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It’s not submarine science

In September last year, Social Services Minister Christian Porter addressed the National Press Club with the findings of an actuarial study conducted by PwC which “shows that we face a total estimated future lifetime welfare cost of the present Australian population of $4.8tn”.

What an absolutely meaningless figure.  Its only purpose could be to find the biggest number you can to try to justify attacking welfare recipients under the guise of budget repair.

A more relevant figure might be the lifetime earnings of the big four accounting firms from government contracts.

The 2015 budget allocated $33 million to be spent over four years to bring in actuaries “to work out an annual estimate of the lifetime cost of Australia’s welfare system and to identify groups most at risk of welfare dependency.”

A nice little money earner but only the tip of the iceberg.

As Michael West points out, the Big Four accounting firms have picked up at least $2.6 billion in fees from the Australian government over the past ten years.

When it comes to leaners look no further than PwC itself which has picked up $759,736,134.06 over the past ten years from the Commonwealth; almost $760 million in taxpayer money for doing reports – providing advice, paper shuffling.

Let’s not forget Ernst & Young, which banked $525,064,685.80 for writing stuff, and Deloitte with its $415,773,994.86, the lowest of the Big Four leaners but nonetheless a leaner par excellence.

It is KPMG though which takes first prize in the corporate welfare stakes, strapping on $934,351,772.48 of the taxpayer’s finest, clipping almost $100 million a year, leaning like a test rugby pack.

All four have been big donors to the major political parties. All four are the architects of global tax avoidance. All four, while sermonising to government on tax policy, are busy advising their multinational clients how to skulk out of paying tax.

And what did this hugely expensive report actually achieve?

It identified that there were two groups particularly at risk of entrenched welfare – 11,200 young carers aged 15-24 and 4370 young parents (aged under 18).

In order to help this very small, very specific group, the government’s first move will be to create a $96 million honey pot – the Try, Test and Learn Fund – to trial experimental initiatives aimed at getting key groups off the public books and into employment.

“Anyone who can see these human stories playing out on the ground can come to us with an idea,” Mr Porter told ABC radio. “We will fund those solutions and measure them”.

But the Coalition already defunded one such successful program in the 2014 budget from hell.

Funding for the Youth Connections program, which provided funding to local youth services to support young people at risk of disengaging from education and work, ran out at the end of 2014.

“This is a highly successful program, supporting 30,000 young people each year.  When we have national youth unemployment at 12.2 per cent and many regions as high as 20 per cent we cannot afford to end assistance now,”  Youth Connections National Executive Officer and now Xenophon MP Rebekha Sharkie said.

“What’s more, 93 per cent of young people in the program who had reconnected with education, training or employment for at least 13 weeks, were still working or studying six months after Youth Connections.” That’s an extraordinary level of success and shows that this programme is too important to face the chopping block.”

“It costs on average $2,500 for a person to be assisted on Youth Connections, when you look at annual costs of $20,000 for a young person to be on Youth Allowance, it just makes logical economic sense to provide the support.”

In a typical cost shifting exercise, the then Parliamentary Secretary to the Minister for Education, Senator Scott Ryan, issued a statement saying it was a state government issue.

“It is the responsibility of state and territory governments to ensure that young people stay in school until they are 17 as per their own legislation,” the statement said.  “Around 74 per cent of the young people supported by the Youth Connections program were under 17 years old and thus a state and territory responsibility.”

Since Mr Porter is asking for ideas, I have a few to share.

Stop gifting hundreds of millions to the big 4 for work that could be done by government departments.

Stop supporting the firms that facilitate corporate tax evasion – their advice is tainted.

Stop defunding successful programs particularly since you have no better ideas.

Stop squeezing the poor to pay for your promises.

Stop making the taxpayer fund your celebrity lifestyle.

And just to show you how easy it could be…..

Stop the corporate tax cut saving $50 billion over the next decade.

Cap the defence materiel budget to $10 billion a year saving $200 billion over the next two decades.

It’s not submarine science!


29 comments

  1. Keitha Granville

    I read these articles and weep – for the profligacy of our politicians at the expense of those with nothing. Nothing to keep them warm, to feed them and certainly nothing to fight against the screaming hypocrisy of those making decisions which ruin so many lives.

    Stop ? They will never stop. They will make some decluttering moves for a while and then gradually it will fade from the collective conscience and it will be back to business as usual.

  2. silkworm

    “Stop making the taxpayer fund your celebrity lifestyle.”

    Taxes do not pay for government spending – taxation comes after spending.

  3. Kaye Lee

    I know that is what MMTers say silkworm but at the moment our government funds deficit spending by bond issuance which places unnecessary costs and constraints on budgets. That being the case, I would prefer not to be wasting money on paying for pollies to party.

