If it can go wrong, it will

If it can go wrong, it will.

by John Tomlinson, 20 February 1999

Prof. Chris Murphy on Radio National Breakfast Program16/2/99 happily insisted that the tax systems should meet economist's three basic requirements: efficiency, simplicity and equity. He said that food should be left in the GST for simplicity and efficiency reasons and any equity questions arising would be better addressed through income tax and social security adjustments.

Implicit in the analysis of Prof. Murphy is the assumption that modifying income tax and the social security systems will address the GST equity issues for low income earners, pensioners, beneficiaries, poorer superannuatees and others in financial need. This analysis ignores the fact that many poor and even desperately poor people receive no income from either work or social welfare. The numbers of people excluded from any form of welfare has dramatically increased as a result of excessive targeting in recent years. Young people in particular have born many of the cut-backs in income maintenance.

Murphy, like many economists, continues to promote the idea that the tax system has to be simple but the social security system can be complex. That the tax system has to be efficient but the social security system can limp along as hotchpot of programs strung together without any coherence. Even those economists who understand the social security safety net is marred by huge holes through which people fall don't feel the need to insist that the system of welfare distribution should be simple, efficient and equitable. So that it might be understandable, obtainable, reliable and provide what, in 1965 the British economist Lady Rhys-Williams described as "a floor below which no one falls without installing a ceiling above which people cannot rise."

The claim to equity for the tax system is debatable but what is not in dispute is that it is comprehensive. The tax system claims to be coherent and to treat people equitably. The ongoing attacks against the welfare state have left the system of income support no longer able to lay claim to adequacy, coherence, comprehensiveness nor equity. The comprehensiveness of the social security system has been lessened by:

the extension of waiting time from 6 months to 2 years for migrants,
lengthened non-payment periods as punishment for failing to meet stricter Centerlink requirements,
the abolition of unemployment payments to 16-18 year olds, and
the introduction of the "work for the dole" scheme.

The comprehensiveness of the income security system will be further diminished by

the foreshadowed cuts in benefit to young unemployed people who have literacy or numeracy difficulties announced by prime Minister Howard in his 28^th January1999 Federation Address in Brisbane. If any of the reductions to industrial conditions and the social security as proposed to the Prime Minister by Peter Reith, Minister for Employment and Work-place Relations, are implemented both the waged and non-waged minimum levels presently in existence will be further eroded. Reith's intended assault on the industrial and income maintenance provisions were revealed when the contents of the letter were leaked to the Labor Party which exposed them in the Parliament on 17^th February 1999.

Driven by a relentless desire to enforce the Government's rhetoric about supporting "the family" combined with a meanness of spirit deriving out of its economic rationalist ideology the Howard Government has launched a ruthless attack on the ease with which young people might get income when they are homeless. In collusion with social workers in state departments of family welfare it developed a "protocol" which delays payment to those who are homeless if even one parent (who may or may not have previously abused the young person) says they can come home.

The current Government has relied upon what it chooses to call "mutual obligation" to justify its determination to divide the population who experience a low income between the deserving and undeserving poor. Even within the deserving poor, by paying different amounts it sets up a hierarchy of deservedness: pensioners are more worthy than beneficiaries who are more worthy than some allowees; although family allowees are clearly more worthy than the unemployed beneficiaries- particularly the young without work.

This division of people in receipt of little income into categories of deservedness would not have seemed out of place in the workhouses run by the 1832 Poor Law administrators. They too had their work for the dole schemes. They too determined that people in identical financial situations should be paid at different rates, they too insisted the principle of less eligibility should underpin their approach to their poor. They too were afraid that if people were provided with an income sufficient to sustain them they would refuse to work. These 19^th Century Poor Law administrators felt they needed to compel those to whom they provided welfare rather than provide opportunities and encourage poor people to take control of their own lives.

Those attitudes prevailed 167 years ago. They have substantial resilience and are still reflected in much of current economic thought about the welfare state. For economists to suggest that minor adjustments to the rates of social security benefits would be sufficient to handle the equity problems which leaving food in a GST package would cause is naive.

To ensure that the social security system became equitable would require a major overhaul of the entire social security system. To adjust the various rates of payment of all the pensions, benefits and allowances by a fixed percentage of each type of payment might compensate the recipients for the differentiated effect they suffer as a result of the GST but it would not be equitable. Only a basic income paid at standard rate to all permanent residents of Australia will be capable of comprehensively addressing the issue of equity in relation to meeting the essential needs of all Australians.

Introducing a basic income would require the abolition of most existing forms of income security and their replacement by a universal payment. To enhance its equity it should be paid individually to all permanent residents irrespective of family or economic circumstances. The income tax system would need to be modified to exclude all tax free areas and an income tax rate from the first dollar earned to at least twice average weekly earnings set at a flat rate would increase simplicity for the bulk of the work force. The equity question would be addressed by the basic income not through the tax system.

The introduction of a basic income would be significant change to our approach to welfare. It would take a little time to introduce, but if Australia can be turned inside out by the Howard Government's desire to introduce a new GST tax system because it is "outmoded" after 50 years then it surely is not too much ask that we revamp the principles of the system of income maintenance after 167 years of inadequacy.

Though the idea of a basic income might be a new idea to many Australians it is an idea which has been around since the 1975 Henderson Poverty Inquiry which recommended the introduction of such a scheme. Across the Tasman, our Kiwi friends have a GST which started in October 1986 at 10% and was increased to 12.5% in 1989. They have been researching basic income for a number of years and publish most of their material electronically. The New Zealand Basic Income Website: http://www.geocities.com/ubinz/ as well as providing a number of detailed papers provides links to basic income research centres in Europe and other parts of the world.