Talking Budget Fairness with Leon Delaney

I spoke on 2SM today with Leon Delaney about the fact that the Abbott Government may be strong at standing up to the weak, but it's weak at standing up to the strong.




SUBJECT/S: Budget cuts; Means testing; Expenditure on Joint Strike fighter; Superannuation; Pensions.

LEON DELANEY, PRESENTER: I said at the beginning of the show today, I've never seen a scare campaign like it. It's most unusual, in fact unique, because it is a scare campaign being conducted by the Government against itself, basically. We're being told to be fearful of what might be in the Budget in a couple of Tuesdays away from now. So that's very, very strange, very unusual. We almost don’t need the Opposition to tell us to worry about it because the Government is telling us to worry about it. Nevertheless I thought we should find out what the Opposition thinks. On the line now, the Shadow Assistant Treasurer Andrew Leigh. Good morning


DELANEY: How are you today?

LEIGH: I'm very well, how are you?

DELANEY: Very well thanks. There's almost nothing for you to do because Joe Hockey's doing all the scaring for you isn’t he?

LEIGH: You put it very nicely. Yes, Mr Hockey is good at one thing in the area of manufacturing, and that's manufacturing a budget crisis. I think he wants people to forget that last year he did the deal with the Greens for unlimited debt, he said 'no' to 50 tax measures that Labor had put in place, and he gave $9 billion to the reserve Bank that they hadn’t asked for. Now he's standing around saying, lo and behold, there are fiscal problems, when he's doubled the deficit.

DELANEY: Okay but when you say he's manufacturing a Budget crisis, perhaps he's gilding the lily a little bit, but it is widely recognised, there is a structural Budget challenge that must be confronted over the years and decades ahead. We cannot simply go along as we have been going can we?

LEIGH: Well government is always about making trade-offs and decisions, Leon, but when you say no to the revenue from the mining tax and from the carbon price, immediately there you blow a hole in the budget, to say nothing of what you do to the environment. And if you're not willing to go ahead with modest measures, such as Labor's measure to impose a fairer rate of tax on people with superannuation balances over $2 million, again you blow a hole in the budget. But I don’t think it's fair to then turn around and say the people who have to pay for that are pensioners on $20,000 a year, regardless of the fact that the Prime Minister made a very clear promise to pensioners that there would be no changes to pensions.

DELANEY: Yeah. Now, of course we're all speculating a little bit because we haven’t seen what's actually in the budget, but we've been given a pretty clear indication from Mr Hockey, particularly in his speech last night, that there will be some sort of changes involving the pension and welfare generally, there will be some sort of changes involving our visits to the GP, why is it wrong to ask people to pay a little bit towards the cost of their trip to the GP? What's wrong with the idea of a co-payment?

LEIGH: Certainly if you ask health experts, whether it's the Australian Medical Association or the Doctors' Reform Society, they'll tell you that the impact of a co-payment is going to deter people from chronic conditions getting the help that they need in the cheapest place, which is from a doctor, and instead going to a more expensive place, which is a hospital emergency ward. We've already got out-of-pocket costs in Australia are high and rising, we've had the biggest increase in private health premiums in a decade approved by the Health Minister at the end of last year. So in that environment, it seems pretty rough to me to then be saying we're going to put a GP tax on the top.

DELANEY: What about the idea, because the, speaking in generalities, because that's all we have, but the idea that the Treasurer is telling us that nothing is free, and that we should look at more income tests, more means tests, and perhaps more co-payments in various areas of government services. Again, isn’t that reasonable, if people have the capacity to provide for themselves, shouldn't they do so?

LEIGH: I think means testing is a very reasonable principle Leon. The trouble is I can't remember a time when we were in government when Joe Hockey supported a means test. In fact when we made some modest changes to the baby bonus for second and subsequent children, Joe Hockey compared it to China's one child policy. So you know, this is a bloke who talks means testing, but then wants to put in a parental leave scheme that not only isn’t means tested, it's actually regressive - it gives five times as much to millionaire families when they have a child as it does to minimum wage families when they have a child.

DELANEY: Now I forget, what's the projected cost of that, six billion dollars or something?

LEIGH: Somewhere around there, $5.5 billion, and you know -

DELANEY: Is that annually?

LEIGH: No that's the cost over the four -

DELANEY: Forward estimates?

LEIGH: Four years, as we understand it, I mean we don’t, we don’t have details on this scheme but if Mr Abbott has to break a promise, well let's start with the unaffordable promise to turn a fair flat rate parental leave scheme into an unfair wage replacement scheme that gives the most to those who have the most, and according to independent economists, won't boost productivity or participation.

