Who could have predicted what a hash a Coalition government would make
of its first budget? If Joe Hockey wants to lift his game in 2015, as we
must hope he will, there are lessons the government - and its
bureaucratic advisers - need to learn.
The first and biggest reason
the government is having to modify or abandon so many of its measures is
the budget's blatant unfairness. In 40 years of budget-watching I've
seen plenty of unfair budgets, but never one as bad as this.
Frankly,
you need a mighty lot of unfairness before most people notice. But this
one had it all. Make young people wait six months for the dole? Sure.
Cut the indexation of the age pension? Sure. Charge people $7 to visit
the doctor, and more if they get tests, regardless of how poor they are?
Sure.
Charge people up to $42.70 per prescription? Sure. Lumber
uni students with hugely increased HECS debts that grow in real terms
even when they're earning less than $50,000 a year? Sure.
What
distinguished this budget was that even people who weren't greatly
affected by its imposts could see how unfair it was to others.
Unfairly
sacked Treasury secretary Dr Martin Parkinson is right to remind us we
have to accept some hit to our pocket if the government's budget is to
get out of structural deficit. But any politician or econocrat who
expects to get such public acquiescence to tough measures that aren't
seen to be reasonably fair needs to repeat Politics 101.
This is
particularly so when a government lacks the numbers in the Senate - as
is almost always the case. Without a reasonable degree of support from
the electorate, your chances are slim. Especially when you subjected
your political opponents to unreasoning opposition when they were in
office.
A related lesson is that successful efforts to restore
budgets to surplus invariably rely on a combination of spending cuts and
tax increases. To cut spending programs while ignoring the "tax
expenditures" enjoyed by business and high income-earners, as this
government decided to do, is to guarantee your efforts will be blatantly
unfair and recognised as such.
Move in on "unsustainable"
spending on age pensions while ignoring all the genuinely unsustainable
tax breaks on superannuation? Sure. Our promise to the banks not to
touch super trumps our promise to voters not to touch the pension. This
makes sense?
But a politically stupid degree of unfairness isn't
the only reason this budget was such a poor one. Its other big failing
was the poor quality of its measures.
It sought to improve the
budget position not by raising the efficiency and effectiveness of
government spending, but simply by cost-shifting: to the sick, the
unemployed, to the aged, to university students and, particularly, to
the states.
There are various ways to improve the
cost-effectiveness of the pharmaceutical benefits scheme - though this
would involve standing up to the foreign drug companies and to chemists -
but why not just whack up the already high co-payment?
There are
ways to reform the medical benefits scheme - by standing up to
specialists - but why not just introduce a new GP co-payment, even
though we already have a much higher degree of out-of-pocket payments
than most countries?
The claim that introducing a GP co-payment
constitutes micro-economic reform because it gets a "price signal" into
Medicare lacks credibility. For a start, I don't believe that's the real
motive. Who doubts that, once a co-payment is introduced, it won't be
regularly increased whenever governments see the need for further
cost-shifting?
For another thing, the notion that introducing a
price signal would deter wasteful use without any adverse "unintended
consequences" is fundamentalist dogma, not modern health economics.
Similarly,
the notion that deregulating tuition fees would turn universities into
an efficient, price-competitive market with no adverse consequences to
speak of is first-years' oversimplification, not evidence-based
economics worthy of PhD-qualified econocrats.
I'm not convinced
the range of savings options Treasury and Finance offered the government
was of much higher quality than the options it picked.
This budget was so bad because so little effort was put into making it any better.
I'm
starting to fear our governments and their econocrats have got
themselves into a vicious circle: because the econocrats can't come up
with anything better, they fall back on yet another round of that great
Orwellian false economy, the "efficiency dividend".
But the
never-ending extraction of what have become inefficiency dividends is
robbing the public service of the expertise it needs to come up with
budget measures that would actually improve the public sector's
efficiency.
