If you walked down the street and asked people why government collected taxes you'd probably get one of two answers.
Some would say their taxes ensured a social safety net for the least advantaged members of the community. Others would say their taxes allowed government to provide things that taxpayers can't purchase individually for themselves, for example defence.
It's unlikely that anyone would claim they paid tax so that the government could use the money to speculate on the stockmarket. Yet this is exactly what the federal coalition has said it will do with last year's budget surplus.
Instead of returning the surplus to taxpayers through tax cuts, the government will spend some of the surplus on purchasing shares. Of course there's nothing novel about government investing in various sorts of assets. Spending on physical or social infrastructure is investment. Building a road or repairing a school is an investment. What's different about investments in equities made by the Future Fund and its ilk is that shares are inherently risky and inherently speculative. Put simply, there are some things that government should invest in, and some things that it should not.
As anyone who hasn't been living on Mars for the last four weeks would know, investing in shares is hazardous. One hundred dollars of taxation receipts could be spent on buying stocks that end up being worth $99, $90 or $50.
The reaction from the federal government this week when it discovered that it had $3.7 billion more money than expected was interesting. The reaction wasn't "here's the chance to give back the money we don't need".
Instead, the question was "how do we lock the surplus away so that Labor can't get its hands on it?'
Bulging coffers have forced ministers to invent ever more ingenious excuses for not reducing tax. These excuses are variously entitled the Future Fund, the Higher Education Endowment Fund, and the Health and Medical Investment Fund, with more funds to come. The Prime Minister has promised a fund for transport infrastructure.
Understandably, university vice chancellors are excited by the prospect of getting the income from the $6 billion in the Higher Education Endowment Fund. They wouldn't be quite so happy if ever that fund made a negative return.
A further problem is that earnings from the government's funds will be spent on capital items rather than as recurrent expenditure. This distorts the decision-making process and makes unjustified assumptions about the kind of spending that will be required in the years ahead.
For instance, there's a good case to be made that the most effective way of improving the health of Australians is not by having hospitals purchase more high-tech medical equipment. Primary health care in the form of preventative measures, early treatment, and public education is more likely to require recurrent funding through wages and salaries for professional staff rather than bricks and mortar infrastructure.
Yet bricks and mortar generate the attention of the local press in marginal seats at election time and so this is what the money gets spent on.
Leaving aside the question of why the Commonwealth would want to run hospitals, Kevin Rudd's announcement yesterday that he would "take over" state government-run hospitals does at least provide the opportunity to have exactly this sort of discussion. And it will force the coalition to explain the justification for its emphasis on capital spending rather than on the alternatives.
When companies have more funds than they need, they give their money back to their shareholders through share buybacks or higher dividends. But when the government has more money than it needs, it simply keeps it. And there's another difference between companies and governments. Companies don't threaten imprisonment to extract money from their customers.
The issue is not about whether the nation's universities or hospitals, for example, require more taxpayer resources. Rather, the issue is the way in which the government intends to generate the funds to make those investments. On the one hand, the Prime Minister argues, quite correctly, that it is not the job of government to own Telstra or Medibank or the Commonwealth Bank of Australia. On the other hand, he is willing to have the Future Fund spend voters' taxes buying the shares of those very same companies.
Either you believe in state ownership or you don't. Given the decisions of this week, voters could be excused for being more than a little confused about what exactly the federal coalition believes.
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