In the last chapter of Battlelines, there’s a reference to my previous appearance before the National Press Club. It was probably the lowest point of the worst day of my political life. But today could hardly fail to be an improvement. I’m not late, I don’t have an opponent feeling vindicated and I will try to avoid the slightest suggestion of bad language.
That appearance was in the midst of an election campaign that the Coalition was doomed to lose. It was a day when everything went wrong in a campaign when nothing went right. This appearance, I hope, might be part of a new beginning, not just for me but also for the Coalition which is now in the process of moving beyond the giant shadow of the last government.
The Howard era should be the yardstick against which the Rudd government is judged but it won’t be the blueprint on which the next Coalition government is modeled. Under Howard, there were 2.2 million more jobs, real wages grew by over 20 per cent and Australians’ individual wealth doubled. This happened, not because of the China boom, but because Peter Costello’s first budget sliced almost one per cent of GDP from public spending so that government would live within its means. It happened because workplace relations reform reduced third party-interference in how businesses worked, making them more productive and more rewarding for their employees. It happened because the former government understood that the world owes no one a living so expected people to work for a wage or to work for the dole. The former government didn’t talk about tough decisions; it made them. It didn’t borrow against the future to line people’s pockets now but funded lower taxes and higher spending from the proceeds of a strong economy. Still, the Coalition won’t deserve to win the next election if it is merely a tepid version of the Howard government.
Because “governments lose elections, oppositions don’t win them”, the principal obstacle to the Rudd government’s reelection will be the government itself. The opposition’s challenge is to make the government’s conduct the issue, not its own, and then to persuade voters that it has some sensible policies that address their problems and are based on their values. In Battlelines, I put forward some proposals which could form the basis of the Coalition’s future appeal. They tackle the biggest problems facing Australia in ways which reflect the values of the Coalition parties and, in my view, can touch a chord with the Australian people.
If the prime minister’s political agenda is any guide, apart from good economic management, voters’ principal concerns are health and education. Pre-election, Mr Rudd declared that the “buck” would stop with him on health and that he would take over public hospitals if they had not improved within 18 months. Pre-election, he announced a $2 billion “computers in schools” education revolution which he’s since supplemented with a $15 billion “building the education revolution” school infrastructure programme.
Unfortunately for people who thought that Mr Rudd was serious, he can’t actually revolutionise schools or hospitals: first, because he sees bureaucracy as a solution rather than as their main problem; and second, because he won’t get the states’ agreement to make any serious changes. He will succeed in spending money on schools, although more slowly than he’d hoped and with much less value for money than taxpayers have a right to expect. What almost certainly won’t change is the state-government-imposed management straitjacket within which school principals have to operate.
Similarly, he will spend more money on hospitals but not in ways that patients will notice because there will still be hard-to-manage boundaries between commonwealth and state funded health programmes and because local public hospitals will still lack any flexibility with their own budgets. The longer his government lasts, the more Mr Rudd will seem, in George Megalogenis’ phrase, like our first federal premier, making ever bolder announcements to disguise the lack of real reform and indulging in vanity publishing, much as Bob Carr used to ostentatiously read Marcus Aurelius during parliamentary question time.
The prime minister’s sky-high polls don’t mean that people agree with him that 30 years of neo-liberalism has finally ruined the world economy or that the answer to a financial crisis caused by debt-fuelled private sector extravagance is debt fuelled public-sector extravagance. Like Santa Claus, the prime minister is popular because he has never taken anything away. Sooner or later, though, the accumulated surpluses of the former government will have been spent and the government will lack the capacity to borrow more without raising interest rates. The prime minister would have it that his superior economic management has saved Australia from a recession. Instead of a Rudd recession, he warns us, we will have a Rudd recovery with higher interest rates, business closures, more unemployment and government spending cuts that will make it seem like the recession we supposedly avoided. Everyone who wants the best for our country has to hope that Mr Rudd really is the first world leader to have abolished the booms and busts of the business cycle but it’s hard to avoid the suspicion that his real expertise is in spin rather than economics.
It’s hard to be an effective opposition while voters still want to vindicate their own recent judgment and are still inclined to give to the new government the benefit of the doubt. The temptation is to try to prove that the voters made a mistake at the last election and to undertake the Herculean task of saving the country from opposition. Oppositions that try to fight the government over everything risk looking divided and obstructive. Oppositions, of course, should always be alert for the ways in which the government is mismanaging programmes that it supported in principle or at least didn’t trenchantly oppose. They should probably only fight, though, over issues where they have a clear alternative policy illustrating a fundamental difference of approach between them and the government. Oppositions can’t avoid fights but they should try to pick the ground on which they give battle.
