No, Mr Hockey, the Budget is not fair


Pawn and king chess pieces on different sized piles of coinsMany Australians, myself included, believed that the Federal Budget was unfair. So Treasurer Joe Hockey's recent speech in defence of its fairness offers a welcome challenge. His argument deserves reflection,

It rests on his understanding of the role of government in society, and so in shaping the budget. In his view the tasks of government are to provide equality of opportunity, to provide a safety net to the most vulnerable, and to encourage individuals to take personal responsibility for their own lives and welfare. These tasks are increasingly compromised today by unsustainably growing costs of education, health and particularly welfare. So the Government needed to address this in the Budget by establishing a framework for cutting costs.

In Hockey's judgment the fairness of the Budget is not to be judged by whether people benefit equally from its provisions but by whether it safeguards equality of opportunity and promotes individual responsibility for all. Those who criticise it for unfairness demand equality of outcome. But this result would itself be unfair. It would entail some people being forced to pay taxes in order that others might retain benefits they do not need.

The Budget provisions most criticised for unfairness, such as changes to youth allowances, co-payment for medical expenses and higher costs for education were fair because all were designed to promote and enshrine individual responsibility.

Although I agree with Hockey's view that the way in which the Government gathers and spends revenue must be reviewed, I am not persuaded by Hockey's argument that the Budget is fair. It rests on too thin a view of the role of government in society.

Governments have a broader responsibility to order society in such a way that the human dignity of each person is respected and the economy serves the good of all. This flows from the mutual dependence of people in society and their consequent responsibility to one another. Taxation and the regulation of institutions that conduce to human flourishing are expressions of government responsibility.

From this perspective the tasks that Hockey ascribes to government are not a complete list. They simply name some aspects of the Government's oversight. A more complete list would include the responsibility to ensure that people enjoy the freedom to develop their life and projects, have access to food, shelter, medical care, education and to work, and are encouraged to take responsibility for their lives.

Because the Government has a responsibility to all its citizens to ensure these things, it has a special responsibility to the vulnerable who cannot secure them unaided. It must also encourage the fraternity that leads all citizens, including the wealthy and corporations, to contribute to the needs of the disadvantaged.

In this view of government the fairness of the Budget must be measured by whether it effectively promotes the flourishing of all citizens in society. Such measures as co-payment for visits to the doctor and the restrictions on benefits for young people are unfair because, despite their goal of promoting personal responsibility, they disrespect and do not promote human dignity. They show no understanding of the condition of the disadvantaged and so will be counterproductive.

Those living in financial stringency will not visit doctors if they have to pay, with the result that their health will suffer. Unemployed young people will have obligations imposed on them, will be deprived of the financial resources needed to meet them, will lose their precarious self-respect and will be less able to exercise personal responsibility for their lives. So the Budget is unfair in its details.

The Budget also raises broader questions of fairness. Hockey claims rightly that fairness does not demand equality of financial outcome. But it does demand that burdens are proportionately borne. To ensure that they are, the Government must consider together the benefits available through welfare and those available through other provisions, and adjust them equitably.

It is evident that the burden of this Budget will fall most heavily on less well-off Australians. It is also clear that those who framed the Budget chose not to touch benefits available disproportionately to wealthier Australians through such things as superannuation, negative gearing, paid maternity leave and the absence of death duties. The failure to do so suggests that the Budget is unfair in its design.

Finally, the Treasurer's speech raises more general questions. Hockey is right to insist that fairness can co-exist with gradations of wealth within society. But fairness is incompatible with gross disparity of wealth because the concentration of wealth in the hands of few people and corporations destroys equality of opportunity.

When individuals, banks and businesses are too big to fail, too well resourced to take to the courts, have too many media resources to resist, and form the natural group in which government leaders socialise and choose advisers, they have a privileged access to power denied to others. Governments will have a natural bias to favour their interests without even recognising that they are doing so. Budgets and the regulatory framework will then generate and promote unfairness.

Aspects of the Budget do suggest this generative unfairness. The loss of funding, combining, weakening and suppression of many regulatory and monitoring bodies will limit individuals' access to information and to remedies. They will naturally further the concentration of wealth and power and diminish equality of opportunity.

