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Unfair, but for the greater good - where is Labor going with super?



4 April 2013

Wayne Swan

The biggest retirement reform since the age pension, compulsory superannuation is one of the ALP's greatest achievements.

Before it was introduced, as part of the Hawke Government's Accord with the union movement, superannuation was mostly a benefit enjoyed by well-paid, male, white-collar workers such as judges, politicians and public servants.

The scheme is simple; it is essentially a compulsory savings scheme for an ageing population that is not good at saving, made more attractive by concessional tax treatment.

Without compulsory superannuation, most of us would be facing a far tougher time in retirement.

It is another great social policy achieved at the cost of some inequity in the treatment of low and high income households.

It is this very "spirit of reform" Labor is now attempting to evoke amidst building speculation the government will change the superannuation tax arrangements for high income earners in the May 14 budget.

While refusing to confirm reports that income earners in the top 1-2% income brackets may pay more tax, Treasurer Wayne Swan has said the system must be reformed to be sustainable in the long-term.

Prime Minister Julia Gillard also said superannuation as an ALP creation was "safe in Labor's hands".

Labor has often accepted some unfairness for the greater good of a policy framework that captures everyone and is politically sustainable.

Superannuation is not fair in the way the rich and poor get treated - but neither is health and education funding and much else that governments get involved with as well.

The ALP's greatest policy reforms have succeeded because they have been far-sighted, inclusive and framed to pursue national, rather than class, interests - a point made by outgoing cabinet ministers, Simon Crean and Martin Ferguson.

But the problem for the Gillard government is - again - process.

Big social policies are not set in stone and they should be regularly reviewed and improved - the trade-off between social, political and financial objectives is always open to tweaking.

Any review of such a big policy area needs to be done openly and transparently, with clear objectives and guidelines.

So why has the Gillard Government repeated the mistakes it made with the mining tax and the recent media reforms package?

Especially when it comes to superannuation, when people are being asked to make decisions for the decades ahead, and confidence in the basic integrity and longevity of the scheme is critical.

Changes to superannuation shouldn't just be announced on Budget night, that's not a twenty-first century approach.

Gillard's "trust us" approach smacks of hubris and a poor strategic grasp.

Labor should be a party of consultation, not edicts from above.

Labor's most admired leaders from Fisher to Keating have all understood that great economic and social change can only be made through appeals to a broad national interest.

No-one exemplified this approach more than Bob Hawke with his appeal to reconciliation and consensus to heal the wounds of the divisive Fraser years.

Whitlam opened up higher education by removing fees, delivering a great benefit for high-income households while putting university within the reach of many more families.

Hawke funded a further, even greater, expansion of higher education partly through the introduction of the Higher Education Contribution Scheme (HECS).

HECS made higher education funding a bit fairer in tax terms to lower income households - but not much.

At the time HECS was formulated, Labor specifically rejected a proposal for fees and loans, arguably fairer for taxpayers, made by some of its bureaucratic advisers on the grounds that up-front fees were neither socially desirable nor politically sustainable.

Whitlam gave this country a universal health care scheme. Had it not been for Medibank (now Medicare), which passed Parliament only after the 1974 double dissolution, we would still be back where the USA was before Obamacare.

Yet, Medicare, like higher education funding, is not fair in the way the Gillard government now talks about fairness in reference to compulsory superannuation.

Medicare is partly funded through a levy, at the same rate for low and high-income earners.

The richest among us can use the public health system at the same cost per service as the lowest paid.

Radio broadcaster, Alan Jones, strongly opposes Medicare on this specific ground - the rich get too much benefit.

Unfair it might be, but Medicare has proven to be politically sustainable.

Consultation is particularly important if the Gillard Government intends to drop Labor's century-long national approach to economic and social reform and start looking for some radically greater perfection in the equity of tax treatment.

Labor's century-long brand as the party that represents everyone who earns a living by their own efforts is at risk.

Trevor worked as a ministerial policy adviser to John Dawkins and Simon Crean during the Hawke Government.

The Conversation

This article was originally published at The Conversation. Read the original article.

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