Especially in budget week, it’s important to remember that every government program has a cost you bear as taxpayers; and everything government does for you erodes your ability to do things for yourself. Especially during the pandemic, the notion grew that there was almost no part of life that government shouldn’t interfere in, for a good cause. Yet however well-intentioned, the bigger government gets, the more diminished citizens inevitably become.
More money for childcare is supposed to empower women. More money for aged care is supposed to give seniors a better quality of life. More money for the NDIS is supposed to give people with serious disabilities the dignity they need. And up to a point, that’s true. But it all has to be paid for with money that the government has taken away from us as individual taxpayers, and eventually there comes a point where citizens are reduced, in de Tocqueville’s words, to “timid and industrious animals” with government as their shepherd.
For all political parties, the challenge is to get the balance right. For new Labor governments, that’s relatively easy. Getting the right balance between government and citizens invariably means spending more of citizens’ money on government’s services; because whatever the Coalition had spent, almost by definition, was never enough. It’s harder for new Coalition oppositions, because they must have done something wrong to lose and the last thing any democratic politician wants is doubling down on failure by repeating a previous mistake. Hence the tendency to be critical of spending as a proportion of GDP, while focusing on measures to boost overall economic growth, as a way of getting spending down in percentage terms, without advocating cutting any particular program.
One of the most successful recent centre-right governments was John Key’s in New Zealand, which managed to reduce the overall size of government from about 35 to 30 per cent of GDP, not by cutting spending but by growing the economy. To work, though, this meant almost no new spending while boosting growth through measures such as a tax mix shift from income to consumption. This was politically easier in a unitary, unicameral nation than it would be in a bicameral federation such as Australia.
Failing to get the balance right was the undoing of Liz Truss’ brief British prime ministership. She attempted simultaneously to cut taxes, to undo previously announced tax increases and to boost spending to alleviate cost-of-living pressures, without any obvious plan to balance the budget, other than a hoped-for growth dividend. Even though each of the measures could be argued for, taken together, they were too much, too soon, and looked like “magic pudding” economics, where taxes could be cut and spending increased without any pain for anyone. Worse still, when the critics came, she just hid in her No.10 bunker, which spooked a Tory parliamentary team that had never been convinced she was up to the job.
The danger for the incoming UK chancellor of the exchequer-turned-PM, Rishi Sunak, is that he’ll now both cut spending and increase taxes, in ways that will simultaneously slow the economy and discourage Britain’s most entrepreneurial citizens, yet dismay everyone who relies on government services such as the NHS.
The challenge will be to improve government services without just spending more borrowed money; and to improve incentives in the economy, other than by cutting taxes in ways that spook the markets. But that will mean taking on the vested interests that inefficiencies protect and being able to stare down the leftist media’s pitch that conservative measures inevitably hurt the poor and benefit the rich. It’s a big ask in the two years left before the next election.
Where Truss was on the right track was in her aspiration to emulate Margaret Thatcher. Because along with John Howard here, and Ronald Reagan in the US, she was a conservative leader who was able to shrink the state, grow the economy, make most people better off, and consequently win successive elections. Maybe this was easier in the 1980s and 90s, when there were council houses to be sold to their tenants and nationalised industries to be privatised; when America was still indisputably the world’s most technologically advanced nation; when the Australian Senate was not quite the house of obstruction that it’s become, at least to governments of the centre right; and when the media were more analyst than activist. Still, it’s hard not to contrast the intellectual conviction and self-confidence of those consequential leaders with the political opportunism and shallow managerialism of many of their successors.
While Labor has used the language of budget responsibility this week, the reality is that its greater spending on health, education, childcare, disability care and social housing has been only temporarily masked by a windfall terms-of-trade gain from the fossil fuel exports that its green activists want to limit and then stop.
If Peter Dutton and this generation of Liberals are to succeed, they will need to develop a clear and intellectually coherent critique of Labor’s mix of big government with climate zealotry paid for, while it lasts, by the very exports it demonises.
Tonight’s budget reply from Dutton will say as much about the opposition as the budget revealed about the government. It shouldn’t just be a critique of Labor but an address to the nation about what the Coalition believes and where it will take the country.
Dutton should explain that Labor’s budget forecasts of much higher power prices and lower real wages are both broken election promises. His real challenge, though, in what will be the public’s first chance to have a good look at him as the alternative PM, is not just to criticise the government but to outline where the next Coalition government won’t just be different and better than Labor but different and better than the Morrison government too.
If he is to keep the bipartisan commitment to net-zero emissions, he needs to explain how the country can get there while keeping the lights on – and that has to mean nuclear power, not ever-more weather-dependent wind and solar. And in the shorter term, keeping 24/7 coal plants open. He needs to explain how higher immigration can’t be relied on as a quick growth fix for governments that shirk reform, and businesses that won’t train Australians or pay them more. He needs to explain the paradox of businesses that can’t get staff while nearly a million Australians are still on unemployment benefits and what he’ll do about the work-shy. And because politics is downstream of culture, he should firm up his position against the voice (confirmed as costing taxpayers $75m-plus in Tuesday night’s budget papers) and the so-called integrity commission that will leave government even more process-bound, and our country more demoralised and divided.
Above all, he needs to give the Liberal base hope that the days of being just a more cautious and careful version of big-government Labor are definitely over.
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