Intergenerational report: call for smarter programs, tighter control

By Harley Dennett

March 6, 2015

Government agencies, and in particular Treasury, must start measuring and improving the efficacy of social output programs as they chew up increasing proportions of future spending, onlookers have warned following the release of the 2015 Intergenerational Report.

Dr Andrew Young from the University of New South Wales’ Centre for Social Impact says it’s disappointing to see a lack of analytical thinking on the expenditure side to match the analysis on the income side.

“The mission of Treasury is to improve the wellbeing of the Australian people based on objective and thorough analysis of options … Treasury just isn’t fulfilling that function,” Young told The Mandarin. “There’s no analysis anywhere of whether we can improve our productivity in social spending.

“Where is the data on wellbeing, however you want to define it? It’s very tangible in some ways. When senior Treasury officials convened a roundtable with not-for-profit CEOs on how we can improve productivity in social spending, absolutely the right question, I asked what the mission of government was? He said: wellbeing. I asked: where’s your data? He said: we don’t have any.

“You can see ad-infinitum predictions of demographics, economics, productivity and labor force participation, and that’s important, but we should be putting similar effort into the other side of this equation. We’ve got to get much more sophisticated than just assuming that having less money to spend equates to less outcome.”

“The government is now responsible for everything, and we’ve got to reverse that.”

Reform is needed, but the government currently lacks a cohesive strategy for how it will improve social outcome with less money, Young warned. But even with more than half of the federal expenditure on improving social outcomes, and 30-40 years of funding increases, we haven’t solved most of our important social issues.

“We’ve wasted the good years,” Young said. “The same disadvantaged communities 40 years ago are still today, and we haven’t invested in better ways to approach the issues. Our improvement in health, education, welfare for the last 40 years, on the whole, is nil. All we’ve done is, program by program, introduce a competitive tendering process and we know it doesn’t work. That’s what has to change.”

The future of constrained government income doesn’t mean the responsibility needs to fall to the public sector alone. Young says the key here is the relationship between government and community must change again, as it did 40 years ago when agencies took over more and more responsibility from community.

“We’ve made it very easy to rely on government, and we’ve done exactly the same for the not-for-profit sector. We’ve drummed innovation out of the sector. The government is now responsible for everything, and we’ve got to reverse that. It’s got to be a shared responsibility,” he said.

Education’s far-out forecasts

Grattan Institute’s Andrew Norton is sceptical that the forecasts are meaningful. In the education projections — the only section to see a net reduction in total expenditure — will nonetheless see growth in expenses per student.

“There’d be real scepticism about forecasts in 40 years time,” Grattan’s higher education program director told The Mandarin. “There are a lot of people who aren’t sure where they’re going to be in 2016, let alone 2054. It’s silly to predict fees that far out.

“Numbers going into higher education: it’s probably going to be increasing a little bit over the next decade or so, but we’re probably hitting the point where about as many are going as should go, and so that will stabilise. It will actually shrink a bit due to the ageing nature of the Australian population, so the demographic that makes up most of the students will be a smaller share of the total population in the future than it is now.

“We are seeing stabilisation of demand and that’s probably sensible given the current job markets for students.”

Norton says the tertiary education projections showing growth — not be in direct grants, but the lending to students — isn’t inherently problematic.

“It’s the cost of debt that won’t be repaid, and it’s the cost of holding tens of millions of dollars on the government’s books and only getting CPI interest on it. We need to do things to control the costs of the loan scheme because otherwise it’s going to spiral upwards in ways that are undesirable for taxpayers.

Norton has proposed three changes to how the loans are administered, and modelled that if implemented would substantially bring down the government’s costs of the loans scheme.

  1. Changing the threshold in which people start replaying their student debt. “This has been increasing in real terms quite a lot over time so fewer and fewer people are having to make a repayment.”
  2. Remove the waiver for Australians going oversees. “If you’re going oversees you’re not required to repay your student debt, we say you should repay if you’re oversees.”
  3. Remove the waiver for Australians who die without paying. “At the moment student debt is written off if you die, it’s quite unlike most other debts that are not written off, and we say that should be stopped. It’d be paid out of the estate like other debts.”
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