Tuesday, 17 January 2017
The age of entitlement is over. The age of personal responsibility has begun.
Joe Hockey, 2 February 2014
Four discussions are going on right now that tells a lot about the current state of play between Australian government and society: means testing on pensions, the Centrelink fiasco, MPs expenses and the implementation of income management through the BasicsCard.
Actually, tell a lie.
Only three of those are being discussed. The BasicsCard is barely being discussed at all, which tells you everything you need to know about the current state of play.
In most developed economies, the welfare system was usually a function of the integration of organised labour and the political nature of it. One important concept around welfare that came with this integration was the idea of benefit being a social right and was often tied up with universal benefits that were given to all irrespective of the recipient’s particular circumstances. It was especially a concept that took hold after the Great Depression and the World Wars which were often seen as failures of the system for which the system itself was expected to compensate.
Australia’s fairly distinctive welfare system both reflects the rapid and early organisation of labour at the end of the 19th century but also its political conservatism. Australia’s social security system led the world in many respects but had features that would be politically unacceptable in other countries, the politics of universalism was weak, means testing was much more politically acceptable, as was the involvement of the private sector in benefit provision.
Another reason why the concept of social security universalism was weak in Australia was race. The idea of universal benefits was not straightforward in a country that had formal racial segregation until the 1960s. It was only for a short time in the late 1960s and 1970s that both the Coalition and Labor would, for example, accept the idea of dropping means testing from pensions.
Since the decline of unions in most of the developed economies in the 1980s, there has been a shift in social welfare. It is not so much as benefits have been less generous – as the left side of politics likes to highlight – but a shift in the way it is viewed as less a social right but a function of personal responsibility, in which the left has often played a leading role. In Australia, where the idea of personal responsibility has always been significant in social security debates, that shift has been very rapid – and thorough.
Discussion around personal responsibility can be very moral and you only have to look at the discussion around means testing for pensions to see how moral it can get. On one side, it involves commentators and politicians telling people how much they should be satisfied with, while on the other side ignoring how they might have accumulated those assets whether through forgoing income for years or having it land in their lap through inheritance.
On top of that it has also become convenient to ignore the real uncertainties of retirement savings today. The Keating reforms kicked off a shift in responsibility for provision from employers to employees and with employers contributing, even at 9%, less than they would have if they took that responsibility on themselves. The result is an increasing reliance by retirees on the vagaries of the market, especially for the self-funded, while reducing the government backing to manage it.
All of this was summed in a piece in The Australian by a financial advisor talking about a million dollars in savings assets in an article about pensions without once mentioning what pension that million dollars can buy. Current annuity rates would get a pension from age 65 of about $50,000 in real terms (less for a woman), a little less glamorous than a million dollars in assets and presumably why it wasn’t mentioned. Even this is generous. In the US and Europe, where interest rates have been suppressed during the downturn, retirees have been left with considerably less, and if there is a downturn in Australia, could be repeated.
Nor is it just the market. One argument has been to run savings down and then rely on the government pension kicking back in 20 years, an especially counter-intuitive suggestion as a response to government cutting back pension benefit in the here and now, let alone what it might be like in 20 years time.
This acceptance of shifting the burden on to individuals is even present in the understandable outrage over the chaos around Centrelink’s debt repayments.
This system has a long history of stuff ups, not all of them technical. The biggest legal stuff up was back in 2010 when a South Australian Court ruled that claimants were not obliged to tell Centrelink of a change in circumstances, so putting some 15,000 prosecutions since 2000 into doubt. Instead of taking the cop, the then Gillard government introduced retrospective legislation the following year that not only kept the 15,000 pinned down but exposed others to retrospective prosecution as well. This retrospective legislation was tossed out by the Courts in what amounted to yet another highlight for the government lawyers during that term.
The whole problem with the system is that it being driven for ideological reasons rather than pragmatic ones. As has rightly been pointed out, the sums involved are small. A pragmatic response would be to accept that rorting will go on but given the small amounts would not be worth the cost (nor ethical priority). But such small-scale avoidance has been a political football in the last 20 years, and on top of the hysteria over the Budget deficit of the last few years, has meant it has become an ideological priority. To square the circle of the cost of chasing small sums, Labor helpfully automated the system when it was in government, and the Coalition sped it up last year.
But here again the real problem is not so much the inevitable problems of a complicated system but the way the burden of mishaps, the miscalculated sums, the misdirected letters, are being passed on to claimants. It is not just the mistakes. In order to chase claimants yet keep departmental resources at a minimum, Centrelink gave themselves a leisurely six years to chase past debts meaning a government department with its administrative resources could demand claimants find salary slips from years ago.
