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Kevin Andrews: Civil Society, Social Welfare And The Economy

The Minister for Social Services, Kevin Andrews, has set out a philosophical framework for the Abbott government’s policies on social welfare and the economy.

Andrews delivered the speech to an Aon Breakfast Forum. Aon is one of the world’s largest insurance brokers.

Transcript of speech by Kevin Andrews, Minister for Social Services, to the Aon Breakfast Forum.

AndrewsI’ll begin by expressing my gratitude to Aon Australia, Deloitte Consulting and Macquarie for organising this event under the auspices of your Not-for-Profit Forum.

Thanks to Bill Marynissen of Macquarie for MC’ing this morning’s event.

And a thank you also to the NFP Forum members.

Your dedication to Australia’s not-for-profit sector is both noteworthy and praiseworthy.

Ladies and gentlemen the future of Australian civil society is a topic that deserves serious attention and I welcome the opportunity to discuss it with such a preeminent audience.

When Benjamin Disraeli declared in 1867 that “change is constant”, his frame of reference was the Industrial Revolution of the late-18th and 19th centuries.

Disraeli’s Britain was witness to an era of technological progress without precedent in prior human existence.

From the steam engine of the mid-1700s to the internal combustion engine a century later – its economy and society were radically reshaped by invention and innovation.

Fast forward to the 21st century.

Fast forward from the era of the cotton gin to the era of the computer;

From the era of the landline telegraph to the era of the mobile telephones;

From the era when Jules Verne’s Phileas Fogg could win a wager by traveling around the world in 80 days to an era when the globe can be easily circumnavigated in 80 hours.

Comparing the pace of today’s technology to that of Queen Victoria’s Britain is like comparing a Lamborghini to a horse and carriage.

If Disraeli were resurrected today he’d be gobsmacked by our gadgetry.

He’d be astonished by the way technology has made our lives healthier, longer and more prosperous.

Higher living standards and enhanced life expectancies are positives in absolute terms.

But it can’t be denied that the latter creates a serious policy challenge for the former.

The silver lining of longer lifespans is surrounded by a cloud of pressure on the Budget from increased health and pension costs imposed by a growing cohort of seniors.

When the age pension was instituted in 1909, average Australian life expectancies were 55 years for men and 59 years for women.

In other words, the system was designed upon actuarial calculations that a sizeable proportion of the population would not live until pensionable age of 65 years.

But this is no longer the case.

Over the past century, average Australian life expectancies have lengthened by about 25 years.

The number of Australians aged 85 or over has quadrupled since the 1960s.

A new wave of healthcare innovations such as gene therapy and nanotechnology promise to extend lifespans yet further.

As Britain’s Office of National Statistics related last December, one third of the infants born in 2013 Britain can be expected to reach the age of 100 years.

Not quite in same league as the biblical Methuselah’s 900-plus years on Earth, but we’re making steady progress in that direction.

But amidst these glad tidings remains the challenge of how to pay for it all.

Cutting edge pharmaceuticals and medical technologies are already quite expensive and can be only expected to become more costly.

The architects of our social welfare system never imagined a world in which millions of Australian seniors would be drawing upon the aged pension over two plus decades of life.

Add to that the coming decline in the ratio of working-age to pension-age Australians over the next few decades.

The Intergenerational Report of 2010 projected that this ratio will fall from the present-day five-to-one to around 2.7-to-one by mid-century.

These demographic facts of life alone are enough to tell us that serious structural reform of government is an absolute imperative.

Then there’s the larger context in which the Government is operating.

In the year 2014 that larger context is dominated by the need for fiscal constraint at home within the framework of a turbulent economy abroad.

Ladies and gentlemen we are gathered here this morning at an event entitled: “Twilight for the Age of Entitlement”.

Debate on this topic in Australia has been raging fast and furious since Joe Hockey’s “The End of the Age of Entitlement” speech.

But it’s not just Joe Hockey making this argument.

Identical sentiments are now reverberating through the corridors of power at the epicentre of the European welfare state system.

In his annual Speech from the Throne to the Dutch Parliament last September, King Willem-Alexander [VILLE-EM ALEXANDER] announced that social policy in The Netherlands must foster a transition to a “participation society”.