I am not persuaded by the Treasurer's arguments that the Budget is fair. I believe that it is unfair in some of its details and in its design. I am also concerned that it may be generatively unfair in encouraging further gross inequality and so undermining the equality of opportunity on which Hockey has built his defence.

Andrew HamiltonAndrew Hamilton is consulting editor of Eureka Street.

Pawn and king image from Shutterstock

Topic tags: Andrew Hamilton, Joe Hockey, Budget 2014



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Existing comments

I think, at heart, both the PM and Treasurer, along with a majority of the Coalition, believe in an economic system more reminiscent of the Bad Old Days of the 18th and 19th Centuries. A Canadian friend, who has lived in the USA, told me he thought, if this Budget is implemented, it will lead to the sort of massive social dislocation and crime which blight America and which progressive politicians there are trying to counter. Satyajit Das, one of the persistently most insightful commentators on the Australian and World Economies, keeps repeating that merely arguing about Economics is wrong, we need to have a general, inclusive, national debate about the sort of society we want. I fear the Government would not want that as it might expose their complete lack of any vision of a cohesive, mutually supportive Australian society. Regarding Abbott & Co I am reminded of what the Duke of Wellington said about his troops: " I don't know what effect these men will have on the enemy, but by God, they terrify me".
Edward Fido | 19 June 2014

St Paul proclaimed. ".there are no more distinctions between Jew and Greek, slave and free, male and female...... We seem to have retained some of these distinctions, and added some new ones, like wealthy and poor; young and old, powerful and vulnerable. There used to be a saying "Noblesse oblige". This seems to be replaced in the Government with "Money rules."
Robert Liddy | 19 June 2014

The budget is unfair, but also it is short sighted and poor economics. When conservatively valued, ecosystem services have an annual contribution greater than global GDP, how may responsible government separate the environment from economic prosperity? Consideration of natural capital and Australia's natural advantage must enter the national dialogue. What economic rationalism or capitalist model allows intentional degradation of assets, denial of risk and profit won on future loss? Do the alternate political parties comprehend the inevitability of their responsibility to meet the economic cost of restoration of value? The burden will fall on those, intentionally or inadvertently, acquiescing today's fiscal vandalism. You all shall be noted in Hansard and be perpetually accountable.
Milton | 19 June 2014

Thank you, Andrew, for your extremely well argued article. The growing inequality in Australia troubles me immensely and this budget will only lead to more people struggling to obtain the basic rights of a place to live, a place to work and a place to learn. These are despairing times for all Australians committed to the ways of compassion and justice.
robert van zetten | 19 June 2014

Neither this government nor, sadly, the current opposition, have any idea at all of what sort of society and economy we will have in 10 or 20 years' time; no idea of the sorts of industries that will be producing the nation's wealth, nor of the sorts of skills that our people will need to have, nor of the place we will have in the world around us. All they have is a blind faith that a commitment to free-markets and global capitalism, will result in the best of all possible alternatives.
Ginger Meggs | 19 June 2014

A lot of the unfairness of this budget will take some time to be felt, eg. the concessions to seniors that state governments will cut because they were federally funded. The cuts to legal aid - even now difficult to get - will particularly affect Aboriginal people. But also the basic premise about 'unsustainable' spending is questionable. People need more information than the mass media provide. Thanks God for the internet - you can go to the website of the Medical Journal of Australia and among the latest articles is one called 'Can we sustain health spending?' by Jeffrey Richardson. Well worth reading.
Russell | 19 June 2014

Andrew Hamilton is too kind to Abbott and Hockey. If they were blind to the budget's unfairness when it was presented, surely they aren't now that they have heard stories from those who will be affected. They have deliberately chosen to target only the non-wealthy but have they considered the societal consequences of having a more unequal and divided society? They must be aware of the anxiety felt by many people about this blatantly unfair budget? Have they considered likely consequences such as mental health problems, possibly suicides and increases in crime? This punitive budget does not offer equality of opportunity. The starting point that Hockey promises for all is a neo-lib illusion.
Zia | 19 June 2014

