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Feb 06 2014

Government has a double standard on entitlements

This is a longer version of an article published at Independent Australia.

Last week, Australian Treasurer Joe Hockey refused to provide $25 million of government assistance to struggling local tinned fruit cannery SPC Ardmona. Hockey says “the age of entitlement is over, and the age of personal responsibility has begun”. This opposition to “entitlement” is an emerging narrative of the governing Liberal/National Coalition’s, with Prime Minister Tony Abbott stating “we don’t believe in corporate welfare”.

Hockey’s choice of the word “entitlement” is a prime example of right-wing spin. It sounds almost like it belongs in a left-wing critique of privilege, power, and big business. Don’t be fooled. Dig deeper and you’ll find the Government’s real intentions are the opposite of what the spin suggests.

Hockey justified his decision on the basis that the cannery is supposedly “over-generous” to its employees (and more reasonably, that it is part of the much larger company Coca-Cola Amatil). But Liberal backbencher Sharman Stone, whose electorate includes the cannery, has accused Abbott and Hockey of “lying” or “not speaking the reality”. She points out SPC’s problems are caused not by extravagant wages and working conditions, but by unrelated factors such as extreme weather, the supermarket duopoly, and increased exports. She described the move as a “witch-hunt”. Thus Hockey is not taking a principled stand against corporate welfare, he is using withdrawal of assistance as a stick to punish employees for standing up for themselves.

Hockey’s colleague Simon Birmingham claims the Government “won’t be pursuing policies that prop up unsustainable policies or bad business practices.” This would be very welcome news if by sustainable he meant living within the Earth’s natural limits. Instead, the Government’s idea of sustainability seems to be about cutting costs. The Government is pursuing policies, including corporate welfare, which prop up unsustainable business practices.

The Government is set to spend $9.83 billion subsidizing fossil fuels in its first budget (FY2014/15). That’s 393 times the subsidy denied to SPC Ardmona, in one year alone. These subsidies were mostly instituted under the previous Coalition government during 1996-2007, and continued by Labor during 2007-2013. Here’s the full list of fossil fuel subsidies planned for FY2014/15 (those in italic are made redundant by the Government’s carbon price repeal bills and are excluded from the aforementioned total):

  • Fuel tax credits scheme ($5.88 billion)
  • Accelerated depreciation ($1.46 billion)
  • Aviation fuel excise concessions ($990 million)
  • Energy Security Fund: free carbon permits for coal power stations ($922 million)
  • Application of Fringe Benefits Tax statutory formula to value car benefits ($720 million)
  • Exploration and prospecting deduction ($400 million)
  • Fringe Benefits Tax exemption for employee taxi travel ($55 million)
  • Goods and Services Tax exemptions for domestic air and sea travel ($55 million)
  • Petroleum Resources Rent Tax expenditure uplift rate ($55 million)
  • Petroleum Resources Rent Tax gas transfer price regulations ($55 million)
  • Petroleum Resources Rent Tax starting base and uplift rate for capital assets ($55 million)
  • Shipping investment incentives ($55 million)
  • Thresholds for carbon price obligations ($55 million)
  • Carbon price uncovered sectors ($30 million)
  • Fringe Benefits Tax discounted valuation for car parking ($20 million)
  • Fringe Benefits Tax discounted valuation for travel industries ($10 million)
  • Alternatives to logbook method of substantiating car expenses ($5 million)
  • Fringe Benefits Tax exemption for minor private use of company motor vehicles ($5 million)
  • Fringe Benefits Tax for certain remote area transport including oil rigs ($5 million)
  • Capital expenditure deduction for mining, quarrying, and petroleum operations ($2 million)

The Government not only subsidizes fossil fuels, it promotes growth of the industry in other ways too. It aims to restore the profitability of coal-fired power stations. It is granting environmental approvals to new fossil fuel mines and export infrastructure projects, and is yet to reject a proposal. It is promoting coal seam gas development with a “use it or lose it” permit policy to ensure “every molecule of gas that can come out of the ground does so” (despite Abbott having said in opposition “if you don’t want something to happen on your land, you ought to have a right to say no”). It recently announced a committee to market coal seam gas to NSW voters. It will spend billions of dollars building new roads. It is already well into the process of delegating its environmental protection powers to state governments. And in free trade negotiations the Government is offering to sign up to investor-state dispute settlement (ISDS), which would give multinational corporations the power to sue a government for any policy that hurts their profits in an unaccountable tribunal with unlimited powers.

Meanwhile the Government is cutting renewable energy subsidies (which were already a fraction of the aforementioned fossil fuel subsidies). It has slashed the budget of the Australian Renewable Energy Agency, is attempting to repeal the Clean Energy Finance Corporation, and will review the Renewable Energy Target with a view to scrapping or reducing it. Its justification is that renewable energy cannot survive without government support – but fossil fuels are only profitable today thanks to past and present government subsidies, ownership, and supportive policies.

