Adam Creighton identifies a massive source of potential budget savings in reducing unnecessary welfare expenditure.
A more blatant example of upper-class welfare is found in Canberra, among the bloated senior ranks of the public service. Thousands are paid exorbitant sums grossly disproportionate to the social value of their output. Taxpayers lavish salaries between $200,000 and $750,000 a year on almost 2900 senior public servants. Another 13,230 are paid about $150,000 a year.
Whole suburbs of Sydney and Melbourne pay tax to support this artificial, taxpayer-created upper class, whose incomes dwarf similarly employed public servants in London and Washington DC.
He also identifies a serious problem:
The share of net taxpayers among working age people has fallen from 52.4 per cent in 1999 to 50.9 per cent in 2011, during a time the unemployment rate was falling.
Okay – there was an upward spike in unemployment at the end of that period but the principle remains. The Howard government made the net income tax system more progressive – and were proud of that policy.
Not forgetting that a significant proportion of those ‘taxpayers’ would be public servants, for example.
So the proportion of ‘net contributors’ would certainly be well below 50%.
This is indeed a dangerous phenomenon in a so called ‘democracy’.
Rabz
1 Feb 13 at 8:30 am
A simple solution is to give them the opportunity to see how much they will be paid in private enterprise (and I’m not talking about the plethora of lobbying firms).
I’m sure the market will reveal they are overpaid.
Token
1 Feb 13 at 8:34 am
They would get better quality for less if the bureaucrats didn’t have to live in Canberra…
But surely the real problem is an excessive number of programs and functions of federal government.
Sleetmute
1 Feb 13 at 8:39 am
Indeed, welfare is meant to help only the needy. It has become a lifestyle choice for many all over the developed world.
I’d agree with getting rid of the childcare subsidy (the rest just goes without saying) if, and only if, the government slashes regulations around it to the bare bones of “make sure kids are safe” and that’s it. Government intervention has made it ridiculously expensive and in need of a subsidy, from said government, so that it’s even worth having a second parent work.
Other than excessive regulation there is no reason childcare should cost more than $30-50 a day per child. Instead it’s in the region of $90-150 a day. All for the sake of ‘protecting our kids’ (read: regulating the crap out of a valuable industry).
MattR
1 Feb 13 at 8:40 am
Politicians and senior public servants are looting the Australian people. I gather Julia gets paid more than the President of the US.
Julia is also planning to loot the superannuation of self funded retirees according to the AFR today.
Eyrie
1 Feb 13 at 8:44 am
I’d say very significant. 16% of the employed work force.
ABS figures:
Commonwealth Government
250,000
State Government
1,449,600
Local Government
192,500
Total Public Sector
1,892,100
Keith
1 Feb 13 at 8:50 am
End the 15% superannuation rort as well.
John Comnenus
1 Feb 13 at 8:51 am
15% flat tax plus no deductions except working interest and you have an economic boom the likes of which…..
Alfonso
1 Feb 13 at 8:58 am
Total wages and salaries for the public servants, almost $129 Billion. Let’s see, at 30% tax rate, that’s $38 Billion of churn.
Keith
1 Feb 13 at 8:59 am
Same thing in the US.
Poor Old Rafe
1 Feb 13 at 8:59 am
Thanks Keith – didn’t have the figures at hand…
Rabz
1 Feb 13 at 9:02 am
It is very difficult for someone who receives their income from the government to be a net taxpayer, surely?
DriftForge
1 Feb 13 at 9:03 am
Sinc – remember this http://catallaxyfiles.com/2011/06/15/a-modest-savings-proposal/
Samuel J
1 Feb 13 at 9:04 am
And the unfunded superannuation and pensions these people entitled themselves to! Add their peers working for the UN and all the other governments and bureaucracies and we have a significant number of totally unproductive people living off the rest of us.
I’m reading Robert Wilton’s eyewitness account of the Russian Revolution and, really, things have not changed one iota since 1917. If anything it’s got worse in a sense of production and people on welfare.
Louis Hissink
1 Feb 13 at 9:13 am
It’s also interesting to note that from 30 June 1998 to 30 June 2012, the number of Commonwealth (APS) Senior Executive Service (SES) employes increased from 1567 to 2786, by my calulations an increase of around 76%.
