Category: Tax & spend

Social democratic liberal conservatives vs conservative liberal social democrats

~ Andrew Norton ~ 41 Comments

Back in 2005, Nick Gruen wrote a useful post about the components he liked of the three ideological elements of our political culture: liberalism, conservatism and social democracy. In practice, all major political parties tend to be a mix of the three, but with differing emphasis.

I’d call Labor conservative liberal social democrats; social democracy placed as the noun because that I think is the party’s animating force. People join Labor because they want more equality. Some can be quite conservative and others quite liberal on social issues, and Labor has in the past proven itself capable of major liberal economic reforms. Rudd proclaims himself an ‘economic conservative’. But these ideas complement or modify the party’s social democracy, rather than being the core of what Labor is about.

Under Howard, the Liberals have been social democratic liberal conservatives. For him, conservative ideas were most important – family, Queen and country, so conservatism is the noun. While I think the argument that Menzies was more liberal than Howard is nonsense, this is not because liberal ideas are what drove the former PM, but because he largely took as given the large social changes of the last 40 years.
Continue reading “Social democratic liberal conservatives vs conservative liberal social democrats” →

A baby bonus boom?

~ Andrew Norton ~ 7 Comments

A story on The Age website this afternoon, referring to the release of the ABS birth statistics for 2006, is headlined ‘New figures reveal our baby boom’. It reports:

Australian Bureau of Statistics data released today showed that 265,900 births were registered in 2006, the second highest since the record 276,400 births recorded in 1971.

The baby bonus rate changed during the year, but on my estimates that would have cost taxpayers $950 million. So did nearly a billion dollars buy us an increase in the number of babies being born?

A closer examination of the statistics suggests not. Continue reading “A baby bonus boom?” →

Is there an implicit subsidy in the HECS debt?

~ Andrew Norton ~ 16 Comments

Over at his blog, Andrew Leigh asks whether the OECD was right not to count an implicit subsidy in HECS-HELP in its figures on how much the federal government spends on higher education. The federal goverrnment argues that because the OECD only counts direct subsidy paid to higher education institutions, it understates total spending on higher education. This is a complex issue; I would welcome feedback on my analysis.

There are two possible subsidies in the income contingent loans scheme. There is the writing off of bad debt, about which I have written extensively (pdf). Lending to students that won’t be repaid should be classified as a higher education expense. And there is an interest rate subsidy, because HECS-HELP debts are indexed to inflation, but otherwise no interest rates are charged. There are direct and/or opportunity costs to the federal government in not charging interest on HECS-HELP debt.

Andrew L is questioning the implicit interest rate subsidy point. These are not his words that follow, but the reasoning goes like this:
Continue reading “Is there an implicit subsidy in the HECS debt?” →

Is the education rebate the FTB of the future?

~ Andrew Norton ~ 4 Comments

Labor’s education rebate, under which recipients of Family Tax Benefit A can receive

* A 50 per cent refund every year for up to $750 of education expenses for each child attending primary school (maximum $375 per child, per year)
* A 50 per cent refund every year for up to $1,500 of education expenses for each child attending secondary school (maximum $750 per child, per year)

will no doubt go down well in the electorate. I’m much less keen. It is another example of the government taxing us more than necessary and then giving the money back with strings attached, in this case a requirement that money be first spent on ‘laptops, home computers, printers, home internet connection, education software and school text books.’

Most families will spend this much and more on items on the list anyway, so the distorting effect is likely to be small in this case – it’s effectively just another cash handout for families in exchange for yet more government paperwork (Labor says it will reduce the ‘digital divide’, but this seems unlikely since families still have to find the cash to cover the full cost since they only get the rebate with their tax return, more than twelve months later if they purchase at the beginning of a financial year).

But how long before more of the FTB-linked money starts coming with strings attached, so parents spend the money as approved by Nanny – no fattening foods, no cigarettes or alcohol, no plasma TVs, no clothes made in sweatshops, no coal-generated electricity etc etc.? The current government is bad enough on these things, but Labor is full of busybodies who think they know how the rest of us should live.

Good times for ‘working families’

~ Andrew Norton ~ 9 Comments

During the week, the relentlessly on-message Kevin Rudd repeated his lines about ‘working families’:

The other big challenge is offering help to working families under financial pressure. Mr Howard just said he understood that, well that’s the same Mr Howard who said that working families had never been better off.

And the ACNielsen poll at the end of the week suggests that the public believes him, with 59% agreeing with the proposition that ‘John Howard has lost touch with working families’.

It’s not often that I agree with Clive Hamilton, or he with John Howard, but the Australia Institute has published some interesting ABS and HILDA-based research on just how well ‘working families’ are doing (as usual with Hamilton’s work, it gets a good report in Fairfax papers).

On average, the real disposable income of couples with kids went up 40% in real terms between 1994-95 and 2005-06, considerably more than the 28% increase recorded across the whole population. There were above-average increases across all the income quintiles for couples with kids, with the lowest gain of 35% in the second-highest quintile. General prosperity and very generous family benefits from the ‘out of touch’ Howard mean that, financially at least, families never have had it so good.

