Spend, spend, spend will not build a better society

Tuesday, 09 February 2016

Illustration by Eric Lobbecke in The Australian

Nick Cater's weekly column in The Australian:

If improving education were just about funding, it would be safe to conclude that there had never been a smarter group of school-leavers than the class of 2015.

Last year it cost all governments, on average, $11,100 a year to educate a pupil for a year. Twenty years ago, when John Howard was elected, it cost $4000 a pupil per year, or roughly $6600 in today’s money. Are we getting value for money? Labor’s Bill Shorten doesn’t think so. Last month he warned that education outcomes had been “going backwards internationally”.

“We are running for instance, in mathematics, now 17th in the world,” the Opposition Leader said. “If Australia was coming 17th in the medal tally at the Olympics, the government would certainly do everything it could to fix it.”

It shows remarkable faith in the doctrine of state socialism that, despite a century of evidence to the contrary, Labor believes that by spending more, government can fix education, our Olympic rankings and much more besides. Shorten intends to throw even more money at schools in the hope that some of it will stick. He has promised to restore the Gonski funding scheme Labor said it would introduce in 2018 and 2019.


That’s an extra $4.5 billion a year of recurrent spending.

To justify the spending he employs the deadening, instrumentalist logic of the socialist technocrat. Inspiration, aspiration and application are edited out. Instead education is “a key driver of a country’s economic growth”, it enhances the nation’s “capacity to innovate”, it is “an investment in future prosperity”.

Evidence suggests the first and often only beneficiaries of increases in education funding are teachers and administrators. The ratio of teachers to pupils has risen since 2000 and class sizes have fallen. Yet the inconvenient truth is that results in reading, maths and scientific literacy have all recorded statistically significant declines, not just in international rankings but in real scores. Meanwhile, the top performing countries — all Asian — have larger class sizes as well as better results.

If politicians paid attention to the evidence, the money-makes-the-world-go-round approach to public policy would have had its day. Yet in education, as in most other portfolios, the evidence is too often ignored.

The political debate is fixated on the economics of government — the raising and spending of revenue — rather than the purpose and effectiveness of government. Labor generally wants to spend more money and the Coalition — on its better days — generally wants to spend less. Yet seldom do we ask how governments could serve their citizens better. Some of our Asian neighbours spend less on health and education yet do better at school and live longer. So why don’t we ask what approach to education would genuinely improve learning? How can our health services increase the quantity and the quality of our lives? How could welfare be adjusted to better relieve poverty while removing the disincentive to help oneself or one’s family?

One thing is certain. The hard yards will not be traversed by raising the GST from 10 to 15 per cent. Indeed it is arguable if merely changing the tax mix qualifies as reform at all when decisions are inevitably skewed by the imperative of restoring the budget to surplus.

It took a former Labor prime minister last week to make the obvious point: the public does not trust government, state or federal, to spend its money wisely.

“To simply give the commonwealth cabinet, any cabinet, another $30bn to spend at its discretion, is fiscal folly in the extreme,” Paul Keating said. “We cannot pretend we can go on spending as though nothing has happened. The world has trimmed us down — we now have to trim ourselves down.”

Two decades of rising revenue have allowed governments to avoid confronting weaknesses in government programs by spending more money. An extended holiday from reform coupled with the knee-jerk Keynesianism of a panicked Labor government left a legacy of poorly targeted spending and boondoggle schemes that seem all but impossible to scrap.

The Abbott government’s agenda after its election in 2013 was more reform-minded than its critics allow. It commissioned Patrick McClure to examine efficiencies in the welfare system. It investigated changes to the Medicare Benefits Schedule to remove wasteful or counter-productive procedures. It established major reviews of taxation and the nexus between the commonwealth and states, and more besides.

Yet the friction of everyday political debate has steadily eroded the government’s will, reducing the reform debate to a sterile argument about raising revenue. The danger now is that the poor policy decisions of the boom years will be compounded by reform driven by tax hikes.

Take superannuation, where the biggest problem is not that tax concessions are too generous. It is that the dream of self-funded retirement is out of reach for about 80 per cent of wage earners. Yet in this finance-trumps-all climate, the challenge of delivering the superannuation system we were promised, one that gives most Australians the dignity of a comfortable, self-funded retirement, is seldom mentioned.

At some point since the economic reforms of the 1990s, the purpose of government appears to have been lost. We expect more from our administrations than the ability to balance the books, although that clearly helps. We expect them to make our lives better.

The death on Christmas Eve of Jim Carlton, a former minister in Malcolm Fraser’s government and a leading member of the Dries, was a moment to reflect on what governments — Labor or Liberal — are really put on earth to do.

Last week, when parliament marked his passing, Shorten recalled Carlton’s own summary of his parliamentary career delivered in 1993 on the eve of his retirement. “It has worried me that I have been characterised as being solely concerned with economic issues,” said Carlton, “but I have only ever regarded these economic issues as a means to achieving social outcomes. That really is what it is all about.”






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