What is even more interesting is that in 2009, the Government, concerned about the impression that this blow out might make on the taxpayer, imposed a cap on SES numbers, with agencies having to come to the APSC to argue for an increase. Despite these central controls, in the last three years SES numbers have still increased by 220. More significantly, the number of SES Band 3 employees – the really big earners – increased from 116 to 135, or by 16%!!
BTW, to the best of my knowledge and belief, since its inception in 1984, no SES empoyee has ever been successfully terminated for inefficiency.
Des Deskperson
1 Feb 13 at 9:15 am
As well as mission creep and job classification creep, some of it is tantamount to corruption, such as finding cosy jobs for mates like ex ACTU bosses:
“In October, Liberal MP Jamie Briggs speculated in Parliament that Mr Lawrence was bound for the industrial relations commission, in one of the two new vice-president roles.
”He has a bit of time on his hands, is looking around for new opportunities – and guess what pops up? There we are: vice-president of Fair Work Australia. It pays pretty well – $350,000 to $360,000 a year with a car, superannuation, a nice office, two associates,” Mr Briggs said.”
Read more: http://www.smh.com.au/national/lawrence-tipped-for-fair-work-bench-20130102-2c5mz.html#ixzz2JaxaivCd
I haven’t been able to find any announcement of who the lucky two new v-ps are, but watch this space.
No-one has satisfactorily explained why they need two more of these privileged, taxpayer funded positions.
johanna
1 Feb 13 at 9:40 am
Canberra [or insert state capital of choice], employing the otherwise unemployable for 100 [or insert the appropriate the length of ineptitude and indolence] years!
JakartaJaap
1 Feb 13 at 10:12 am
Creighton also has an admirable solution to the problem flagged by Steve K in his Quadrant on line article today where he pointed to the vote buying by politicianns
John Stuart Mill suggested that democracy would eventually implode under such conditions. “The receipt of (welfare) should be a peremptory disqualification for the franchise. He who cannot by his labour suffice for his own support, has no claim to the privilege of helping himself to the money of others,”
alan moran
1 Feb 13 at 10:43 am
Not the same in the US
Annual salaries in US Dollars:
Obama – $400,000
Biden – $230,700
Senate Leadership
Majority Leader – $183,500
Minority Leader – $183,500
House Leadership
Speaker of the House – $212,100
Majority Leader – $183,500
Minority Leader – $183,500
Rank-and-file of the House and Senate – 174,000
Civil Service
Executive Level I makes $199,770
Now if the topic is the bloated size of the US Government and the sheer amount of those oxygen thieves….
Zatara
1 Feb 13 at 10:46 am
The NBN also has the appearance of upper class welfare, but at least it is not a burden on the federal budget- right?
But, oh dear, the ACCC is now demanding that NBNCo provides by 12 February its disaggregated capital and cost forecasts for each year until 2040.
Government funding of the NBN can only be treated as a federal budget investment, if NBNCo demonstrates that it will recover its costs, and provide an equitable financial return to the government with a properly discounted net present value.
The implied threat is that the $4.6 billion in equity that the government will inject into NBNCo this financial year may have to be factored into the budget deficit.
Now where could the Gillard government find a quick $4 billion to rebalance the budget?
Leo G
1 Feb 13 at 11:15 am
“I’d agree with getting rid of the childcare subsidy (the rest just goes without saying) ”
Why not get rid of the subsidy and simply make it tax-deductible? After all, it is essentially a work-related expense.
The Beer Whisperer
1 Feb 13 at 11:22 am
All the Chinese would have to do to lose a war against the West is drop/carry small nukes into the centre of our major cities on a weekday. The loss of all these parasites would free our respective economies to such an extent that we would be undefeatable.
Winston Smith
1 Feb 13 at 11:28 am
Another little example from Canberra – a city of 300K – the boss of our water/electricity utility is paid ~$650K. Does anybody know of a similar earn around the country for a similar sized utility ?
Warwick Hughes
1 Feb 13 at 11:35 am
Actually I recall from Albert Speers book (Inside the Third Reich) that after the disasters of Stalingrad and the need to make up the losses, he told the industrialists they knew how much tax they should be paying, and to hand over the remaining men in their offices to fill the Wehrmachts depleted infantry divisions.