DELANEY: OK. You've mentioned the Carbon Tax Repeal, which still hasn't gone through of course, but when we look at the question of environmental management, Direct Action is set to cost, what is it, 3.2 billion dollars over the forward estimates?

LEIGH: Well the problem with Direct Action was it was drawn on the back of a napkin in that interregnum after Tony Abbott won the Liberal leadership, and it really hasn't been updated since then. It's a policy which no serious economist backs and that's because it's really a political strategy rather than an economic or environmental one. What we did with the carbon price was to say well let's deal with the problem of climate change and let's also get the double dividend of cutting income tax rates at the same time. So it's a scheme that works on two levels. Direct Action taxes households in order to pay polluters, and won't meet those emissions reduction targets that both sides of politics say they're committed to.

DELANEY: Now if we really want to get serious about balancing the budget, shouldn’t we look at, as suggested by the Greens, fuel subsidies for big mining companies which amount to something like 13 billion dollars?

LEIGH: Well Leon I'm not the Treasurer, so I'm happy to respond to -

DELANEY: Well you're the Assistant Treasurer, let's have a look at - Assistant Shadow Treasurer, I should say, so you know let's have a look at this, isn't that a reasonable suggestion, because obviously big mining companies are pretty profitable?

LEIGH: Look I'm happy to respond to proposals the government is making on the budget, what I would say is that Joe Hockey's budget numbers have the mining tax raising nearly $2 billion in a couple of years, and foregoing that revenue is again putting more pressure on the Budget. I mean Mr Hockey's cuts all seem to be cuts that will hurt low and middle income families, whether it's getting rid of payments to kids of veterans, scrapping the School Kids bonus, or raising superannuation taxes on low wage workers. But then at the same time, he wants this unfair parental leave scheme, he doesn't want to more fairly tax people with multi-million dollar superannuation balances, and he doesn't want to rethink giving a tax cut to mining billionaires.

DELANEY: So you don’t want to comment on the Greens' suggestion that looking at the 13.7 billion dollars in fuel subsidies for mining companies might be a way of helping the budget bottom line?

LEIGH: I think sticking with the mining tax would be a sensible move, and we know that a profit based tax is the right way of taxing commodities. That was what the Minerals Council of Australia put to the Henry Tax Review a couple of years back.

DELANEY: Yes. OK let me throw you a curly one.

LEIGH: Sure.

DELANEY: I've just had a caller a few minutes ago who expressed her absolute disgust that the Federal Government could be talking about cutting pensions, or indicating that there's some threat to pensions, while at the same time announcing a $12 billion purchase of jet fighter aircraft which will probably cost a lot more than that in the long run anyway. She sees that as being the height of hypocrisy. We've got plenty of money to buy jets, but no money to help aged people. Now I know that the F35 purchase has bipartisan support, but how do you explain that to people? Say ‘well look we can buy jets but we can't help people see the doctor’?

LEIGH: Well, there's no new money going to purchase the Joint Strike Fighter, so they've been in the Budget and they go back to the 2011 Defence Capability Plan, the 2013 Defence White Paper, and so they're about making sure that our capacity to defend ourselves continues. And the only concern that I have with the Joint Strike Fighter purchase is that the government is cutting jobs from the Defence Materiel Organisation which is one of the key organisations that manages projects of this kind. We need to make sure that we make the best use possible of this capability, because as your caller notes, that it's an expensive purchase.

DELANEY: But you understand the frustration of ordinary people who can't understand why we can spend billions of dollars on that sort of thing, but can't seem to find enough money to keep our health system running as well as it should?

LEIGH: Well I think we need to make sure that we have a strong defence capacity, but at the same time I think that if you're looking at making budget savings in an Australia where the gap between the haves and the have-nots has been steadily widening for the past generation, then you don’t want to have the axe fall hardest on those who have the least. Cutting back on the income support bonus, on people with very modest means, but then for those who are the most affluent, giving them a parental leave scheme which gives them $75,000 a year. $75,000 - that's more than many of your listeners would earn in an entire year, but that's what a millionaire will get when they have a child under Mr Hockey's new proposals.

DELANEY: The other comment that constantly comes up when people ring in about you know, trying to rebalance the Budget, and how the government tells us everybody has to take their share of the heavy lifting, the comment that frequently comes back is, ‘yes but when are the politicians going to take their share of the heavy lifting and reduce their salaries, and reduce their entitlements after they retire?’ People are pretty frustrated with what they see as hypocrisy on that front too.

LEIGH: I can understand the perspective that's coming from. What we decided to do a couple of years ago was to put off politicians' pay to an independent committee, because I don’t think it's appropriate for people to be setting their own pay. I think that's a bad look and we also traded off some of the things like the study tours, which I think were mostly being well used, but in certain cases were being abused, and giving the study tours a bad name.

