Catallaxy Files

Watching the Supreme Leader, Kim Jong-un, mourning his father, Kim Jong-il, I get the sense that he killed his father just as Caligula killed his adoptive grandfather Tiberius.

Read the rest of this entry »

News Limited estimates that it has cost taxpayers $15 billion for the Prime Minister to retain her job. While not her money, it does give an indication of the value (to the Labor Government in any case) of retaining government. Would there be a price to the taxpayer too high?

It seems that China is going to resist any efforts from the European Union to charge a carbon tax on aircraft arrivals. Following the ruling of the European Court of Justice that validated the European attempts at this new form of protectionism, we have heard US officials criticising the ruling. But the Chinese reaction is much stronger; it seems unlikely that the Chinese will accept the EU decision.

I fear that we are headed for a significant trade war reducing living standards in all countries. The pretext will be the EU’s carbon tax, which is a hideous piece of legislation. But while this will be the catalyst, the pressures stored up from the GFC have added to protectionist sentiment. In short, the world is willing, wanting and waiting for a trade war. And it will get one.

Not a Christmas present I want. Can it be returned to the sender?

In John Kay’s recent article on Václav Havel, I was reminded of George Orwell’s Politics and the English Language

The appropriate noises are coming out of his larynx, but his brain is not involved as it would be if he were choosing his words for himself.

An apt description of phrases such as:

• moving forward
• we can do this when we say yes
• Labor says yes to Australia’s future
• here we acknowledge Australia’s first people, we acknowledge the traditional custodians of the land on which we meet
• There will be no carbon tax under the Government I lead
• Let’s get Australia back on track
• It begins with us
• Yes we can
• Incentivise is the one that does it for me

What are your choices for senseless slogans? Perhaps we should all read Modern Manglish (see also Scruby’s article in the Australian).

In 1946 Orwell wrote these words – as true today as in his time

This mixture of vagueness and sheer incompetence is the most marked characteristic of modern English prose, and especially of any kind of political writing … prose consists less and less of words chosen for the sake of their meaning, and more and more of phrases tacked together like the sections of a prefabricated henhouse.

As of today, 17 December 2011, Julia Gillard has been Prime Minister for 541 days. This makes her presently the 8th shortest serving Prime Minister of Australia (out of 27 Prime Ministers).

If she can hang on to 13 January 2013, she will equal Kevin Rudd’s term of office.

Here are some other dates where she will match the term in office of previous prime ministers (counting those with multiple terms as a single longer duration) if this Parliament runs its full duration:

• McMahon on 21/3/2012
• Holt on 16/5/2012
• Scullin on 7/9/2012
• Rudd on 13/1/2013
• Barton on 16/3/2013
• Whitlam on 30/5/2013

I was amused to read in the Australian about moves to bring back Kevin Rudd on the basis of Wayne Swan’s performance

And his budget process is farcical. Finding savings by increasing the efficiency dividend is the last refuge of the economic scoundrel. It’s not a hard decision,” the source said.

Was this ‘source’ complaining in 2008 under Prime Minister Rudd when there was a one-off increase to the efficiency dividend?

In fact the Rudd-Gillard Governments seem to have a love affair with the efficiency dividend.

In its first Budget (2008-09 in May 2008), in its ‘Responsible Economic Management’ section, the Government

applying a one‑off 2 per cent efficiency dividend to the departmental funding of most Government agencies to improve the cost effectiveness of the public sector, generating savings of $1.8 billion over five years (Budget Paper 2, 2008-09)

Then in this year’s May Budget (2011-12) there was a ‘temporary increase’ to the efficiency dividend

The Government will deliver savings of $1.1 billion over four years by increasing the rate of the efficiency dividend to 1.5 per cent in 2011‑12 and 2012‑13, and 1.25 per cent in 2013‑14 and 2014‑15, before reverting back to 1 per cent in 2015‑16. (Budget Paper 2, 2011-12)

Then in this year’s MYEFO, a further one-off efficiency dividend

The Government will apply an additional one-off efficiency dividend of 2.5 per cent in 2012-13 to departmental appropriations excluding departmental capital funding. This measure will not apply to: public sector entities already exempt from the ongoing efficiency dividend, the Australian Communications and Media Authority or to specific cultural agencies; courts and tribunals; and Aboriginal and Torres Strait Islander organisations exempted by the Government. This will result in savings of $1,490.0 million over the forward estimates.

