Corporate welfare on the rise

As the Productivity Commission’s annual Trade and Assistance review revealed yesterday, corporate welfare is on the increase. After increasing at an annual rate of around 6% until mid-decade, it increased by 14% in 2006-07 and 23% in 2007-08.

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But this is nothing compared to what is on the way. As The Age reported:

The Rudd Government’s spending plans for research and development, the car industry and the farm sector would add another $20 billion in coming years, it says. But the emissions trading scheme would put all that in the shade. The commission says free permits to emission-intensive firms alone would cost taxpayers $6.5 billion in 2011-12 under the original plans — now postponed for two years due to the global financial crisis.

The chapter called ‘Recent developments in industry assistance’ (pdf) runs to 35 pages, discussing over 40 developments – not all of them bad from an anti-corporate welfare perspective, but most of them. That’s up from 23 pages in the last full year of the Howard government.

21 Responses to “Corporate welfare on the rise

  • 1
    Rajat Sood
    May 28th, 2009 21:13

    I’m not sure its correct to say that free carbon permits constitutes corporate welfare. They are just a rebate on a production tax.

  • 2
    Corin
    May 28th, 2009 21:21

    I’ll read this on the train one night for a bit of fun.

    The Productivity Commission has already found that for every job saved in the auto industry it costs the community some $300,000 and the Green Car Innovation Fund would be unlikely to yield significant innovation and greenhouse benefits. The PC are none too keen on the MRET as well.

    My guess – with GM set for bankruptcy in US – we’ll see how big assistance might get … What would the Government do if Holden could not easily be sold off in a broken up GM … how would it form part of a global supply chain??

    If the Govt wants to ‘make things’ this is too big a political nightmare for words. We’ve not seen an Australian nationalisation in my lifetime?? Well if you don’t count Broadband …

  • 3
    Corin
    May 28th, 2009 21:25

    Rajat, I think that tax reform with an ETS as part of that review, could have seen industry concerns partly assuaged without the need for corporate welfare in the form of too many free permits. i.e. why not have lower payroll tax or lower company tax rates instead of a high number of free permits.

  • 4
    Andrew Norton
    May 28th, 2009 21:36

    Rajat – The same kind of objection could be made to the many of the ‘tax expenditures’, an industry or particular business activity getting a break on tax obligations that others must meet.

  • 5
    Rajat Sood
    May 28th, 2009 21:58

    True, others will have to meet the cost, but the rationale for free permits for emissions-intensive trade-exposed industries is that they will be unable to pass on the costs to their customers, unlike non-tradeable industries.

  • 6
    Corin
    May 28th, 2009 22:23

    Isn’t this the big debate about going first before there is an international agreement on emissions … frankly it’s in the too hard basket for me. I’m pro ETS and pro auction of permits, but Rajat you make a very good point about the trade exposed sectors. I guess where an international agreement fails, there is a question that only politics can resolve about going first. Do we lead or is this folly …

  • 7
    Sacha
    May 28th, 2009 22:56

    Would anyone like to bet on when assistance to the car industry will end?

  • 8
    conrad
    May 29th, 2009 06:56

    “Would anyone like to bet on when assistance to the car industry will end?”
    .
    Whenever humans give up cars, or, at least in Australia, whenever the industry pulls out even though they are subsidized.

  • 9
    M
    May 29th, 2009 09:54

    Sort of on topic. Yesterday I saw this article about a review of the green jobs policies in Spain (who are at the forefront of this sort of policy).

    http://www.washingtontimes.com/news/2009/may/27/five-million-green-jobs/

    Remember that Productivity Commission are soulless economists who only consider numeric outcomes. This makes it hard to capture the intangible benefits (of national interest) of maintaining various industries/skill-sets. Also as economists they are almost always fundamentally opposed to any form of market intervention and probably would like to get rid of the pension and unemployment benefits.

  • 10
    caf
    May 29th, 2009 12:10

    Sacha: It’s my understanding that the underlying rationale for car industry support is the vague feeling that we’d want to be able to build military vehicles here should the world find itself in another global war. So I guess, as the possibility and memory of such wars becomes more and more remote, the likelihood of the assistance ending rises.

  • 11
    Andrew Norton
    May 29th, 2009 12:19

    Caf – I’m not sure even the government is making that argument.

  • 12
    Chris Berg
    May 29th, 2009 13:01

    Andrew, if only! Kim Carr: “You can’t make a jet fighter without having a strong car industry and that’s precisely what we are doing now.”

  • 13
    Andrew Norton
    May 29th, 2009 13:17

    Chris – I should have guessed that there were no arguments that Carr would not try – one even more ridiculous than what Caf suggested in the first place. I will await with interest the process of converting a Commodore production line to one producing the latest from the Joint Strike Fighter project.

  • 14
    M
    May 29th, 2009 13:18

    Remember Kevin Rudd doesn’t want to be Prime Minister of a country that no longer “makes stuff”.

  • 15
    johno
    May 29th, 2009 13:25

    “Would anyone like to bet on when assistance to the car industry will end?”

    Conrad suggested ‘Whenever humans give up cars, or, at least in Australia, whenever the industry pulls out even though they are subsidized’

    I wouldn’t bet on assistance ending just because we had no car industry. What sort of crazy assumption is that. You must be mad to think that!!! 🙂

  • 16
    caf
    May 29th, 2009 15:08

    I wasn’t saying I agreed with it! It’s just the only even partway coherent reason I’ve heard that explains why we have car industry assistance but not bra industry assistance.

  • 17
    M
    May 29th, 2009 15:12

    Caf the conspiracy theory I read in one opinion piece is that the car industry employs men, whereas the bra industry (textiles, clothing and footwear) employs mostly women who don’t speak much english….

  • 18
    Martha Maus
    May 29th, 2009 16:25

    It must be the Friday, M, because that conspiracy theory sounds like the another way of comparing the union power of the Australian Manufacturing Workers Union (AMWU) with over 130000 workers and the the Textiles, Clothing and Footwear union with no published member numbers that I can find.

    The TCFUA claims various numbers of outworkers that range from 30,000 to 330,000, but not members.

  • 19
    drscroogemcduck
    May 31st, 2009 21:48

    carrs arguments are pretty ridiculuous. everyone is supporting their car industry so we should as well. i think everyone supporting their car industry is a bloody excellent reason to get out. seems crazy to throw money at an industry with massive losses when everyone else is massively subsidising the same industry.

  • 20
    Andrew Norton » Blog Archive » What constitutes successful working of a policy integrity system?
    June 23rd, 2009 20:45

    […] by Ministers and all those companies that have benefited from government decisions, an expanded Productivity Commission Trade and Assistance Review that names names as well as […]

  • 21
    Andrew Norton » Blog Archive » Economic liberalism and the opportunities for political favours
    June 26th, 2009 22:57

    […] by the pervasive modern state, I don’t think this is actually a major problem. The reason the corporate welfare state is bloating is not that any of the Labor Cabinet are crooks. They actually believe they are doing the right […]