The working families doing-it-tough message is, I think, the key mistake of the Labor campaign. Not that it will harm the ALP’s immediate electoral prospects – to the contrary, it will probably add seats to their likely victory – but it is creating expectations that cannot be met, not even with the me-too tax cuts. Though ‘working families’ will almost certainly on average be even more affluent in three years than they are now, Rudd is fanning such an inflated sense of entitlement that ‘working families’ will be disappointed with their gains.

What does the public want done with the surplus?

~ Andrew Norton ~ 13 Comments

Though there are signs that tax cuts are coming back into public favour, two polls published this morning suggest that this is more due to the politics of massive surpluses, which allow tax cuts and more spending, than to a shift back to preferring tax cuts over more public services.

The more interesting poll, for my purposes, was a Galaxy poll published in the News Ltd tabloids. It asked:

On balance, which one of the following would you prefer the Government to do with $34 billion?

And the answers were:

Give tax cuts 12%
Spend it on schools and hospitals 71%
Give more money to states 3%
Invest in some major infrastructure projects 13%
Uncommitted 1%

Continue reading “What does the public want done with the surplus?” →

Will the Coalition offer tax cuts during the campaign?

~ Andrew Norton ~ 37 Comments

According to media reports, the Coalition has announced nearly $10 billion in new spending since the May Budget. But will it announce tax cuts during the campaign?

The political case for doing so is strong. The ACNielsen poll on Monday added to the accumulating evidence that tax cuts are heading back into favour. 51% of voters thought that tax cuts should be offered in the campaign, while 41% thought that they should not.

While that is only a small majority in favour, the proportion of potential Liberal voters interested in a tax cut is likely to be much higher. The 2004 Australian Election Survey found that Liberal voters were significantly more likely than Labor voters to prefer tax cuts to more services, and to rate tax as an ‘extremely important’ issue.

It is also an issue on which – consistent with the history of party stereotypes being resistant to contrary empirical evidence – the Liberals remain credible. In both the Newspoll and AES time series Labor is almost always well behind as the party better able to handle (Newspoll) or closest to the respondent’s view (AES) on tax. (Labor last drew even in the Newspoll series in January 1998.)

True, it is unlikely to save the Coalition from a big defeat. But it might help stave off electoral catastrophe. And if Labor keeps matching Coalition promises, it will at least deliver the Liberal constituency something, win or lose on election day.

Second-rate rent seeking

~ Andrew Norton ~ 6 Comments

The Australian Vice-Chancellors’ Committee may have changed its name to Universities Australia, but so far at least nothing else seems to have changed. Their recent media releases contain more of the second-rate rent-seeking that has long marred the organisation’s public advocacy.

Last week, in their tradition of ‘good first step’ reactions to government initiatives, they welcomed a small extension of student income support and issued a media release repeating their call for:

“Firstly all scholarships and bursaries (regardless of their source) to be excluded from assessable income for the purpose of student income support; and

“Secondly, a reduction in the age of independence for Youth Allowance from the current 25 years to 18 years over the next term of parliament,”

There is no mention (and nor was there when the proposal was first made in August) of how much these changes might cost, how important this proposal is compared to other higher education spending options (let alone other alternative uses of the money), or other implications of the changes.
Continue reading “Second-rate rent seeking” →

One expert does not back claims on low uni funding

~ Andrew Norton ~ 7 Comments

The Age‘s sub-editors must have concluded that I am not an ‘expert’ on uni funding. In an article this morning Simon Marginson and Barry McGaw said this week’s OECD report Education at a Glance, which reported declining public funding on tertiary education, was ‘reasonably accurate’. However I was reported as saying that ‘tertiary funding had returned to 1995 levels by 2006’. The headline was not however ‘Experts divided on uni funding claims’ but ‘Experts back claims on low uni funding’.

As it happens, I do think the figure quoted in The Age‘s article of a 4% drop between 1995 and 2004 is ‘reasonably accurate’ (it refers to this Excel table in Education at a Glance). Using the ABS Government Finance Statistics publication, based on Commonwealth spending, I get a 2% drop between 1995-96 and 2004-05; the difference with OECD could be using the financial rather than calendar year (there were subsidy increases for 2005) and/or using a different method of adjusting for price changes.

But by 2005-2006 the ABS clearly shows a surge in spending, so that Commonwealth spending is now well ahead (about $600 million) on 1995 levels, plus approximately $1.2 billion more in HECS revenue (my figure, based on DEST data).
Continue reading “One expert does not back claims on low uni funding” →

OECDitis

~ Andrew Norton ~ 13 Comments

The ALP came down with a bout of OECDitis yesterday, a condition that afflicts many politicians and commentators when they offer arguments assuming that whatever on average happens in other OECD countries Australia should do as well. The virus yesterday was the 2007 edition of the OECD’s statistical compendium, Education at a Glance (at 451 pages, it is very long glance).

The problem, according to the ALP, is that:

* Australia is the third worst of all OECD countries – ahead of only Korea and the United States — on public education spending as a proportion of total education spending;
* Public investment in preschool has languished at just 0.1 per cent of GDP, the equal lowest of all OECD countries with Korea; and
* Public investment in tertiary education has fallen by four per cent at the same time the average OECD investment increased by 49 per cent with Australia being the only country to record a drop in public investment.

Third worst of all OECD countries on public spending as a proportion of all education spending? Continue reading “OECDitis” →