The Guardian 16 May, 2007

Budget 2007-08:
Locking in the cuts; privatising the future

Treasurer Peter Costello headlined the budget as "Locking in the Gains; Investing in the Future". It certainly does that for big business and the rich. But for ordinary working people, pensioners and students it is about "Locking in the Cuts: Privatising the Future".

It is a cynical election budget, but the bribes are not just thrown to the wind. Costello’s $4 billion of pre-election one-off payments carefully target key groups in the electorate and do so in a way that promotes the private sector and individual "self-reliance" to the detriment of the public sector. Additional spending on education, child care, water, transport and communications directly challenges the fields where Labor is out in front of the Howard Government in the opinion polls.

Education is high on the agenda to counter Labor leader Kevin Rudd’s focus on skills training and education. They are in reality another step towards the government’s goal of privatising education at all levels and imposing its narrow conservative curriculum. The huge tax cuts are yet another redistribution of wealth at the expense of those on lower incomes.

Key groups in the electorate are thrown one-off "feel good payments" (around $500-$1,000) to spend on the eve of the federal elections. Only a small handful of groups in need are thrown one-up "feel good" payments (around $500-$1,000) to spend on the eve of the federal elections. It is a classic conservative, Coalition government budget: the less you have and the more you need the less you get.

Embarrassment of riches

The income tax cuts announced in this budget will cost an estimated $31.5 billion over the next four years. They are in addition to the $36.7 billion worth of cuts made in the 2006-07 budget. That is a staggering loss of government revenue of $68.2 billion over five years from personal income tax cuts.

Then there is what Costello calls the budget surplus — an estimated $13.631 billion in 2006-07 alone — and forecasts of more large surpluses to come over the next four years. The total of these surpluses comes to $63.2 billion over five years.

The obscenity and extent of the government’s cuts and failure to adequately spend on essential services and other needs of the people is starkly revealed when the total tax cuts and budget surpluses are added together. Taking the government’s estimates quoted above that cover the five-year period from 2005-06 comes to a mind-boggling $131 billion ($68.2b + $63.2b)!

The Higher Education Endowment Fund squirrels away another $5 billion of "surplus" funds.

Two questions immediately spring to mind:

1. Where is all that money coming from? 2. Why isn’t it being used to address the chronic under funding of basic services and infrastructure?

The answer to the second question is very simple. The government does not want to support the public sector and it is not interested in helping the sick, those with a disability, the unemployed, Indigenous Australians, women or any groups in society that are not wealthy. The government is there to serve the business end of town, the capitalist class. It does everything it can to assist the financial markets, big corporations and private enterprise.

As to the source of the money, Costello credits much of it to the government’s good management. The reality is that the booming mining sector has contributed additional dollars. The banks and other financial institutions, in particular are awash with money, much of it at the expense of ordinary people paying higher interest rates and exorbitant fees.

WorkChoices and other anti-union, anti-worker laws have played a big part in the record profit-take of the private sector. These profits come out of the labour of workers. But income tax paid on corporate profits covers only a fraction of budget income.

Cuts fund handouts

Twelve years of successive cuts to federal spending on welfare, health, education, community amenities, housing and other areas by the Howard Government continue to erode these services. Tens of billions of dollars of savings are being made, year after year, without any new announcements.

This is a huge cost to working people and the most disadvantaged in the community. Medicare has been starved of funds, dental services closed down, thousands of people cut off welfare, women’s services closed, ABC funding slashed, ATSIC shut down and other Indigenous services slashed, and migrants denied English language classes, to name a few examples.

The 2007-08 budget locks in these cuts, a miserable future for those who have been denied basic needs and rights.

GST unseen

The budget "windfalls" are also a result of the GST (the 10 percent Goods and Services Tax). The GST covers more goods and services than the wholesale sales tax it replaced and it is calculated as a percentage of the retail price which means the profit mark-up is also taxed. It was supposed to provide the states with all they would ever need and allow them to abolish other taxes. It has not done this, although the takings are substantial and ever-increasing.

The GST taxes people who are not earning enough to pay income tax such as pensioners, those on low incomes or part-time work. It is a regressive, unfair flat tax which has a greater impact on those on lower incomes.

On the surface the states look as though they are doing all right with a GST take of almost $40 billion in 2005-06 and are just making a loud noise to get more. Research by Roy Robertson of the Macquarie Bank reveals that federal funding to the states is at its lowest level as a percentage of Gross Domestic Product (measure of national income) since the 1970s.

The federal government has quietly wound back its share of contributions to welfare payments and other important services and infrastructure and used the money to fund tax cuts for the wealthy and handouts to the corporate sector.

While the Labor Party initially opposed the GST it has no intention of scrapping it should it win government. Yet that must be done as part of a total revamp of the tax system to reduce the huge tax burden imposed on working people and their families. Both major parties never mention the GST yet both know that it is a most unfair and discriminatory tax.

Flat-tax agenda

The changes in marginal tax rates take the personal income tax system another step towards the government’s goal of a flat maximum 30 percent rate, in line with the taxation of corporate profits. These latest cuts, as with previous cuts, are regressive, favouring those on higher incomes.

