During a National Press Club address in Canberra today, the Prime Minister Julia Gillard is expected to announce spending cuts and a temporary levy on taxpayers to help fund the foods rebuild.
It is being reported that early Treasury estimates show the Commonwealth will have to outlay well over $5 billion, and that does not factor in the expected hit to Government revenues.
Earlier this week a Croakey contributor suggested asking members of the Crikey Health and Medical Panel (CHAMP): Where could we make savings in Commonwealth health spending to help avoid the need for a flood levy on all Australians?
Some CHAMPS didn’t like the question at all. A common response was along the lines: What’s wrong with a flood levy?
And it’s true that the question doesn’t acknowledge that some areas in health – such as primary health care and mental health – will be under increased pressure in the floods aftermath, and needing more, not less, support.
But levy or not, it’s likely that the health portfolio – being such a big spender – will be under pressure to make cuts.
Here are some of the CHAMP’s sugestions:
Public health advocate Telphia Joseph
Wouldn’t it be fantastic if there was a mechanism for public servants to nominate to stay in 3 star accommodation for a time period – anywhere between 3 months to a year and the difference between your ‘accommodation allowance’ can be forward to a relevant cost code?
Ian McAuley, lecturer public sector finance at the University of Canberra, and Fellow of the Centre for Policy Development
The 30 percent rebate on private insurance would be a good start. Savings up to $3.6 billion a year, possibly a little less if some drop their PHI as a result.
Patrick Bolton, NSW health services manager
1. John Maynard Keynes arguably gained credibility when Rudd used his inflationary policies to ward off the GFC. I was therefore interested that the current government has promised to retain its proposed surplus: I would have expected that it is appropriate for government to insure citizens against catastrophe in some circumstances, and if the floods are such a circumstance a deficit may be necessary. It was Keynes who said: “When the facts change, I change my mind. What do you do, sir?”. Fear of politics may again be threatening good policy.
2. Health expenditure in Aus is approaching 10% of GDP. The law of diminishing marginal returns suggests that greatest benefit will be derived from investing in areas of current under-investment, rather than spending more in an area like health which is already well-funded area. The floods may be one area of under-investment. Climate change seems to me to be another which is likely to be related to the floods. I am not sure that we as a species can afford to take the risk that global warming is not due to human agency. Even were it a “natural phenomenon” we might think about how we can manage it. Global warming is likely to have a huge impact on health, and so be another area where prevention is preferable to cure.
3. The obvious saving in healthcare, about which I expect we will hear increasingly, is stopping unnecessary services. My recollection is US evidence is that these account for around 1/3 of health services in that country. Of course even were we able to stop provision of unnecessary services we would not save 1/3 of the health budget because of the law of diminishing marginal returns!
Robert Wells, Director Menzies Centre for Health Policy, Director Australian Primary Health Care Research Institute, ANU College of Medicine, Biology and the Environment
One place to start looking for potential savings would be the hospital component of the April 2010 COAG meeting where the Commonwealth promised significant additional and growth funding through to 2020.
At the very least, the phasing of these payments could be reviewed especially given that one state (WA) has not signed the agreement, another (Victoria) is reviewing its commitment and a third (NSW) will review the commitment should the government change in March 2011. A second reason for reviewing some components of this is that they are targeted at areas of waiting time reduction (elective surgery and emergency) which experience has shown time and time again have little real benefit.
These initiatives included $400m for hospital capital upgrades. If those funds could be redirected to repairing or rebuilding hospitals affected by the floods, that alone would be a substantial contribution to the rebuilding effort from funds already in the Forward Estimates.
Psychiatrist Professor Alan Rosen, Brain & Mind Research Institute, University of Sydney, and School of Public Health, University of Wollongong.
This question appears to be the wrong way around. No doubt it was meant to be provocative. Surely we should be asking: How can we have an equitable national flood levy to avoid cuts in essential services and especially essential health spending? How about a 1-2% tax on all salary packages over 1 million dollars (as was passed by plebiscite in California Proposition 63 in 2004), including all bonuses at the big end of town? Or increasing existing levies on profit margins or the cost of the unhealthy products of industries widely perceived as”dodgy”, such as those concerned with alcohol, cigarettes, and gambling? What about a levy on all home insurance companies with dodgy definitions of flooding?
The even better question may be: What can we do to stop the state and national impact of these floods being used as an excuse to decrease public mental health service spending, just when demand for them is likely to grow exponentially and plateau at a new peak, because of the irretrievable losses, long-lasting “slow-burn disaster” and wearing-down effects of these events?
Maybe the answer is a Proposition 63 recurrent tax levy on high incomes which goes directly to child, youth, adult and elderly mental health services, which cannot be diverted for other purposes, as the good people of California voted in and imposed on themselves, for the greater good of all?
Rod MacQueen, an addiction medicine physician from rural NSW
BUT what about saving money from some of the Commonwealth funded activities that, so far as I can see, produce little or no nation building or welfare promoting output?
Others would know where the most money is squandered, but I would think of Defence, and helicopters that do not fly and planes that may never be built (and vehicles that are too heavy, and body armour that does not work etc etc….).
