Social policy -post Abbott

Posted by on June 1, 2016 in General, Issue 83 May 2016

Social policy -post Abbott

Ben Spies-Butcher

Tony Abbott’s departure as Prime Minister led many Australians to draw a sigh of relief. The first Abbott-Hockey Budget represented an unprecedented attack upon Australia’s system of social protection, more so even than the first Howard-Costello Budget. Fending off many of these attacks is an important win, but there is little evidence the Coalition Government has genuinely changed track. Importantly, the shift to a more privatized, ‘asset-based’ welfare system retains large bipartisan support.

The 2014 Budget included a devastating range of cuts across services like health, education and housing and to payments to those most in need. There was also an attack on the institutions that would normally defend weaker voices, like legal aid, the ABC and scientific bodies. The Budget was not simply a belt-tightening exercise – indeed many of its core components, like the abolition of the Mining and Carbon Taxes, and even university fee deregulation, increased the deficit – rather it was an attempt to re-make (or un-do) Australian’s social compact.

The Budget saw a permanent shift in the Government’s fortunes and is rightly viewed by many as the beginning of Abbott’s woes. Strong community campaigns placed pressure on the Senate to successfully block some of the headline cuts. University fees have not been de-regulated; there is no new co-payment for Medicare; there is no 6 month waiting period for young job seekers. The campaigns built around these issues were key to these successes, and should be seen as an important part of changing the government. But many other cuts – to affordable housing, women’s shelters and a range of community groups – did proceed. The largest cuts of all – to the grants provided by the Commonwealth to states to fund hospitals and schools – remain in the budget papers.

More recent statements are ambiguous on the future of many of the Budget measures. Health Minister Susan Ley has initiated a new, although less dramatic, round of spending cuts. This includes removing incentives to bulk bill many essential medical tests, like pap smears. A freeze on Medicare payments also remains in place, which is likely to gradually reduce the number of other medical services that are bulk billed. Turnbull has pointedly failed to rule out some form of university fee deregulation. And the Government’s new childcare plans both exacerbate some existing inequalities while also being funded by cuts to family payments.

The sheer scale of the cuts initiated under Abbott partly distracted from a more subtle and long term process that is eroding social protection. In virtually every area, the welfare state is being incorporated into the market. This is not necessarily the result of cutting public funding (as Abbott intended), but is often the result of transforming state run services into competitive markets and extending public funding to private providers. It creates what we might call a ‘dual’ welfare system.

This dual welfare model is now pervasive. We have a public pension, and privately run superannuation funds. We have publicly subsidized private health insurance, publicly funded private schooling, public funding for private colleges that run technical education. The deregulation of higher education threatens something similar for universities. And recent changes to home-based aged care and through the disability insurance scheme have led to further privatisation. These changes increase public spending, but spending is directed to private markets.

This dual structure reflects the ideology of neoliberalism. Private provision has been extended via National Competition Policy, enacted with bipartisan support in the early 1990s. It also reflects a hollowing out of government capacity. As the problems in the 'Building the Education Revolution' policy revealed, governments have outsourced so much they now lack the internal capacity to even buy in new services at competitive rates. This represents an ideological commitment to privatizsation, individual choice and a rejection of collective provision.

Policy making now has an inbuilt ‘neoliberal’ bias. Competition is assumed unless it can be shown to be harmful. Official policy advice now assumes efficient private markets. For example, the series of 'Intergenerational Reports' focuses only on public spending (with the aim of minimising it), without even comparing this to outcomes in private equivalents (like private health insurance or superannuation). The structure of review bodies does the same – thus the Productivity Commission examines new welfare measures rather than a body focused on promoting social equity or cohesion, or ecological criteria.

Policy bias has important consequences. The dual structure of our welfare state is leading to growing inequality. Most forms of direct social provision – whether services like hospitals or payments like the pension – are highly egalitarian. In dualistic welfare systems, public subsidies to private alternatives become radically unfair.

Take two examples. In healthcare we know that Medicare disproportionately benefits lower income households. This is both because inequality itself has health impacts, but also because it is free and so easily accessible. The private health insurance rebate, in contrast, goes disproportionately to those on higher incomes who can afford it, and can afford more expensive insurance products. The rebate was largely justified on the grounds that it took pressure off public healthcare. Yet it soon became the fastest growing component of the health budget. This reflects weaker cost control in private medicine.

Or look at age pensions. Australia’s public pension is one of the cheapest in the developed world – in terms of GDP it costs us less than half the OECD average. Alternatively, superannuation now constitutes an enormous pool of over $3 trillion housed in private funds. These funds are more highly geared to risky stock market and real estate investments than equivalents in almost any other country. Superannuation is highly unequal in its distribution – much less equal than income and even less equally distributed than housing assets.

That is what you might expect from market-based wealth funds, but because superannuation is supported by generous tax concessions, it is effectively publicly funded. Like private health insurance, concessions for super were partly justified as taking pressure off public spending. But those concessions now cost the budget roughly the same amount as the age pension, and are growing at a much faster rate. Super tax concessions are distributed even less evenly than superannuation itself.

Alongside growing inequality, this dualistic welfare system is placing pressure on democracy, and on the ability of governments to implement effective policy. Private colleges, for example, have developed business models that seem designed to encourage students to fail so they can collect fee revenues without fully funding the teaching. And the privatisation of public works has led to a process where new transport infrastructure is designed by the private sector on the basis of profitability, not by the public sector on the basis public interest. Thus, a proliferation of large road projects.

The nature of non-government providers is also changing. There remains an explicit bar on for-profit schools. But that bar has been lifted on private health insurers – some of whom have demutualised, while other for-profit players have entered the market. For-profit providers are common in child care and are emerging in age and disability care. And their entry often creates incentives for non-profits to act in much the same way, transforming the culture of charities.

Few of these changes are popular. There remains strong opposition to privatization in healthcare and education, as the Abbott budget demonstrated. Yet the bipartisan consensus in support of competition often takes these decisions off the public agenda. There was virtually no debate over the model for the NDIS that entrenched private competition and or over the privatisation of the largest home and community care provider (owned by the NSW Government). This makes opposition much harder.

There are two emerging signs for optimism. One is the growing profile of inequality, and with it a gentle realisation about the costs of this dual model. Labor has begun to trim the worst aspects of this model – such as limiting super tax concessions and means-testing the health insurance rebate – while the Greens have become more confident in promoting more radical change. This shift is most evident in terms of public subsidies, where the much more rapid growth in subsidising private equivalents is causing obvious budgetary pressures.

More difficult to shift is the strong ideological commitment to competition policy, as evidenced by Labor’s support for competition in disability care. This is also harder to see and to explain. Changes to the funding model in health or education are often invisible to the end users. Here the most effective resistance has come from public sector unions, like the Teachers and the Nurses. These workers can see changes more easily, and unlike much of the rest of the union movement, retain the density to do something about it.

Unions have been at the centre of fighting the Abbott budget. The Nurses drove much of the Save Medicare campaign and the NTEU drove much of the campaign against university deregulation – both independent to, and well before, the Labor Party. Teachers have been at the centre of driving the Gonski funding changes. The strength of these campaigns and their ability to link industrial and political democracy, potentially offer a way out of the ideological straight jacket towards a more equitable and efficient society.


Ben Spies-Butcher lectures in Economy and Society in the Department of Sociology, Macquarie University.

Be Sociable, Share!
    Skip to toolbar