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Wednesday, 22 June 1994
Page: 1830

Senator KERNOT (Leader of the Australian Democrats) (10.48 a.m.) —The Training Guarantee (Suspension) Bill is one of the first of a batch of bills to flow from the white paper on employment released early last month. It is a bill which the Australian Democrats support. As my colleague Senator Bell has outlined, this was one of the aspects of the white paper which conformed with the recommendations contained in our budget proposals to the government which we released in March. In those proposals we too called for the suspension of the training guarantee for three years and its replacement with a 10 per cent training investment allowance. The reasoning behind this was simple: we felt that the big stick approach to encouraging training, as represented by the training guarantee levy, had gone as far as it could have. It was time to attempt a carrot approach through the use of the taxation system.

  As the training guarantee when it was introduced was an experimental piece of legislation, breaking new ground, I think it is appropriate to review its operation and to explore alternative means of improving our still very poor vocational record. Senator Bell has dealt with the history of the guarantee and the Democrats involvement in that, but I want to add to the debate our view that this bill and the white paper package in general do not go far enough to encourage training and to reduce employment on-costs. Unfortunately, it is typical of the entire white paper, which was, in typical fashion these days, very big on rhetoric, very big on hugely exaggerated spending figures, but very small on real commitment and needed reform.

  The Prime Minister (Mr Keating) laid on the rhetoric about the $6.5 billion of so-called new spending in the white paper over the next four years. We all recall his trumpeting of a $1.1 billion figure for this year and a $1.7 billion figure for the year after. He described this as his helping hand to the unemployed, a demonstration of Labor's great commitment to the unemployed and the less well off. `Ben Chifley,' he said, `would have been proud.' Ben Chifley, honest family man that he was, would not have put his name to such a deceptive set of figures.

  The fact is that in the first full year of the white paper, 1995-96, this government will not be spending more; it will be spending less in real terms on employment-related programs than it did in this financial year. Instead of an extra $1.7 billion, on the most optimistic projection there will be $70 million less spent in 1995-96 on total employment-related programs. These include labour market programs, the training and employment services areas, science, manufacturing industry and income support programs. If we include infrastructure spending, the situation is even worse. In 1995-96 the government will be spending $1.3 billion less in real terms than in 1993-94. That rises to $1.5 billion dollars less in 1996-97.

  The government in its white paper recognises the importance of infrastructure in generating employment, especially in regional Australia. Yet its spending on infrastructure will fall by almost $1 billion in the first full year of the white paper's operation. Take away the first big day's headlines and look at the reality of the figures, and it is less, not more. In the worst possible case, assuming employment growth meets the 1993 budget estimates of 2.5 per cent and 2.75 per cent for the next two years, the white paper looks pretty paltry indeed. In fact, it results in $2.3 billion less being spent on employment-related programs in 1995-96 and $3.3 billion less in 1996-97. Given that employment growth is now slowing, this second scenario is not as extreme as it might first appear.

  If we turn to the current year, on the most optimistic projections available the additional spending in real terms on employment-related programs is just $254 million. No-one is going to say that we do not want that. The point I am making is that this is a quarter of the $1.1 billion that the Prime Minister has been trumpeting around this country. If we include infrastructure, the government will be spending $437 million less this year than last year in real terms.

  How has the government managed to get away with this fiddle? The so-called new spending on programs in the white paper is not new spending over and above what is to be spent in 1993-94—there is a little bit of cleverness going on here; it is new spending against the forward estimates published in the 1993-94 budget, and those estimates were always quite a bit unrealistic, I think. They appear to have been set not at realistic expenditure goals for the following year but rather to lend some support to the government's contention that it could meet its deficit reduction strategy of one per cent by 1997-98.

  Instead, we have total expenditure in 1994-95 that is $1 billion higher than the forward estimates projected and—here is the rub—precious little of that is going into employment related programs. Take training, for example. Increasingly, governments all over the world recognise that employment and economic prosperity depend heavily on the skills of the work force and this Labor government has recognised that. But according to the 1994-95 budget papers, notwithstanding the new initiatives in the white paper, spending on vocational training will fall by $5 million in real terms in 1994-95 and will fall by $19 million in real terms in 1995-96.

  The white paper contains many training initiatives which the Democrats welcome. The youth training initiative, for example, has a bit of a resemblance to the youth guarantee proposal announced by us two years ago and we welcome suspension of the training guarantee, but these initiatives, it appears, are to be paid for by taking from other vital training programs.

  In our budget proposals to the government we called for an overhaul of the taxation system to encourage investment in human capital. The government provides a $3 billion incentive to invest in physical capital but allows a $6 billion tax disincentive to invest in labour. We argued to the government that the abolition of the training guarantee should be combined, not just suspended or abolished outright, but that we should do something constructive. We should combine this with the phase-out of payroll tax to even up the tax system choice between investment in capital and investment in labour. We demonstrated, we believe, that it was possible to suspend the training guarantee to provide tax incentives to encourage training and to phase out payroll tax without affecting the budget deficit.

  With suspension of the training guarantee we are less than halfway there to a tax system which is more friendly to employment. With the clear aversion states such as Western Australia, New South Wales and Queensland have shown to payroll tax in their recent budgets, I really believe that the federal government could and should have made a reasonable offer to phase out the current tax and replace it with a new growth tax sharing arrangement. We believe that up to 200,000 new jobs could have been funded through a different tax mix.

  In summary, we will support this bill even though, like the white paper, it does not go anywhere near far enough to addressing the overall restrictions and tax induced on-costs on labour. We will be closely assessing all of the 40-odd pieces of legislation that will come to the parliament out of the white paper.

  The white paper really is a bit of a snow job. We will be seeking to make sure that the Prime Minister does in fact provide a helping hand to the unemployed without using his spare hand to raid the pockets of the unemployed and others. Bills such as those taking $96 million out of the pockets of up to 100,000 unemployed people through a tougher means test and outrageously excessive penalty clauses will not attract our support.

  Unemployment will not go away just because the government says it has addressed the problem, particularly when it says it has addressed the problem in such a dishonest way. There are still people suffering out there and they deserve better treatment than the rhetoric which has been exposed as fiddling the books and fiddling their pockets.