are badly served.
We seem to have moved over the past 30 or more years, from seeing public health and education services are for all of us, to seeing them as somewhat inferior services that those who can afford better can opt out of and then want some of their tax back. This approach also feeds into constant demands for tax cuts with the odd contradictory demand for better services. Too many still want good government services, just in case, but do not take the responsibility of paying for them.
I actually would support more universal payments and services, were there also higher taxes, as more people both contributing to and sharing the public pot create a more civil society. The current debates seem to reflect the self-interest of the better off: avoiding taxes, rather than contributing to fairness.