social security written on typewriter

Pocock’s inclusion committee another blow to fiscal discipline

The deal between the Albanese government and Senator David Pocock to get the industrial relations bill across the line raises two matters of concern.

The first is that after weeks of huffing and puffing, Pocock achieved little change in the bill from what the government wanted in the first place. He will now join the Greens in waving it through the Senate.

The reasons to be concerned about the bill have been well aired in the media. The outcome is not, in any case, surprising. Pocock’s policy predilections suggested that he would be comfortable with legislation strengthening union power and with the government’s ‘get wages moving again’ mantra.

His grandstanding on the IR bill had more to do with demonstrating to his ACT electorate that he is not just a wallflower in the Senate. As a territory senator, Pocock must face voters every time there is a House of Representatives general election, not just every six years like his state colleagues.

But we should hope that for as long as Pocock remains in the Senate and its composition puts him in a pivotal position on certain key legislation, he uses that power to beneficial effect — which brings us to the second point of concern about his weekend deal with Albanese.

It came as a complete surprise that to secure Pocock’s green light to the IR bill, the government agreed to his demand for an Economic Inclusion Advisory Committee. The details remain to be seen, but it appears this body is to be given a statutory basis and is to report to the government two weeks before every budget on the adequacy of welfare benefits such as the JobSeeker allowance.

Whether its charter will be broad enough to include the full range of benefits such as the age pension and family tax benefits remains to be seen, but there is enough in what has already been announced to set off alarm bells. It is, put simply, another blow to fiscal discipline and tax moderation.

It is a sign of the government’s desperation over the IR bill that it agreed to Pocock’s demand. Any government remotely interested in expenditure discipline would see this as a rod for its own back.

There are signs that the government tried to minimise the importance and role of the new body. It is only a committee (as opposed to a council or commission) and if it really does stick to reporting two weeks before the budget there will be little time left for it to influence budget decisions.

However, the committee can still make fiscal policy-making more difficult and further drive up already high levels of social security and welfare spending over time. Adverse findings will embarrass the government. After one or two reports, the tenor of the committee’s views will become known and anticipated by the government.

The government will appoint the members, but there is sure to be strong representation from welfare lobby organisations.

The committee will be in effect a pressure group for higher welfare benefits. Pressure groups have a role in a democracy, but there are many examples in the history of economic policymaking of narrow interests being advanced to the detriment of the broader public interest.

Pressure groups are better organised and more vocal than the broad public. For example, it took many years for the arguments on behalf of the broad public interest in low tariffs to overcome the advocacy of sectional interests.

In the case of the Economic Inclusion Advisory Committee, it is highly unlikely to find that all the welfare benefits under its purview are adequate and nothing needs to be changed. But in reaching its conclusions, it will have no regard to the fiscal position or to competing demands on the budget or to the level of taxation. It will be all care and no responsibility.

This criticism of the new body is not to say that nobody should ever consider the adequacy of welfare benefits. But to outsource the task to a permanent statutory body is the wrong move to make. This should be basic work of government and undertaken by its public service advisors. And considerations of adequacy should always be balanced against all the other inputs to budget decision-making.

If the new committee is the way of the future, perhaps what is needed now is a Taxpayers’ Advisory Committee stacked with believers in low taxation to tell the government before each budget which taxes are too high

Robert Carling is a Senior fellow at the Centre for Independent Studies and a former World Bank, IMF and federal and state Treasury economist.

Photo by Markus Winkler