While the details will be left to budget night, and Greg Hunt’s special briefing for journalists within the budget lock-up tomorrow, the government appears to have decided that it will be the taxpayers who will bear the burden of a massive increase in aged care spending that will form the core part of the government’s response to the recent royal commission.
After initial speculation of an extra $2.5 billion a year, the government on the weekend dropped that it would be committing more than $4 billion-plus a year extra to the sector, primarily to address the desperate need for a larger and better paid aged care workforce.
If true, it would represent the first time this government has actually tried to lift wages in any industry, rather than forcing them down or holding them flat. All power to them — it’s crucial to a better, more efficient and more caring aged care sector.
But while most budget announcements usually obfuscate the level of new spending by throwing in old spending, this is one area where the scale of spending has already increased significantly and will now — if reports are correct — become a permanently increased and huge budget item.
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In 2017, the government spent around $13.5 billion on residential aged care and home care.
In 2020’s additional estimates papers — which incorporate announcements since last year’s budget, including a substantial injection of funding into extra home care packages — residential and home care were forecast to cost $17.5 billion this year, as part of a $22.5 billion aged care spend.
Another $4 billion-plus a year will lift residential and home care spending to nearly $22 billion a year and total aged care spending to over $26 billion a year.
It’s not quite the $9 billion a year extra suggested by the aged care royal commission as needed to repair decades of funding cuts, but it represents a step-change in funding into the 2020s. And it seems it will be baked into the budget, permanently.
How will it be paid for? Like everything else that has been announced already, and that will be announced tomorrow night, it’s borrowed. Not merely have we left the obsession with debt and deficits behind, we’re not even bothering to confine borrowing to capital and investments like infrastructure. As Wayne Swan pointed out yesterday, it’s funny how the question “where is the money coming from” never gets asked if it’s a Coalition spendathon.
Remember the aged care royal commission didn’t recommend funding extra spending from borrowings — both Lynelle Briggs and Tony Pagone recommended some form of personal income tax increase, though they differed on the mechanism. Barring a surprise Frydenberg tax increase tomorrow night, it appears the government has rejected this recommendation. A multi-billion dollar annual increase in spending has been added to the budget with virtually no debate about how it will be funded.
It’s not a debate politicians are exactly queueing up to participate in, because none of the options are palatable. Either you borrow it, or the whole community funds it through extra taxes, or you make aged care clients and their families pay for it, usually by accessing the wealth of the family home, or — in coming decades, less so at the moment — getting people to tap their super assets.
If you want to see how such a debate could play out, consider Aaron Patrick’s contribution today in the Financial Review: he suggests the aged care increase is a subsidy for greedy retirees who don’t want to sell their homes to pay for their care, which also adds to an over-inflated property market. Make them sell their homes and pay their way in commercially-viable aged care, he suggests, in a piece headlined “another boomer bailout”. Kudos to Patrick for a piece that probably is the last thing his readers want to hear.
And while his language might border on shit-stirring, he has a point: what exactly are the equity impacts of permanently and substantially increasing taxpayer funding for aged care? Do we let the feelgood factor of finally doing something about a sector that has meted out horrific treatment to so many people in their final years override a discussion about how fair it all is?
From a neoliberal point of view, taxpayer subsidies are completely wrong. But at least Pagone and Briggs articulated the case for them, and where in the tax system the funding should come from. Maybe Greg Hunt will do that tomorrow. But it appears a fait accompli. The questions that are asked of Labor spending should be asked about Coalition spending — and in this case, it’s all the more imperative.