WE HAVE had a bucketful of budgetary numbers in the past week. But both Opposition and Government have put quantity before quality. 
The Opposition’s mantra is to cut government spending. The Government’s mantra is that the Budget will move to surplus come next financial year.
Both are pandering to audiences. The Government is engaging in some smoke and mirrors which have been fairly well worked over in the past few days.
But the Opposition has been engaging in massive myth-mongering.
Myth One: All government spending is a bad thing and all reduction in revenue is a good thing.
Myth Two: The Australian Public Service is a burgeoning ballooning burden riddled with lazy inefficient bludgers and should be cut back for the greater good of the country.
Myth Three: John Howard presided over a frugal, prudent Government that contracted the public sector to the greater economic good of Australia.
On government spending the Opposition pays a lot of attention to social welfare: dole bludgers, single mothers, people who spend their family allowance on gambling and drugs.
For example, earlier this year Opposition Treasury spokesman Joe Hockey called for Centrelink to quarantine payments to parents with a gambling or drug addiction.
“We have to meet head-on the challenge of growing welfare dependency,” he said. “This is particularly important for families where children may be at risk from parental drug abuse, gambling, or other lifestyle afflictions.”
Hockey does not spell out how Centrelink will determine who has drug or gambling addictions or how much it will cost. It is a fatuous populist proposal that would save little.
Opposition Leader Tony Abbott wants working for the dole mandatory for long-term unemployed people under 50; quarantining half of welfare to long-term unemployed for necessities; creating a two-tier system of disability support; and suspending young people’s unemployment payments if they live in an area where there are unfilled, unskilled jobs.
“Sometimes governments have to be firm to be fair,” Abbott said.
But it is all tinkering around the edges, with no substantial reduction in Government outlays.
Indeed, very large increases in social welfare payments can be put down to the Howard Government. It converted the system of tax breaks for income earners with children to a system of direct payments to families with children.
It meant an increase in the government sector. In part the new system was unintentionally more efficient than the old. Instead of tax breaks for the higher income-earner of a couple (usually the male) the support can in the form of a cheque to the mother.
The Government did it because it thought cheques would translate to votes and for the ideological reason that it thought that stay-at-home mothers should be supported.
But in doing so it put money in the hands of mothers which was much more like to translate into food, clothing and education for kids than tax breaks for dads.
It was an example of expanding the public sector for greater efficiency.
Under Howard, government spending in 2000-01 reached the highest level as a percentage of GDP in Australia’s history, bar a period just after the election of the Hawke Government.
Howard was buying votes. One of the silliest parts of it was the baby bonus. It is proving hard to remove, but doing so would save far more than the Abbott-Hockey populist tinkerings with other aspects of welfare.
Hockey’s horror about welfare dependency is directed only at the weak and vulnerable. If the Opposition wants to cut welfare effectively it should apply stricter means tests, particularly to the private-health-insurance rebate.
Of more importance, it should look at corporate welfare.
Corporate welfare is insidious because a lot of it does not show on the books. It comes in the form of tax breaks. So the government gets less revenue. The rest comes in the form of industry assistance and tariffs.
The Productivity Commission tries to get governments to see sense. It tries to educate the public about the costs to consumers of corporate welfare, but has a great deal of difficulty getting through.
Last Budget provided about $15 billion for industry and workforce support. An Opposition concerned about Government spending should look there first.
The chair of the commission, Gary Banks, pointed out the costs of much of this industry support in a speech last month. A lot of it did more harm than good, he said.
Making governments buy local, opposing “dumping”, protecting Australian jobs, and opposing off-shoring all resonate well with Australian voters, as the rise of the Mad Katter’s Tea Party – the Australian Party – testifies.
But these policies cost Australian consumers dearly. Australian businesses prevented from off-shoring become less competitive which puts high-end Australian jobs at risk. Governments forced to buy locally pay more so they have to tax more. Dumping is a pejorative term. If foreigners want to sell cheaply why shouldn’t Australian consumers get the advantage.
Banks also warned against the warm fuzzy feeling we might get when government supports “innovation”. Market demand is the best driver of innovation. Banks acknowledged that some government support for innovation was valuable, but too often government gives support to innovation that would have happened without it.
The Government and Opposition should attack spending on industry and workforce support before welfare because a lot of industry support is not merely wasteful but actually harmful for Australians.
To waste money is silly enough but to spend it in a way that harms the people is more irrational.
Have we ever come across a sorrier case of welfare dependency than the Australian car industry? If we ever needed to quarantine welfare payments to help the addicted, the Australian car industry should be, pardon the expression, first cab off the rank.
An even worse effect of industry support is the propensity for corruption. Not the brown-paper bag sort, but the expectancy form of corruption. Industry donations to party funds builds up an expectancy for something in return and political action that helps an industry builds up an expectancy for donations later.
The problem is worse when the industry assistance requires regular renewal. But Australian jobs and buying Australian are vote winners.
So, alas, is the good old public-service bash.
The public service is not growing like topsy. On any measure (raw numbers, full-time equivalents or Budget across-government figures) Public Service growth has been less than population growth since 1998.
Besides, the nation could become less well-off, prosperous and efficient with fewer public servants.
Maybe because the Public Service, particularly Treasury and the Productivity Commission, is so good at pointing out the folly of populist policies that the politicians want to keep it pruned.
CRISPIN HULL
This article first appeared in The Canberra Times on 3 December 2011.