"When individuals, banks and businesses are too big to fail..." &c: This para of Fr H seems correct - even to me, an advocate of minimal government. But the attempted link with gross wealth disparity fails, I suggest. If a government is truly free market, there are no banks or businesses (eg, the car industry) that it views as "too big to fail". If the government ran the justice system efficiently , anyone would be able to obtain justice regardless of their wealth. (Private police and justice systems are much more efficient than government monopoly systems). And the remark about advisers being in cahoots with the government applies not just to rich people, but to all manner of individuals and groups whose interests the government shares. Unionists, academics of the same persuasion, lobbyists for all manner of sectional interests line up to twist the law and budget in their favour, with considerable success. As minimal government advocates have been saying for decades - if it's a problem of power corrupting, why not just dramatically reduce the size and scope of the state? For so many of these ills, government itself is the problem, not the solution.
HH | 19 June 2014

Burdens shared ... now that's where the rubber Really hits the road in the realm of fairness - thank you Andrew for pointing this out. The old Aussie maxim of "I'm alright Jack!" is still very much at play. I saw this attitude emerging from Australian institutions (and some individuals in power) about 15 years ago when I became a single parent of 3 teenage children. This economic & social apartheid (I stayed for a while in South Africa) is nothing short of radicalising inhumanity ... it's a time for Australians to resist it loudly and forthrightly. Otherwise we are all colluding with this ever increasing inhumanisation of the 'other'. How could these politicians, who were given privileged access to good and ethical education do this to us? How did it come to this?
mary tehan | 19 June 2014

I fear we, together with other Western nations held entranced by the "marketplace" god, are taking on more and more pre-fascist tendencies, both in government and individual attitudes. The land of the fair go, egalitarianism, helping mates and those in greater need appears to be dying. Particularly of concern in Australia now is this hardening of attitudes towards those less fortunate, and a "me-first-at-all-costs" mentality, as well as the willingness - even eagerness - to punish and persecute people seen as "other" than "us". For the last 25 years, we have seen positive encouragement of voters in Australia by certain political parties to identify people we love to hate and scapegoat them. (And of course now it's a basic Australian human right to be a bigot!) So added to the obvious current favourite cultivated hates - asylum seekers/boat people - we are also witnessing the start of new campaigns against the good old favourites such as the unemployed, welfare 'cheats', single parents, people 'faking' disabilities, unionists, and (serendipitously) recently rioting university students. We are ruled - and manipulated - today by propaganda, not information. Goebbels would indeed be proud!
Paul | 19 June 2014

HH you keep saying that "government itself is the problem" without apparently understanding why people demanded that it grew. It's because we've come from a time of small government and that didn't protect us sufficiently from misfortune. So our grandparents demanded unemployment benefits and pensions, they demanded state provided education for children, and outlawed child labour, and so on. This isn't hard to understand: in countries where people demanded these state provided protections you find longevity and a dignified life, not just for the fortunate, but also for the unfortunate - for the great majority of the community. When my grandmother's father died, when she was a child, she and her brothers went to orphanages - she was trained to be a servant, to cook and to sew. Bigger government means we no longer live with the terrifying insecurity that if something goes wrong our lives will fall apart. Christians should applaud the progress we've made.
Russell | 19 June 2014

Oliver Wendel Holmes said that the greatest injustice is the equal treatment of unequal people. This budget enacts that to perfection. last week the Pope strongly ctiricized governments who put economics ahead of people and of society. Lessening the lives of the poor, the hungry, the unemployed and the aged. Meanwhile money for "defence" goes unquestioned. the Pope suggests that as world war 3 is out of the question so the world military industrial complex manages to have small wars. Obviously Abbott Hockey and other catholics in the cabinet have a different view of doing what they say and doing what the Pope says.
Michael D. Breen | 19 June 2014

