Government Social Welfare Review: Working For or Against

Wednesday 22 January 2014 @ 10.33 a.m. | Legal Research | Taxation

A highly reported Oxfam briefing paper entitled "Working For The Few - Political capture and economic inequality" was published on 20 January 2014. The paper's primary purpose was providing information for the World Economic Forum in Davos  Switzerland this week. The report has drawn a great deal of comment for the key point it makes that effectively 85 people in the world control the same amount of wealth as half the world's population or in a more statistical form the wealth of 85 people is comparable in size with that of 3.5 billion people.

The Oxfam paper points out that: "[E]conomic inequality is rapidly increasing in the majority of countries". It explains that the wealth of the world is largely divided in two groupings with almost half the wealth going to the richest one percent and the other half to the remaining 99 percent. The paper cites this as the major risk to human progress identified by the World Economic Forum.

As the Oxfam paper says:

"Extreme economic inequality and political capture are too often interdependent. Left unchecked, political institutions become undermined and governments overwhelmingly serve the interests of economic elites to the detriment of ordinary people."

The Oxfam paper makes interesting reading as the Davos meeting is being attended by the Australian Prime Minister as well as a group of Australian business people and follows a recently announced Welfare Review by the Australian Social Services Minister. A review which it seems is to be primarily targeted at "unemployment benefits and disability pensions" and which will exclude "the age pension and family tax benefits".

Thus a welfare Review which seems to target the most disadvantaged welfare recipients, namely the unemployed and the disabled for cuts or changes while leaving other higher spending areas out of consideration.

The Social Services Minister in announcing the review is quoted as warning that the welfare system "risked becoming unsustainable" unless a ''broad'' review of payments worth more than $70 billion a year was undertaken. However, while putting this justification forward for the review, by excluding age pension (worth $36 billion last financial year "about half of all welfare spending") and Family Tax Benefits Parts A and B (worth $19 billion last year) the Minister is eliminating more than half of the $70 billion from consideration even before the review starts.

Further, the review seems to have its focus limited to the less advantaged part of the welfare system, those who only recently were acknowledged by all sides of politics and most welfare agencies as needing a boost income, namely those on "New Start Allowance" and the disabled. It seems the current government might not actually have the right part of the system under the microscope as it were; for example, if the government were concerned about the "sustainability of the system it might more productively consider reviewing the government's preferred Parental Leave Scheme which is estimated as adding as much as $5.5 billion a year to welfare expenditure or even looking at the other income sources of wealthier pension recipients.

The Sydney Morning Herald quotes Cassie McGannon of the Grattan Institute:

''There are big chunks of money under the age pension going to people who are relatively well-off.  .  .  . If we look at what the government pays out under the age pension, about half of it goes to households that have more than half a million dollars in assets.''

The approach being taken by the Government in its welfare review seems to amplify some of the points made in the Oxfam brief paper, in particular the consequences of widening the economic gap between the wealthiest and the poorest. As the paper says:

"When wealth captures government policy making, the rules bend to favour the rich, often to the detriment of everyone else. The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all."

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