Election 2013: Day 15 (or, throwing the costings out with the bath water)

4:48 AM | Labels: Australian politics, Economy, Election, Taxation

So the big splash for the Libs in the friendly Sunday papers was all about babies. Well no, but that was the way it was spun. It was actually about Abbott’s 3 year old paid parental leave scheme. You have to love that a policy first announced in early 2010 is still able to badged up as an exclusive that deserves a front page massage.

I wish I had kept a copy of every front page story this policy has been given over the years. I’d say a minimum of four at least.

Oh well. Let’s be generous and say at least it is a policy.

Now firstly I written quite a bit about this policy – here, and here. Most recently on my Guardian blog.

So I’ll try not to repeat myself (Oh bugger it you know I will). And let’s see if we can focus on the positives.

I guess given they have had the thing hanging in the Liberal Party closet for so long now, I’m sure this time we have got all the costings to go with it? You know just to make sure that they have crossed all the i’s and dotted all the t’s.

And best of all we know we are going to see the costings because as Joe Hockey said on the weekend:

JOURNALIST: Are you still going to wait until that last week to release the costings to the public?

JOE HOCKEY: What we have said is - you don’t release policy costings before you release the policies.

So given this policy is now announced, we’re going to get to see it all!

Hmm. Well that seems to be a no.

Look I know I am being a right pest about these costing. I should just trust Joe Hockey. After he also said this on the weekend:

JOE HOCKEY: Well we've been releasing the costings on individual policies along the way. And therefore you don't release, you don't release policies and costings before the appropriate time during the election.

I mean can I, can I say this Lyndal? Labor did not at the last election nor at this election has it released all of its costings. At the last election…

LYNDAL CURTIS: But don't you want to be better than Labor?

JOE HOCKEY: We are. And we are. That's exactly what we're doing. We have released the most comprehensive analysis of a political party's costings and policies ever. Ever.

Oh wait, sorry that was what he said back in 2010. You know back when their costings ended up being out by around $11 billion dollars.

My mistake.

Here’s what Hockey said on the weekend (when he announced that he had picked three people – Peter Shergold, Ian Scanlon and Geoff Carmody to “sign off” on his costings):

JOE HOCKEY: No, no, not at all. Not at all, not one second. Every number the government has produced for the last six years has been wrong, and having an independent verification process as well as using the Parliamentary Budget Office means that no Opposition has ever put more effort into ensuring that the numbers are correct.

Yeah. Show me them, and then we’ll talk. Till then you’re just an empty suit.

But we should be glad that at least their PPL policy document does give us a bit of detail.

In fact it gives us just enough detail to realise that the long said line that the PPL scheme will be covered by a “modest increase” in the company tax is a fib.

Right at the end under “Costings” we find: “The cost will be fully met by associated reductions in other outlays”.

I guess these associated reduction are a bit like “on road costs”: the salesperson doesn’t want to include them in the price of the car, or actually mention them, but you sure as heck will end up paying for them…

One of the other ways in which the cost of the policy is covered is from the state governments paying money to the Federal Government in the case of the state employee choosing to take the federal scheme rather than the state scheme. On this aspect the journalists at this morning’s press conference were pretty good:

QUESTION: Mr Abbott, just on paid parental leave, Mr Abbott, one of the savings measures that you’re counting is preventing state public service workers from double dipping, that of course has been costed by the PBO you say. What’s the value of that saving? You must be able to put a dollar figure on it? I mean how is it real? Don’t you need an agreement with the states to do that? Aren’t you just announcing something now and trying to finalise it later?

Excellent question, goes to the heart of it all. The Australian's David Crowe and Patricia Karvelas report that if the states don’t come to the party the costs could be short rather a sizeable sum.

So let’s see how Abbott goes giving us a “fair dinkum” response for his “fair dinkum” policy.

TONY ABBOTT: Look, there are many things which are obviously subject to agreement, but sensible adult governments are normally able to get agreement and obviously the state premiers understand that if we are relieving them of some hundreds of millions of dollars of obligations that they’ve got, there ought to be a fair trade-off. The state premiers understand that and we’ve got some 18 months or so between an election should we win and the beginning of the policy and that is more than enough time for sensible adult governments to sit down and negotiate what are sensible win-win arrangements.

Tony Abbott might want to ask Julia Gillard how it went dealing with “sensible adult governments” to get health deals and schools funding deals done.

There was also a good question about the impact of franking credits on the amount of tax raised by the 1.5% tax increase to pay for part of the scheme.

And then one question that went right to the centre of the policy failure that is the Liberal Party’s scheme.

It is supposed to improve productivity and participation. So one journalists asked Abbott to explain that:

QUESTION: Chris Richardson has said that your policy is unsustainable, the paid parental leave scheme policy, can you quantify how it will boost productivity?

TONY ABBOTT: Well, it is absolutely sustainable because it’s fully costed and fully funded. Our policy is the same broad policy as exits in most of the OECD countries right around the world, now why is it that it is sustainable there and unsustainable here? I would respectively suggest to the learned economist in question that he go back and look at the Productivity Commission report that he read our policy and I am confident that fair minded observers looking at our policy will accept that it is good for our economy, as well as being good for our society.

