longweekend58
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One levy is quite enoughRob Burgess
Published 2:23 PM, 1 Feb 2011
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There's some cloudy thinking going on at Greens HQ. Following Senator Bob Brown's sensational call for miners to pay for the floods clean-up – arguing that they dug up the carbon that's causing global warming – Senator Sarah Hanson Young appears in the Fairfax media today with a call for an ongoing disaster relief levy.
For many, any levy at all is a mistake – given that two thirds of the federal government's rebuilding commitment is paid for by expenditure cuts, critics have pointed out that the remaining $1.8 billion could easily have been found through a few more.
But for Hanson Young the levy is such a good idea we should just keep it rolling: "If a levy is good enough for one disaster, surely there should be an ongoing levy to ensure there is money in the kitty for future events."
This seems to make sense, but only if you accept a fairly extreme interpretation of Hanson Young's next point: "We know that extreme weather conditions and natural disasters are increasing, due to climate change."
It is not necessary to be a climate change 'denialist', or to take issue with the idea that global warming is likely to increase extreme weather events, to find holes in this argument.
Australia's sudden flip from nine years of parched paddocks into catastrophic floods is fairly well understood by climate scientists – they've been studying the El Nino/La Nina current in the Pacific Ocean in earnest for 30 years, and were at least aware of the phenomena from the late 19th century.
The kind of La Nina event that is currently dumping rain on our eastern seaboard may well increase in frequency as a direct result of global warming, though scientists can't be sure – more research is needed, and given that statistical analysis requires long term data-sets to test such a theory (and given that we've only been pumping substantial amounts of CO2 skywards for a bit over a century), chances are we won't get firm answers for some time.
Politics, of course, cannot wait for certainty. But is it really necessary to impose an ongoing levy to "ensure there is money in the kitty" for next time?
Not at all. If we thought the next round of floods or fires would create damage bills that would be beyond the reach of the current insurance industry and government, money would need to be collected and invested to cope.
But that is not what we expect. Just compare the idea of an ongoing levy with the structure of the already established Future Fund. It was established to cope with unfunded Commonwealth superannuation liabilities that the government didn't think it could afford, and that were absolutely certain to eventuate.
By contrast, the 'once in a century' floods currently hurting so many Australians may or may not recur in the near future. And, though insurance premiums will likely rise, nobody is predicting that the Commonwealth, along with the private sector insurance industry, would fail to cope if another similar deluge arrived in ten, rather than 100 years.
However, at the heart of many wild policy suggestions is a grain of truth – and it fell to New England independent Tony Windsor to identify it. He told The Age over the weekend that "'we don't have a process for events of this magnitude – and we should have''.
He's right. The state has a major role to play in reconstruction after a natural disaster, and may even have an ongoing role in acting as reinsurer as Luke McKenna described last week (Preventing an insurance disaster, January 28).
But a process for dealing with natural disasters or a federal budget-funded reinsurance pool is quite a different proposition from a pot of money funded by an ongoing levy – which some of the of the independents, including Nick Xenophon in the Senate, still seem to be backing.
Australia already has a progressive tax regime, which no side of politics has sought to substantially undermine. To tack an ongoing 'progressive' levy on top of that is pointless. It would create a 'progressive-squared' flow of revenue into a kitty that would tempt governments of the day rather than providing a backstop to an occasionally, if substantially, overstretched insurance industry.
Much better is for the kitty-less government of the day to issue appropriate amounts of debt (if that is even necessary) to cope with unusual events, and service and pay off that debt from forward budgets. Suitable legislation needs to be drawn up to both constrain and compel the government of the day to leverage its credit rating to respond to times of national crisis.
Yes, it's conceivable that disasters become so frequent and so large that this option would fail to get the country back on its feet. But then neither would an ongoing levy.
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