They range from a miserable $2.88 a week on a taxable income of $20,000 to $52.88 on a taxable income of $180,000. (see more details on tax cuts)

War chest

Since the Coalition government came to office in 1996 the "defence" budget has more than doubled from $10.4 billion to over $20 billion. In 2003-04 military spending was $13.7 billion, surpassing the amount spent on education — a very sad indictment of this government’s priorities. In the past five years military spending has risen by another 50 percent, and estimates for future years are set to accelerate this trend.

The main reason for the huge hike in military spending is the US-Australia military alliance and the Australian Government’s eagerness to unquestioningly do whatever is asked of it by the US administration. Spending on Australia’s involvement in Iraq and Afghanistan to fight the US’s wars there has cost billions of dollars.

The other main increase in allocation of funding is to finance Australia’s role as deputy sheriff to the US in the Asia Pacific region and the Government’s attempts to dominate Pacific nations including Solomon Islands, Papua New Guinea and East Timor.

The defence allocation only shows part of the true picture — other military funding is hidden in other budget items such as foreign aid, protection of borders and public order and safety.

Squeeze on public sector

The government steadfastly refuses to spend where the money is needed in the public sector on health, education, public infrastructure and other services. There is no justification for any shortage of teachers, nurses and trained doctors and the under-resourcing of public schools and hospitals. There is no financial or moral justification for the huge university fees, growing TAFE fees and HECs debts being imposed on students and the financial difficulties facing many public educational institutions.

It is criminal that the government can find over $140 billion in tax cuts, budget surpluses and military allocations but cannot address the basic needs of the people.

There is more than enough money to introduce universal access to bulk billing of medical services, to fully incorporate dental health into Medicare where it should be.

Education dollars misdirected

The government’s promise to allocate an extra $5.6 billion on education (over four years) sounds great, but it is not being allocated where it is needed. Instead of ensuring that public schools are adequately funded, staffed and resourced, the government is spending money on testing and pressuring teachers to get "results" and providing vouchers for private tutoring.

It is threatening to make funding and teachers’ salaries conditional on results, and give principals the power to hire and fire teachers and determine what they are paid. Neither teachers nor education can be measured by test results. At present private schools pick and choose the students they will accept. It is not hard to imagine that public schools will be pressured to do likewise to boost "performance" and blackmailed to comply with threats to their funding. Forget the kids, its test results that count!

The dollars should instead be directed into the public schools so that there are enough teachers to give students the attention they need and that will do more to improve education outcomes than anything else.

Restrictions on the proportion of full-fee paying places in universities will be lifted. Universities will be free to abandon or change the numbers in different courses, regardless of needs — the potential for raising income and making profits will take over.

The government is further transforming education into a commodity that can be bought on an "education market" where universities, colleges and schools compete for funding.

The one time payments to apprentices will no doubt be welcome and so too the promised scholarships for university. But these payments to individuals cover up the real issues. Employers should pay apprentices higher wages. Universities and TAFE colleges should be free as they were 20 years ago.

Private schools are further enriched. Their funding will increase by $1.7 billion over the next five years to $7.5 billion, while federal funding to state schools — which two out of every three students attend — increased by only $300 million to $3.4 billion over the same period. (There will be a detailed analysis of the education budget in a future issue of The Guardian.)

This criminal starving of the public education system and promotion of private schools is in line with the Coalition’s drive for private enterprise and the "markets" to take over everything. It is also very handy as a pre-election bribe to the Catholic Church and parents whose children attend private schools.

Long-term neglect

Many of the handouts serve the dual purposes of undermining the public sector and electoral bribery.

The fact that additional dental expenditure made an appearance on budget night was due to the pressure being felt by the government from Labor’s successful push in this area. (see details of the dental con

Carers will receive a one-off bonus which does nothing to address the ongoing shortfalls in support — both financial and in back-up services. At best it offers some temporary, partial relief. It has the smell of another cruel election bribe.

Some groups in the community miss out altogether on the Budget’s largesse. They include "single mums", Indigenous Australians, unemployed, under-65s with a disability and other social groups that John Howard has, both verbally and through his policies, continually demonstrated his complete contempt. As such, these groups have consistently voted against the Howard Government, and as non-swinging voters they simply count for nothing and face further cuts or loss of income or closure of programs.

The government continues to neglect Indigenous housing and health. It is more interested in promoting private individual ownership of Aboriginal land.

Peanuts for the environment

On the question of the environment and climate change, there was some hot air; key words were bandied about, a few band aids thrown on, but a complete failure by the government to seriously address the issues. The massive subsidies to fossil fuel industries continue and nuclear energy is promoted at the expense of development of sustainable, renewable energy.

What the government has shown once and for all is that there is no shortage of money to meet people’s needs. At the same time it shows that the government has other priorities — enriching its corporate mates and beefing up the military. It is to be hoped that the electorate will not be fooled by the petty election bribes and will throw out this most reactionary government ever suffered by the Australian people.