  4. wam

    unfortunate use of submarine $50billion to support the frog sub work force diverting the flak of ship building to the spanish gov enterprise in a fairy tale promise of building subs in SA. X is an opportunistic slime

    where is the SQUEALING with rage that this government has the support of the electorate to demonise refugees and persecute Australian with a 20% error rate.

    great suggestions, kaye. shame little billy won’t go on the commercial shows to pose them as questions for the asking of?

  5. silkworm

    Kaye, your explanation still makes no sense.

  6. Kaye Lee

    I don’t really want to have a discussion on MMT here. Until you can convince the government, it is an academic discussion better had on one of John Kelly’s articles

  7. Matters Not

    I think one of the big problems we have is the way the political system works at the moment. Individuals crawl over each other to get ‘endorsed’ and then to be ‘elected’ – regardless of party affiliation. Requires all sorts of effort and there is always the threat of ‘losing’ sometime in the not too distant future, with the result you become a mere cypher on the historical record. Power and influence gone as well as the reasonable income – while your prospective pension disappears before your eyes. It’s a potent recipe for conservatism.

    And it works!

    There is no appetite to be visionary. No motivation to think outside the square. Better to just go with the flow – because that’s where the rewards are. Sad but true. And there’s no ‘visionary’ on the horizon. Just a bunch of false prophets who are embraced without regard to any logical thought.

  8. Kaye Lee

    The way the system is at the moment, visionaries would be wasted in parliament. Imagine having to listen to Malcolm Roberts or Brian Burston or Bridget McKenzie or Barnaby Joyce or George Christensen or Cory Bernardi waffle on for hours talking crap. Imagine having to lower your standards to the debacle they call Question Time. Imagine how aggravating the time-wasting would be.

    They think they are on a stage, inadequately looking for a line that will make people laugh. I still cringe at Dutton’s attempt at telling a joke in parliament. Is this what our government has descended to?

    https://youtu.be/hOcU5PJiAGo

  9. Matters Not

    Perhaps I am guilty of romanticising the ‘past’. I remember a Gough Whitlam who had all sorts of visions and was prepared to enlist leaders in the field to flesh them out. Peter Karmel springs to mind. Blind Freddie knew what Karmel would recommend when commissioned. His previous work in South Australia illuminated the pathway. Whitlam knew what he would get.

    You cite Michael West above with approval. Why not commission West to lead an expert group to develop a whole set of policies to deal with the problem of multinational tax avoidance? Read his articles to get the flavour of the likely recommendations. Why not commission an expert educational group to develop policies in the light of the (self inflicted) Gonski stuff up? And there’s so many other experts willing and able to help across the policy spectrum but remain sidelined. Much to their frustration and chagrin.

    Labor needs to become ‘visionary’.

  10. John Hermann

    And of course, underpinning all of this accounting absurdity is the equally absurd proposition that the budget needs “repairing”. The federal budget does not need repairing, and never did.

  11. Matters Not

    The federal budget does not need repairing, and never did.

    Fact is, that ‘politically’ speaking – it does! And that’s the view shared across the political spectrum. It’s just a ‘common sense’ that resonates. And until a new political ‘common sense’ is constructed, the Budget needs repair.

    In short, your economic ‘common sense’ is just that – your ‘common sense’. And it’s devoid of the political reality.

  12. Roswell

    I’m trying to get my head around what silkworm said at 10:00pm. It’s a bit like what came first, the chicken or the egg?

  13. silkworm

    “Sovereign government does not really need revenue in its own currency in order to spend.

    This sounds shocking because we are so accustomed to thinking that “taxes pay for government spending”. This is true for local governments, provinces, and states that do not issue the currency. It is also not too far from the truth for nations that adopt a foreign currency or peg their own to gold or foreign currencies. When a nation pegs, it really does need the gold or foreign currency to which it promises to convert its currency on demand. Taxing removes its currency from circulation making it harder for anyone to present it for redemption in gold or foreign currency. Hence, a prudent practice would be to constrain spending to tax revenue.

    But in the case of a government that issues its own sovereign currency without a promise to convert at a fixed value to gold or foreign currency (that is, the government “floats” its currency), we need to think about the role of taxes in an entirely different way. Taxes are not needed to “pay for” government spending. Further, the logic is reversed: government must spend (or lend) the currency into the economy before taxpayers can pay taxes in the form of the currency. Spend first, tax later is the logical sequence.”

    http://neweconomicperspectives.org/2014/05/taxes-mmt-approach.html

  14. John Hermann

    Matters Not said:

    “That’s the view shared across the political spectrum. It’s just a ‘common sense’ that resonates. And until a new political ‘common sense’ is constructed, the Budget needs repair.”

