The lovechild of Prime Minister Tony Abbott, his $5.5 billion a year Paid Parental Leave (PPL) Scheme, is being condemned from every corner.
Last month, The AFR reported that former Treasury Secretary, Ken Henry, cautioned against the Scheme, questioning whether it was appropriate as the Federal Budget comes under increasing pressure as the nation’s population ages.
And shortly afterwards, The AFR also reported that former Treasurer, Peter Costello, had advised Hockey not to support the PPL Scheme, claiming that it was “excessively expensive at a time when the government was looking for structural savings”. In 2010, Costello also described PPL as “silly”, noting that it would reduce the competitiveness of Australian business, whilst contravening the Liberal Party philosophy of low taxes. In a similar vein, former Howard Government minister, Peter Reith, described PPL as “one of the ‘bad decisions’ Mr Abbott made in the cause of defeating Labor”, whereas the Commission of Audit has reportedly criticised the Scheme in its initial report to Government.
Now members within the Coalition Government are taking a stand against the PPL, urging Prime Minister Abbott to scale down the scheme in the interests of sharing the burden in the budget. From The AFR:
Sources said a group of Liberal senators, including Cory Bernardi, Ian Macdonald and Dean Smith, have told colleagues they either harbour deep reservations or have resolved not to support the scheme when it comes before Parliament later this year…
“There are enough [Coalition members] to stop it,’’ said one senior Liberal of the plans by the senators. “If he brings it up now, he will lose by his own people”….
[An unnamed Coalition member]… agreed the generous scheme sent a poor message in the context of the government’s budget narrative and described as “a crock of shit’’ recent claims by Mr Abbott and Treasurer Joe Hockey that the measure would act as a return-to-work incentive…
“It doesn’t encourage women back to work. It feeds the entitlement mentality,’’ he said.
The scheme has always been unpopular with the Nationals…
If the scheme is defeated by either the Greens or the growing Coalition revolt, there would be a loss of face for Mr Abbott but general joy in much of the rest of the Coalition.
There is no getting around the fact that the PPL Scheme is the wrong policy at the wrong time.
As argued beautifully by The Guardian’s Greg Jericho last month, the PPL Scheme, despite its huge cost, will likely “fail to achieve any significant lift in women’s participation in the workforce”, while at the same time necessitating cuts to spending on childcare, “which is much more likely to achieve this aim”:
…the Productivity Commission found that PPL schemes like Abbott’s with “full replacement wages for highly educated, well-paid women, would be very costly for taxpayers and, given their high level of attachment to the labour force and a high level of private provision of paid parental leave, would have few incremental labour supply benefits”…
[The OECD] compared spending on PPL and childcare and noted that “policies to foster greater enrolment in formal childcare have a small but significant effect on full-time and part-time labour force participation – and these effects are much more robust than the effects of paid leave or other family benefits”.
This reflects the work of the IMF last year, which found that “if the price of childcare is reduced by 50 per cent, the labour supply of young mothers will rise on the order of 6.5 to 10 per cent”…
And given the government has placed spending limits on any new childcare policies, it is a case of their constraining the most likely performer in order to blow money on a policy much less likely to succeed.
PPL also undermines the Government’s pontifications about the need for “shared sacrifice’ to bring the Budget back to surplus. It is much harder to sell cutbacks in welfare spending and increases in taxes and charges while turning a blind eye to egregious schemes like PPL.
Abbott should lose the stubbornness and take a leaf from his political master, John Howard, who knew when to execute a dignified reversal.