Yes, once again lazy budgeting.

Do Treasury and Finance consider that ad hoc one-off changes to the efficiency dividend are to be preferred than a predictable efficiency dividend? Should the Government disclose whether there are costs to unplanned changes to the efficiency dividend (which must make it difficult to plan an agency’s future budget?

One-off arbitrary changes to the efficiency dividend are hardly efficient.

Surely further evidence that increases to Ministerial salaries and to departmental secretary salaries are not justifiable? Surely Treasury and Finance can do better in proposing savings measures than one-off increases to the efficiency dividend?

As a result of these decisions, the efficiency dividend schedule has been:

2008-09: 2 per cent

2009-10: 1 per cent

2010-11: 1.5 per cent

2011-12: 1.5 per cent

2012-13: 4 per cent

2013-14: 1.25 per cent

2014-15: 1 per cent

This means that (in real terms) $100 in expenses in 2007-08 would fall to $88.34 in 2014-15.

The same end result could have been achieved by an efficiency dividend around 1.75 per cent per year from 2008-09 to 2014-15. Not only would this have been more predictable, allowing planning and better management of the application of the efficiency dividend, but it would also continue at the higher predictable rate beyond the forward estimates.

In conclusion, the efficiency dividend is lazy budgeting. But arbitrary one-off changes to the efficiency dividend is super-lazy budgeting.

With the Government and the Parliament wiping their hands of responsibility for parliamentary salaries to the ‘independent’ Remuneration Tribunal, it is time to shed light on that organisation. The powers of the organisation were expanded through the Remuneration and Other Legislation Amendment Act 2011 – among other things this allows the Remuneration Tribunal to set the base pay of parliamentarians rather than making a recommendation to the Parliament.

The Tribunal currently comprises three members: John Conde AO, John Prescott AC and Jillian Segal AM. All have long experience in the private sector. Conde has been a member of the Tribunal since 1998. Tribunal members are appointed by the Governor-General on the advice of the Prime Minister. Hence claims to true independence need to be taken with a grain of salt – if Bob Brown was the President of the Tribunal there would have been a different outcome.

As noted in noted in Judith’s post, the Tribunal itself appointed Egan Associates to undertake studies of Parliamentarian,  Departmental Secretary, and specified statutory offices.

This is the crux of the problem – the Remuneration Tribunal has abrogated its responsibility. If Conde, Prescott and Segal (in conjunction with the Tribunal’s own secretariat) cannot of their own accord work out appropriate remuneration arrangements, without wasting taxpayers’ money on a consultancy, they should resign and hang their heads in shame. It is not only an abrogation of their responsibility and a waste of taxpayers’ money, but also inappropriate to appoint Egan to conduct such a study.

As I have argued previously, we should pay our public servants - and our politicians and judges – systematically less than ‘equivalent’ positions in the private sector. I do not want Australia to copy France, where 70 per cent of graduates aspire to a public service career; I want graduates to aspire to the private sector, generating wealth.

Therefore it is inappropriate to make comparisons to private sector salaries, resulting in large remuneration increases.

At this juncture, the Tribunal has not formally made new determinations, instead issuing three statements of intent. In particular, the Tribunal wants changes to Parliamentary superannuation arrangements:

The Tribunal will not determine parliamentary base salary at the level proposed in its Report while it results in windfall gains in the pensions of retired parliamentarians, however justifiable that proposed base salary may be for current parliamentarians (page 3 of the Statement)

However, in proposing a large increase to the base pay of parliamentarians, the Tribunal does not seem to have segregated those who enjoy the old superannuation scheme, and those who enjoy access to the lifetime gold pass, from newer politicians without such access.

If the Tribunal wants to increase the base salary to ‘cash out’ entitlements such as the gold pass, and to not make a windfall gain to current MPs who are on the old superannuation scheme, it should be a choice. Existing politicians with such benefits should be given an option: stay with the status quo (including the current base pay), or forego the gold pass, and the link of superannuation to base pay, and in exchange get a higher base pay.