    Beware of ‘common sense’. Bertrand Russell said:- “The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd; indeed in view of the silliness of the majority of mankind, a widely spread belief is more likely to be foolish than sensible.”

    What budget deficit hawks fail to recognize or understand is that deficits are the norm and surpluses are the exception. A glance at the history of budget deficits in this country and in all other countries that do not enjoy sustained positive current accounts (where exports exceed imports) will reveal that for the past century national budgets have been in deficit for around 85% of the time. Incidentally, this situation also applies to the UK and the US and most of the EU countries. Moreover, in these countries, whenever an attempt was made to run budget surpluses, recession quickly followed. This is telling us something very important about how real economies operate.

    Deficits are good for our economy and surpluses are bad for our economy. If the budget happened to go into surplus, then the budget most certainly would need repair. The only issue here is how big the deficit should be in order that the economy will operate optimally. At the present time, Australia’s national budget deficit is demonstrably too small. So in that sense, the budget would be “repaired” by increasing the current level of deficit spending. However it can be argued that the very notion of a budget needing “repair” is absurd, on the grounds that the deficit should be allowed to rise to whatever level is required for a healthily operating economy — which is one where available resources are being fully utilized, including human resources.

  15. paulwalter

    I wish people would stop referring to him as “Christian” Porter. He is not a Christian or even the bootlace of one.

  16. Miriam English

    It constantly amazes me when government people talk of social support payments as money lost. It isn’t lost. It returns almost immediately back to government. People on social support don’t save money and hide it in offshore tax havens. They spend it immediately, boosting local economies, increasing the stability of communities and helping to maintain local business and local employment.

    The money comes back to the government every time it changes hands — as GST, as company tax, as payroll tax, as numerous charges and levies. If you guess an average of 20% going to the government every time money changes hands then it only needs to change hands 4 times for more than half to return to the government.

    Start with $100
    100-20%=80
    80-20%=64
    64-20%=51.2
    51.2-20%=40.96 remains in the community. Another 4 movements and 80% of the money has gone back to the government.

    Even GST, at 10%, only needs money to change hands 7 times before more than half has gone back to the government.

    And if the people on social support help to buoy up the local community then that means more people spending more, helping to keep shops open and attracting more customers, all meaning the government gets even more from people who are not on social support.

    It is a false economy to see that money as lost, and then wanting to axe it. But how do we tell the halfwits in power who are so educationally and morally stunted as to not realise that an economy must be considered as a whole and that it is supposed to serve the people?

  17. Miriam English

    The government doesn’t lose money by spending money on poor Australians, but there are a few ways our government does lose money:
    – when wealthy people hide money offshore in tax havens (I’m looking at you Malcolm Turnbull)
    – foreign corporations bleeding money away — often billions tax-free
    – foreign companies buying up Australian assets (water, electricity plants, telecommunications infrastructure, etc) then having Australians pay for them forever
    – local companies offshoring services
    – when our government destroys local businesses so that Australians have to buy goods from other countries

    It is in a government’s interests to help the money to move around as fast as possible to speed up the rate that it returns to them. Austerity slows money down and brings on a recession. People stop spending and the government’s return slows to a dribble.

  18. Keith

    Once again a well written article, thanks Kaye Lee.

    The LNP comprise a rag tag of ideologically driven politicians who are creating a climate for recession.

  19. MACAM

    This is a cruel and corrupt government comprised of self serving thieves , any government that can rip hundreds of millions of dollars from public education and give it to their wealthy mates and donors is a blight on humanity…

  20. guest

    Visionaries? You want visionaries? Rowan Dean, writing in the Murdoch press has the answer. Tony Abbott. Brilliant visionary. Made a few mistakes, but was learning. Now he is brilliant on the world stage.

    That is not the Abbott I remember.The clown on a bike. The worst PM ever(?). The ideology warrior ready to shirtfront Putin. You bet you are.

    So Dean is upset that Abbott was dumped. Big mistake. Too much like Labor. Abbott would have won more seats than Turnbull.

    Ah, so that is why Dean is so peeved.

    So what are we left with? A government struggling to survive. Just listen to Turnbull trying to explain anything. Stumbling and back-tracking and flustering, a silly grin on his face…

    Meanwhile, Census stuff-up, welfare retrieval stuff-up, expenses stuff-up, renegade back-benchers…

    Then we look at finances. Increased debt (by their own standards). NBN stuff-up, “Jobs and Growth” chaos, $50bn to be given to industry for “investment”…

    No Gonski, but complaints about education spending. Let States raise their own taxes (this from a “low” taxing government). Spending on private schools saves money and we have spent more money on education than ever before – but the standards are falling, so we might as well spend less. Confused already?