Or all the snooping agencies with their many acronyms, which have all gained massive funding increases in the past few years.
Or the private health insurance rebate and its evil twin, the private school subsidies?
I am sure there are many more.
No doubt there are cost savings to be made in health, but we are starting from a lowish base (and mental health, and dare I say drug and alcohol, could easily do with double the current budget). Dismantling reduplicated bureaucracies would be a start, but seems beyond our politicians’ skill despite the rhetoric.
Carole Taylor, CRANAplus
Why health? There are other areas that have less of a social impact.
Health economist Gavin Mooney
My feeling is that the thinking behind this question is exactly the opposite of what we need as a nation at the moment (as I tried to express on Crikey last week).
It is not just a flood levy we need but a compassion levy to deal with the flood of disadvantage that we face as a society – the disadvantage of the poor, of Aboriginal people, of people with mental illness – we all have our own “favourites” I suppose.
We are a stinking rich – but unequal and uncaring – nation. Time to rethink our social philosophy. And not just for disadvantaged Aussies but for disadvantaged people across the globe.
Associate Prof Gawaine Powell Davies, CEO, UNSW Research Centre for Primary Health Care and Equity
Not sure I like the assumption: that health spending should be cut, and that a flood levy is not a good idea. There are good arguments for funding government activity out of general revenue and avoiding hypothecated taxes. However in this case a levy (which should be proportional to income or wealth – perhaps a very small but identified income tax surcharge) may give the community a sense of making a personal contribution, and so increasing social capital.
Public health expert Dr Peter Sainsbury
Great idea. While we’re at it let’s also have a look for savings in Aboriginal affairs spending, social security spending, environmental protection and climate change spending, child care spending, public education spending.
I’m not saying that money isn’t being spent with less than 100% efficiency and effectiveness in health or any of these other areas, or that the public purse may not need to be nipped and tucked to cope with the floods, but decisions should be made on rational grounds, with evidence about cost-effectiveness, and should cover all government programs. My CHAMP colleague’s proposal has a whiff of robbing one needy group to help another that happens to be on the front pages at the moment.
What’s so wrong with a flood levy? Share the load across all Australians. But don’t limit it to individuals and ‘income tax’, include businesses and corporate taxes.
Yes, tackle the waste, says ACOSS
This is an extract from a statement issued this week by the Australian Council of Social Service:
ACOSS supports the proposal to introduce a Flood Levy. However it must be introduced fairly, and applied only to those who can afford to pay. It should also not be open ended – that is, the nation must know that the levy is directly related to helping those devastated by the floods, and no more. The Federal Opposition should not be tempted to play politics with this important issue with alarmist rhetoric about the budget bottom line.
ACOSS also supports tackling the waste that remains in our national budget.
When the Labor Government made its commitment in May last year to return the federal budget to surplus by 2012-2013, ACOSS supported this approach. ACOSS has long highlighted the waste that exists in our national accounts: tax loop holes, unfair tax concessions, poorly targeted subsidies, and the like. Just a few weeks ago, we met with the Treasurer to make our case for tackling this waste so that the government could invest in important national infrastructure – both the physical and social infrastructure needed to set a strong future direction for our nation: investing for adequate, more secure retirements, creating a more equitable personal income tax system, and improving the affordability of housing.
We recognised that reducing this waste would not always be popular, particularly with some powerful interests in town, but we argued that the broader Australian public would strongly back greater fairness and equity in who pays for what, and how. Our view was supported by a recent survey by one of our members which found that 84 per cent of Australians want the Tax Summit later this year to crackdown on tax loopholes that overwhelmingly benefit wealthier individuals.
We strongly oppose any suggestion that cuts should be made to important services to fund responses to the floods – many of these services have been so vital to our flood response and are now in greater demand. We also oppose a line by line slash and burn approach to our national budget which is not driven by the longer term objective of building a fairer and more equitable society. For example, should we fund the response to the floods by slashing funding to services? No. Should the recovery be funded by starting to tackle some of the tax breaks for higher income earners? Absolutely.
Update, Jan 28
Professor Helen Keleher, president of the Public Health Association of Australia and Head, Department of Health Social Science, Joint Chair in Health Equity, Inner South Community Health Service, Monash University
Is the topic right? Or should we be questioning the policies of local and state governments that allows people to build their homes on flood-plains and swamps?
The land is undoubtedly cheaper than anywhere else in those towns and is therefore, likely to have attracted people on low-incomes. They are then, in a double-jeopardy – a flood through their homes and not much by way of means to recover. And it’s a triple-jeopardy if their insurance is insufficient or non-existent.
There is a story here about the vulnerability of low-income people to inappropriate development and government policy that allows such development. Many of those people will remain in financial jeopardy for a long time to come so inequalities increase.
As an tax-payer who will pay the levy, I would like to see reassurances from the federal and state governments that they will strengthen planning procedures and policies to ensure that the exposure of people to such disasters is minimised in the future and their lives are not compromised by stupid planning decisions.