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Funding people, not institutions

By Wilson Tuckey - posted Tuesday, 5 July 2005

While any Australian government has a clear responsibility to ensure access for all to quality and affordable education, health and similar services, it is astounding that both sides of politics believe this responsibility entails the actual provision of the service.

In the case of education and health, private sector services exist and appear to be preferred by those who can afford them after paying taxes to also support the government service they don’t want. Worse, any inefficiencies and or cost overruns in the public sector become the benchmark for private sector charges. Every institution in receipt of government grants presents a common defence to their failings which is “the government must give us more money”. Furthermore, the recipients of such services have little idea of the costs involved which form the basis of their taxation contribution.

From an Australian government perspective, its overall payments to the states represents approximately 50 per cent of their overall revenue. Yet lobby groups turn to specific grants to criticise the level of Australian government contributions in their sector.


During a lecture by a doctor just returned from communist China, he advised that he had remarked to his guide upon the fact that all those attending a Chinese hospital were queuing to pay an entry fee, to which his Chinese guide replied, “Oh sir, what the people get for nothing they do not appreciate”.

The solution to the above problem - be it for health, primary, secondary or tertiary education, or any other area of government service provision - is to direct our Australian government contribution by way of a voucher or direct subsidy to those entitled to it, for a payment to an approved service-provider of their choice.

If the Australian government provides 50 per cent of the approximately $10,000 per annum cost of educating a secondary student in a state school, why not send all eligible parents an average $5,000 voucher, cashable at a public or private school? Such a sum can be adjusted to recognise geographic and socio-economic factors.

While the government now subsidises private health premiums, it does so only for those who choose to privately insure. These people are typically in high age brackets, whose claims profile totally distorts the fundamentals of private insurance which requires high levels of non-claiming contributors who now opt for the free but inefficient government services they do not expect to use anyway.

Figures produced in 1988 by actuaries proved that if everyone participated in private insurance, the government could provide 100 per cent premium subsidy for full age and other pensioners and all children under 19. It would also allow an average 80 per cent subsidy for all persons of pensionable age not entitled to the full pension at a cost of approximately two thirds of the cost of operating Medicare that year. This would allow for the cancellation of the Medicare levy.

Under such arrangements, no one would personally pay more than $10 a week for full doctor and hospital cover. When addressing the then Opposition party room, Maggie Thatcher put the point well, advising us that, “You must get government out of business, after all if we politicians (bureaucrats) were any good at business we’d be in business”.


This should be our fundamental policy principle. Assistance can be targeted. The public has the choice and the market will set the price.

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First published in The Party Room, Issue 1, winter edition 2005.

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About the Author

The Hon. Wilson Tuckey is Federal Minister for Regional Services, Territories and Local Government, and the Member for O'Connor (WA).

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