As it is, however, it seems that while the Tribunal might ensure that increases to the base pay do not flow through to retired MPs, the Tribunal has done no such thing to quarantine the increases from existing MPs in receipt of such benefits.

If the purpose of higher salaries is to attract better MPs (which I think is a fallacious argument), surely the increase should not flow to existing MPs who have accepted office on current remuneration arrangements?

The same also applies to departmental secretaries and other specified statutory offices.

I think it is time to reform the Remuneration Tribunal. In particular, it should comprise former public servants (rather than the private sector) and salaries be set at reasonable levels (rather than being comparable to the private sector).

Taking into account the security of the positions, the very generous superannuation schemes (usually 15 per cent or more), and the prestige of the positions, public servants and politicians are at an elite level in society. Many, if not most, are paid well above (in a total remuneration sense) what they would earn in the private sector. Exceptions include Malcolm Turnbull, Kevin Rudd and Peter Garrett. But for the rest – the total remuneration package (and its associated monetary and non-monetary benefits (which include for instance post career positions opened up because of work in the public sector) –  are probably well above what they would have earned if they had eschewed the public sector and worked in the private sector all their lives. I doubt that many departmental secretaries would have been CEOs of companies had they pursued an purely private sector career.

In conclusion, the Remuneration Tribunal has erred. Public sector salaries (judges, politicians and public servants) should be cut. This is in line with my previous proposal of a an across the board 10 per cent cut in public sector salaries. I think that the quality of public servants and politicians is invariant to salary over a relatively large range around current levels. Higher salaries will not result in better public servants or politicians. We may as well cut salaries and get better value for money from our current spend.

Apart from the expected (and long overdue) departure of Nick Sherry, it doesn’t appear that any other frontbencher will lose his or her ministerial (parliamentary secretary) salary. At this rate the entire Labor backbench will move to the frontbench.

I thought the best line from the Prime Minister was:

I have therefore decided to strengthen our early childhood education team. That team currently consists of Peter Garrett, Kate Ellis and Jacinta Collins. I’ve decided to strengthen that team with the appointment of Brendan O’Connor

Apparently childhood education is so complicated that it requires four parliamentary frontbenchers.

Is this the way of the future? Instead of a Minister being charged with a responsibility, a team of ministers takes it on. And thus goes ministerial accountability.

Now that humans can predict and control climate change, the next logical step is to predict and control the planet as a whole. Enter FuturICT a visionary project costing the European Union €1 billion over 10 years. And what will we get for that €1 billion?

Revealing the hidden laws and processes underlying our complex, global, socially interactive systems constitutes one of the most pressing scientific challenges of the 21st Century. Integrating complexity science with ICT and the social sciences, will allow us to design novel robust, trustworthy and adaptive technologies based on socially inspired paradigms. Data from a variety of sources will help us to develop models of techno-socioeconomic systems. In turn, insights from these models will inspire a new generation of socially adaptive, self-organised ICT systems. This will create a paradigm shift and facilitate a symbiotic co-evolution of ICT and society. In response to the European Commission’s call for a ‘Big Science’ project, FuturICT will build a largescale, pan European, integrated programme of research which will extend for 10 years and beyond.

And why do we need to do this?

Thus now is the time to create a paradigm shift moving from a focus on the system components and their properties towards evaluating their interactions. These interactions are often hard to measure but create collective, emergent dynamics which are characteristic of strongly coupled systems.

So rest assured, dear reader, that while it appears the EU cannot control the financial and economic crisis currently affecting the continent, and while the future has dropped its ‘e’ , once the EU understands the

planetary nervous system

the European way will be our way. Every error will be predicted before it occurs, and thus prevented, we will be able to live peaceful and meaningful lives just as the Planner desires.

And with this powerful technology, deployed by thousands of technocrats acting in our interests, we can echo the Prime Minister’s seminal words

Labor says yes to Australia’s future.

One of the consequences of increasing the base pay for politicians from $140 000 to $180 000 is a commensurate increase to the pension of retired politicians. Does Malcolm Fraser deserve a 28 per cent increase in his parliamentary pension? Thanks to the Remuneration Tribunal many of great and bad ex members of parliament will be having a special Christmas present.