Russell, child labour has been the established norm for all pre-capitalist societies in history, and indeed much of the world today. It started to disappear, for the first time in history, in industrialized capitalist economies completely independent of any child labour laws that were enacted (eg England). If a state enacts effective child labour laws, poor families become even poorer unless the child finds alternative illegal employment (such as prostitution). Also, in line with what Fr H rightly fears but wrongfully (IMO) ascribes to inequality, child labour laws in England were a perfect instance of the state being manipulated by vested interest groups. It was the landed gentry (represented by the Tories), resentful of the newly-monied middle class factory owners, who lobbied for the legislation. It was targeted at the new factory centres and not at child labour on their own estates. Shaftesbury, when asked why he only opposed child labour in factories, replied that if he had lobbied against child labour everywhere, his campaign would have failed. As for the other wonderful achievements you've attributed to the state ... they've can and have been done without the state, and more effectively. E.g, African Americans were forbidden (by law) to be educated in many parts of the U.S. in the 19th century. Yet their literacy rate then has been estimated at an astounding 90% - far higher than it now is when education is compulsory and subsidized.
HH | 20 June 2014

Well spoken Andrew. Unspoken in much of the discussion around the budget is the philosophy which underpins it. You have nailed it, more importantly your comments place the budget within a context the aim of which is to fundamentally change the nature of Australian society, elevating individualism above the established communitarian nature of Australian culture.
Matt Casey | 20 June 2014

HH - Economic growth, and the state arranged re-distribution of wealth, and opportunity has given us the huge improvement in the standard of living for ordinary people. There was no shortage of wealth and its benefits, for the fortunate, when WW 1 broke out, and the fortunate suddenly discovered that all those men from the lower classes needed for canon fodder were terribly malnourished, diseased and had not a terribly long life expectancy. They just hadn't noticed before. State interventions have corrected many of these things. But since you claim that "As for the other wonderful achievements you've attributed to the state ... they've can and have been done without the state" please point out to us those 'stateless' countries where, for example an old, poor person on their own will be looked after, a child with cancer, from a poor background will receive the world's best treatment, and the disabled are helped to fulfill their potential?
Russell | 20 June 2014

What a great image! It looks about right to me. Put an additional 12 dollar coins under the pawn and check the imbalance.
Reg | 20 June 2014

Russell, in answer to your question, before the advent of the big and increasingly unsustainable welfare state there was an efficient, sustainable and burgeoning private welfare system for the poorer in society. There were hundreds of charitable associations of course, run by churches (for example). But perhaps of greater importance were mutual aid societies, friendly societies, lodges and so on. As David Green (Mutual Aid The Evolution of Friendly Societies in Britain) writes, "By the early years of this century the friendly societies had a long record of functioning as social and benevolent clubs as well as offering benefits: such as sick pay when the breadwinner was unable to bring home a wage due to illness, accident or old age; medical care for both the member and his family; a death grant sufficient to provide a decent funeral; and financial and practical support for widows and orphans of deceased members. Medical services were usually provided by the lodge or branch doctor who was appointed by a vote of the members, but most large towns also had a medical institute, offering the services now provided by health centres. The societies also provided a network of support to enable members to travel in search of work." These societies covered a very large and ever expanding section of the working classes. By 1911 (the year of the National Insurance Act), 9 million out of 12 million workers were members of a mutual aid society. The picture in the U.S. is equally impressive, with a variegated array of friendly or mutual help societies looking after the full gamut of social services for their members. For the U.S., see D. Beito, "From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967" The notion that without the welfare state people - especially poor people - can't help each other materially and haven't done so in sophisticated and efficient ways is as non-historical as it is insulting to the poor.
HH | 20 June 2014

HH conflates two very different approaches to the alleviation of distress among the poor. The first is the charity, funded voluntarily by some, but by no means all, of the rich, and offered selectively as a grace and favour, not as a right, and usually encumbered by or conditional upon a certain amount of deference and grovelling on the part of the recipient. In other words, it helped to keep them in their place and, not surprisingly, was anathema to many of the poor. The second is the mutual self-help society, organised and funded by the poor themselves, which provided some mutual insurance but which could never cover the cost of the standard of health care and education that the rich themselves could afford. They were encouraged by the rich because they cost them nothing, but only so far as they did not seek to solve the cause of poverty through collective bargaining with the employers. At that point they were stomped on heavily by the wealthy. Old and new money may have had their differences, but they quickly came together when it came to keeping the poor poor. Nobody on this blog has suggested that the poor have no agency, the point of the article is that the poor have limited means but are entitled to equal opportunity that should be funded by the rich, and that because the recent budget fails to do this properly it is therefore 'unfair'.
Ginger Meggs | 21 June 2014