As part of the speeding up last year, the statute of limitations was removed altogether in a heart-warming display of bipartisanship. The Minister denied it was to allow even longer back-dated chasing up, while his own department put in the estimates some $158m in expected additional clawback over the next three years. It also means that from this year claimants now have no limit when in the future they will be required to provide proof of innocence.
Yet despite all of this, there has been little argument that maybe the whole chasing of small amounts from those who should be the main beneficiaries of government support is perhaps unjustified. The tenor of the outrage has been more on the inefficiency of the system rather than the system itself and the way it puts the burden on those who can least afford it. It is almost as though the problem is not the cutting of claimants to the financial bone but that the knife being used is not sharp enough.
Yet the way Centrelink has overseen what is supposed to a system of support putting an increasing burden on those it is supposed to be supporting, is nothing compared to the way the very basis of welfare is right now being turned on its head when it comes to income management for nearly 20,000 indigenous people.
If race was perhaps a barrier to the political concept of universalism in much of the 20th century, it is turning universalism into its very opposite now. From its inception following the Northern Territory intervention in 2007, income management has brought out all the worst aspects of day-to-day government interaction with the public.
On top of further reports of Centrelink administrative incompetence, even when it is functioning, it manages to be both indiscriminate and yet discriminatory. Indiscriminate in that it targeted indigenous people irrespective of the need for child protection, the original premise of the intervention (and involving only 0.5% of the income managed population).
And discriminatory in terms of race, explicitly in the beginning, when it required the suspension of Race Discrimination Act, and then implicitly from 2010 when it was nominally extended to the non-indigenous population (allowing the RDA to be put back in operation) but still overwhelmingly indigenous, accounting for over 90% of the income managed population.
At the end of last year, a damning report came out from the ANU’s Centre for Aboriginal Economic Policy Research on the progress of the income management program. It was damning in two ways. First because it highlighted that despite perceptions from some quarters, there was no progress, in neither spending habits, quality of food consumption, personal budget management, family relationships or basic child metrics such as underweight births or mortality (which actually worsened). The only discernible change was a negative, if unsurprising one, an increased dependence on government, especially from younger participants. The only positive modest improvements were detected in some of the small voluntary projects.
But the other damning aspect of the report was the way governments from both sides of the fence deliberately ignored the findings, with Labor’s Macklin in the last government preferring to focus on the perceptions of improvement in earlier reports, despite them clearly stating they were not backed up by the objective evidence, and Andrews in this government pointing to the modest gains in the voluntary programs to support an extension of the compulsory program that had no such gains.
The report’s author speculated why there was such a government persistence to carry on with a such a demeaning program with so little results, and it was best summed as:
an initial belief in the policy being right because the origin of the decision was made by ‘moral people’ behaving in a ‘moral way’. In this explanation, a more subtle process tends to lock in the policy – and ignore the evidence.
The income management program illustrates the way the erosion of the social basis for the political system that formed the welfare system has resulted in its inversion, not as originally intended, as the government supporting its citizens, but as citizens increasingly being subordinated to government, even to being told how to buy the very basics of living. The last few weeks have brought this into grotesque juxtaposition with the flipside of this erosion, an increasingly rootless political class struggling to justify its own much more generous entitlements from the same system.
The fall-out from the Sussan Ley revelations followed the usual course. An insistence that the rules were adhered to (true) was then followed by a promise to redraw the rules again. The problem is that with no real social base to the politicians’ activities, there is no real common sense base on which the rules to finance them can be established.
This dilemma was summed up by Chris Kenny who made a brave attempt to lay down some guidelines by arguing surely an education minister should be expensed to visit schools around the country. But why? The Department of Education has hundreds of school inspectors with years of training to do precisely that. What possible insight would be added by a visit from a Minister with two or three years in the portfolio? As anyone who has been present on such a Ministerial visit will know, such visits are more about politicking than ‘fact-finding’.
Ministers and politicians generally are not fact finding policy wonks, but are there to represent, and to rely on expertise in the public service to carry out that task. But with it being unclear who they represent, their function also becomes less clear. It is not the personal business that politicians do on their official junkets but what those junkets are for that is the problem. Similarly it is not so much that expense scandals aggravate a broader discontent with politicians than it highlights what that discontent is ultimately about, a lack of representation in the political sphere. Just as the public’s experience of welfare is becoming inverted, so those who benefit from the system are perceiving it the wrong way round. Everything is upside down. It is intolerable.
Posted by The Piping Shrike on Tuesday, 17 January 2017.Filed under The Australian state