Tuesday, March 18, 2008

Tuesday column: Axe the baby bonus

So the carers’ and seniors’ bonuses are safe.

Despite the fact that when each was introduced the government of the day declared it a “one-off” and set aside no money for it to be ever paid again.

Whatever else this past week's repositioning of the Opposition as the “party of compassion” and the Government’s capitulation has demonstrated, it hasn't included good decision-making.

Which is a pity because it has made good decision making even more important.

Before the guarantee to seniors and carers, Lindsay Tanner’s razor gang needed to cut spending by $4 billion in the upcoming budget. It now needs to cut it by $5.7 billion.

Where should it look?

I would start with the $1 billion baby bonus. Not because it will be easy to cut...

Kevin Rudd said it was safe just last week.

But because cutting it might save lives.

Do you think that’s too strong a charge to make? I think it’s justified, and in any event there are other reasons for abolishing the baby bonus.

One is that it goes to the wives of millionaires who can’t possibly be thought of as needy. James Packer’s wife Erica will get $4,187 if her baby is born before the end of June and more if it is born in or after July when the payment jumps to $5,000.

On The Insiders on Sunday the Finance Minister Lindsay Tanner defended the payment saying it was helping to boost the population.

Barrie Cassidy responded by asking whether $1 billion a year was a steep price to pay for a few extra babies.

Tanner replied: “Look, it's important to keep in mind that extra babies do matter in this regard. And it's relatively early days too. We've only seen it in place for a few years.”

It has actually been four years, and it is possible to form some pretty firm conclusions.

One is that Erica Packer and wives like her are highly likely to provide their husbands with heirs whether or not they get a taxpayer-funded bonus. Labor has already promised to withdraw Family Tax Benefit Part B from families earning more than $250,000 a year. It should do the same with the baby bonus.

Another conclusion is that the bonus doesn’t really seem designed to lift the birth rate. Nearly all of it goes to families who were going to have a baby anyway (just as nearly all of the $3.6 billion annual Private Health Insurance Rebate goes to families who were always going to take out private health insurance anyway).

If the bonus was going to boost the birth rate it would probably be paid only to parents who were having a second or a third child, or it might be graduated as it is in Singapore – the more children you have, the higher the payment for each extra one.

And in any event it is not clear that we should be trying to boost the birth rate. There are cheaper ways to increase the population, if that’s what we want to do. Immigrants are keen to boost our population for free.

It would be good to think that a government that claims to be “evidence-based” as this one does would be able to cite evidence that the baby bonus did any good, and it would be good to think that it paid attention to the growing body of evidence that suggests that it in fact does harm.

Something odd happened when the bonus – initially $3,000 - was introduced on July 1, 2004. That day, a Thursday, was the busiest in Australian labour wards in three decades. A record 1,005 babies were born on July 1, compared to only 500 the day before – which happened to be one of the quietest Wednesdays on record.

It can’t have been because people timed their decisions to become pregnant with the bonus in mind. It was only announced two months before it began to be paid.

But can be because, in the quaint word used by Dr Andrew Leigh of the Australian National University, they took actions that would “overcook” their babies.

Dr Leigh and Professor Joshua Gans of Melbourne University can show that around 1,000 births were moved from June to July in 2004, most of them by delaying inductions and cesareans.

Since they published their raw findings back in 2006 they have obtained more detailed data from hospitals that confirm this is how the births were moved.

For many of the later-born babies, the delay was only slight, but for 300 it amounted to more than a week. For 150 it amounted to more than two weeks.

Are those babies as healthy as they would have been without the baby bonus effect? Leigh and Gans say probably not. They tended to be born heavier. Whereas normally around 11 per cent of babies are born weighing an unhealthy 4 kilos or more, during the first week of July the proportion approached 14 per cent.

Leigh says that’s around an extra 140 babies born unhealthily heavy as a result of Peter Costello’s baby bonus, something the former Treasurer might have liked to consider as he posed for the cameras surrounded by smiling healthy babies to celebrate the success of his scheme.

In fact the former Treasurer had an opportunity to reconsider the scheme in 2006 when Leigh and Gans and medical professionals implored him not to go ahead with the plan to boost the bonus to $4000 on July 1.

The Treasurer was unmoved, and Leigh and Gans say 687 births were shifted, about four per cent of the children who would have otherwise been born in June.

Their concern now is that the bonus is due to increase again - to $5,000 - on July 1 this year.

They are certain we are in for another bout of heavy babies and mayhem in delivery wards as perhaps another 500 women attempt to move births from one month into another.

They are this week writing to the Health Minister Nicola Roxon begging her to change things.

Dr Leigh says there are three ways to do it. Abolish the baby bonus or the planned July increase, increase the bonus immediately, or phase in the increase week by week.

As he told me: “If you want to give out middle class welfare because that's how you feel you are going to win the next election, that’s fine. But please don’t do in a way that endangers babies health”.

A government concerned with evidence would listen.