DELANEY: And of course the Parliamentary Superannuation Scheme was changed a couple of years ago now, so the people who are elected now don’t get the same entitlements as people who were previously elected.

LEIGH: Yeah that's right.

DELANEY: But those changes don’t seem to have been enough to, I guess, allay the concerns of many of the people that ring up and say, yeah they talk about heavy lifting but that's easy for them to say, they don’t have to worry about the next dollar, or where the next meal's coming from do they?

LEIGH: Leon, I think it's a fair point and I would certainly acknowledge that as Parliamentarians, our salary puts us in the top couple of percent of Australian income earners. I thought there was a little moment in Joe Hockey's speech last night where he talked about the pain shouldn’t fall on the few - and he talked about them as being other people. For the Treasurer not to accept that his own income places him very high in the income distribution I think is to forget his sort of moral responsibility to be making sure that the burden is shared across the community.

DELANEY: One of the other things, I didn’t actually see the speech itself, but reading the reportage this morning, he appears to have endorsed one of the broad goals of the Commission of Audit. The full report of course has not been released yet, but one of the broad goals being the capping of future government spending at an increase of 1.7 percent above inflation annually. Now that's a much tighter constraint than ever before, pretty much in the history of the country isn’t it?

LEIGH: We had a two percent spending cap coming out of the Global Financial Crisis, and we offset all of our new spending decisions with additional savings. Some of them weren’t straightforward; we got attacked by the Coalition when we means tested the Private Health Insurance rebate, for example. Or when we phased out the outdated Dependent Spouse Tax Offset. But we thought that they were reasonable savings measures to make. And in our final year of government we actually managed to cut nominal spending.


LEIGH: We spent less even after inflation, and as far as I’m aware, there's not another government in the history of Federation that's done that.

DELANEY: Yeah but to maintain a figure of 1.75 over a decade, which is I think the intention, that would be unprecedented, wouldn't it?

LEIGH: 1.75 is smaller than 2 but not by much.

DELANEY: Yeah but to maintain it over a decade is a fairly big ambition. And the effect of that if you achieve it is you quite dramatically reduce the government participation in the overall economy don't you?

LEIGH: Yes, and you need to take account of where Australia is compared to other developed countries. I mean our size of government, whether you look at taxing or spending, puts us down near the bottom, where with government in the economy in Australia is more like it is in the US or Korea, than in Sweden or Finland.

DELANEY: Oh yes.

LEIGH: So we've got a fairly modest size of government in Australia, and let's face it, when you look internationally: strong growth, those AAA credit ratings, and debt around a tenth of GDP, which is significantly lower than most developed countries.

DELANEY: If the Budget in a couple of weeks’ time, actually does unveil some sort of change to aged pensions, and does introduce the co-payment for visits to the GP, and does introduce things like cuts to funding at the ABC, these are all clear and blatant breaches of election promises aren't they. So what do you see as the political fallout of that?

LEIGH: I think it would be an unwise Prime Minister who spends three years criss-crossing the country talking about the importance of keeping promises, and attacking Julia Gillard for a promise that she made the day before the 2010 election, and then says ‘well when I made a promise the day before the 2013 election, I didn't actually mean it. And it's OK for me to break my promises because I'm a Liberal Prime Minister and Liberal Prime Ministers are allowed to break their promises’. If that's the strategy he wants to pursue, good luck to him. I'm not sure how pensioners, ABC viewers and so on will take it.

DELANEY: No. Well pensioners in particular I think are pretty cranky already and it hasn't even happened yet.

LEIGH: That's right and I think they're right to be concerned and I think it's particularly worrying to me that Mr Hockey is playing these political games and not considering the impact it has emotionally on pensioners. I had a man in my electorate office the other day who was just genuinely worried about what the government is going to do. He's living on the margins and not feeling as though he could cope with big cuts to the support that he receives.

DELANEY: Yes and that's you know something that perhaps isn't often enough considered, that that emotional impact that you're talking about is really quite substantial for a lot of people.

LEIGH: It is, and I think had Mr Hockey released the Commission of Audit early, rather than holding it back for the South Australian election and the Western Australian Senate election, we could have had a better debate over this and he would have been able to more clearly say what he was going to do and wasn’t going to do. But because he's played games with the Commission of Audit report, it's left many older Australians a little concerned about their fiscal futures.

DELANEY: Well you've brought us back to where we started. I think the government is conducting the most extraordinary scare campaign against itself and it's succeeding.

LEIGH: It's a very strange spectacle isn't it.

DELANEY: It is. Thanks very much for your time today.

LEIGH: Thank you, appreciate it.

DELANEY: The Shadow Assistant Treasurer, Andrew Leigh.


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