Both sides of politics lose the fiscal plot

Like the Coalition's carbon plan, Labor's education spending commitments are totally irresponsible. Julia Gillard may as well add that Australia will land a person on Mars.

Much of the criticism of the prime minister is shallow, hysterical and/or sexist, but she deserves everything she cops over this week’s education policy announcement.

It was little more than a political stunt – a desperate attempt to use rhetoric to try to regain some political initiative. After nine months of considering the Gonski review of school funding, nothing has been achieved beyond copying some of the report’s words into a press release.

Education is a state responsibility yet none of this plan was discussed with the states before this week, despite repeated urging in the Gonski report to do so.

Suddenly, despite endless rhetoric to the contrary, both sides of politics are throwing fiscal caution to the wind. Labor is Whitlamesque in its unfunded social ambitions, while the Coalition potentially has its own unfunded grand ambition with climate change.

It is plain that tax revenue will now decline with the terms of trade; the only question is how big the budget deficit is likely to be this year and beyond. Yet we now have a $6.5 billion education plan, an $8 billion National Disability Insurance Scheme, an extra $5 billion a year to house and process asylum seekers and $4 billion for dental care.

That’s $23.5 billion per year in extra spending before we even start the election campaign. These things are all worthwhile, but it’s totally irresponsible to announce them with no clue about where the money is to come from. The PM could add that Australia will land a person on Mars by 2050, or build a bridge to Tasmania – it’s meaningless without the funding.

Likewise the Coalition’s climate change policy. Two problems: Tony Abbott apparently wants to ditch the tax and keep most of the compensation, at a cost of tens of billions of dollars, and also wants to achieve the same result as the carbon tax and emissions trading scheme by "direct action” – paying companies to cut emissions, rather than taxing them when they don’t.

This plan is no less irresponsible than the government’s $23.5 billion list of big-ticket social items, something Abbott attempts to cover by extravagantly blaming the carbon tax for every problem the nation has.

Vague savings will be found to pay for the tax-free compensation and fill the so-called black hole, while the "direct action” plan to reduce carbon emissions will cost $10 billion year, according to the Coalition. That’s a guess, and laughably conservative – it’s said to be based on a price of $10 a tonne, which will be nowhere near enough.

So almost a year out from the election we have both sides of politics entering a period of falling tax revenues and probable deficit budgets with huge spending commitments. It’s enough to make you want to move to Spain, where at least the government is trying to get the deficit down.

As for this week’s education funding plan, it is but a wee shadow of Scotland’s School Act of 1696 – the first universal education funding policy.

A key part of the Gonski plan is for school funding to be determined by an independent statutory body it calls the National Schools Resourcing Body, which would be responsible to all state and federal education ministers.

That was not mentioned in the government’s announcement this week. Instead it proposes a "National Plan for School Improvement” which apparently puts the federal bureaucracy firmly in charge.

The School Act that was passed by the Scottish parliament in September 1696 required every parish to have a school – it was the first fully funded universal education law. It was also used to spread the Presbyterian religion and the English language, and to wipe out "popery” and Gaelic, especially in the highlands – a sort of National Plan for School Improvement.

But at least the 1696 scheme was fully funded. A new tax was imposed on heritors (the landed gentry) and life-renters to pay for a suitable house and the salary of a schoolmaster. If the tax was not paid, the debt was doubled, and if it still wasn’t paid, it was repeatedly doubled until it was paid.

By the end of the 18th century, Scotland’s literacy rate was higher than that of any other country. More importantly, the fact that even the poor were given free education meant that Scotland became Europe’s first modern literate society, with many great intellectuals as well as educated merchants rising up from the lower classes. At that time in Europe and Britain, only the upper class attended school.

David Gonski’s plan to remove educational disadvantage in Australia is only 316 years late, but at least it is based on a tried and tested formula that is too little employed these days.

The Gonski plan involves paying schools per student – a sort of voucher system where the money goes direct to the school, rather than the parents so they can spend it where they wish, which was an earlier, rejected, idea.

The additional $6.5 billion proposed by the government is more than the $5 billion suggested by Gonski, but there is no explanation for the difference. Moreover, that increased funding is not inherent to Gonski’s plan at all: it only results from the Gillard government’s announcement that "no school will be a dollar worse off”.

The important addition from Gonski is to increase funding where disadvantage exists. Talent and intellect is oblivious to social rank or wealth; it follows that a nation that provides equal access to education will end up with more smart people.

Doing this costs money, but it’s not enough on its own. As the Gonski report said: "In the panel’s view increased resources are necessary, but alone are insufficient to improve educational outcomes. …The real challenge is to make resource use more effective by building the capacity of school systems and schools to manage and deploy them with appropriate public accountability for what they achieve.”

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