Keeping polluters sweet at the expense of the community sector

A recent research paper by David Richardson of the Australia Institute, “Who are the (un)intended losers from emissions trading?” (PDF 84KB), highlights yet again the way in which all aspects of climate change threaten to have a disproportionate impact on the less advantaged members of society. Not only are they more affected by the changes themselves, as I have previously argued on this site, they stand to be even more disadvantaged by the measures we take to counter those changes.

The principle behind compensation for the Carbon Pollution Reduction Scheme (CPRS) is that even if all the costs to emitters are fully passed on, there should be sufficient to compensate the final users. The pertinent question is: which groups should be compensated?

To date, the federal government has flagged reparation only to business and households. Mr Richardson’s paper considers the likely costs to the four groups that were overlooked in the Green Paper: the Commonwealth itself, state and local governments and the community sector. I am concerned here with the implications for the last group.

Using Australian Bureau of Statistics data for 2007, Richardson notes that the community sector accounts for 7 per cent of GDP, employing 884,000 people and incurring total expenses of $68.3 billion. He estimates the cost of the CPRS at between $822 million and $1.191 million, “depending on the willingness and ability of the sector to maintain the real wages of their employees”.

Put another way, the CPRS will see the cost of providing services rise between 0.9 and 1.4 per cent, “depending on the extent to which community sector workers are willing to take a real reduction in their incomes”.

Unlike business, community organisations are in no position to pass on increased costs to their “consumers”. Hence, unless donations rise proportionately with the impact of the CPRS, “services to the most vulnerable members of society will be cut unless compensation is provided by the Commonwealth”.

Probable consequences of the CPRS (from the Green Paper itself) include a 16 per cent increase in energy costs associated with water heating, space heating and air conditioning; an average increase of 0.9 per cent in food prices; and a 0.9 per cent rise in labour costs if real wages are maintained.

As Richardson says: “Australia needs emissions trading to tackle climate change, but we also need a well designed compensation package to make sure the groups who need the greatest assistance are looked after. Some of the big polluters are making a lot of noise, but our research shows that it is the community sector which is more likely to miss out on adequate compensation.”

Of the several lessons we might draw from this, the most important is that it provides an exemplary test of the seriousness with which the federal government takes its own social inclusion agenda.

To state the obvious: when it comes to lobbying government, community groups do not have the same financial and political clout as business and trade unions. Worse, the majority are directly or indirectly dependent on government funding.

This does not, however, make us supplicants. The sector is critical for the well-being of society. While reliance on government financial support may seem to put it at a structural disadvantage in comparison with business and unions, it provides essential services of a quality and at a price government itself would be quite unable to match (as demonstrated in the annual Productivity Commission Reports on the cost of government services). Government is therefore also reliant on the sector. If not exactly a relationship of equals, it is certainly one of co-dependents.

The Rudd Administration has recognised this and sought to repair the somewhat dysfunctional association that prevailed under its predecessor. It has, for example, removed the “gag clauses” in service contracts that, among other things, inhibited advocacy.

As Deputy Prime Minister Gillard said in announcing the policy: “We’re creating a whole new climate with this approach. We are saying to the voluntary sector - to those great not-for-profit agencies that work with the disadvantaged and provide services - that we want to hear what you’ve got to say.” The proposed National Compact between government and non-for-profit organisations is a means of formalising this - an initiative Anglicare Australia has cautiously welcomed.

We have yet, though, to negotiate any hard case. The CPRS compensation issue provides just that. Unlike, say, the Business Council of Australia, we are not in a position to issue thinly veiled threats about a flight of capital or major industry closures. And community service workers tend not to go on strike. The only force we can rely on is that of argument and evidence - along with what we must hope is a general sense of responsibility towards those who are disadvantaged.

By comparison with the levels of compensation the mining and other carbon emitting industries are demanding, the $822 million the community sector would need to offset increased costs is insignificant. Yet the realities of politics are such that it is by no means obvious a strong intellectual case will win the day.

Government priorities are determined by all manner of interests. For example, Dr James Connor of the Australian Defence Force Academy has recently calculated that the 13 gold medals won at the Beijing Olympics cost $16.7 million each in direct federal grants, with the real price about $100 million once funding by state governments and sporting infrastructure costs are taken into account.

To compare the needs of elite athletes with those of the homeless or mentally ill seeking hot water and a bed is, as they say, to compare apples with oranges. Success in professional sport is obviously fundamental to our national identity and must be encouraged at all costs - even during a financial meltdown. Indeed, especially under such circumstances, with the threat of jobs to be lost and homes repossessed. The majority need hope. It may lack the ferocious grandeur of the coliseum, but a steady diet of hamburgers and spectator games serves equally well our civic duty to be solidly diverted.

There is, though, another way of responding to the meltdown and associated economic insecurity which would bring into public discussion both the realities of politics and the deeper question of the kind of society we want to become.

As Anglicare Australia notes in its 2008 State of the Family (PDF 1.39MB) report, agencies have begun to see a new kind of clientele: people with jobs who “own” their own home but who find themselves unable to meet essential needs because of the rising cost of basics like food and fuel. This is something that began well before the current crisis, during the period of supposedly “unprecedented prosperity”.

Such prosperity was, of course, delusional, based on unprecedented levels of household debt, encouraged by governments and the financial services sector alike. While pointing this out in the past was considered bad form, if not outright fear-mongering, the true nature of things is now common knowledge.

But this is not to wallow in gloom, still less to engage in schadenfreude. It provides, instead, an opportunity to reconsider the values on which public policy is based. Just as, internationally, governments aim to devise a Breton Woods system Mark II - in which not only financial but economic, environmental and social policies may be for the first time considered in tandem and a cohesive overall framework developed - so too Australia might take advantage of our current (relatively benign) emergency to rethink our priorities.

On the face of things, the timing is propitious. The Rudd Government is formally committed to making social inclusion (in the words of Parliamentary Secretary Senator Ursula Stephens) “an objective and organising principle of the nation’s social and economic policy”. And the Henry Review of the tax-transfer system is examining in detail the mechanics of an overhauled system.

We might make a start, however, with another of the government’s main concerns: the CPRS. And we might entertain the fancy that government support for the most disadvantaged in our society could at least be maintained at existing levels - even to the point of being treated as equally important as keeping the major polluters sweet.