Australia’s schools and hospitals don’t actually need a revolution. What they need is devolution of authority from head office to the people who work in them and who benefit from them. The basic problem in Australia’s schools and hospitals, particularly public ones, is not lack of money but lack of the institutional freedom that would allow them to respond effectively to people’s most important needs. Establishing local school boards and local hospital boards to appoint principals and CEOs and to approve school and hospital budgets would not solve all their problems but it would give to the local community some real ownership over these institutions and their issues and at least some of the means of addressing them.
Empowering local boards, though, might threaten the public sector unions which have become part of the mechanism for managing the existing sprawling bureaucracies. Even if the prime minister felt no particular obligation to these unions, the state Labor governments certainly do and they have the capacity to thwart any changes that he proposes. There’s an instructive comparison between the Rudd government’s school infrastructure programme and the Howard government’s investing in our schools programme. Providing money to public schools via the state education bureaucracies has meant that many schools are getting what they don’t really need at an exorbitant cost to taxpayers. By contrast, giving money directly to individual public schools, as the former government did, not only meant meeting local priorities but it often meant getting extra value through the work of local parents and people with school connections. As this contrast shows, there’s a big practical difference between Labor’s instinct, that officials know best, and the Coalition’s which is to cut out the middleman.
In any event, better teachers would normally make more difference to the quality of education than newer buildings. Most Australian teachers do a good job, sometimes under trying circumstances. The best teachers, though, are seriously under-recognised and under-rewarded. Almost certainly, the best way to make a difference in education would be to provide much higher pay for some teachers. A hardly noticeable five per cent change in class sizes (from, say, 25 to 27 on average) could fund a $50,000 a year pay rise for the best 20,000 classroom teachers. Perhaps one of the first tasks of newly empowered school boards could be establishing the criteria (which could be different at different schools) for determining who are their best teachers and for paying them more.
Similarly, hospital boards would end the near-complete disempowerment of local public hospital management and the consequent demoralisation of doctors and nurses who have to justify to patients decisions that were made in head office on budgetary rather than on health grounds. Instead of breaking down this head office control, Mr Rudd is now considering whether the Commonwealth should fund a wider range of health programmes. To avoid rampant cost-shifting, it would make sense to give one level of government (inevitably the national one) overall funding responsibility and authority in the sector. It’s unlikely, though, that the states would ever agree to the loss of such a substantial part of their existing role or to the required change of financial arrangements including the GST.
In the absence of any Commonwealth power to impose change in this area, the recommendations of the Health Reform Commission are of little more than academic interest. The Rudd government can hardly be serious, for instance, about the commission’s recommendation for an insurance system to make dentistry more affordable when it is actually trying to close down the Howard government’s Medicare-funded dental programme in favour of giving more money to the states for dental check-ups.
As the two Inter-Generational Reports have shown, without a higher birthrate and a longer average working life, the ratio of workers to pensioners will drop from five to one to two and half to one by 2050. The prime minister acknowledges the demographic challenge but is imposing means tests (on family tax benefit, the baby bonus, and childcare benefit, for instance) that will make it harder for middle income families to cope with the costs of children. Although our children are this generation’s gift to the future, too many women don’t have them or don’t have as many as they would otherwise choose because of pressure on the household budget. Quite apart from people’s natural instinct to have families, a country’s future rests even more on tomorrow’s citizens than on its investment in new roads, power systems and broadband, important though this undoubtedly is.
In the 1950s, when Western countries like Australia generally had universal child endowment, fertility rates were above replacement, particularly in middle income households. A dramatic fall in fertility rates has accompanied reduced support for families with children and its targeting towards low income households where, unsurprisingly, fertility remains high.
As Malcolm Turnbull declared in 2003, “a society that cannot reproduce itself has surely embraced a cultural death wish”. He called on policy makers to “stop being obsessed about ‘middle class welfare’” and to consider a universal payment to all mothers set near the maximum rate of Family Tax Benefit. He was also one of the first to call for a comprehensive paid maternity leave scheme to give career women a more realistic chance of having children. To be meaningful, unlike the Rudd government’s re-badged baby bonus, such a scheme should be for six months, replace a mother’s normal wage and be funded by business through a levy on payroll.
