A win for Big Bureaucracy

Good economists believe that bigger government is inefficient and retards prosperity; good liberals believe it is unfair and erodes individual responsibility.

Take Lord Keynes, 1st Baron of Tilton, hardly a red-blooded, screaming libertarian. He wrote that government taxation at 25% of GDP would be the ‘maximum tolerable’ proportion.

Nothing in climate science implies government be bigger. That’s one reason why the Gillard government’s carbon tax package is disappointing. Australian government is already big enough, and now set to grow even more, far beyond the modest, Keynes-approved 25% of GDP it measured when Gough Whitlam lost office in 1975.

The carbon tax will raise another $8.5 billion a year for government, but barely a third will go towards cutting other taxes. And the revenue will ratchet up year after year as the carbon ‘price’ climbs, while inflation steadily erodes the tax cuts. Treasury estimates that by 2015, the price of carbon will rise to $29/tonne, increasing the burden on the weekly shopping bill by $13.40.

The bewildering array of new programs and quangos that accompany the carbon tax betray a government deep in the pocket of Big Bureaucracy, with a blithe disregard for public money.

The Department of Climate Change was a mere entree of fiscal excess. Australians will soon savour the Clean Energy Finance Corporation (replete with a cool $10 billion to ‘invest’), a Clean Energy Regulator, the Climate Change Authority, and the Australian Renewable Energy Agency.

Of course, a market-based mechanism would be impossible without an Indigenous Carbon Farming Fund, a Biodiversity Fund, a Carbon Farming Skills Initiative, and the crucial Land Sector Carbon and Biodiversity Advisory Board. And try not to confuse the Clean Technology Investment Program with the Clean Technology Innovation Program.

To underscore the ‘market-based’ approach, the scheme also includes Energy Efficiency Information Grants, the Clean Technology Food and Foundries Investment Program, and the Clean Technology Focus for Supply Chain Programs (more than one, naturally).

Thankfully, there’s also a Clean Energy Skills Package, a $32 million tiddler that presumably equips bureaucrats with the skills and temperament to navigate the other programs.

One almost wonders whether the government’s Department of Finance and Deregulation had been consulted.

Government already digests about a third of Australia’s national income, displaying a relative abstemiousness among our rich peers. Government consumes about 40% of British and New Zealand output, more than half of Swedish, for example.

But in Asia, where our long-term competitors live, Australian government is greedy. ‘Communist’ China barely touches a fifth of Chinese income, in keeping with practice in India and Indonesia.

Australia’s prosperity will ultimately be guided by how true to their favourite scribbler today’s ‘Keynesians’ can be.

Adam Creighton is a Research Fellow at The Centre for Independent Studies.