Blight on the hill

BY TOM O’LINCOLN November 18, 2007

After Labor’s campaign launch, the Daily Telegraph had the best headline: “Pennies from Kevin”. I laughed watching him lecture Howard on how “this reckless spending has got to stop”, yet it’s not really funny. It’s been coming for a long time, but still it marks the end of an era. No longer does Labor claim, however fraudulently, to use government to advance workers’ welfare. The Light on the Hill really has gone out.

In case you’ve forgotten, Ben Chifley used that phrase in a 1949 speech: “We have a great objective – the light on the hill – which we aim to reach by working for the betterment of mankind not only here but anywhere we may give a helping hand. If it were not for that, the Labour movement would not be worth fighting for.” Yes, the last bit’s correct.

What better time to consider how it all started. Not the ALP, but its identification with the post-war welfare state. The story goes that in the midst of a great war, Chifley and John Curtin found time to consider the longterm needs of the working class. This story is partly about legitimizing WW2 as a “people’s war”, partly about claims that the post-war welfare state began with the ALP.

But it didn’t. Menzies laid some of the basis. And Curtin and Chifley’s decisive 1943 initiative was primarily about financing a war in the face of working class discontent.

Canberra insiders had long fretted about unfunded pension liabilities, and were looking for ways to make social insurance “contributory”. In other words, make people pay regular contributions for their own insurance, like many of us do to a super scheme today. In 1938 Menzies and his allies like R.G. Casey proposed just such a plan, calling it “practical instead of visionary socialism”; but the Labor Opposition denounced it as regressive. Labor called for rich taxpayers to foot the bill.

The Liberals retreated, and after losing seats in the 1940 election they weren’t game to pursue it seriously again. Menzies did introduce child endowment, which reinforced women’s family role, but was also a sop to workers disgruntled with wartime austerity and a way to avoid pay rises.

Behind the scenes, public service boffins’ minds were ticking away, looking for another way to skin the cat. They based themselves in the Finance and Economic Advisory Committee (F&E). These were all followers of the new guru, John Maynard Keynes, the best known of them being H.C.(Nugget) Coombs. At the same time as contemplating welfare, they were looking for ways to pay for the war.

From October 1941 the Labor government faced the same challenges as Menzies, and after December the challenges mounted. The F&E boys offered them a new strategy.

Chifley unveiled his welfare proposals in February 1943. There would be ambitious-sounding government welfare support … eventually. Most importantly there would be support for the unemployed. But of course in 1943, at the height of the war, there were very few unemployed, so Labor needn’t spend much on them in the short run.

Chifley announced ambitious funding plans all the same. Egged on by F&E, the government set about widening the tax base—to pay for the war. In his book on the origins of the welfare state, Rob Watts calls this:

another step to refine the fiscal machinery of a total war economy. They were also a device to resolve a political problem. The Curtin Government had vowed publicly never to tax low-income earners … Yet the advice which the Government received [from F&E] indicated that sooner or later it must break its pledge.

What better way to do this than to pretend the taxation moves were for workers’ welfare? The welfare scheme also aimed to mollify Labor supporters angry about the government’s plan to introduce conscription. This worked pretty well.

Not everyone was fooled though. On radio 3KZ, broadcaster Brian Walkinshaw argued it was as bad as a contributory scheme. “If we do not pay insurance, we will pay taxes.” (For this, Chifley abused him.)  In parliament, the small-l liberal Sir Frederick Steward was scathing:

… it is a deliberate confidence trick, a sham practiced on the working class … The man on the basic wage of 5 pounds a week will have his tax increased from 8/- a week to 13/6 a week, an increase of 5/6 a week, which is about three times the amount he was to have paid under the national insurance scheme.

On the Labor side, Maurice Blackburn likewise said the government had “increased the burden of taxation upon receivers of small incomes, particularly the small wage earners.” He would vote for the plan only because it was better to do something about welfare than to do nothing. Blackburn compared Chifley to the character in “a Spanish proverb which says, ‘Such a man would steal a sheep and give the trotters away in charity.’ As the sheep has now been stolen from the owner, I am prepared to vote that the victim shall at any rate get back the trotters.”

Under a Kevin Rudd regime, can we hope for the trotters? Don’t count on it. Melbourne businessman W.S. Robinson told Labor’s H.V. Evatt in January 1943 that some of the Labor government’s advisers were “sadistic” and liked to tell the people, ‘Last year we chastised you with Whips – this year we shall chastise you with Scorpions’. Rather than trotters, keep your eye peeled for the scorpions of Rudd