Gonski report opens another can of worms

WITH the rally in Labor's primary vote in the 33-35 per cent zone Julia Gillard's tactic of switching the agenda away from Tony Abbott is showing dividends -- the danger is the cost to Australia from the Gillard-Abbott permanent election campaign.

This week both sides escalated their pledges off the back of the now broken Gonski school funding model. The Prime Minister said every independent school in Australia would see its funding increase under Labor's plan, a far higher and costlier benchmark than Labor's previous guarantee that no school would be worse off.

This is a predictable march across the financial Rubicon on schools policy. It is the latest manifestation of Gillard's "whatever it takes" politics. In case you missed the point, Gillard spurned the government school lobby and declared: "I've never looked at a big independent school in an established suburb and thought: 'That's not fair.' I look at a big independent school in an established suburb and think: 'That's a great example.' I've never looked at a new independent school in a coastal town and thought: 'Why aren't those kids at the public school?' "

Addressing the Independent Schools National Forum, Gillard praised what she called "that first famous Menzies science laboratories program" from 1963. That she invoked Robert Menzies and called his initiative "a genuine new frontier" is significant. How often does Gillard declare fidelity to Liberal Party icons? What she didn't say, but knows, is that Menzies inaugurated the long transformation of the politics of state aid.

Gillard's statement this week is consistent with the philosophy she articulated back in 2008 -- she wants to support all schools, not one system against another. It remains her position. She is going to disappoint the government school lobby, whose expectations of the Gonski review were always hopelessly unrealistic. Gillard was never going to disadvantage the private school sector.

She will not repeat the Mark Latham 2004 blunder. There will be no private school "hit list". There will be no private schools left without an increase in funds. Killing any final doubts, Schools Minister Peter Garrett told ABC1's Lateline the pledged increase was "in real terms". Yes, Gillard will offer significant new funds to public schools but not on any zero-sum basis.

The irony this week is that Labor played the school card at the very time its policy process is in chaos. Gillard's governing principle is survival, survival, survival. Her ruthless tenacity seems on permanent display. Beneath the surface, however, her government is mired in abject confusion, with the Gonski report a classic case.

Fine in theory, its funding model didn't work in practice. Too many schools, public and private, would be worse off. Within the independent sector the data showed Gonski's model meant that of Australia's 1100 independent schools about 900 would be better off and about 200 worse off. This was untenable. There were big differences among states, with schools in the ACT being the big losers followed by NSW and Western Australia, while Victorian independent schools were big winners. Such state-by-state differences are untenable.

At the micro level some of the better-provided independent schools would be enhanced significantly, such as Geelong Grammar and Scotch College in Melbourne, and Trinity Grammar and The King's School in Sydney. Again, this would be untenable. The upshot is that Labor has had to refine and alter the model.

A few weeks ago Gillard wrote to the states, Catholic and independent sectors, seeking to establish a select council to negotiate the outcomes. But most states have declined to participate. The upshot is that Gillard has been forced to delay her policy but has decided to run on the politics against the Opposition Leader.

The bottom line is apparent: Gillard's appeasement of the government, Catholic and independent sectors will impose a hefty cost on the budget. Her technique on schools policy, like John Howard's, is the "all winners" formula. But Gillard must show government schools win a greater increase than the better-off private schools, otherwise the public schools lobby will launch an accusation of "betrayal" against her.

In short, Gillard needs huge funds to try to negotiate a new grand bargain that includes all systems. The pure Gonski model that would leave many schools, public and private, worse off will be revised.

Where does the money come from? The report from businessman David Gonski envisaged that extra funds would be found 30:70 between Canberra and the states respectively. This is just a pipedream. By any test, Canberra will meet a greater share but the overall funding levels will fall below the $5 billion annual benchmark Gonski recommends.

Meanwhile Abbott and his education spokesman Christopher Pyne juggled objectives -- advancing their attack on Gillard, buttressing their own schools policy and signalling alarm about the ever-rising schools policy demands on the budget.

