Opinion - The Age of Entitlement

IN APRIL last year, the then Shadow Treasurer, Joe Hockey, declared: "The Age of Entitlement is Over".

The speech, to a right-wing think-tank in London, the Institute of Economic Affairs, was greeted in Australia with a mixture of outrage and puzzlement.

There was outrage because it appeared that the man who who is now Treasurer, wanted Australia to drastically slash welfare entitlements if not end them altogether. Hockey spoke approvingly of Asian countries where there was little or no social security, singling out Hong Kong for particular praise.

joe hockey

There was also puzzlement, because Hockey's leader, Tony Abbott, was vocally pursuing the more traditional "bribe-the-voters" approach, promising increases in some payments, such as "a Paid Parental Leave plan that would provide six months' leave at full salary plus superannuation for new mothers".

Undaunted, Hockey later did it again, reminding the Institute of Public Affairs in Melbourne (6th May) of his London speech, and reiterating his belief that "all developed countries are now facing the end of the era of universal entitlement. Addressing the ongoing fiscal crises will involve the winding back of universal access to payments and entitlements from the state."

No wonder there is panic in the social security ranks. However, the speeches also make it clear that Hockey is talking about government expenditure as a whole, not just pensions and other transfer payments.

If he were talking purely about social security, his comments would be rubbish. No government has been "forced" to cut social security as a result of the crisis. Many have chosen to do so, or have been ordered by their financial masters to do so, but it is a deliberate choice.

The man who is now Treasurer ignored the fact that the original financial crisis was caused by massive failures in the free market financial system, by sheer greed and unregulated financial engineering. It was all about private sector derivatives and excessive private debt. It had nothing to do with the cost of social security. Government debt levels around the world had by and large been manageable until the politicians decided to bail out huge financial corporations which had been criminally incompetent but were deemed "too big to fail".

It is true that some governments are trying to tackle their resulting debt burden mainly by slashing social welfare as well as cutting government services. It's a big chunk of government spending, and it is an easy target. But forcing the least well off to pay the price for the greed of the rich is only one option, and it may well not be the best one.

In Europe and even in the IMF the mood is turning against this austerity approach as being both unfair and ineffective. Hocke's speeches read like the words of yesterday's man.

In his London speech, Hockey asserted: "What we have seen is the market is mandating policy changes that common sense and years of lectures from small-government advocates have failed to achieve".

But he could just as equally argue that "the market" (by which he presumably means the increase in government debt, not the collapse of much of the free market financial system) is forcing governments to cut industry grants, slash defence spending, raise taxes, and compel the financial institutions to repay their government handouts, with interest, as fast as possible.

Hockey-bashers on the Left, however, need to acknowledge that the has also stated: "All of us would agree that there are some basic community entitlements."

He is not just talking about social welfare but to "a range of social programs including education, health, housing, subsidised transport, social safety nets and retirement benefits".

The danger is that he will take an accountancy approach, focusing purely on slashing the cost, not the complexity and inefficiency in the system.

No one has really focused on defining what are the "basic community entitlements". Instead, politicians on both sides of politics have used the system to bribe the voters every three years.

Hockey himself has confessed: "As a democratically elected legislator I want to give my constituents everything they wish for. . . Being profligate is easy and politically popular in the short term . . .

"The entitlements bestowed on tens of millions of people by successive governments, (have been) fuelled by short-term electoral cycles and the politics of outbidding your opponents."

He's right. Look at the results.

On a rough count at the time of writing, no fewer than five different payments for the sick or disabled, two for the unemployed, ten for families, eight or more for those in education.

Some of these benefits are overlapping, some are mutually exclusive, all with different amounts, cut-off points, means tests and eligibility rules. And every year the rules change, payment rates change, new allowances are invented and old ones phased out or scrapped.

Some are federally-funded, others are state-funded and vary from state to state around the country.

Then there are the subsidies. For rent, for telephone, for travel, for education, for medicines, for different age groups, different regions, different income groups . . .

It goes on and on.

Not to mention all the tax allowances and concessions.

It amounts to micro-managing individuals on a mind-boggling scale.

It is extraordinarily complex, inefficient, arbitrary and often brutally unfair. And all too often it fails those who need it most.

It requires the state to spy on people who share accommodation to make sure they don't sleep together. It imposes effective tax and penalty rates of up to 60 per cent or more on people who move the dole into paid employment. It requires those who are unemployed to waste hours of everyone's time applying for jobs with businesses that are never going to need them.

Simply cutting funding won't fix it, throwing more money at it won't fix it, and re-arranging the deck chairs will be a waste of time.

In our society there has never been a job for everyone who wants one. Now the rapid advance of robotics and artificial intelligence is making that situation worse.

Now that they have won the election, the Liberals need to sit back and decide what is the basic community entitlement.

The simplest way to do that is merge the tax and welfare systems. Replace all existing benefits, allowances, concessions etc with a Basic Income paid to everyone, rich or poor.

A Basic Income scheme only provides everyone with a financial safety net. Education is an investment, not a safety net. Health is an insurance problem. Lumping all "social" spending into one big headline figure is meaningless.

Once established, a basic income scheme governed by an independent body and administered as part of the income tax system might not stop governments subsidising multinational car companies or big coal mining groups. It wouldn't stop them subsidising the opera, giving grants to private geothermal energy projects or sending everyone free Easter eggs at Christmas if they wanted to. But it would make it harder to buy the popular vote by tinkering with pensions and family payments.


First published

Adelaide Independent Reporter 2013