ROSS GITTINS August 01, 2012
Illustration: Kerrie Leishman
You may not have noticed, but last week was among the most significant of the Gillard government's term. The commitments made may do great good, but they will also cause much pain and gnashing of teeth in the years ahead.
Last week the nation made it crystal clear to its political leaders - federal and state - it wanted them to get on with implementing the national disability insurance scheme. After decades of turning a blind eye to the difficulties faced by the disabled and their carers, last week conscience struck.
Fine. You're a believer; so am I. But the scheme is very expensive: when fully implemented in 2018, an additional $8 billion a year. Or, as the politicians and the media usually prefer to put it, $32 billion over four years.
To give you an idea, $8 billion a year is more than will be raised each year by the carbon tax or more than twice what will be raised by the new mining tax.
So how will the disability scheme be paid for? No one has any idea. The pollies were arguing about that very question when - urged on by the same radio shock jocks who on other days rail against ''debt and deficit'' - the electorate put a rocket under them: Just do it!
That's why I have reservations. We behaved like a teenager with his first pay packet who goes out and buys a car on the never-never, without a moment's thought about how he'll fit the repayments into his budget.
Perhaps this was the only way an increasingly self-centred nation was ever going to commit to something so caring but expensive. Had we dwelt on how much it would cost and how we'd be paying for it, we might have made an excuse and passed on.
Even so, the accountant in me remains uneasy. Sometimes in politics, good deeds aren't born of the purest motives. The Productivity Commission report that recommended the scheme called for the pilot programs to begin in 2014.
I suspect Julia Gillard brought it forward a year because she wanted to be seen doing something worthwhile - and something that didn't have Kevin Rudd's fingerprints on it. She committed to spending just $1 billion over the four-year trial phase.
If Gillard has a clear idea of how she would afford the scheme when fully implemented, she's given no hint of it. All we know is that, contrary to the commission's advice, she expects the states to bear some of the cost.
I suspect she's fingered the states as a red herring, intending to draw attention away from her own lack of forethought. That's where we got to last week. She put the wood on the premiers to make a small contribution to the cost of their state's pilot scheme, but many declined. This could have been the usual story - whenever the feds require the premiers' co-operation, their hands go out: What's it worth to you?
If that was the premiers' motivation, I'm sympathetic. Though the states are responsible for provision of many costly public services - law and order, roads and transport, schools and hospitals - their taxing powers have been greatly constrained by the High Court, leaving them heavily dependent on the feds.
John Howard's decision to grant them the full proceeds from the goods and services tax was intended to solve their problem, but it's no longer the ''growth tax'' it was. Our consumer spending no longer outstrips our income the way it did, and an ever-growing proportion of our spending goes on items excluded from the tax, particularly private education and health.
So the premiers can't reasonably be expected to stump up for anything much. And, indeed, it's the feds who'll have to come up with a solution to their chronic revenue problem. This week a poll shows 84 per cent of respondents oppose increasing the rate of the GST to 12.5 per cent.
But only the Liberal premiers jacked up last week. The remaining Labor state and territory leaders played along. So maybe it wasn't the standard premiers' money-motivated bail-up.
There isn't a politician in the country with the courage to openly oppose the disability scheme. Gillard's lack of courage comes in telling us how she proposes to pay for it. Maybe she's decided she'll worry about that only if she wins the next election.
Tony Abbott's more likely to win it, of course. I suspect the hard-heads on his side had been intending to relegate implementation of the full scheme to the status of an ''aspiration'' to be afforded only when finances permit.
That now would be a lot harder to do, following the surge of public pressure that forced the premiers of NSW and Victoria to back down after just a day or so. Such forceful expressions of the public's will stay burnt on politicians' brains long after you and I have forgotten them.
Abbott's shadow treasurer, Joe Hockey, is saying it would be cruel to offer hope to the disabled when there was no guarantee the money could be found. In contrast, his more slick-tongued finance spokesman, Andrew Robb, says the full scheme would be introduced in 2018, but this ''probably would require the removal or scaling back of other programs''.
Don't forget Abbott would first have to cover the cost of abolishing the carbon tax and the mining tax. This is a man who professes to believe taxes must go down and may never go up. Now he's got to find a further $8 billion a year in spending cuts.
I find it hard to believe this would happen. But whatever happens, I foresee much pain and gnashing of teeth.
Ross Gittins is the Sydney Morning Herald's economics editor.