Julia Gillard should choose wisely with the national disability scheme
by PAUL KELLY
EDITOR AT LARGE
The Australian 16 May 2012
THE Gillard government has rejected the central Productivity Cormmission recommendation for the National Disability Insurance Scheme that the federal government become the single funder to guarantee its stability.
This transforms the finances and the politics of the NDIS, opening the way for serious conflict between Labor and the Coalition and between the national government and the states.
The critical test for Labor is whether it can establish the NDIS without the convulsions that botched two earlier reforms, the 2010 mining tax and the hospitals agreement. Has Labor learned from its past blunders?
Nobody should doubt the intent of Disability Reform Minister Jenny Macklin. Interviewed by The Australian, Macklin said: “I would hope to legislate the scheme in this parliament.”
If achieved, it would become one of the Gillard government’s iconic triumphs.
Macklin is a tough politician genuinely moved by the inhumane fate of the disabled and their carers. “This is the area of Australian social policy where the national effort has been the weakest until the last couple of years,” she said.
The budget reveals both Labor’s commitment to the NDIS and the complete absence of any agreement over the scheme’s design. Labor has announced its nonnegotiable intention to have an NDIS. It has made a hefty budget pledge of $1 billion over four years for the first stage. “It is extraordinary to get this amount of new money in the current fiscal climate. It means we have support across the top of government for this initiative,” Macklin said.
Yet Labor has conducted no negotiation with the states over the financing design. Labor chose instead to commit to the NDIS in principle, raise community expectations, advance the NDIS as a defining Labor reform and promote it as integral to a strategy of regaining the Labor base vote. The signs are that Labor wants both to wedge the Coalition on this reform while also delivering its historic policy.
The NDIS is being promoted by a weak Prime Minister who is short of funds. That should flash the warning signs. NSW Liberal Treasurer Mike Baird accuses Gillard of bad faith.”I am amazed the federal government has produced such a reform without having done its homework,” he told The Australian. “It is beyond comprehension we are talking about sharing funding without having had a discussion. If there’s one area where you shouldn’t be playing politics its with the disability sector. I think this is raising false hopes. ”How do the Prime Minister and Treasurer intend to finance this scheme? They don’t have an answer.”
The budget funding for the initial launches envisages a 78-22 per cent split between national and state jurisdictions. The states are expected to contribute $280 million to match the $1bn from the commonwealth. But the fiscal situation means the coming negotiation with the states will be brutal.
Fundamental to Labor’s strategy is whether it seeks to fund the NDIS via a tax levy. That would further transform the politics. It would constitute a deliberate effort to reject bipartisanship and recruit the scheme as a weapon against Tony Abbott. Labor has taken no decision to this point. Neither Gillard nor Treasurer Wayne Swan rules out a levy. This may be a sensible negotiating stand. Note, however, that Labor keeps comparing the NDIS to Medicare and there is a Medicare levy.
The Productivity Commission rejected a tax levy as an “inferior’ option with its preferred funding being a legislated formula for financing out of consolidated revenue. If Labor chose a tax levy it would wedge the Coalition with Abbott having to choose between accepting the new tax, being seen to oppose the scheme or needing more spending cuts to honour a Coalition scheme without the levy.
Last year the campaign director for the disability cause, NSW Labor veteran John Della Bosca, said ditching the tax levy was basic to successful implementation. ”The contrast with the debate on carbon is apparent,” he said. “This reform needs bipartisanship.”
“The Australian government should be the single funder of the NDIS,” the Productivity Commission said. “Only the commonwealth has the revenue base to provide certainty.” If the national government rejected this option as Labor has the commission warned that any joint funding arrangement with the states must be based “on agreed shares of the legislated formula”.
The commission warned that without a clear, long-run formula the danger was that “shorter-term arrangements with renegotiated co-contributions would be likely to ultimately break down, losing the required certainty of funding”. This warning is pertinent given the funds involved are huge. The commission found the present disability system was “underfunded, unfair, fragmented and inefficient”.
It wants a conceptual break to an insurance model whereby all Australians would have coverage for long-term disability support. The NDIS would cost about $6.5bn above present spending of $7.1bn. The 78-22 per cent initial federal-state breakdown may offer a guide to the more substantial NDIS cost sharing between jurisdictions. But Macklin warned against any such conclusions.
Gillard is putting Coalition states under real political pressure. ”We are prepared to pay the lion’s share,” she said. “Of course, we are asking states and territories to show their concern about people with disabilities too.” Of course. The coming debate will be conducted in the court of public opinion with the accusation of heartlessness hanging over reluctant states. The strength of Gillard’s case is that the national government is now stumping up a generous offer. Where will the states get a better deal?
The related issue penetrates to distribution of funding among the states that arises because Victoria and NSW now fund disability at a far higher rate than Queensland. Queensland Premier Campbell Newman says his state doesn’t have the money to fund the NDIS. Tough. Gillard is lining up Newman for a double hit not only will Queensland have to pay, it will have to pay more because it has been underfunding disability to only about 70 per cent of Victoria’s level.
“Budgets are about choices,” Gillard lectured Newman. “I believe there’s few better investments than doing something that offers people with disability more of a life of hope and inclusion.”
It is Labor values on display. The question is whether the Coalition is trapped into contesting those values. Abbott has taken a strategic decision: he wants to hug close to Labor on this issue and avoid being wedged. But the Coalition side speaks with different voices.
The initiative lies with Labor. It must decide whether its priority is reform bipartisanship or wedging the Coalition in the name of electoral recovery. There are distinct risks for both sides.
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