ABC MELBOURNE DRIVE
TUESDAY, 25 JULY 2017
Subjects: Trusts, inequality.
RAF EPSTEIN: Andrew Leigh joins us, he is the Shadow Assistant Treasurer. Good afternoon.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good afternoon, Raf. Great to be with you.
EPSTEIN: Are you doing stuff with trusts?
LEIGH: Raf, we’re looking at a range of different tax loopholes as you’d expect from a sensible Opposition that cares deeply about inequality. We’ve led the debate around superannuation tax concessions, brought policies to the last election closing loopholes on negative gearing and the capital gains tax discount and we’re looking across the board at ways to make our tax system fairer at a time when inequality has been rising for the last generation.
EPSTEIN: And I’m keen to talk about inequality and that was a fantastic bit of advocacy for the Labor Party-
LEIGH: [laughter] Thank you very much.
EPSTEIN: But not at all an answer to my question. Are you going to look at trusts in any way?
LEIGH: Raf, I’m on your show today to offer fresh perspectives rather than new announcements. Certainly, we’re not ruling out the issue of trusts. You’d be aware of the Australia Institute report that came out at the end of last week which suggested that around a fifth of national income was going through trusts and that half of the distributions from trusts were going to people with incomes over half a million dollars. Think about that for a moment. I mean, superannuation, negative gearing, capital gains tax discount – they all skew a bit to the top end, but half the distributions of trusts according, to the Australia Institute, are going to people with incomes over $500,000.
EPSTEIN: But people are still paying income tax. They’re still paying tax at their marginal tax rate, nothing – I mean, there’s nothing legally wrong with what they’re doing, is there?
LEIGH: No one is suggesting that people are behaving illegally at the moment. What’s important is that an Opposition that cares passionately about fairness, about maintaining the great egalitarian project that Australians prize is looking at each of these tax loopholes. Past tax reviews, including the Henry Review, have looked at this one and it needs to be part of the focus for an opposition that wants to make sure we don’t have what Bill Shorten has correctly called a ‘two class’ tax system.
EPSTEIN: And can I just ask you about the Henry Review – people may remember Ken Henry, former head of Treasury, did a big tax review for then Prime Minister Kevin Rudd. Why didn’t Labor take up that recommendation last time, do you know?
LEIGH: Well, we picked up a range of the recommendations out of that review.
EPSTEIN: I’m just wondering if you know why that one wasn’t followed.
LEIGH: Part of the challenge in government, Raf, is prioritising issues. So if you look at the previous big tax review, the 1975 Asprey tax review, that took the best part of a quarter century in order to implement. I think Ken Henry when he was doing his 2010 review didn’t envisage he was doing a review that would all be implemented in a single burst, but that he was laying a set of ideas that people would pick up in years to come. And we did many of the things recommended there – we tripled the tax free threshold, took a million people out of the burden of having to file a tax return every year for example.
EPSTEIN: So look, I assume you’re happy to have the government fulminating about the end of the world as we know it for farmers and small businesses. Because, I suspect, you’re ahead in the polls you’re not too worried about that-
LEIGH: Well, Raf, I’d prefer it if they weren’t fulminating. I’d prefer if they were dealing with climate change, if they were worried about bringing down record government debt, I’d prefer if they were thinking about how to fund our schools properly. Fulminating at Labor is not the job of a sensible government.
EPSTEIN: But if you do change things on trusts – I mean, farms are often passed down and run through trusts. They’re right, aren’t they – hundreds of thousands of small businesses run through trusts. So they’re right to point to people who manage their affairs in that way and say ‘listen, Labor’s changes could be harmful to you’. That’s right when they say that, isn’t it?
LEIGH: Raf, I look at the hyperventilating of Barnaby Joyce and Scott Morrison this week and I just think to myself: ‘you guys have better things to do with your week. You’re in government, you should be getting on with making long term decisions for the nation.’ At a time when real wages for many listeners are going backwards, when the home ownership rate is as low as it’s been in 60 years, when we’ve got the UNHCR making some pretty serious allegations against the government, when we’ve got marriage equality to be dealt with. I mean, why don’t they get on and deal with some of these real issues instead of beating up on the Opposition?
