Kevin Rudd's failure to consult mining industry on tax baffling

KEVIN Rudd's reputation as a policy wonk is in tatters after his failure to consult the mining industry on the super-profits tax. 

BEFORE addressing the merits or otherwise of the government relying on a draft piece of US research by a PhD student and his supervisor to prove mining companies pay a low effective rate of tax, let's address how the opposition chose to deal with the situation. It variously described the research as a shonky piece of work, a graduate paper, not worth the paper it was written on.

And Liberals wonder why the university sector thinks that they are unsupportive.

The research isn't shonky and it doesn't deserve to be discredited in such a way. But it isn't worthy of being held up as proof positive of anything by a government in another country either. As the supervisor -- who also put his name to the publication (not uncommon in academia) -- has said, it is a working paper only, preliminary and yet to be sent off to peer review before hopefully being published in a scholarly journal.

A government, with all the attendant resources of the state, should have been able to do better than rely on such a piece of work. An opposition shouldn't resort to the politics of smear against an innocent third party to try to discredit the government's argument.

Yesterday the Coalition got its act together. It was reported that its analysis of ATO data showed that the effective tax rate on mining companies was about 27 per cent of company tax, instead of the US paper's suggested rate of just 13 per cent. The debate will no doubt continue.

Given that the government is so enamoured with the US academic research on effective tax rates, I can only assume it is equally enamoured with all the academic research available (peer reviewed, no less) which condemns its approach to asylum-seekers, its failure to consider lifting the GST rate, its unwillingness to look at changes to how the family home is taxed, and its timid efforts to lift superannuation rates when an ageing population needs swift action (at least it is doing something on this last point, mind you -- the opposition proposes no increase to the compulsory 9 per cent rate).

On each if these scores, Australian academics have produced quality research. And that's only the beginning of it. One of the great things about the academy is the battle of ideas. But let's stick to research which relates to the mining tax issue of the day, or more accurately the government's failure to consult before announcing it. If the government wants to quote academic research it should look at the seminal text on public policy making, written by a pair of academics the PM knows well.

The two authors of the nation's leading textbook for students of policy, The Australian Policy Handbook, are Glyn Davies and Peter Bridgman, former colleagues of Kevin Rudd in the Queensland public service. First published in 1998, the book is now in its fourth edition. Bridgman and Davis were public servant colleagues of Rudd. Davis took over Rudd's job as head of the Queensland Cabinet Office after Rudd left to seek preselection for federal parliament. Now Vice-Chancellor of Melbourne University, Davis was courted by Rudd as Prime Minister to move over and run his department. Davis declined.

Bridgman rose to become deputy head of Premier and Cabinet in Queensland during the Peter Beattie years, but now runs his own policy consultancy, having been used at various times by Rudd's administration.

Given the myriad of policy and political problems that have ensued as a consequence of a lack of consultation ahead of the proposed mining tax, perhaps Rudd should have read his mates' textbook.

Here are a few choice quotes from it:

"A fundamental trap (of policy development) is the failure to consult relevant parties."

"Without consultation, legitimate and workable solutions to many problems prove elusive."

"Consultation also provides an opportunity for policy makers to invite and obtain stakeholder input into the calculation of whether any particular policy is feasible."

And this: "Consultation is not so much a stage in the policy cycle but an important dimension to the whole process."

Just not important enough for Rudd, it would seem.

What makes the PM's failure to adhere to the most basic principles of the Bridgman and Davies text so disappointing is that he may well have been the inspiration for it. In its foreword, the authors note that, in 1995, Rudd's final year in charge of the Queensland Office of Cabinet under Wayne Goss's premiership, Bridgman led a team out of that same office that prepared what was called the Queensland Policy Handbook, a precursor to the more seminal text that followed.

Rudd is nothing if not procedurally driven. That, at least, is the image he has promoted since becoming Prime Minister.

How then to explain his decision to announce a so-called super-profits tax of 40 per cent on the mining industry -- including a moral hazard whereby the government pays for 40 per cent of the losses in any and all failed ventures -- without adequate consultation?

The government thought it appropriate to avoid consultation on the new mining tax because, as the Treasurer has said, consultation would have given the mining industry a chance to mount a case against the new tax before the government could commit to it. In other words, it was an entirely political decision not to consult -- not good enough for a prime minister who prides himself on his supposed procedural competence.

And let's not forget Wayne Swan wanted the tax pronto to help bring the budget under control, deliver expensive new goodies and a surplus in three years' time. Consultation before announcing the policy as part of the budget would have taken too much time, preventing Labor countering the debt and deficits argument of the opposition by setting out a path to surplus.

Again, politics trumped good policy processes.

Just maybe Rudd isn't the giant of policy making he would like to think that he is. From the botched home roof insulation scheme to the building of expensive school halls to the mining tax, the track record isn't good.

Rudd might need to read a couple of basic textbooks on policy.