The Coalition proposes to replace Labor’s climate and renewable energy policies with an Emissions Reduction Fund, which will pay polluting companies to slightly reduce their emissions per economic output. As those reductions are unlikely to be meaningful, in effect the Fund is yet another fossil fuel subsidy. Even if the money were redirected to legitimate climate action, the Fund’s budget is capped at less than $1 billion per year, paling in comparison to the much larger quantity of fossil fuel subsidies.

It’s not just mining. Across many policy areas, the Government subsidizes the already affluent. Examples include superannuation concessions favoring high-income earners, paid parental leave favoring high-income earners, negative gearing, and bank borrowing guarantees. I’m aware there are various arguments for and against these specific measures, but the overall effect is an awful lot of welfare for the rich. Again, many of these policies were introduced by the Coalition and maintained by Labor.

Similarly, the Government has no objection to large sums of government money going to politicians. The Coalition has voted for repeated increases in politicians’ salaries, to the point where Australia now has some of the world’s highest-paid politicians. Hockey receives $366,000 per year from taxpayers, while Abbott gets $507,000. Are they entitled?

So why, given its insistence on the supremacy of free markets, is the Government so hypocritical about it? In an interview with Lateline in 2012, when asked whether fossil fuel subsidies counted as unaffordable entitlements, Hockey gave this revealing answer:

Well they need to be looked at on a case-by-case basis, but the two that I think you’ve identified relate to business and business investment. The great criticism of Spain at the moment is that the fiscal consolidation program in Spain involves reducing any incentive and support for business and not taking a hard look at the welfare entitlements of the people.

This quote illustrates that the Government’s hypocrisy results from a double standard: welfare for the poor and vulnerable distorts the market and drains the budget, but subsidies for the rich and powerful merely facilitate investment. As a right-wing Treasurer, Hockey believes those who have reached the top of society deserve to be there. If you’re at the bottom, bad luck – it’s your own fault because you didn’t try hard enough. As Guardian blogger Alexander White explains, in the Government’s worldview:

if a person is rich, it is proof that they are a good and moral person. It demonstrates that they must be hard-workers, wise investors, who are self sufficient and possess personal discipline.

The corollary of this is that poor people, who lack money, also lack morality. To a conservative, lack of money proves that you must be lazy, ill-disciplined, self-indulgent, deviant and dependent on others. […]

Support for renewable energy, assistance for disadvantaged people, foreign aid, or industry packages for Holden, Ford and Australian manufacturing should be opposed because it is the role of government to punish immorality, and lack of money is proof of that immorality.

Or to quote Tony Abbott: “we will be very loth to do for businesses in trouble the sorts of things they should be doing for themselves.”

Whether an economic activity is government-funded, privately funded, or both is not important in itself; it is a means to an end. The left advocates greater government control of the economy to protect the public interest and redistribute wealth downwards. Beneath the right’s rhetoric about efficiency and growth lies a hidden goal mirroring the left’s: to protect corporate interests and redistribute wealth upwards. That the free market is just a tool to achieve this is evident in the hypocrisy of the Abbott government, and neoliberal governments around the globe (including Australian Labor governments). Whenever it suits big business, they suddenly abandon their professed free market principles and intervene to save the corporations. It makes sense when you understand the real goal isn’t a free market, but to make the rich richer and ensure those at the top of society remain there. Privatize their profits, socialize their losses.

This is a nuance missed by many commentators bemused by the apparent contradiction between the Government’s stated free market ideology and supposedly “Soviet style” climate policy. In reality, the Emissions Reduction Fund could not be further from a socialist policy. Whereas socialism would give money to the poor, the Fund will give money to rich, powerful industries that don’t need government subsidies.

Business has already rewarded the Coalition for its service in opposition. As is required by law, earlier this week political parties disclosed large donations during FY2012/13 (donations in last year’s election campaign will not be released for another year). The Coalition received $95.2 million, exceeding Labor’s $54.7 million and dwarfing the Greens’ $8.1 million. The Coalition’s total included over $1 million from mining and energy companies. Other donations included $580,000 from the widow of media magnate Kerry Packer; $372,500 from the Australian Hotels Association, who benefit from the Government’s pro-pokies policies; $107,000 from tobacco company Philip Morris; $42,000 from mining billionaire Clive Palmer, despite his leadership of a separate political party; $17,094 from media mogul Harold Mitchell, and $15,000 from Qantas chairman Leigh Clifford. Another $3.3 million from unknown sources was funneled through the Cormack Foundation.

When Hockey says the age of “entitlement” is over, he really means welfare for the disadvantaged is over. Welfare for the privileged lives on.

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