EPSTEIN: I think it’s pretty normal for a government to attack an Opposition’s potential policies, but still. Andrew Leigh is with us, he is the Shadow Assistant Treasurer. He is part of Bill Shorten’s economic team. It looks like Bill Shorten will be unveiling something about trusts at Labor’s NSW state conference this weekend, so Andrew Leigh’s not going to make any announcements on this show sadly. Can I ask you, Andrew Leigh, about inequality? Scott Morrison is having a go at, I think, a fair few of the Labor frontbench. I think a few of you have said that inequality has reached a 75 year high and the Treasurer didn’t mince words. He said that is a lie and that one of the international measures that we use actually tellsprecisely the opposite story. What do you make of that?
LEIGH: Raf, I’m happy to debate Scott Morrison on inequality any day of the week. If you want to look at the Gini coefficient, we can go back to the Australian Bureau of Statistics first measuring it in 1981 at 0.27. Now it’s either 0.3 or 0.33, depending on the measure you use. If you want to go back 75 years, you’re looking at the top income series – which I originally developed with the late Sir Tony Atkinson, now being run by Roger Wilkins – that again shows a steady increase in the top one per cent share, which has doubled over the course of the last generation. You can look at wage inequality, where the ratio of what’s earned in the top tenth to the bottom tenth used to be 2 to 1 in the mid-1970s. It’s now nearly 3 to 1. You can look at wealth inequality, the work that I’ve done with Pamela Katic using a range of measures to look at a century of wealth inequality and you see again this U-shaped pattern over the last century - falling inequality through to the late 1970s/ early 1980s and then a significant increase since then. I reckon Scott Morrison’s the only guy in Australia that doesn’t think inequality has risen over the last generation.
EPSTEIN: I couldn’t possibly begin to engage with all those numbers, but let me ask you this question for all the statistics you reeled off – if it’s that entrenched and that deep, how on earth do governments of any persuasion make a difference? If the problem’s as extensive as you say, it sounds a bit like house prices – the horse has bolted.
LEIGH: It’s a big challenge and I don’t think there’s a single answer to addressing inequality. In that sense, I’m a fox rather than a hedgehog. I think we need to make sure that our schools funding is as progressive as possible. We need to make sure our tax system is progressive, that we’re not giving tax cuts to those at the top of the distribution while cutting the penalty rates for those at the bottom of the distribution.
EPSTEIN: Sounds like all you’re promising to do is slow down the slide down the slippery slope, but not actually fix the slippery slope.
LEIGH: Raf, that’s a great point, and a couple of years ago I think I would have spoken about the need to stem the growth of inequality. But I’ve actually turned my head around in the past couple of years and thought this is a bigger issue than that. I gave three speeches I called ‘Just Ideas’ over the course of the end of last year and the beginning of this year, arguing that we actually need to bring inequality down in Australia – it’s too high. You look at the people who agree with this view – the OECD, the IMF, Warren Buffett, Bill Gates. The Ford Foundation is now solely devoting its grant-making to inequality. Inequality is a signal issue of our age, whether you go to Thomas Piketty or Pope Francis. We need to start tackling this seriously, we need to optimistic that if we look at a suite of policies across the board from competition policy to industrial relations, we actually can make Australia more equal tomorrow than it is today.
EPSTEIN: I understand there’s real work in an Opposition laying out what the problems are before they describe their solutions, but if you do win, if you change things around negative gearing, if you change things around trusts, are things going to change that drastically?
LEIGH: I’m optimistic we can make a difference. I think we need to scrutinise proposals as they come before cabinet, to think about the inequality impact that they have. My colleague Jenny McAllister has done some really important work there, thinking about this. You’ve seen significant speeches on inequality from Jenny Macklin, Jim Chalmers, Chris Bowen – many of the Labor frontbench have talked about the importance of inequality in different areas. Brendan O’Connor about the importance of tackling inequality in the workplace because strong unions are actually one of the best bulwarks against inequality and probably a third of our rise in inequality has come because the union membership rate has fallen. So we need to be engaged in what my basketball colleague Ed Husic would call a full court press on inequality.
EPSTEIN: I do like that American expression.
LEIGH: I do too, Raf.
EPSTEIN: Andrew Leigh, full court press, part of the Shadow Treasury team. He’s Shadow Assistant Treasurer.