Paying the maximum rate of Family Tax Benefit (Part A), currently about $75 per child per week, for all children under five would cost about $2 billion a year. This is about half the cost of the Rudd government’s recent unfunded increase to pensions, the equivalent of an 8 per cent increase in tobacco excise, roughly the annual increase in government revenue from bracket creep, or the approximate annual savings from raising the pension age from 65 to 69, as recommended by the Harmer review.
Because most people enjoy working and derive from it a part of their sense of self, and because people who can’t work will continue to have access to other benefits, further raising the pension age should not be a political suicide mission. Policy changes that both encourage more children and discourage a premature end to people’s economically productive lives could be the best practical response to the demographic timebomb we otherwise face.
The Coalition should especially beware of sloganeering against so called middle class welfare. A universal payment to families with children is not middle class welfare but a tax cut for kids. The consequence of the campaign against middle class welfare has been to trap people on social security where they are an economic burden on others rather than to facilitate lower taxes. Being against middle class welfare means being in favour of means tests. In a tightly targeted system, these often ensure that welfare recipients trying to get ahead face effective marginal tax rates in excess of those faced by highflying businessmen. It’s not surprising that the Labor Party, now as much a welfare party as a working class one, should tolerate such arrangements. The Coalition, by contrast, should not put any structural obstacles in the path of people trying to better themselves. Trying to ensure that at any given level of income and in any household type, people keep a reasonable proportion of any extra income they earn should be the Holy Grail of Coalition policy.
After better schools and hospitals and a fair go for families, the third mega-issue confronting Australia is the dysfunctional federation. Because the Commonwealth has financial authority while the states have legal authority, sorting out health, education, infrastructure and water policy is like participating in a three legged race. The public may not be across the rights and wrongs of particular Commonwealth-state disputes but they sense that this problem is holding our country back and they instinctively look to the national government for leadership. A massive 79 per cent last year told Newspoll that “when there is an important issue that state governments are not solving, the federal government should step in to resolve it”.
Voters don’t really care which level of government solves their problems and, understandably, look for solutions to the senior politician to whom they have access. Because this is the prime minister, the national government is subject to inexorable mission creep. It’s not that politicians in Canberra arrogantly think that they are better than anyone else at running things. It’s democracy, not centralism that keeps adding to Canberra’s responsibilities, thanks to citizens’ understandable instinct that the national government should ultimately be in charge.
The fact that Canberra, unlike the states, usually delivers services through private and community organizations rather than through giant public sector bureaucracies suggests that Canberra-based politicians have less faith than most in the inerrancy of government. I suspect that Labor’s new-found respect for the states owes more to their predilection for delivering services through top-down bureaucracies than any real enthusiasm for the subsidiarity principle.
Of course, one way to address the dysfunctional federation would be for prime ministers to tell voters that there are numerous serious national problems that they can do very little about. Achieving better schools, hospitals, roads etc would be up to the premiers of the particular states or perhaps even a consensus of all the premiers. Another might be for the premiers to refuse Commonwealth funding for the services they are constitutionally supposed to deliver themselves so that state services deteriorate but the Commonwealth’s budget bottom line improves. Another might be for the states to once more impose their own income taxes. These are all interesting speculations but none are serious political options. In practice, addressing health, education, infrastructure or water issues has normally meant that the Commonwealth has had to pay the states to do what they should have done but wouldn’t without a bribe. Like public officials in third world countries, the states have often expected to be paid off just to do their job.
On this issue my position has shifted from philosophical federalist to pragmatic nationalist as experience has trumped intellectual prejudice. The arguments in favour of having three layers of government rather than two seem to have originated in pre-Civil War America. Whatever their theoretical merits might be, conservatives in the United Kingdom or in New Zealand have never found them at all persuasive. Nor did our own constitutional founders seem to think that NSW or Victoria, pre-federation, would have been improved by the introduction of another tier of government. They regarded three levels of government as the price of turning six colonies into one country. Notional bulwark against improbable tyranny, the states may well be but, in Australian practice, they are far more often a handbrake on effective government.
