Opinion & Commentary
PM should think small
Around the English-speaking world, right-of-centre parties have replaced small-government liberalism with big-government conservatism. In the US, George W. Bush has increased spending at a faster rate than any president since Lyndon Johnson in the 1960s. In Britain, Conservative Opposition Leader David Cameron has abandoned Thatcherism in favour of promising extra spending on public services.
With less fanfare, John Howard's Liberal-Nationals Government has adopted a similar strategy. In the core policy areas that Labor has traditionally made its own - social security, health and education - the Howard Government has made an ambitious bid to match and exceed the ALP. The figures are quite striking. Between 1996 and 2005, per-person spending on social security went up 28 per cent in real terms, with even larger increases in health and schools, both of which are approaching 40 per cent rises. John Howard's Labor predecessor, Paul Keating, showed greater fiscal restraint.
Unlike Bush, Howard is running budget surpluses. He could do this because, at least until the 2005 and 2006 budgets, the Liberals were trying to take Labor's "tax the rich" strategy as well.
The share of income tax paid by the top 25 per cent of income earners jumped 3.4 percentage points to 64.2 per cent between 1996 and 2004. Australian Bureau of Statistics analysis shows that household income inequality, after taking into account taxes paid and transfers received, is trending down, and is lower than it was at the end of Keating's tenure in 1996.
Howard has turned the Liberals in a social democratic direction, though not simply into an imitation of Labor. They preside over a distinctively conservative social democracy, with government spending used to foster whatthe Prime Minister calls "modern socialconservatism".
So Howard's welfare state doesn't just tackle low income, as a Labor social democratic government might. Rather, it targets favoured social institutions, especially households with children. As single people do not have high average incomes, this redistribution is regressive in a conventional social democratic sense. Already affluent families receive added benefits denied to poorer singles. Family Tax Benefit B, in particular, is unlikely to have been implemented by Labor. It has no means test and is available only to single-income families.
Howard also differs from left-wing social democrats in seeing able-bodied welfare recipients as owing something to society in exchange for income support, rather than as victims entitled to support without conditions. This is the basis of mutual obligation policies such as Work for the Dole, which adds to spending but involves the unemployed in community projects.
Clearly Howard has, thanks largely to a strong economy and national security issues, enjoyed electoral success. But it is less clear that big-government conservatism provides a viable long-term strategy for right-of-centre parties. In the US, spending hikes have not countered the political consequences of the Iraq War. In Britain, the Conservatives continue to struggle in opinion polls.
In Australia, the Coalition has received little direct political credit for outspending Labor in education, health and welfare. The Australian Election Survey, conducted after each election, asks voters which party's views are closest to their own. This shows Labor's lead in health and education narrowing since 1998, but with the Coalition still behind where it was in 1996. More than three-quarters of Australians believe the gap between rich and poor is widening.
In Newspoll's regular polling of which party would best handle various issues, Labor's lead in October 2006 on health and welfare was larger than when it last held office. An education question was not asked until 1999, but the Coalition is almost consistently below Labor. Even on family issues, Howard's signature theme, the Coalition has dropped from equalling Labor in early 1996 to being behind in all but one poll since 1997. If $27billion a year in family assistance doesn't change people's views on which party handles family issues best, then it is hard to imagine what might.
Modern conservatism, it seems, does not actively discourage or prevent departures from the norm in social and family relationships. So no-fault divorce stays, single-parent benefits are retained, and Howard now proposes removing various forms of discrimination against gay couples, while not permitting gay marriage.
Public perceptions of where the parties stand rely heavily on stereotyped views, which are very difficult to dislodge. The Liberals' failure in state election campaigns, where health and education issues dominate, reflects the party's inability to convince voters that they can out-Labor the Labor Party. The actual spending of their federal colleagues has perhaps neutralised services spending in some voters' minds, but without giving the Liberals issue ownership.
If the Liberals are going to clearly distinguish themselves from Labor in the long term, big-government conservatism is not likely to work. The high taxes needed to finance large spending programs risk undermining the Liberals' historic polling strength in taxation. In the Australian Election Survey, the Liberals still haven't fully recovered from the big GST-caused dip in their lead over Labor on tax issues. Though public opinion as a whole has shifted since the mid-1990s towards favouring more spending on services, Coalition voters still prefer less tax.
It is not clear what has been gained from increased spending on families. Children add to household expenditure, but people with children have higher average incomes even before income redistribution. Though births have recently trended slightly up, most other family indicators such as divorce rates are stable or, from a social-conservative perspective, worse. A smaller proportion of children are born to married parents now than when Howard first came to office. It is not clear that "modern social conservatism" has been very successful in its own policy terms.
Worse, bringing families capable of self-reliance into the social security system through family tax benefits widens Labor's welfare constituency, and gives future governments opportunities for social engineering through adding conditions to family payments. Modern social conservatism may not turn out to be so family-friendly.
The Liberal Party is, as the Prime Minister has often pointed out, a broad church that includes liberals and conservatives. But perhaps it is time for people sitting in the smaller-government pews to be more vocal against big-government conservatism. The Liberals could end up with the worst of both worlds: a general public reluctant to believe that the Coalition is a bigger spender than Labor, and a Liberal base wondering why they bother, as their party adds to the welfare dependence they have traditionally tried to reduce, and increases the taxes they have traditionally sought to cut.
Andrew Norton is a research fellow at the Centre for Independent Studies and a former Howard government adviser on higher education. This article is based on The Rise of Big Government Conservatism in the summer 2006 issue of Policy magazine.