And he went on declare:

“the classical post-war welfare state produced schemes that are unsustainable in their present form”.

The 2013 Speech from the Throne really constitutes a watershed event;

A watershed because over the past six-plus decades Holland has been a central player in western Europe’s post-war experiment with social democracy.

Social policy expert Professor Peter Flora noted:

“In no other Western European country has the welfare state expanded to such an extent since World War II”.

By the 1990s, the Netherlands had become one of the world’s “highest-spending welfare states”.

And just a few years ago it would have been unthinkable to hear a Dutch Head of State saying what Willem-Alexander said last September.

But what was once heresy now reflects reality.

It’s begun to dawn on even the most ardent exponents of social democracy that the party’s over.

The fiscal facts of life are forcing Europe’s political elites to confront the reality that the welfare state as we’ve come to know it is now in its death throes.

Its demise was caused by the simple fact that the fiscal appetites of the modern welfare state have outstripped the revenues that feed it.

Decade-upon-decade of profligate entitlement spending has generated massive mountains of public sector debt.

The welfare states of Europe have been engaged in a form of fiscal cannibalism, borrowing, not for the future, but from the future.

They’ve been eating their fiscal seed corn.

They’ve accrued massive budget deficits to finance consumption by this generation at the expense of generations yet to come.

Faced with credit downgrades and the spectre of insolvency, European governments have had no choice but to restore sustainability to their national balance sheets.

This belated recognition of fiscal reality has dictated sharp reductions in public expenditure and a radical redefinition of the relationship between the individual and the state.

The necessary harshness of these 11th hour remedies has inflicted considerable economic dislocation and social distress.

In turn that social pain has spawned a wave of political extremism that is very worrisome indeed.

Here in Australia we’ve so far managed to escape the worst of what some have come to call the ‘Great Recession’.

I would strongly contend that our present good fortune stems from the past good fiscal policy of John Howard and Peter Costello.

When the last Coalition Government left office in 2007, we left behind a budget in surplus and a cash nest egg of $45 billion in Commonwealth coffers.

Those $45 billion dollars served as a solid financial bulwark that insulated Australia from the financial crisis that shook the world in late 2008.

But we’d be very foolish to assume that, because so far we’ve weathered the tempest reasonably well, all danger is past.

The United States has yet to deal decisively with a $17.6 trillion national debt that exceeds the entirety of their annual gross domestic product.

Yet the protective fiscal bulwark that preserved our prosperity in 2008 has long since been frittered away.

A glance at the Commonwealth’s balance sheet reveals how vulnerable we are should the global economy once again descend into chaos.

The most up-to-date data from the Australian Office of Financial Management – for the March 2014 Quarter – reveals gross Commonwealth debt at a level of 317 billion, 432 million dollars.

That works out to over $13,500 for each and every Australian, including the newest of newborns.

Before they can talk or much less walk, each Australian infant has been saddled with a $13,500 bill to pay for Labor’s disastrous record in government.

This massive accumulation of debt not only renders us vulnerable to the vagaries of global markets, but it also constitutes an act of intergenerational theft.

An act of theft that prospectively picks the pockets of our children who’ll be left to pay the bill.

It’s a raid on the future prosperity of young Australians, both born and yet-to-be-born, who’ll be saddled with the cost of Labor’s profligacy and ineptitude.

And if our current situation isn’t good, our future prospects are looking far, far worse.

Seven months ago the Abbott Government inherited a fiscal trajectory from its Labor predecessor that puts the Commonwealth on track to a projected debt of $666.6 billion in 2023 – nine years hence.

The essential mathematics of our current condition are undeniable.

Ours is a fiscal reality that can’t be wished away through an exercise in magic thinking about a mythical self-replenishing pot of gold.

This combination of factors – an aging population, the fiscal irresponsibility of previous Labor governments and global economic instability – threaten to generate a perfect storm for Australia.

Ladies and gentlemen continued business as usual is not an option this Government is prepared to embrace.

We know that to do what’s right; to do what is responsible and to do what is necessary will not be easy. We know that we need to make tough decisions.

But those same hard choices that are driven by our sense of duty to the children of today.

Because if we are derelict in that duty; if we lack the moral fibre to make the hard choices now, we’ll bequeath to coming generations an economy hobbled by debt.

