We will all benefit from a strong welfare state

The Centrelink queues at the Pittwater Rd Brookvale office in Sydney during the Covid pandemic. Picture: John Grainger

If there is one lesson from the pandemic it is how much all of us – rich and poor – rely on the welfare state. We all relied on vaccines, testing, a strong public hospital system and well-trained doctors, nurses and allied health professionals. Countless lives were saved.

A modern, productive economy also relies on a strong welfare state; it produces the healthy and educated workers hi-tech industries need. Yet when most people think of the welfare state, they think first of the unemployment benefit and other support payments. Yet this spending (less than $20bn in a typical pre-Covid budget) is a fraction of what the government spends on the welfare of all citizens. The two biggest areas of spending by far are health and the retirement income system. These operate as a vast insurance scheme that benefits all of us. Our ageing population will continue to put enormous pressure on these two programs. The welfare state is also expanding in disability and aged-care services.

The welfare state has been one of society’s greatest and most civilising achievements. However, with an ageing society, a sustained slowdown in productivity and the nation staring at a $1 trillion debt, we stand at a fork in the road. How do we ensure welfare continues to exist as a meaningful social safety net?

The key rationale for the welfare state – to protect us all when we are vulnerable – remains as compelling as it was in the first half of the 20th century when most of our key institutions emerged.

During World War II, the Curtin government passed legislation to strengthen the welfare state – building on institutions that had been created after the 1890s and 1930s depressions. Courageous and visionary, the reforms were undertaken during a period of such profound and menacing uncertainty. Similar vision and foresight is required today in another period of extreme uncertainty.

I believe the welfare state has three key intellectual pillars – the universal provision of services; the redistribution of resources; and a focus on risk management. All are important. Yet governments tend to adopt a reactive approach to the many risks that society faces.

Consider the following: between 2009 and 2012, governments in Australia spent 50 times more on cleaning up after natural disasters than preventing or preparing for them. Federal, state and local governments spent $11bn on cleaning up and just $225m on mitigation and resilience. We clearly need a renewed focus on risk management – and to invest more in preparation for future natural disasters and pandemics.

This then raises the question of whether we can improve the way the welfare state manages risk for individuals. Risk management has always been central to the welfare state, which emerged in the late 19th century precisely as a result of regulatory reforms to insurance schemes. As a poem of that era stated: “Better put a strong fence ’round the top of the cliff than an ambulance down in the valley.”

Given that risk management plays a key role in insurance schemes, it is instructive to think of the welfare state as a vast social insurance scheme in which we all pool our resources to help those who through no fault of their own need assistance after fate has dealt its cards. Too often people think about the welfare state as largely redistributive, creating a mindset of “lifters” and “leaners”, to use Joe Hockey’s words. But that’s simply not accurate for most of our social insurance institutions. We all benefit from this vast insurance scheme.

So how can we do more without a significant increase in taxes as a share of GDP? We can do more by focusing on: better long-term outcomes for citizens through targeted and tailored supports; risk management – prevention rather than cure, and; practical, innovative strategies that will help us deliver better services at a lower cost. Universal service coverage is often the right approach in areas such as vaccinations, GP access and childcare but, where people have complex requirements, bespoke packages are required. The NDIS is a good example – and will be even more so after Labor has fixed it. A greater investment in navigators and case managers will enable recipients to direct scarce resources to what they desire most.

A risk management framework can also better manage and shift risk, which can be a game-changer, as HECS proves. This opened up higher education opportunities for many. Income-contingent loans could be applied in many areas, including social housing and medical expenses. Similarly, when government partners with industry to support innovation, rather than offering grants government could take an equity stake and minimise risks.

By returning to the origins of the welfare state, which arose from insurance schemes and was motivated in part by risk management principles, we will improve the outcomes for the most vulnerable and preserve the public institutions that have served us so well.

Daniel Mulino is the federal Labor MP for Fraser. His book, Safety Net: The Future of Welfare in Australia, is published by Black Inc.