Having read the report a few times now, I’ll spare you the chore and will quote the pertinent statements which refer to PPL scheme’s like the Liberal Party’s:

It would also entail support for high-earning women, who already have strong attachment to the labour force, often receive privately negotiated paid maternity leave, and usually have better access to resources to self-finance leave.

So it’s expensive and that expense is to paid cater to women who already have pretty good access to leave. Not sure that is what Abbott had in mind.

OK, what about the benefits?

Payment at a flat rate would mean that the labour supply effects would be greatest for lower income, less skilled women — precisely those who are most responsive to
wage subsidies and who are least likely to have privately negotiated paid parental leave.

Full replacement wages for highly educated, well paid women would be very costly for taxpayers and, given their high level of attachment to the labour force and a high level of private provision of paid parental leave, would have few incremental labour supply benefits.

Now again, that doesn’t strike me as the Productivity Commission giving the Liberal’s scheme a big thumbs up. But then, I’m not probably the most “fair minded observer”.

But we don’t need to take the Productivity Commission's word for it. Joe Hockey this morning

“It applies to the people most vulnerable, those who are pouring the coffees, collecting the cups, those who are involved in the day to day work that many people take for granted,” he said.

“Often women on lower incomes, this is the shot in the arm that gives them income security and job security on a scale we have never seen before.”

Exactly right – it is those on low incomes who benefit most from paid parental leave. The benefits of applying to those on higher incomes is well.. “few”. And the cost of that is, shall we say, “not few”

Laura Tingle in the AFR pretty well nailed it:

The Coalition’s paid parental leave scheme is policy so bad, so appalling – on both policy and political grounds – that in any reasonable contest, it should give Labor a fighting chance to get back in the election race.

Spot on. Unfortunately for ALP supporters she was spot on with her next paragraph as well:

Unfortunately for decent public policy, and for us as taxpayers, we cannot be confident, on the basis of Labor’s political form in the campaign so far, that it will be able to consign this piece of irresponsible, populist junk to the dustbin of history.

For mine, yes you can argue the regressive nature of it, where the government is giving people more money because they earn more, but the big deal for me has always been that it is a waste of money.

If there was any sense of equivalent benefits to be gained from the cost, then I could get on board. I could be convinced that the amount should be capped at the median wage, but the costs of the Libs current policy is so utterly detached from any benefits that it is absurd.

The Liberal Party in what is apparently a time of a budget emergency is spending $5b a year on a policy which won’t achieve what they say it will achieve!

$5b a year gone for no gain. Think up some things that could be spent on that a year, and there’s you advert.

Forget rich mothers and poor, this is a $5b productivity measure which won’t improve productivity.

That’s the advert. Leave the rich-poor fight out of this. No one rich or poor likes a government wasting money for no discernable benefit.

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Speaking of wasting money, a big “scoop” today was that some $5 million in cheques from the government for the GFC stimulus payments that have been sent out this year. I use “scoop” advisedly because Shane Wright of the West Australian actually had the story back in July:

Four years after they were mailed out to save the economy, 47,000 stimulus cheques remain uncashed ready and waiting to be spent.

Figures obtained by The West Australian show there is about $39 million in cheques stuck on fridges, attached to pin boards or hiding in shoeboxes.

The Tax Office distributed 8.8 million payments totalling $7.7 billion in late 2008 and early 2009.

But, yeah “exclusive”. And of course the Liberal Party was all over it.

Now it might be nice if the Liberal Party could come up with a better way of administering the tax system, but just as if someone was owed a tax refund for that year and they had not received it, it would be sent out again – especially if that person was late in doing their taxes. (I’m sure I’m not the only person who knows someone who has not bothered putting a tax return in one year and then finally gets around to doing it a year or so later)

But ok, maybe the Government should have included in the legislation that the cheques needed to be cashed by a certain date, but I doubt the legality of that would fly as my understanding is government issued cheques don’t have a statute of limitations

But hey, there were $7.7billion worth of payments. And we’re talking $5 million. That’s about 0.065%. The Libs are setting the bar pretty bloody high for “waste”.

Look, it’s $5 million in “waste”. Fair enough the Liberal Party are all over it. But geez, I can’t wait till they find out about the $5 billion that one party is blowing for no good reason.

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On other policy things today, the Libs went full Laura Norder in western Sydney. Always good when a Federal campaign turns state government like.

Meanwhile Kevin Rudd was announcing a policy in aged care and putting $20 million in to a program called Active Ageing and also $357 million on health, in which he talked about the Liberals policy to cut Medicare Locals.

Actually it’s not the stated policy of the Liberal Party. That would require the Liberal Party to have a policy. At present it’s all a bit vague and involves reviews, and then the cut (probably).

Maybe at some point we will be deigned worthy enough to get some details, but I doubt it.

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But look it could all be worse. You could be the journalist who wrote this story: