21 October 2015
ACOSS and the State and Territory Councils of Social Service today released a statement on reform of the federation based on legislated ‘community service guarantees’ in areas of shared responsibility to ensure universal access to affordable essential services for people across the country. The statement also sets directions for tax reform to help pay for these guarantees.
“A basic duty of governments is to provide certainty for people that when they need a doctor, home care, or schooling for their children, those services are available and of good quality regardless of their income and where they live. The present federal system in Australia fails to provide that certainty. Federation and taxation reform are needed to guarantee access to essential services into the future”, said Dr Cassandra Goldie, ACOSS CEO, speaking on behalf of the Councils.
“Essential services for the community must be available to all. People should also know that if they fall on hard times, for example if they lose their job or become homeless, they will get the support they need until they are able to provide for themselves.
“We know that government budgets are coming under immense pressure. The answer is not to cut or withdraw vital health, education and welfare services, nor to shift their cost to the public. Instead we should improve the cost effectiveness of services and strengthen the revenue base.
“To give people certainty that essential universal community services will be there for them, we propose that where public funding for these services is shared between governments, it should be legislated in the form of ‘community service guarantees’.
“Federation and tax reform should be coordinated so that the revenue base is strengthened at the same time that community service guarantees are introduced. This would help to secure public confidence that increases in public revenue will be put to use to fund essential community services, and that this funding cannot be readily taken away in future.
“Essential community services should be funded mainly through the tax system, according to people’s ability to pay. To do this, we need to plug the gaping holes in the public revenue base.
“One option we propose to fix this problem is to earmark tax revenues to expenditure in community services. For instance, revenue from strengthening of the Medicare Levy base by closing loopholes in the personal income tax system, together with reforms to the tax treatment of superannuation for people over 55 years old to future health care and NDIS services.
“This would ensure a good fit between future growth in spending and revenues as the population ages, and is a much fairer alternative to higher user charges or increases in regressive taxes to fund health care.
“All options to strengthen the tax system should be on the table but we should not start the conversation with a higher GST. This is one of the last options that should be considered to provide the increased revenue governments will need.
“A better starting point for tax reform to fund services such as health care is reform of income tax to curb tax shelters and broaden the base of the personal income tax system, such as through responsible reforms to superannuation, capital gains tax discounts, negative gearing, and private trusts and companies. We welcome the fact that they are once again part of the tax reform discussion.
“Our statement also calls for reform of tax bases to provide more revenue certainty for State and Territory governments. Options include strengthening Land and Payroll taxes, and replacing inefficient State taxes such as insurance taxes with more efficient ones.
“The Federation and tax reviews offer an opportunity to guarantee our essential community services, and to pay for them in a way that is fair and sustainable. We look forward to working with all levels of government, business, unions and the community to achieve this,” Dr Goldie said.
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Fit for purpose: a federation that guarantees the services people need:
A framework for reform from ACOSS and State and Territory Councils of Social Service
- Community service guarantees would specify a set of services that are available to all who need them regardless of income or where they live.
- The Commonwealth Government would be responsible for ensuring that guarantees and related outcomes are achieved, while State and Territory governments would be responsible for planning and delivery of the services.
- Costs would be shared according a formula set in legislation – not by administrative fiat.
- In return for these funding guarantees, State and Territory Governments would be required to provide services in a cost effective way, for example through investment in prevention and health promotion.
- We already have a legislated guarantee for access to doctors through Medicare and in some areas for disability services through the NDIS. We propose to extend this principle to other services such as home care, hospitals, schools, and affordable housing subsidies for households with low incomes.
- Funding arrangements for community services should be pragmatic and fit for purpose. Reform in this area should be free of ideological assumptions: for instance, that private is more efficient than public and that costs will be reduced without sacrificing quality if governments put all services out to tender.
- Gaps in the revenue base need to be filled in order to pay for essential community services into the future. This is a better way to fund future services than user pays models or consumption tax increases. Reform of income tax is a priority to curb tax shelters such as superannuation, capital gains, negative gearing, and private trusts and companies.
- An increase in the GST would fall disproportionately on people with low household incomes. The GST raises 7% of income from the lowest 20% of households compared with 3% from the top 20%. A higher GST would require substantial compensation for people on low and middle incomes, which would reduce the funds available for community services.