THE bureaucratic proposals for spending cuts made public by Mr Howard seem to confirm that there are relatively few painless cuts of the "waste and duplication" variety left.
However, they also point to some of the substantial savings available from the more careful targeting of government assistance and the use of moderate user-charge -- if politicians are prepared to pay the political price.
Just tightening the income test on AUSTUDY, means-testing nursing home benefits and increasing patient contributions under the pharmaceutical benefits scheme are estimated to save well in excess of $700 million over four years.
And that's just scratching the surface of the savings available.
The reduction of Medicare subsidies for the hospital care of middle- and high-income earners, and the introduction of a modest co-payment for medical services could save the Government large amounts of money.
Of course, some of the saving would be merely pushing expenditure from the public to the private sector, and it might not result in improved efficiency or even a substantial increase in the level of national saving in the short term. However, some of the savings would be real.
The key would be to extend the co-payment to pensioners, who are the largest consumers of medical services. As with the introduction of the charge on pensioners' prescriptions, the co-payment could be offset by an increase in the pension to ensure that no pensioner was left financially worse off.
The saving would occur because pensioners would cut unnecessary visits to the doctor.
I have estimated that the introduction of a $5 co-payment with a $400 annual safety net could save the Government in excess of $1 billion a year.
Similarly, further reductions in the level of subsidies for pharmaceuticals (offset in the case of pensioners by an increase in the pension) could produce genuine savings by reducing the unnecessary use of drugs in general, and of the new, more expensive drugs in particular (doctors would have greater incentive to prescribe generic drugs where these were appropriate substitutes).
Whether pushing middle- and high-income earners into private insurance would produce significant gains in efficiency would depend very largely on the behaviour of the private health insurance industry. However, there are a number of reforms to private health insurance that, if implemented at the same time, certainly would encourage greater efficiency.
There are also big savings available in the area of tertiary education, especially in the longer term. Apart from tightening the means test for AUSTUDY in the short term -- and abandoning its policy of reducing the age of "automatic independence" to 22 -- the Government should look at providing all new AUSTUDY assistance in the form of loans which could be repaid through the Higher Education Contribution Scheme (HECS) system.
At the same time, the Government should increase the HECS charges for all university tuition, but especially for the higher-cost courses such as medicine. (HECS is now set at about 23 per cent of the average cost of a higher education place.
Such a reform would certainly be justified on equity grounds, since university graduates can generally expect to earn far higher incomes than non-graduates. It may also lead to a better use of resources. In a rather extreme application of the argument against higher marginal tax rates, the opponents of higher HECS charges claim that people would be deterred from going to university by the prospect of having to repay the HECS loan. At the margin, a higher HECS might lead to a more efficient use of university resources.
Further efficiency gains might be achieved if individual universities were allowed to vary their HECS charges.
The Deputy Prime Minister, Mr Howe, said yesterday that spending cuts of the kind canvassed in the document leaked to Mr Howard would be inconsistent with the Government's social record.
However, the tighter targeting of welfare and subsidies and the careful use of co-payments and other user charges would not undermine the Government's social objectives.
The provision of universal health insurance under Medicare would not be compromised by insisting that higher-income earners pay more towards their health care costs, or by asking everyone to pay a small co-payment (Mr Howe proposed a co-payment for medical services in 1991).
Similarly, a scheme that required middle- and high-income earners to repay a higher proportion of the cost of their still heavily subsidised university education is not likely to reduce the education opportunities of the children of low-income families.
Naturally, all of these reforms would be controversial. But the current account deficit requires fiscal policy to be tightened over the medium term. Fortunately for the Government, not all of the unpleasant fiscal medicine has to be taken before the election.
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