HH - you were asked to support your statement that minimalist state systems could provide welfare to the standards that we enjoy in Australia, and you haven't. I also gave the example of my own grandmother, whose family was shattered by poverty because her father died. In her orphanage she was prepared 'for service' - don't you think that was a little limiting? Her elder sister, about 10 years old, remained with her mother and the two of them spent their days doing 'piece work' - making ladies hats. This is very recent history and what a smaller state sector provides for unfortunate people. I know about the self-help societies you mention - my grandfather belonged to one, the Rechabites. How useful were they during the Depression, when so many were out of work and needed help? If all had been well, as you seem to think, people wouldn't have worked for a proper state-provided welfare system.
Russell | 21 June 2014

Russell, in 2004 a colleague of mine in his early seventies (so a long time taxpayer) was denied as a matter of regulation a cheap, simple cancer operation on the NHS in Britain, on account of his age. The cancer would have killed him in a year or two. He paid for a private operation. Today, ten years later, he is in great health and flourishing. His story is legion. So much for quality care of cancer sufferers in the welfare state. (Bizarrely, my own aged father was similarly refused here, but the very same surgeon who refused him as a standard public patient, agreed to perform the cancer operation anyway…and this renegade insisted on not charging a fee!) I provided the evidence you requested that, independent of the welfare state, sophisticated private systems can evolve to assist the sick, the widowed, the unemployed, etc. Did I imply somewhere that a non government welfare system would supply welfare to current Australian standards? If so, it was an unfortunate slip of the pen. Let me correct the miscommunication. I believe a non government system of welfare, all other things being equal, has been and will be vastly SUPERIOR to our current decrepit statist system:- a system which in fact perpetuates poverty, dependency and low self­esteem, as is most obvious when it is unleashed unambiguously, as it has been in the aboriginal remote community hell ­holes; a system which has crushed more efficient, imaginative and flourishing voluntary solutions to welfare situations worldwide such as the mutual society networks and straight out charitable works; and a system which is - if the budget forward projections are right - unsustainable beyond the next few decades. Yet why should we be surprised by its manifest incompetence? It’s designed by politicians conscripting other peoples’ hard earned wealth with an eye for the popular vote, and administered by faceless bureaucrats for whom it’s just another 9 to 5 shift at the desk with no incentive, material or spiritual, to weed out blatant rent­seekers like (and, more often, unlike) our miraculously healed long term “disability pension” compatriot Khaled Sharrouf, an ISIS murderer.
HH | 23 June 2014

HH once again conflates two issues, viz the source of funding for a 'fair' system, and the means of delivery. Nobody on this page has suggested that there is no place for the cooperative sector in the management and delivery of services to communities, nor that there will always be a need to ration the delivery of services. What we are saying is that the poor are entitled to a fair share of the resources of the community and that can only be brought about by the ability of the state to redistribute resources from the rich to the poor. This budget fails to do that, therefore it is unfair.
Ginger Meggs | 23 June 2014

HH's assertion that the state's social services are delivered by 'faceless bureaucrats for whom it’s just another 9 to 5 shift at the desk with no incentive, material or spiritual, to weed out blatant rent­seekers' is fanciful and insulting to the vast majority of those who work for us in the public service. And sure, there will be 'rent-seekers' among the poor, but they are minnows compared with the sharks among the rich.
Ginger Meggs | 23 June 2014

Judas sold Jesus for 30 silver shekels, the price slaves were bought for. Where profit, gain, power and money are given priority over assisting the practical and emotional needs of single parents, their children, the elderly, the disable, the homeless, and refugees seeking asylum. Jesus is again being sold as a slave.
Plato | 24 June 2014

