Opinion & Commentary
Big government Libs
In Parliament last week the Prime Minister railed against critics of his family policies. ‘They have attacked the family benefit system and they have attacked some of our childcare policies,’ he said, ‘but I welcome those attacks because they have been a reminder that the government I lead has governed very much for the great mainstream of Australian families.’
We are among those who have expressed concern about this government’s family policies. We have viewed with alarm the explosion of spending on Family Tax Benefits, the introduction of childcare benefits, and the childcare allowances announced during the 2004 election campaign. We were appalled by the $3,000 per child cash hand-outs showered on parents at the time of the last election, and we are increasingly convinced that the government’s new Family Relationship Centres are a waste of money.
None of this means we oppose government support for families. Far from it. We agree with the Prime Minister that the family is the pivotal institution of any society. It is the place where the young learn how to behave and where adults can take responsibility for themselves and care for others. Strong and independent families are the foundation for a strong and independent civil society. If families start to unravel, society starts to fall apart. It is entirely right, therefore, that government should seek to support and strengthen family life.
But it is precisely because strong and independent families are so important that we have been so concerned about the direction of this government’s family policies. Rather than strengthening families, the government is nationalising them.
This has happened in two ways. Families are losing their financial independence as they become habituated to receiving hand-outs from Canberra. And their autonomy is undermined as government interference and meddling increases.
The erosion of financial independence is a direct result of what the Prime Minister proudly called the ‘burgeoning’ of the Family Tax Benefits system (FTB). Last year Centrelink handed nearly $13 billion in FTB payments to nearly two million Australian families. ‘Part B’ payments are made to all families where one partner stays at home or works a limited number of hours. Even millionaires’ wives can claim them. ‘Part A’ payments are means tested, but the income test is so generous that families on over $100,000 per annum still qualify. Nine out of ten families therefore now receive a fortnightly welfare payment from the government.
There is an argument, which we broadly support, that families with dependent children should be treated more favourably than other households earning equivalent incomes, for they have more mouths to feed. But the best way to do this is to reduce their tax burden. The way the government does it is to tax them as stringently as everybody else but then compensate them with hand-outs from Centrelink. This has two catastrophic consequences.
First, it destroys work incentives. By combining progressive income tax with means tested family payments, the government hits working families with a double whammy, for each extra dollar they earn is taxed at the same time as their family payments are reduced. The Treasurer has tried to reduce this penalty on working by easing the means test, but this has pushed eligibility for family payments even higher up the income ladder so even more families now get dragged into the welfare system.
Secondly, giving all these people fortnightly payments makes families increasingly beholden to the government. It encourages them to look to Canberra rather than providing for themselves. Mr. Howard boasts of his ‘generosity’ to families, but he has been using families’ own tax payments to turn them into claimants. Families would not need so much of his help if only they were allowed to retain more of what they earn.
To restore incentives and strengthen family independence, the FTB system should be scrapped. In its place, we need a higher tax-free earnings threshold, so people can earn at least a subsistence income before they start to pay tax; couples who wish to be taxed jointly should be allowed to do so; and every dependent child should qualify for a tax credit sufficient for their parents to cover their basic needs. We should be freeing families from tax, not locking them into welfare.
We should also reverse the government’s meddling and fiddling in the lives of families. The government should not be favouring mothers who choose to stay at home over those who choose to work, but this is what FTB ‘Part B’ was designed to do. It is also no business of the government whether families choose to use childcare rather than care for their toddlers at home, but childcare benefits and allowances inevitably favour the first choice over the second. The Treasurer is not Santa Claus and should resist the temptation to make one-off lump sum payments to families whenever he feels generous. And what on earth does the government think it is doing setting up a national chain of Family Relationship Centres when the voluntary sector already offers counseling and mediation services to families who want to use them?
The Howard government is spending record sums of taxpayers’ money providing for families who could provide for themselves if only it taxed them less. A pro-family policy does not necessitate a high-spending policy. We might have hoped a ‘liberal’ government would understand this.
Greg Lindsay is Executive Director of The Centre for Independent Studies where Barry Maley is Senior Fellow and Peter Saunders is Social Research Director.
