Wasted opportunity on superannuation concessions needs to be ‘put right’ at ALP National Conference

Recently Bill Shorten announced projected reform of superannuation concessions affecting around 180,000 Australians.  ‘The Age’ in particular observed that the two key reforms concerned

would see retirees lose tax-free status on annual superannuation earnings above $75,000, and more people paying 30 per cent tax on contributions.

Certainly Bill Shorten’s announcement is “a step in the right direction”, bringing in $14 billion over ten years. 

But it is a very  modest intake when considered in perspective.

The problem is that Shorten appears to be ruling out further action on top of this on superannuation concessions AHEAD of the ALP's 2015 July National Conference. 

And more alarmingly:  arguably $15 billion out of a total of $50 billion will soon be going to 'the top 10 per cent' income demographic. 

Former Australian Tax Office public servant, John Passant has explained that this means  “the top ten percent of income earners get 30% of the tax concessions on super.”  (discussion with John Passant, 22/4/15)

And ACOSS has argued that the top 20% income demographic receives half of all superannuation concessions. (ie: that will soon be over $25 billion annually!)

To get that in perspective, the Australia Institute observed in 2014 that: “The [entire] age pension currently costs [only] $39 billion”.

Is this really the best possible use of taxpayers’ money? Does it fulfil the ‘distributive justice’ test?  And given the scale of the gain to only the top 10 per cent income demographic is it even politically wise when we consider what else might be done with the money?

A more decisive policy here could fund a suite of progressive reforms: National Aged Care Insurance; NDIS and Gonski; build the National Broadband Network Fiber-To-The-Premises; Medicare Dental; address life expectancy crisis for indigenous and mentally ill; expand mental health services; crisis accommodation for cases of domestic violence; welfare reform; build transport infrastructure publicly; invest in public housing to put downwards pressure on property prices and rental costs...   Many of these policies have been suggested in the ‘For an Equal and Democratic Australia’ document which points the way to the kind of policy a reforming Labor government could potentially introduce.

Labor needs to think of policies in terms of tens of billions – not just ‘token policies’ which attempt to win over voters on appearances only. Further reform of Superannuation Concessions is essential. As is reform of the broader tax mix – ideally to bring in new revenue in the vicinity of $40-$50 billion. (about 2.5%-3% of GDP) (modest in the context of an economy valued at $1.6 Trillion)

Right now,  with the mining boom over – Labor is 'on track' to capitalize politically from the Abbott government’s austerity .  And yet Labor is also ‘on track’ to again introduce austerity of its own in government should it maintain its inflexible commitment in its National Platform to ‘small government’. (though probably less severe, and less cynically targeted - you would hope!)

Specifically the problem is Labor’s commitment to holding down tax as a proportion of GDP.

 Labor must  ‘think bigger’ (and better!) than this!!!

These issues must be addressed at Labor’s National Conference in July.

From conversations and research I have become aware that there are some within the Labor Party who are resigned to (or even in favour of) the National Conference being reduced to a merely token affair.  Shadow Treasurer Chris Bowen, for instance, is in favour of a more robust and inclusive discussion of policy at Conference; but on condition that Conference  (and the Platform itself) have no binding influence on policy. (Bowen,  pp 122-124)  In a conversation with one colleague  specifically (and probably there are more),  this colleague was resigned to the notion that Gonski and NDIS are ‘dead’  in their original form – presumably because they think the money cannot be sourced for reforms on a large scale. (the assumption seems that ‘small government’ cannot successfully be refuted; that we should not even try)   Even mild redistributive policies are apparently viewed by some as an ‘ideological anachronism’ – belonging to an apparently ‘defunct’ tradition of social democracy. 

Just how widespread these views are I cannot tell.  But there is a now-long history of Labor governments (dominated by the Party’s Right)  cutting and regressively restructuring tax, capitulating to the ideology of small government, and pursuing cynical policies such as assaults on the welfare rights of sole parents.  Top income tax rates, for instance, have been reduced or eliminated.  The tax system has become ‘flatter’.   Again, Chris Bowen has come out in favour of a ‘simpler’ tax system which includes lower Company Tax;  which probably translates as a less progressive tax system. (Bowen, pp 60-67)  Though there have been some efforts in the opposite direction from Labor governments as well; for instance raising the tax free threshold.  (Though Ross Gittins argued in the Sydney Morning Herald that these measures were not really as strong as Labor had claimed once reductions in the low-income tax offset were considered)

 More generally anoutlook of pragmatism appears to make policy often a matter of tactical expedience.

To summarize, this kind of pragmatism is highly questionable.  Bill Shorten was elected to reform the Party; and part of what people wanted was fidelity to Conference decisions. Shorten also has to offer his supporters on the Left something - after they were pivotal in his success.  If Labor fails to deliver on progressive tax, new social programs – and end up implementing only more austerity – just not as severe  as the Libs - that would show  a lack of conviction and principle.  For instance Gonski and NDIS were immensely popular policies!   Dropping or otherwise avoiding strong policies as a matter of tactical expedience  could  simply mean Labor continues hemorrhaging support to the Greens.  That would not be 'realism'.  It would be both ideological and practical self-destruction.  Surely the ALP Right itself must recognize this and commit to more robust policies!

We are yet to see an outcome, here, however.  I hope these views I have encountered are not as widespread within Labor as I fear.  But it is a debate Labor has to have with itself between now on the National Conference in July this year.   There is talk to the effect that the ALP Right will not hold the numbers on its own at Conference this year.   Should progressive independents move in support of a more traditionally social democratic policy framework the consequences could be favourable.   And sometimes relative progressives break ranks from within the National Right as well.

I look at the Rudd/Gillard years as involving wasted opportunity.   The same might be said of the Hawke/Keating years.  For example, the  "Australia Reconstructed"  document suggested something 'Nordic' - but we got very little of the kind.  We need a Labor Party which pursues an agenda of steady, gradual reform - but appreciable reform nonetheless.   Real (steady) Progress is needed  - not 'one step forward, two steps back'.  So If Labor increases progressive tax and associated social expenditure and investment by 5% of GDP over three terms (roughly a decade) - that's a legitimate medium term agenda.

Another thing that really struck me in one discussion with a Labor colleague was his notion of the rise of a  'wants not needs generation'.  In contrast I would hold that the masses are still concerned with issues of non-negotiable need.  That is,  cost of living;  housing affordability; costs and quality of education; threat of illness or need of aged care for family members.  I think my Labor colleague overstates peoples disengagement from 'non-negotiable-needs'. A lot of people really are still 'doing it tough'.  And they are inclined to vote on that basis!  This needs to find reflection in the ALP’s National Platform.

None of this is likely to change unless progressives in the ALP begin organizing and agitating now – ahead of July’s National Conference.  Superannuation Concessions are ‘the elephant in the room’ – and a lack of decisive reform here will severely limit Labor’s options following the next Federal Election.  (assuming Labor wins)   Labor doesn’t have to ‘lock itself in’.  And it is better for Labor to ‘keep its options open’ rather than lock into minimalist policies which offer very little real progress.   A POLICY of ‘tactical expediency’ is self-destructive;  even though tactical decisions do need to be made during election campaigns.  And for Labor to ‘keep its options open’ there needs to be  a Platform which does not irretrievably commit Labor to small government upon gaining power; a platform which does not ‘lock Labor in’ to merely token reform of superannuation concessions.