Kevin Rudd talks about ending the “blame game” between the Commonwealth and the states but has no meaningful plan to do so. In Battlelines, I propose a mechanism for actually bringing this about. It’s not to abolish the states or readily to interfere with the way they do things. Rather, it’s to give the national parliament much the same power over the states that it currently has over the territories. This is not often invoked. In my time in the parliament, it has been exercised over euthanasia laws and, I think, threatened over gay marriage and heroin injecting rooms. It meant, though, that an emergency intervention could take place in the Northern Territory that was not possible in Queensland, Western Australia or South Australia even though conditions in remote Aboriginal townships there were not materially different.
If a domestic terrorist incident were to take place in Sydney, it would only be courtesy that would place the prime minister in political charge of the operational response. The various arms of government genuinely try to act in a coordinated response to serious problems notwithstanding different lines of command and legal authority but it doesn’t always work as the intractable nature of water allocations or indigenous disadvantage suggests. Given the tensions that can arise over who has ultimate legal and financial responsibility, establishing a hierarchy of government is surely overdue, if only so that voters have a clearer idea of who to blame when things consistently go wrong.
Apart from proposing a possible agenda for the next Coalition government, Battlelines is an affirmation of the role of conservatism in the Liberal Party’s thinking. This is quite different from urging the party to be more “right-wing”. If the Liberal Party was more philosophically liberal, and less the “broad church” that John Howard always insisted that it should be, it might seek to introduce a voucher system for school funding, extend the coverage of private health insurance and tolerate the dysfunctional federation on the grounds that effective government does more harm than good. The policy positions I am recommending are less radical than that. They would significantly improve the way our society works by means of “conservative incrementalism” or making just enough change to address the problem in question.
The father of modern conservatism, Edmund Burke, declared himself to be in favour of a “manly, moral and well regulated liberty”. In a celebrated passage of his famous polemic Reflections on the Revolution in France, though, he stated: “I would therefore suspend my congratulations on the new liberty of France until I was informed how it had been combined with government, with public force, with the discipline and obedience of armies, with the collection of an effective and well distributed revenue, with morality and religion, with the solidity of property, with civil and social manners. All these, in their way, are good things too and, without them, liberty is not a benefit while it lasts and is not likely to continue long”. Burke supported the America revolution because it sought to establish in the new world the traditional rights and responsibilities of Englishmen. He opposed the French revolution because it sought to overturn established institutions in the name of abstract rights.
Because the growth of freedom under the law has been so central to the political character of English speaking societies, there is far less tension between liberalism and conservatism in our culture than there might be in others. Meaningful freedom requires a structure of law. Individuals are only realised in a social context. Tennyson’s celebration of a land where “freedom broadens slowly down from precedent to precedent” perfectly captures this paradox. Even in a society which highly values personal freedom, the social fabric is important too. The conservative instinct which resists social change also moderates intellectual passions. Far from detracting from the Liberal Party’s electoral appeal, the conservative dimension to its thinking might actually enhance it.
Conservatism is attentive to ideas but it’s not very ideological. It’s an eclectic, pragmatic creed, above all respectful of the values and institutions that have stood the test of time. To a conservative, truth tends to be provisional, wisdom relative, and success ephemeral. A conservative, as John Howard once quipped, doesn’t think he’s morally superior to his grandfather. In this sense, conservatism is the characteristic approach of a genial, easy-going and successful society.
I hope that Battlelines will turn out to be a significant contribution to the Liberal Party’s policy development and political success. It won’t be uncontentious even within the party. There’s a difference, though, between fostering debate and rocking the boat. The challenge is not to take sides within the party but to find new policies which strike a chord with the public. It’s not to win internal fights but to appeal to people who have not previously been attracted to the party, perhaps because they haven’t understood it.
First term oppositions don’t win by taking no risks, becoming “small targets”, and simply criticizing the government. As well, taking policies for granted until a few weeks before polling day tends to confirm voter suspicion that their politicians don’t have any views of their own. It’s good that the Coalition is not falling into this trap! Internal debate should only be a problem for a political party if it ultimately prevents the formation of clear policy. The more widely debated policies have been, the better they’re likely to turn out.
The upside of being in opposition is the license it gives to new thinking. The downside of being in government is the groupthink that seems to have been imposed. The appearance of the great helmsman at today’s Labor conference again bearing gifts was as dull and as choreographed as a speech to the Chinese Communist Party people’s congress. By contrast, the Liberal Party is running the serious risk of becoming interesting.