Tuesday, May 04, 2010

On policy and politics

The Democrats once campaigned on the slogan "policy not politics", a slogan I rather liked. But it is easy to get overly carried away by exactly what it means.

In that context, I've been intrigued by commentary like this on the Henry Tax Review that labels the response to it "politics". Worse has been the accusation that Rudd's response has been with "an eye to the election".

Last time I looked this is a democracy. In other words we have a system whereby government is expected to do what we want them to do. Ergo we actually want our politticians to have an eye on the election.

There are two ways to do this. The first is to avoid all facts and simply make "populist" responses to current issues. The second is to undertake thorough research on the underlying issues, and then build a process of implementation that involves taking the people as a whole on a journey.

This is actually how the last great cycle of reform was conducted. Could banking de-regulation have occurred without the Campbell and Martin committees? Would we really have ever got a GST without the tax summit?

The Henry Tax Review should be considered in that framework, not the mindset that Government is really just some model whereby you commission a group of experts then slavishly follow their recommendations. That is called a corporation!

There is an interesting side view on this issue of informed policy making. We've also seen the recent decision by the Government to defer the ETS. It is worth remembering that the template for that came from a review conducted for the Government by Ross Garnaut.

It is an amusing fact then that the biggest policy response to the Henry Review was to introduce the Resource Super Profits Tax. This is an instance of what is more formally called a "resource rent tax" wherein a "rent" refers to super-profit following the analysis of David Ricardo. Policy wonks can tell you that the idea of such taxes was first raised in 1975 in a paper by the self-same Ross Garnaut and Anthony Clunies Ross.

That perhaps should give the commentariat some chance to reflect on exactly what the process of reform can look like.

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