Showing posts with label equity. Show all posts
Showing posts with label equity. Show all posts

Tuesday, March 9, 2021

Stuck with crappy aged care because Morrison won’t ask us to pay

I’m sorry to be so pessimistic but I fear that, in just its first week, the likelihood of the aged care royal commission’s report leading to much better treatment of our elderly has faded.

Within a day or two, Scott Morrison and his Treasurer, Josh Frydenberg, made it known they had “little appetite” for the commission’s plan to use an “aged care improvement levy” of 1 per cent of taxable income to cover the considerable cost of the reforms it proposed.

Morrison wants to be seen as delivering lower – not higher – taxes. I suspect the pair have realised that announcing an increase in tax on all income earners wouldn’t fit well with the costly third stage of their tax cuts, due in 2024, which will go mainly to high income-earners (like my good self).

Rather, the pair are murmuring about making the elderly contribute more from their own retirement savings towards the cost of their care by tightening the means-testing of aged care benefits. Maybe there’d be more and bigger “refundable accommodation deposits”.

Making the better-off old cover more of their own costs – including by taking account of the much-increased value of their homes – would be very fair. Too fair, you’d have thought, for the Liberal Party and its heartland.

Remember how the party’s “base” revolted against Malcolm Turnbull’s measures to restrict tax concessions to just the first $1.6 million of superannuation balances? Remember how hard well-off retirees fought against Labor’s plan to limit dividend franking credits at the last election, with the Libs egging them on?

Can you imagine how keen Morrison would be to have the tables turned in the coming election? He’d be the one seeking support for what Labor would quickly label his “retirement tax”.

Implementing the commission’s report would cost a minimum of $10 billion a year and probably a lot more. It’s impossible to imagine this government having the courage to raise anything like that much by tightening the means-testing of its own well-off supporters.

The commission’s report has been pushed aside before we’ve had time to understand what it’s proposing and why it would be so expensive. Whereas the present Aged Care Act was designed to help the government limit its spending, the report goes the opposite way, proposing a new act which enshrined every person’s statutory right to aged care of decent quality, with reasonable choice.

This would remove the government’s ability to limit the number of people receiving care, making access to free aged care “universal” – just as access to free public schooling has long been universal and, since Medicare, access to free care in public hospitals is universal.

In this context, “free” means the cost is covered by general taxation, not by user charges or means-tested charges. (Note that the freedom from direct charging would apply only to aged care proper. People’s food and accommodation costs would be means-tested. But refundable accommodation deposits would probably go.)

The report found that the root cause of the (often literally) crappy treatment of people in age care was the inadequate number, training and pathetic pay of aged care workers (almost all of them women). Properly done, almost all the increased cost of aged care would end up in the hands of these women.

In principle, it would be perfectly fair to cover the cost of better, universal aged care with a tax levy paid by all income-earners. We’d be paying for aged care the way we’ve always paid for the age pension and much else – by a “generational bargain”.

It’s fair to ask the present generation to pay for the retirement costs of the older generation because the present generation will be old themselves soon enough. When they are, their retirement costs will be paid for by the generation coming behind them. In the end, every generation pays and every generation benefits.

But that’s just in principle. In practice, the Grattan Institute has shown that successive governments – particularly the Howard government – have reneged on the intergenerational bargain by changing the tax and welfare system in ways that favour the old and penalise the young.

Tax concessions on super are now so generous that few retirees pay any income tax, no matter how well-off. As my colleague Jessica Irvine has shown, tax and welfare concessions to existing home owners have made homes such a desirable investment that a growing proportion of the young will never be able to afford to join the charmed circle.

The young bear the brunt of our willingness to live with high unemployment and underemployment and our unwillingness to regulate the gig economy. And the young pay far more for their higher education than earlier generations (and now those with the temerity to do an arts degree pay double).

In the face of this unfairness, the Grattan Institute’s Brendan Coates has sensibly proposed that the cost of fixing aged care be covered by reducing super concessions to higher income-earners, but I doubt Morrison’s game to try that one on his base – or the voters.

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