Shifting the Dial review: sorry, wrong number

The Productivity Commission immodestly calls its first five-yearly review of productivity Shifting the Dial, released this week and commissioned by Scott Morrison. I have another title for it: Shifting the Dial Backwards.

Take it from me, it’s 1200 pages of bureaucratic sludge. But amazingly, its most radical ideas — replacing stamp duty with land tax; turning pharmacies into automatic dispensing outlets (with a TAFE-qualified staff member in charge); transforming universities into schools; imposing a national carbon price and road-user ­charges — are rationalised in the space of a few paragraphs, often with reference to other institutions, particularly the Grattan Institute.

To tell you the truth, were I not trapped in an aeroplane seat, I would have given up reading the brick — sorry, tome. The chapter on health reforms is completely impenetrable. Evidently we are supposed to move to a patient-centric model, but the discussion is all about PHNs and LHNs and how they need more money.

What, you may ask, are PHNs and LHNs? The first are primary health networks and the second, local hospital networks. No patients there but lots of managers and meetings. Yes, the solution lies in more bureaucracy.

Mind you, there are limits to patients being at the centre. If the top dogs think that certain treatments don’t work for the population as a whole — the Productivity Commission keeps banging on about knee arthroscopies but also mentions hysterectomies for women with severe menopausal symptoms — then bad luck, even if the treatment may work for that patient.

To make sure their choices are limited, the commission recommends that these treatments be defunded in the public sector and removed as eligible items for private health insurance cover.

Then all of a sudden the Productivity Commission is an expert on what is a university. Evidently universities are nothing much about research, just teaching institutions churning out vocationally trained graduates. I’m not sure where that leaves all those non-vocationally oriented disciplines in universities, but what the heck.

And universities must have some “skin in the game” when it comes to graduate employment outcomes, as well as the prospects of their graduates repaying student loans.

Student tuition fees should be directed only to student learning, with nary a dollar transferred to a university’s research effort. There is no acknowledgment of the complementarity of the standard of teaching and research effort — good researchers generally make good teachers. But it will be OK because research can be funded separately by a fiscally constrained government.

And if you are a student dissatisfied with what you are offered during your university course, then the Productivity Commission thinks you should be able to sue the institution for some sort of breach of contract under consumer law. You can just imagine what sort of backside-covering this would lead to on the part of university administrators. Red tape, come on down; the list of disclaimers issued by universities would run to many pages.

It is noteworthy that the Grattan Institute’s Andrew Norton, one of Australia’s pre-eminent experts on higher education, has criticised the commission’s central recommendations for university reform. He makes the point that there are many incentives for universities to lift their game in respect of student learning and cautions against bureaucrats setting the rules. He explicitly yearns for the days of the old market-oriented Productivity Commission rather than the new one. (Hear, hear.)

And what about the commission’s loony idea of shifting pharmacies to automatic dispensing machine outlets? Evidently community-based pharmacies are “a significant unnecessary cost to the nation” and the 20,000 qualified pharmacists should be used in other roles or put out to pasture.

No one doubts that there is a lack of competition in the way pharmacies operate and are remunerated. But it is a ridiculous step to suggest that we move to automatic dispensing machines as an alternative, even if that arrangement may be the best option in some remote areas. Would it be a bit like post office boxes?

But according to the Productivity Commission, pharmacies sell lollies and vitamins that are not effective, which “is not reconcilable with an evidence-based clinical function”. Oh, to be so pure. There is little acknowledgment of the role pharmacists — new graduates are not well paid, by the way — play in the broader community service of offering health and wellbeing advice, a service valued highly by the public.

Then we get to replacing stamp duty with land tax, a favourite of left commentators since there is real scope to ratchet up the rate of land tax. Without providing much evidence on the impact of stamp duty on the rate of turnover of housing — most countries have forms of stamp duty, some at much higher rates than ours — the Productivity Commission recommends that the nation must move to imposing land tax on the unimproved values of properties, with a bit of a transition.

Bad luck for those who have just recently purchased a property and paid stamp duty — they will be invited to pay twice. And for those who won’t be able to afford to pay, the Productivity Commission thinks there could be a range of exemptions and the scope for people to pay the accumulated land tax bill (inflated by the bond rate, of course) from their estates. That’s bound to be popular.

And note that the more exemptions, the greater the scope for disincentives to arise in respect of working or working more, for instance. That sounds like replacing one bad system with another bad one, the latter of which would also be political poison.

And here is another irony. The commission notes the public’s distrust of governments and politicians. But we are expected to believe the shift from stamp duties to land tax will not involve any more net revenue and that stamp duties will be reduced in line with the higher land tax revenue. My guess is that most people would see such a move for what it is: a tax revenue grab by untrustworthy governments.

And while we are on the reform bandwagon, can the federal government reform the taxation on alcoholic products? Out with cheap cask wine and concessionally taxed beer; we need to tax products on the basis of their alcoholic content. This will be good for gin and tonic drinkers (like me) and those who fancy a cocktail. Whether this would really make any difference to productivity is another thing.

If there is one ominous theme that pervades the Shifting the Dial (Backwards) report, it is that more data will solve pretty much everything. More data is what central planners always want. With more data, those mistakes that politicians and bureaucrats routinely make can be eliminated.

And with more data, including in the hands of consumers, everything will be better. Don’t worry about privacy breaches, about self-serving analyses, about big brother watching over you. Forget principles, forget markets, forget the limitations of governments and bureaucrats — data will solve everything.

No one will deny that, along with most developed economies, we have a productivity challenge. And it would be great to have more efficient and effective health and education systems. But to think that even more detailed bureaucratic interference, piecemeal changes to taxes or getting rid of pharmacists are the solution is to be profoundly mistaken.