The Federal Buget, Slavery or another 'form' of Human Trafficking? Article 3, paragraph (a) of the Protocol to Prevent, Suppress and Punish Trafficking in Persons defines Trafficking in Persons as the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation.
Name | 24 June 2014

“If all had been well, as you seem to think, people wouldn't have worked for a proper state-provided welfare system.” Russell, as you’ve said so wisely recently: "Follow the money." The reason mutual societies declined was not because they were ineffective welfare agencies: it was because they were so effective they made enemies. The American Medical Association resented the fact that lodge doctors charged cheaper rates than its own doctors, acting as a brake on their own wages. So it conducted a war against them in various ways, including state-enforced licensing restrictions. Moreover, for related reasons, the outstanding lodge hospitals such as the Taborite hospital for blacks in the Mississippi delta (built during the Great Depression) were the target of harassment on petty grounds by local state inspectors (See Beito, op. cit.) In England, the medical establishment readily supported the 1913 National Insurance Act, the beginning of the welfare state. Why? Because it enabled the doctors to substitute a monopsony controlled by the doctors and their political allies for the competitive market created by multiple friendly societies of working people. The result of substituting involuntary taxes for voluntary dues as a source of payment was that doctors’ pay increases were easier to obtain than in the market. (See David Green, “Working Class Patients and the Medical Establishment”). The welfare state was indeed “worked for” as you say … by a host of rent seekers who did very well out of its establishment, and continue to do so. But to describe a welfare state which refuses old people simple operations which add many productive and enjoyable years to their life, mires people in poverty and dependency, and is staring down the barrel at insolvency within a few decades, as “proper”, is surely up for discussion.
HH | 24 June 2014

HH - No, no, no, as Mrs Thatcher said. I already pointed out that groups in Australia, like the Rechabites, while useful for meeting a member's medical bills or suchlike, were useless when a very large number of their members were put out of work. That takes government welfare, if people are to be looked after. You are simply denying history if you think that charities and mutual aid societies ever were adequate. I know it from my own family history, other people's family history and the many social histories and biographies that are just waiting for you to read them.
Russell | 25 June 2014

Russell, I must be having an effect: now you’re invoking Margaret Thatcher! Seriously though, are you saying that because mutual societies were stumped by the (government-created) Great Depression, the welfare state is the only possible way we can run things? Let’s see: in the pointy bits of the Great Depression, U.S. style, you had about 25% of the population at a subsistence level, and unemployment was also around the 25% mark. Forget about private social security: how long could a modern welfare state last in that condition? Well, look at the pin-up modern welfare state: Sweden. Sweden had the distinct advantage of being neutral in WWII, (though it made a mint out of selling iron ore to Krupp, the Nazis’ steel makers) and having, been a free market economy since the late 19th century was in the circumstances post WWII, fabulously wealthy, compared to other economies. It also had a “Protestant” work ethic (I dispute the term, but it will do here) and so an aversion to welfare. This was happily reflected even in the attitudes of its trades union leaders. So, in terms of initial conditions, light years away from U.S. Depression circumstances. Nevertheless, Sweden gradually implemented the “model” welfare state, which was toasted the world over in the 70’s as the miraculous “third way” between capitalism and socialism. In full throttle, it lasted about a decade. It’s now hopelessly shattered. No one now seriously points to the Sweden of the ’70’s as a model to be emulated. History shows that the glitzy modern welfare state fantasized by the left is at its best a temporary phenomenon parasitic upon contemporary - or succeeding - cohorts. Sustainable, imaginative, voluntary mutual societies such as those created by (eg) poor black Americans simply wipe the floor in comparison, created by (eg) poor black Americans simply wipe the floor in comparison.
HH | 26 June 2014

"are you saying that because mutual societies were stumped by the (government-created) Great Depression, the welfare state is the only possible way we can run things?" I'm pointing out what actually hasn't worked and what actually has worked, to provide everyone in a society with a decent, dignified life. There is one sense in which I can share your enthusiasm for cooperatives - we could learn a lot from Mondragon.
Russell | 28 June 2014


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