They did so, and tax payments rose.
Winston Smith
1 Feb 13 at 11:38 am
“BTW, to the best of my knowledge and belief, since its inception in 1984, no SES empoyee has ever been successfully terminated for inefficiency.”
Not necessary. Find the most recent jobs and make them redundant. Small redundancies, just fold the functions back into pre-existing jobs and watch how fast the new owners find most of the functions now in their responsibility to suddenly become “unnecessary”.
It should be like shooting fish in a barrel. After all, how many lowly ranked public servants are going to kick up a stink in defence of their highly paid managers? Especially when it is stressed that these redundancies are in lieu of their own. Too many chiefs, not enough indians. Time to wave goodbye to a few thousand chiefs, i reckon.
The Beer Whisperer
1 Feb 13 at 11:41 am
That goes some way to explaining the extortionate utility bills.
ACTEW is a disgrace.
Rabz
1 Feb 13 at 11:53 am
‘Small redundancies’
I wish it were that easy. Inefficient and/or unwanted SES employees who are dissatisfied with the package they are offered can make themselves difficult for quite some time, all on full salary. Like every other challenge in the public sector, it’s easier to make the problem go away by offering large sums of money than by dealing with it.
It’s also important to remember that the SES is a caste, and senior members tend to protect their fellow initiates, so they are unlikely to want to set a precedent by agreeing to a policy of small redundancies, I mean, it might happen to them!!
I’m sympathetic to BW’s proposals, but it would take a great deal of will and angst at the political level to implement them.
‘the boss of our water/electricity utility is paid ~$650K.’
I assume that’t Mike Costello, another Labor example of, as Johanna above puts it ‘finding cosy jobs for mates’.
Des Deskperson
1 Feb 13 at 12:19 pm
The last really incompetent public servant, on 140K, I came across got her comeuppance. Raised a level, 160K, and sent to head office to run the photocopier.
face ache
1 Feb 13 at 12:20 pm
To be fair, she had “issues”.
face ache
1 Feb 13 at 12:23 pm
Louise 9.13AM. A fact or two here. being an ex Public Serpent I know we do not get “free” pensions. Super deductions were taken every fortnight, no option. Tha fact that governments of all persuasions did not bank this money is not the fault of those who paid it. federal public servants DO pay tax on their pensions, unlike the state ones and many in the private sector. if you can tell me where I can get my pension tax free please tell me. I will have the removalists in tomorrow.
Mother G
1 Feb 13 at 1:34 pm
Yes definitely, so long as they get rid of all the other idiotic, cost increasing, red tape as well.
In fact, I think that tax deductiblity should be applied to lots of things. EG. out of pocket health and education expenses, regardless of current income.
Either that or simply a 20% flat tax rate that kicks in at say $40K, then again, I always was a bit of a dreamer.
MattR
1 Feb 13 at 1:39 pm
Productivity Commission report a 54% increase in rubber stamp usage within the Public Service. Performance bonus’s and OAM’s to be announced Sept 15th. PM advises to keep up the good work till then.
News at 11.00
Splatacrobat
1 Feb 13 at 1:53 pm
Mother G,
Public servants may “appear” to pay tax, but it’s basically churning by government.
Only the private sector pays tax – the rest consume it, and that’s basically the problem at its simplest.
PS pensions are free, though the tax you pay on them is but a bit of state sleight of hand to create revenue in a creative fashion. Taxing public servants is basically all about reducing their actual income without them realising it.
Louis Hissink
1 Feb 13 at 2:28 pm
Adam Creighton wrote a similar article last May.
Flannery’s salary is chicken feed compared to the head of the Department of Climate Change.
Admittedly fighting climate change is a taxing task.
manalive
1 Feb 13 at 5:00 pm
I assume you meant “progressive”, Sinc.
On the broader question, this is just Parkinson’s Law at work. No bureaucracy in history has not grown similarly. A large external shock is always needed to redress the excessive growth.
Large private companies undoubtedly suffer from the same problem.
Mother Hubbard's Dog
3 Feb 13 at 11:45 am