Our children’s life options will be tarnished and their personal prospects diminished.

They’ll curse us for our cowardice and they’ll be right.

The challenge faced by this Government – and by my Department in particular – is to craft the proper balance between productivity and humanity.

Or in other words – how do we build an Australia that promotes economic vitality and preserves social responsibility?

How do we accommodate the needs of an ageing population that deserves high quality medical treatment and first-rate long-term care without breaking the budget?

How do we provide sorely needed support for the seriously disabled without borrowing our way into European-style fiscal oblivion?

How do we ensure our children have a quality education to thrive in the face of fierce 21st century global competition without pummelling the private sector with job-killing taxes?

These are the pivotal questions of our time upon which turn our prospects for prosperity in the future;

Questions upon which we can look the historic guidance, provided by the foundational document of the modern welfare state.

Better known by its colloquial title the ‘Beveridge Report’, the Report of the Inter-Departmental Committee on Social Insurance and Allied Services was published in December 1942.

It laid out a plan for a post-war campaign against the “five giants” of social dysfunction: Want, Disease, Squalor, Ignorance and Idleness.

But just as notable as the place Lord Beveridge wished to take Britain were the means he chose to get there.

Rather than a confident assertion of supreme state authority, the ‘Beveridge Report’ reflected the virtues of limited government, stating:

“The state in organising security should not stifle incentive, opportunity, responsibility; In establishing a national minimum it should leave room and encouragement for each individual to provide more than that minimum for himself and his family.”

In other words, Lord Beveridge made clear that any new initiatives by government were meant – not to supercede existing social institutions – but to complement them.

He envisaged strengthening the institutions of civil society; not displacing them.

And while we’ve strayed somewhat from this principle over the past seven decades, the wisdom of Lord Beveridge is validated by the unfolding events of our time.

Ladies and gentlemen I’ve had a longstanding interest and involvement in civil society.

I’ve served as an official with various associations, on hospital boards and with social service organisations.

It’s this personal experience at the coalface of civil society that forged my views about the critical role of organisations that arise organically from the community in response to human need.

And those views have only been reinforced by what I’ve seen as a Parliamentarian; Indigenous and non-Indigenous communities where the basic structures of civilised society are failing.

Places afflicted by dire poverty where women and children are at constant risk of abuse;

Places where dependency is the rule and self-sufficiency the exception;

Places where the private enterprise is unknown and the only people employed are on the public or not-for-profit payroll;

Places where the last vestiges of individual initiative have evaporated, leaving behind the social residue of hopelessness and despair.

It’s these cumulative observations that have forged my views about what agencies of the state can and cannot achieve.

Ours is a Government steeped in a humble awareness of its imprecise knowledge and imperfect capabilities.

We’re mindful that you know your business better than anyone and you know your communities better than anyone.

We’re mindful that civil society should never be allowed to become either the instrument or the agent of the state.

We want to get Government out of the way and off your backs so you can do what you do best.

When it comes to the good work routinely done each day by Australian charities and NFPs, our job should be to facilitate — not to duplicate.

We see Australian civil society as comprised of righteous people doing the righteous things for righteous reasons.

This Government’s attitude towards the charitable and NFP sector revolves around a rebuttable presumption of virtue.

Existing criminal and trade practice law is more than adequate to address any of the rare cases of fraud or dishonesty within civil society.

We see no justification for the heavy hand of regulation that the ACNC has cast upon the sector.

That is why are moving to abolish the Charities Commission and introduce in its stead a National Centre for Excellence that will operate by persuasion rather than coercion.

We all want to move Australia to a better place.

But this is not something the Commonwealth can do by remote control from Canberra.

We need your help.

We all must work collaboratively to nurture the distinctive, generous, mutually supporting culture for which Australia is known.

The object of the exercise is the reinvigoration of the grass-roots energy that has our nation the best place to live in the world.

Much of this work involves your members selflessly giving of their time and I’d like to pay tribute to each and every one of you for what you’ve done, what you’re doing and what you’ll continue to do.

It’s vital.

And working with you we want to implement policies that put Government – not in the drivers’ seat of policy – but under the bonnet providing the power that will help you to steer a good Australia to an even better place.

Thank you.

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Malcolm Farnsworth
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