Abbott and Pyne reject the Gonski report. Abbott has two worries; he is "deeply sceptical" that Gonski is "doable" given mounting fiscal pressures, and he believes its implementation would damage non-government schools. Pyne has said the Coalition will repeal any policy that cuts funds for non-government schools, a stance now outflanked by Gillard.

But Abbott supports the socioeconomic status model created by the Howard government, saying there is no evidence it can be improved. Since its replacement was the purpose of the Gonski review, Abbott's stance infuriates the public school lobby. He inflamed sentiment further, saying that because independent schools received 21 per cent of total funds but educated 34 per cent of students there was "no question of injustice" to public schools and, if anything, the injustice was "the other way". Abbott's heart is with the non-government sector.

Labor went into seizures. "I was very disturbed, in fact, I would say angered," Gillard told the house in reaction to Abbott's comments. She was just warming up. Gillard alleged Abbott was like "Jack the Ripper" coming after government schools. Claiming that Abbott's position was that public schools "have too much money", Gillard alleged his policy meant that "every public school in this country is on an opposition hit list".

Firing up government school parents, Gillard declared of Abbott: "He is coming with cutbacks and he is coming to destroy the opportunity for those schoolchildren."

This is the farce that bedevils national politics. Abbott has his threatened private school hit list accusation against Gillard, and Gillard has her threatened public school hit list accusation against Abbott. They brand each other in a contest that sinks inexorably into even more bitterness and mutual recrimination.

Pyne made clear the Coalition had an "all winners" policy, revealing it will back school funding indexation at 6 per cent for the next period. (We don't know Labor's indexation figure.) He tried to argue that only the Coalition would put more funds into both public and private schools, as distinct from Gonski with its reported modelling showing that a third of all schools would lose.

Dumping on the Gonski model, Pyne said it "is so complex and so complicated and so lacking in transparency" that Labor had been unable to find a pathway to give it life. In case you missed the message, Pyne called Gonski's plan "unworkable" and "grotesquely expensive". The Coalition remains tied to Howard's SES despite its obvious flaws.

The truth is that both sides of politics are heading towards new and substantial school funding commitments. Neither Gillard nor Abbott wants to be outbid.

This follows Gillard's recent commitment to the National Disability Insurance Scheme, a pledge Abbott has matched to ensure he was not politically wedged on this "Labor values" reform. Gillard has been astute in using both the disability and schools issue to move the political agenda away from Abbott's mantra of carbon tax, mining tax and boat arrivals. The polls suggest her tactic is working.

Abbott had a difficult week. While the carbon tax will remain his issue until voting day, its intensity must diminish. The attacks on Abbott for exaggerating the impact of the carbon tax are gaining traction. The dilemma he faces is whether to stick by his tried and trusted formula or broaden his campaign in response to Gillard. There is one certainty -- both leaders are putting the budget and the Treasury under intense pressure.

Last Sunday on Sky's Australian Agenda program, Gillard said Labor's 2012-13 budget surplus was "non-negotiable". This is also the view of Wayne Swan. Equally non-negotiable is Gillard's survival strategy of hefty extra funds into disability and education. Something has to give.

Treasury secretary Martin Parkinson has issued many warnings that the country faces a structural problem, with revenues unable to meet our high spending expectations. The Treasurer said this week there was a need for "very substantial savings". That's hard in the 12 months before an election. Gillard and Swan, in effect, are switching spending priorities.

The Coalition dismisses this as pure front. It says that in any tight fiscal situation Labor's DNA means higher taxation. Abbott, with his pledge to abolish the carbon tax and mining tax, faces his own daunting surgery on the spending side.

Resources Minister Martin Ferguson was smart this week, Keating-style, to proclaim the resources boom over after BHP's Olympic Dam retreat. Of course, it is not over, yet BHP's decision is a wake-up call for the nation. Ferguson wants to give Labor the chance to scale back expectations and take some tougher decisions -- but this appreciation is not shared by many of his colleagues.