Tuesday, August 07, 2007

Tuesday Column: Howard may have sealed the Coalition's fate, long term.

I welcome Howard government’s decision to directly fund Tasmania’s Mersey hospital, for what it will bring about. The Coalition should not.

It is true that there are silly things about it.

The idea wasn’t run past the Treasury or it seems the Department of Finance. They can’t have been pleased as they tried to imagine the extent of their future liabilities. First funding to keep open a hospital near Devonport, then perhaps the Queen Elizabeth Hospital in Adelaide, then perhaps…

And as an exercise in allocating resources, it is crazy. The economist John Quiggin says it is like letting the Health Minister personally review hospital waiting lists and push swinging voters up the queue.

But it much more than that. It is an attack on the very odd system of federal-state responsibilities in this country that for more than a decade now has consistently given us a Coalition government at the national level and Labor governments at the state and territory level...

It is no accident that we have divided our loyalties that way. The Commonwealth has come to represent one thing to us, states and territories another.

The Commonwealth government has increasingly come to be seen as having one primary purpose – managing the economy. The truth might be that it can’t manage the economy – that the economy is beyond managing – but that’s not the truth we have heard. We want low inflation, good wages, good profits and low unemployment.
Commonwealth politicians have consistently told us that they can deliver it.

As the Treasurer Peter Costello puts it, “it takes a lot of management. If you get it wrong then people lose their jobs, they lose their houses, they lose their businesses. That’s why we take economic management seriously.”

It is also why Australians don’t believe those Liberal Party commercials suggesting that state governments are responsible for interest rates. The Commonwealth has spent more than a decade telling them that John Howard and Peter Costello have that responsibility.

State governments, once seen as having responsibility for the economies of their states, are now increasingly seen as service providers. They run hospitals, schools, busses, roads and railways.

Those services have become increasingly important to Australians.

Asked last May by the polling company AC Nielsen which was more important – tax cuts or increased spending on services, voters overwhelmingly opted for spending on services - 68 per cent to 29 per cent.

It is a relatively new preference. As recently as the late 1980’s the result was the other way around. Some 70 per cent of us wanted tax cuts, only about 30 per cent wanted extra spending on services.

What changed? My guess is that we got richer, and when people get richer the things that matter to them change. Money isn’t quite as important when you have it. But health - something that money can’t buy - matters more and more. Roads matter too. What’s the point of a high income and a good car if it takes forever to drive it to work on clogged roads? Schools matter as well. We expect good government schools even if we can afford to educate our own children privately. We want to live in a society with a high standard of amenity.

It is the state and territory governments that we expect to provide that amenity. We insist that they do it well. And so for the last decade or so we have elected Labor at the state and territory level.

Why Labor? Because we have formed the view Labor is better than the Coalition at providing services. Labor believes in providing them.

The Coalition’s small government rhetoric of doesn’t work well at the state level. We don’t want small state government services - we want Rolls Royce ones delivered by an administration that thinks they are important.

Federally it is the opposite Because the Commonwealth provides next to no direct services to us (apart from defence, which is a bit remote from many of our lives) we are prepared to elect the side of politics that doesn’t much believe in services.

National government is about the economy, and who better to run it that the team that attacks the wasteful ways of the states?

This split between federal and state responsibilities has allowed us to believe that we can have the best of both worlds: superlative services by electing Labor locally, and tax cuts by electing the Coalition federally.

Of course it’s not true. Services have to be funded. You can’t really both want more of something and want its funding to be cut. But the division of responsibilities has allowed us to think and vote as if it is true.

It has allowed us to avoid grappling with reality.

Imagine how different it would be if the Commonwealth both funded and ran hospitals. Australia’s Health Minister Tony Abbott put up such a proposal a year ago.

Then at each national election we would face a stark and uncomfortable choice. If we voted for lower taxes we would know it would mean less money for health. If we wanted better hospitals we would no longer be able to support lower taxes.

We would no longer live in a fools’ paradise.

It would be the same if the Commonwealth took over complete responsibility for funding and providing schools, or if the states took over that complete responsibility.

By moving further into the provision of services John Howard has pushed those doors further open.

As he says, he began to open them earlier, setting up Commonwealth-funded and run technical colleges to operate alongside state ones. In this year’s budget he introduced a $1.8 billion package for people with disabilities to fill gaps in the services “that the states are supposed to provide”.

His Minister Mal Brough wants to do the same sort of thing with low-income housing.

There’s no telling where it will end, but now that the door has been opened, it is unlikely to be shut.

It is a change I welcome. The Coalition should not.

If services really do become a federal government responsibility (and there is every sign that Kevin Rudd thinks that way as well – he even wants to pump broadband into homes) Australians might switch their default vote at the national level to the party they believe is best at providing services.

They might switch their default vote to Labor.

John Howard might have helped make the Coalition the natural party of Opposition federally as well as locally.