    Money spent on outsourcing to private analysts (What happened to the public service?). Money spent on sympathetic Institutes, such as the Sydney or the Menzies etc.

    Massive spending on military equipment supervised by 3 different ministers to protect us from enemies such as China, a huge trading partner (what?). Very little actual spending supervised by 7 ministers (imagine the tangle of communication) on infrastructure.

    Support for the Adani Carmichael mine at a time both China and India are retreating from coal consumption. Advice by Dean that Oz withdraw from the Paris agreement on emissions (what can little Oz do to help?). Climate Change is such a scam, you know! We would just be ruining the economy for no see-able benefit. He said what?

    Need I go on. This “government is playing us for fools and they believe they can get away with it. And if Turnbull goes belly up, Dean has the answer. Tony Abbott, the man with vision. The man with more than 30 consecutive low poll ratings, the man who was replaced by Malcolm Turnbull to common relief – but subsequent disappointment.

    And yet there are those who want Abbott back! What kind of foolishness is that? What lack of vision!

  21. Roswell

    Miriam, I see that 17,000 people out of a target of only 25,000 have signed that petition. That’s about 0.2% of the voting population. It’ll be laughed at by the government, if they ever get to see it.

    Sad, really, because we need a Federal ICAC.

  22. Kaye Lee

    Rowan Dean is an offensive puerile moronic mouthpiece who hasn’t got one scintilla of critical analysis in anything he writes or says. This fool published a list of people he called the “Poor Me List” where he lambasted people like Adam Goodes, Stan Grant, Nova Peris, Waleed Aly and others and made up stupid names for them.

    Of journalist Stan Grant he said he “shot to long-overdue leftie prominence in late 2015 when, after years of ignoring him, the Luvvies finally sat up and noticed he has Aboriginal ancestry”.

    He is possibly the MOST inadequate person in the Australian media and why he is EVER given a gig on panels is beyond me. If he is on, I turn the tv off.

  23. Florence nee Fedup

    We don’t need anything with name “Homelands”.

  24. Florence nee Fedup

    Number young mothers under 18 has decreased, Most if all go onto to form new partnerships, even have more children. Many have benefitted from existing programmes building up skills for better lifestyle. Most work.

    Most single mothers come from partnerships and marriages that have broke down. Was a time many never worked but stayed on benefits. Be surprised if that is true today,

  25. Florence nee Fedup

    Miriam you are correct. Money spent in an economy can’t be wasted. Unless one stores it under the bed, not spending.

  26. Miriam English

    Roswell, I think the petition is only several hours old. They always revise the target incrementally upwards, I think. It will be interesting to see how it fares after a few days.

  27. Andreas Bimba

    The big accounting firms are also key players in Australian and international tax evasion and this is probably the main reason for the federal government’s current revenue problem. For our federal government to focus on the meagre social support payments for the victims of their mismanaged neoliberal economy for expenditure savings cannot in my opinion be based on ignorance but is deliberate, sociopathic or even criminal. This is class war by the top few percent and their Liberal and National Party Coalition political puppets.

    https://www.google.com.au/amp/thenewdaily.com.au/money/finance-news/2016/07/11/architects-global-tax-avoidance-revealed/amp/

    https://www.google.com.au/amp/s/amp.theguardian.com/business/2013/apr/26/accountancy-firms-knowledge-treasury-avoid-tax

    In regard to the fact that the MMT economists have proven that we can easily have full employment within a few years under current circumstances by adjusting the federal government deficit (without additional taxation or debt being incurred) and by having a Job Guarantee program, we would be mad to not support this approach just because the majority of current badly educated economists and possibly all our current politicians remain ignorant or sceptical of this approach. This would actually be worse than still believing the earth was flat or that the sun orbited the earth due to the millions of lives that are currently being destroyed by avoidable unemployment and poverty. For so called progressive parties like the ALP and Greens to also ignore the appropriate policy choices for full employment is even worse and given that such policies existed before the current neoliberal era. The additional economic activity can also speed the essential transition to clean energy and environmental sustainability if managed correctly – which disqualifies the current Coalition government.

    At least Bernie Sanders has accepted the worth of the MMT economists approach to macroeconomics and full employment probably because of his admiration of FDR’s very successful New Deal program that brought the U.S. out of the Great Depression. Do we need to wait to follow big brother before we can act in our own best interests? Japan is also effectively following MMT macroeconomic settings.

  28. George Swalwell

    What a treasure we have in Kaye Lee, pointing out wild overspending by this government
    on private “accounting” firms, and listing the ways government should be allocating tax
    payers’ money.

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